2011 E2

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Management Level
E2 Enterprise Management
Thursday 3 March 2011
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 5.
Section B comprises 2 questions and is on pages 6 and 7.
The list of verbs as published in the syllabus is given for reference on page
11.
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.
Enterprise Pillar
TURN OVER
The Chartered Institute of Management Accountants 2011
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
T has recently been appointed as the new Chief Executive of PV Company which manufactures
cosmetics and toiletries. She has spent the first three months meeting with her senior
management team, employees and customers of the company to establish how PV is currently
perceived by some of its various stakeholders. The discussions with the different groups have
revealed that there seems to be a great deal of confusion on what PV Company stands for. It is
apparent to T that there are many inconsistencies in the priorities and objectives across the
different departments of the company. T has determined that immediate action is needed to
establish a clear mission for PV Company.
To start the process, T intends to run a series of events at which the mission will be discussed
with different groups of employees. She has asked for your help in preparing for the first
workshop session. Specifically, she has asked you to put together a presentation with the aim of
helping the various audiences to understand why it would be beneficial for PV Company to have
a clear mission.
Required
Discuss the points you would include in the presentation on the benefits of having a clear
mission for PV Company.
(Total for Question One = 10 marks)
Question Two
Required:
Discuss the ways in which the strategies of the functional areas of an organisation should
support the other levels of strategy.
(Total for Question Two = 10 marks)
Section A continues on the opposite page
Enterprise Management
March 2011
Question Three
S Company has for many years been a long standing household name, designing and
manufacturing electrical appliances for use in the kitchen. It has developed a strong culture over
the years which can be best typified as a role culture. However, this culture is now acting as a
barrier to the companys ability to adapt to become more flexible so that it is able to respond
quickly to changes in the environment and initiatives taken by its competitors in product design.
In particular, the company is falling behind its new competitors when it comes to innovations in
new product development and design. Effective new product development requires staff to work
together across functional boundaries but this is becoming hard to achieve in S Company where
people now fiercely protect their functional specialism and will only work on the tasks specified
in their job descriptions.
Required:
(a)
Describe the key characteristics of a role culture, explaining why this type of culture is
no longer appropriate for S Company.
(6 marks)
(b)
Recommend, with reasons, the type of culture to which S Company now needs to
change.
(4 marks)
(Total for Question Three = 10 marks)
Section A continues on the next page
TURN OVER
March 2011
Question Four
ST is the operations director of F Bakery. He is in the process of putting together a project plan
for the introduction of a new production plant that will enable the bakery to expand its product
range, moving into high quality cakes and desserts.
ST has identified a number of activities that must be undertaken to set up the new bakery
production plant. He now intends to construct a network analysis to assist ST in the planning of
the project. This will also enable him to provide an answer for the HR manager who has asked
him to provide advice on when she can start the recruitment campaign to select new employees
needed to work in the new part of the bakery.
The activities can be broken down as follows:
Activity
Preceding activities
A
B
C
D
E
F
G*
H
C
A
B
E,F
D,G
Activity duration
In Weeks
12
10
6
26
9
14
10
6
G* = Recruitment campaign
Required:
(a)
Construct a network diagram showing the critical path for the introduction of the
new production plant for the bakery and the overall duration of the project.
(4 marks)
(b)
Identify the earliest time the recruitment campaign can start.

(2 marks)
(c)
Identify the activities where there is float/slack time in the project, and calculate
how much float/slack time there is.
(4 marks)
(Total for Question Four = 10 marks)
March 2011
Question Five
DPW is a very successful home furniture company operating in P Country. It has a good
reputation for being customer focused and providing value for money through its effective
operations. Following a systematic analysis of its home/domestic market, it is apparent that the
market is reaching maturity and to attain further growth and expansion will involve moving into
markets abroad. It has identified F Country as a possible target for its first step into
internationalisation.
The company now wants to undertake formal analysis to help it to better understand the external
environment of F Country.
Required:
Describe ONE strategic management model/framework and explain how it could be used to
help DPW to understand the external environment of F Country.
(Total for Question Five = 10 marks)
(Total for Section A = 50 marks)
End of Section A
Section B starts on the next page
TURN OVER
March 2011
SECTION B 50 MARKS
ANSWER BOTH QUESTIONS FROM THIS SECTION 25 MARKS EACH
Question Six
ZEZ Company is in the business of designing and printing bottle labels for soft drinks
distributors. The company is, at present, facing very difficult times as recessionary economic
conditions have had a negative impact on the demand for its customers' products, which in turn
is having a knock-on effect on the demand for ZEZ Company's labels. As a result, the senior
management team has been investigating how the company can become more efficient to
ensure its future survival.
Redundancies across the company have recently been announced. In addition, the current
operating conditions mean that there will be some significant changes made to the contractual
terms and conditions for management and administration staff working in the various functional
departments, along with a restructuring of operations.
Of immediate concern to the senior management is the threat made by the trade unions to take
industrial action to protect jobs and also the contractual terms and conditions of their members.
Required:
(a)
Discuss the different conflict handling strategies that could be used in managing the
conflict in ZEZ Company.
(13 marks)
(b)
Explain the different stages of negotiation that should take place to ensure the
negotiation process between senior management and the trade union
representatives is effective.
(12 marks)
(Total for Question Six = 25 marks)
Section B continues on the opposite page
March 2011
Question Seven
Over the years, E has had a number of business successes in the building trade and property
development. Her latest venture is to build a hotel in YX town. E has already gained the financial
backing, identified a suitable site, had an architect draw up plans and received planning
permission. She wants the construction work on the hotel to start without delay.
E has appointed P to be the project manager on the basis of his impressive record of managing
successful construction projects. However, conflicts are already emerging as E is interfering in
the management of the project. She is frustrated by the time P says he needs for the project
planning phase, and is irritated by his insistence on formalising the project management
process. E is putting pressure on P to cut corners in the first stages of the project, and to get
started on the construction of the hotel.
Required:
(a)
Discuss the potential problems that the hotel project could face without good project
planning.
(10 marks)
(b)
Explain the contribution that different project management tools and techniques could
make to help P in planning the hotel project.
(15 marks)
(Total for Question Seven = 25 marks)
(Total for Section B = 50 marks)
End of Question Paper
March 2011
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10
March 2011
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
1 KNOWLEDGE
What you are expected to know.
2 COMPREHENSION
What you are expected to understand.
VERBS USED
DEFINITION
List
State
Define
Make a list of
Express, fully or clearly, the details of/facts of
Give the exact meaning of
Describe
Distinguish
Explain
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
Identify
Illustrate
3 APPLICATION
How you are expected to apply your knowledge.
Apply
Calculate
Demonstrate
Prepare
Reconcile
Solve
Tabulate
4 ANALYSIS
How you are expected to analyse the detail of
what you have learned.
5 EVALUATION
How you are expected to use your learning to
evaluate, make decisions or recommendations.
March 2011
Analyse
Categorise
Compare and contrast
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
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
Advise
Evaluate
Recommend
Counsel, inform or notify

Appraise or assess the value of
Propose a course of action
11
Enterprise Pillar
Management Level Paper
March 2011
Thursday Session
12
March 2011
The Examiner's Answers

E2 - Enterprise Management
SECTION A
Some of the answers that follow are fuller and more comprehensive than would be expected
from a well-prepared candidate.They have been written in this way to aid teaching, study and
revision for tutors and candidates alike.
Answer to Question One

The mission essentially provides a broad statement of the overriding purpose of PV Company
in terms of the products and services it provides. It is also concerned with the scope and
boundaries of the companys operations in product/market terms. The mission should,
therefore, be used to guide the companys current strategic decision making, articulating what
PV Company does and who the organisation is for; in other words its raison dtre. It should
reflect the companys core values in line with the values and expectations of the various
stakeholders.
The development of a mission is an important element in the strategic planning process, in
that PV Companys objectives should be set to support the mission. The benefits of this would
help to provide a basis for consistent strategic and operational planning. It could assist in
translating PV Companys purpose and direction into objectives suitable for assessment and
control.
The mission is an essential element in the definition of what constitutes the strengths and
weaknesses of PV Company and could act as a benchmark by which plans are judged
against and it should help to ensure consistency in both future decisions and evaluation of
possible strategies across the organisation.
Since a mission is concerned with why an organisation exists, a key benefit is that it will
convey the scope and boundaries of PV Companys activities. This should help in providing
clarity on purpose which currently appears to be problematic with different parts for the
company having different priorities and objectives.
The mission can be powerful in communicating the intentions of PV Company and inspiring a
common vision of the future. It provides everyone with unanimity of company purpose and a
sense of shared values. The ideal is that everyone in the company will buy into the mission
which should then provide a common source of direction for all employees, focusing on the
companys strengths and competitive advantage.
It would also help in establishing clarity on PV Companys values. The values incorporated in
the mission should relate to the culture and should capture the basic, perhaps often unstated, beliefs of the people who work for PV Company.
The mission could be embodied in a mission statement which could be reproduced and used
on different media to reinforce the key elements of the mission as a communication vehicle
not only for employees but also other stakeholder groups.
March 2011
Answer to Question Two

In explaining how the functional strategies support the overall corporate strategy of an
organisation it is helpful to think about the different levels as a hierarchy, whereby activities at
the lowest level (functional) are guided by decisions at the higher level. In making the
distinctions between the different levels, Hofer and Schendel distinguish between the
corporate strategy (what business to be in), business strategy (what market segments to
serve and how) and functional strategy (the detailed strategies of departments such as HRM,
Finance, Marketing, Sales, Production etc).
Functional strategies, which are sometimes referred to as operational, are the longer term
management policies that are intended to ensure that the functional areas of the company
play their part in helping the organisation to achieve its overall goals. They are important
since this is the level at which corporate and business level strategies are implemented in
detail. This means translating the objectives of the organisation and SBUs into digestible
elements.
Functional strategies within operating companies do accumulate upwards, like building blocks
into business unit development and hence into overall organisations strategy. Steps taken by
the functional departments need to be tied into the business unit strategies because
otherwise departmental actions can thwart or counter the thrust of the overall business, or
add too little to the value within the overall value of the business.
It is essential that the various functions of the organisation contribute to the achievement of
higher level strategies, working in a supportive sense rather than conflicting with the corporate
and SBU strategies since it is the accumulated effect of the strategic steps taken in each
function of a business (HRM, Finance, Marketing, Sales and Production etc) that determines
the strategic development of the business. For example, the recruitment strategies developed
by HRM need to be designed to ensure that new staff are recruited with the skills needed for
the future development of the organisation.
In developing functional strategies there is both a top down and bottom up communications
exchange. This helps to ensure that the right strategic decisions are taken, that the detail will
work and that everyone is aware of the plan and personally engaged in it to ensure its
achievement.
March 2011
Answer to Question Three
Requirement (a)
The concept of organisational culture is an important one for S Company because it can exert
a strong influence on business performance. It can shape the behaviours and actions of
individuals in the workplace and is often referred to as the glue that holds the organisation
together.
There are different types of culture which are determined by an organisation's structures,
processes and management methods. Currently, S Company is typified as having a role
culture which can be very efficient and successful in a stable environment when work is
predictable and the organisation can control its own environment. However, this type of
culture appears to be having an adverse effect on S Companys performance as the company
now faces very different operating conditions and needs to become more flexible to respond
to the quickly changing environment. The reasons for this can be explained by examining the
characteristics of a role culture.
Role culture is usually associated with a formal structure, comprising well established rules
and procedures. Job descriptions are clearly defined, tightly describing the tasks of an
individuals job. This leads to a strict division of labour with people often reluctant to take on
wider responsibilities, as in the case of S Company. Staff tend to be obsessed by fulfilling
their narrow job duties, with a preoccupation on day to day administrative activities rather than
longer term issues. These characteristics would make it difficult for the organisation to be
flexible and adapt to the more competitive operating environment, acting as a barrier to new
product development needed by S Company to compete.
Within a role culture, the organisation will be dependent upon various functions, each of which
has its own areas of strength and influence, with an emphasis on internal processes rather
than external focus. This type of culture is also impersonal, relying on formalised rules and
procedures for work routines and communication and for guiding decision making in a
standardised and bureaucratic way.
Relations between staff are dominated by hierarchy and authority with formal and rigid control
systems. Individuals are selected for particular roles on the basis of their ability to complete a
particular task to the required level and over achievement is not actively pursued. These
characteristics of a role culture can mean that it is more resistant or very slow to adapt to
change and getting people to work together across boundaries can be difficult.
Innovation is often stifled, since the culture is one which insists people go through layers in
the hierarchy to gain approval. Decisions are made at senior level with little involvement from
other members of the organisation. In fact, new ideas from below may be regarded with
suspicion from above. Individuals are required to perform their job and not to overstep the
boundaries of authority. This is occurring in the case of S Company, and would seem to be
partly responsible for the lack of flexibility, responsiveness and ability to be effective in new
product development.
Requirement (b)
It is apparent that the culture of S Company needs to change and it is recommended that a
task culture would be more appropriate given the changes in business conditions. This type of
culture is typified by teamwork, flexibility and commitment to achieving objectives rather than
emphasising a formal hierarchy of authority.
The task culture is often reflected in a matrix structure or project teams, where the focus is on
completing a job or project. A task culture tends to encourage greater flexibility, with people
working together across functional boundaries to achieve organisational objectives, and
people are not hindered in terms of their contribution by tight job descriptions. This would
better suit new product development activities where people need to work effectively across
boundaries.
March 2011
Staff become loyal towards the work rather than towards formal rules. The principal concern
is to get the job done, breaking down rigid hierarchies and functions. Therefore, the
individuals who are important are those with the skills and ability to accomplish a particular
task. Skill and expertise are more important than length of service and position in the
organisation.
Team work is fundamental to a task culture, rather than the achievement of individuals. By
nature a task culture fosters creativity and is adaptable, responsive and able to change very
quickly and well suited to new product development activities.
March 2011
Answer to Question Four

Requirement (a)
12
15
A12
0
1
B10
E9
10
F14
24
24
10
34
G10
H6
6
34
40
C6
D26
4
8
Critical Path = B,F,G,H

Duration = 40 Weeks
40
7
March 2011
Requirement (b)
The recruitment campaign can start in week 24.
Requirement (c)
Activities A and E have 3 weeks float time.
Activities C and D have has 2 weeks float time.
Answer to Question Five

There are a number of strategic management frameworks that could be used to assess the
external environment in F Country to decide whether to move into F Country. These include
PEST, Porters five forces, and Porters Diamond. This answer will explain PEST.
The PEST framework is a useful way of organising information on the macro-environmental
influences that can be used to assess the external factors that might impact on DPWs
development in F country. This would involve an analysis of the political/legal, economic,
socio-cultural and technological factors. The headings can be used as a checklist to assess
the relative importance of the different influences on DPW Companys proposed strategy.
With regard to the information that should be gathered on the general environment in F
Country it will be important to assess the nature of the political and economic environment.
This would include exploring the legislative and government policies and attitudes to
competition that could impact on DPW Companys development. For example, is the
government of F Country encouraging inward investment by offering grants to companies or
does it have policies in place to protect its own industries? DPW Company would also want to
consider the political stability in F Country. If there is political instability and unrest, it may not
be a positive step to enter the market. It would also be interested in any current or future
legislation relating to the home furnishings retail industry.
Information should be collected on the nature of the economic climate such as the rate of
economic growth, level of tax rates, interest rates, exchange rates, and levels of consumer
disposable income and the percentage of household income spent on home furniture. All of
these factors could impact on the demand for DPW Companys home furniture products.
Research should be undertaken to determine whether the social factors are encouraging for
DPW Company, for instance in terms of the customer attitudes, values and beliefs of people
in F Country and the extent to which there is a market for home furniture and whether people
would be willing to buy home furniture from a foreign retailer. Information on factors such as
home ownership, current trends and buyer behaviour for home furniture would be useful.
Information on social factors would also help in determining the cultural context of F Country,
in order to gain an understanding of any potential cultural differences, not only of customers,
but also future employees.
Technological factors that would need to be explored relate to the communications
infrastructure and any technological issues that might impact on the way the retailers operate.
This could relate to computer tracking of stock, as well as ordering and payment systems.
Also, the state of the transport systems needed to move stock around the country would need
to be assessed.
The PEST framework can be expanded to consider environmental/ethical factors. Interest
here will centre on the sustainability in the use of materials/resources and the cost of
packaging and disposal of waste associated with home furniture products. It also is about
ethical conduct in the management of employees.
Examiner's comment: Candidates could legitimately develop their answers using Porter's
Diamond.
March 2011
SECTION B
Answer to Question Six

Requirement (a)
There are a number of different ways of handling conflict. A useful way of explaining the
alternative approaches has been developed by Thomas who identified five conflict handling
strategies based on two conflict management dimensions. These consist of the degree of
assertiveness in pursuit of ones interests and the level of cooperation in attempting to satisfy
others interests. The strengths of each of these in a particular situation can be regarded as
lying along two continuums respectively:
The five identified strategies are:
Avoidance: This is where one or more parties in conflict may seek to avoid, suppress or
ignore the conflict. This would not be recommended in the case of ZEZ Company since it
does not end up resolving the conflict and could therefore impact negatively on the future
survival of the company if the industrial unrest is not resolved.
Accommodation: This involves one party putting the others interests first and suppressing its
own interest in order to preserve some form of stability. Again, in the case of ZEZ Company
this is not recommended given that the nature of the conflict is endemic and the
accommodation strategy will not resolve the differences of the management and employees
satisfactorily. ZEZ is fighting for survival and unless costs are reduced there may be nothing
left to negotiate on.
Compromise: This is often viewed as an optimum strategy. Each party gives something up
and a deal somewhere between the two is accepted. For ZEZ Company this approach might
be used between management and the trade unions to determine the number of
redundancies, the criteria for redundancy, the redundancy package and changes to terms and
conditions.
Competition: This is a state where both or all parties do not cooperate. Instead they seek to
maximise their own interests and goals. It ends up creating winners and losers. This approach
is not recommended for ZEZ Company since it can prove damaging both to the organisation
and to individuals, rather than working to resolve the conflict.
Collaboration: This is where differences are confronted and jointly resolved, with a win-win
outcome achieved. Whilst this is also viewed as a favourable approach to managing conflict, it
is not always possible. In the case of ZEZ Company, where some harsh decisions and
actions will need to be taken, collaborating with the unions to work out solutions will only work
if they accept that there will be a need to make some redundancies and changes to contracts,
but can benefit from collaborating on the how.
Requirement (b)
Negotiation involves argument and persuasion in order to strengthen ones own case by
undermining the opposition.It occurs when there is no established set of rules for resolving
the conflict and parties are committed to search for an agreement rather than fighting openly.
Negotiation is often necessary within organisations to resolve conflicts of interest between two
or more parties which have arisen because the parties have different objectives and is a
useful and civilised way of settling disputes.
In the case of ZEZ Company conflicts have arisen as a result of the need to make changes to
terms and conditions of contracts and also the redundancies.These conflicts may be resolved
through negotiation between management and the unions who are representing employees.
The process of negotiation between employers and trade unions is often referred to as
collective bargaining. Without any negotiation the result could be that the union calls for
March 2011
industrial or strike action which could have a detrimental impact on the ZEZ Companys future
survival.
Approaches to the negotiation process can be through focussing initially on each sides
primary objectives, rather than becoming distracted by minor negotiating points at an early
stage. It is necessary to maintain some flexibility within the negotiation process and for both
parties to be prepared to settle for what is fair. It is important to listen to what the other side
wants and to make an effort to compromise so that both sides can attain their goals.
However, this is often where negotiation can fail because of the tensions between the
different objectives that can never coincide. This could occur for ZEZ Company since the
unions main objective will be to keep jobs, whilst the organisation may see no alternative to
its long term survival without the job cuts and changes to terms and conditions.
It is likely that in the first stages of negotiation that the union will reject the proposals as
unacceptable and will prepare their negotiation strategy. Whilst the union will not want to
agree to job losses it might recognise that they are inevitable and concentrate instead on
persuading management to provide generous severance pay above the legal minimum and
compensation for staff who are being asked to relocate. ZEZ Company management will have
anticipated such a reaction and should have their negotiation strategy worked out.
The ideal will be to achieve a win-win outcome where both sides achieve enough of their
objectives to be satisfied with the end result, trading-off wins and losses so that each side get
something in return for everything they concede on. Win-lose or lose-lose outcomes are in no
ones best long term interest.
Important tactics for negotiation are to use questions effectively so as to control the situation,
also the use of persuasion, and not to weaken your case inadvertently.
It is suggested that effective negotiation between ZEZ Company and the trade union should
go through the following four stages:
Preparation which involves both parties gathering information and insight to the
problems in order to understand the constraints acting on the negotiating parties. At
this stage, who is involved in the negotiation, what the concerns of each party are and
what the goal of the negotiation is will need to be determined. Another key feature at
this stage is the establishment of the time for negotiation.
The opening phase of negotiation involves both sides presenting their starting
positions to one another. It is at this stage that the greatest opportunity is present to
influence the other side.
The bargaining phase is where both parties will aim to narrow the gap between the
two initial positions to persuade the other party that its case is so strong that the other
must accept less than it had planned. This might, in the case of ZEZ Company, be on
the total number of job losses, the financial arrangements for redundancy or in
relation to specific aspects of terms and conditions. The union will want the best for its
members, whereas the management may be constrained by the financial position of
the company.
The closing phase of negotiation represents the opportunity to capitalise on the work
that has been done at the earlier steps. It is at this stage that agreement is reached.
The outcomes from the agreement should be publicised and implemented.
During the negotiation process, particularly in the case of negotiations surrounding the
changes in ZEZ Company which are formal in nature, it is important from time to time to test
that both sides understand clearly what is being proposed and at what stage the negotiations
are.
March 2011
Answer to Question Seven
Requirement (a)
A key part of the planning stage of the project management process involves defining clear
objectives and setting realistic estimates in terms of budget and time and resources needed.
Without this, it is unlikely that an estimation of the baseline budget and project schedule can
be constructed to present a realistic assessment of the time and funding required, and the
resources needed for the successful execution of the hotel project. The outcome could be that
the project ends up with unrealistic timescales and the different activities may not be
sequenced logically, to make the most effective and efficient use of resources. This could also
result in budget overspend and delays in various stages of the project. Ultimately the hotel
project may fail to be completed on time.
As part of the planning stage, feasibility studies should be undertaken, along with an
assessment of the risks associated with the hotel project. If these critical dimensions are not
understood, the project manager will not have the opportunity to identify potential problems
and determine the actions needed to deal with them nor develop contingency plans.
Given the nature of the project, not undertaking social and environment feasibility studies
could lead to future problems and disruptions once construction starts for the hotel. For
example, the impact on the local environment where the proposed hotel is to be built may not
have been considered, and potential social issues in terms of whether the local community
might object to the plans due to the disturbances during the building work.
If the project objectives are not clearly defined and scoped, this can make it more vulnerable
to changing client specification. Whilst it is not unusual for client requirements to change
during the life of a project, if the project is to come in on time and within budget then E needs
to be aware of what is feasible. When the objectives are changed during the life of a project
there is usually a significant impact on project success and it is important that E is made
aware of the consequences.
It is at the early stages within the project that roles and responsibilities are defined for the
project team. If they are not clearly defined this could lead to duplication of activities or
activities missed. The result might be that members of the project team do not work effectively
together, along with poor communications between the various stakeholders in the project.
Finally, it is at the planning stage that various control mechanisms would normally be put in
place. Without developing an appropriate control system there is the strong possibility of poor
cost control and overspend.
Effective planning can minimise the potential problems outlined above. In summary, E is
putting the smooth running of the project at risk by wanting to cut out this stage.
Requirement (b)
There is a range of different tools and techniques that P could use to assist him in planning
the hotel project. For example:
Work Breakdown Structure. This technique is a critical part of project planning

involving an analysis of the work required to complete the hotel project. The activities
in the project are broken down into manageable components, referred to as work
packages. The process defines the activities that must be carried out for each work
package. Each work package will have defined responsibilities and deliverables for
the hotel project.
The analysis of activities for the hotel project can be undertaken at a number of
levels, for example starting with the major phases then breaking them down into more
detailed sub activities. P would be able to develop a task list from the work
breakdown structure to assist in planning, control and monitoring the various stages
March 2011
of the project. The work breakdown structure can, therefore, assist in identifying the
people responsible for each activity or work package.
Another widely used project planning tool is the Gantt Chart. This provides a visual
way of illustrating the sequence of activities in a project. Complex project activities
are converted into constituent tasks and a graphical and understandable picture is
provided. Although it does not show dependencies and internal relationships, it is a
helpful framework in the planning of construction projects, such as the hotel build. It
will show the time taken for each activity and the resources required, hence can be
used to monitor progress against the plan and assist project scheduling by planning
the timescales for the project. It can also be used by P to communicate the
responsibilities for tasks to the project team.
A variation of the Gantt chart is the resource histogram which shows the resource
requirement usage and availability against a timescale. This will help P in the
scheduling and rescheduling of resources for the hotel project.
Network analysis, sometimes referred to as critical path analysis, is an important

technique in project planning, providing a diagram showing the sequence and
dependencies between activities or deliverables on a project. Using a work
breakdown structure, network analysis arranges each work package/task into a
logical sequence, and estimates the time to complete each. The outputs from the
work breakdown structure analysis will help the identification of which tasks are
dependent on others. Dependencies are critical to project planning. Simplistically, this
involves determining the sequence, i.e. if activity B can only begin when activity A is
completed there is a dependency. For example, planning permission must be sought
for the hotel before construction work can commence. This is a crucial activity in
project planning and the allocation of resources.
Having identified dependencies it is then possible to calculate the critical path, which
is the longest sequence of consecutive activities. It identifies those activities which, if
delayed beyond the allotted time, would delay the completion of the hotel project and
how much float time there is on other tasks. In other words, by how much certain
activities could slip before there is an impact on the expected time completion for the
hotel project. This then enables the minimum possible time to be determined, and can
be helpful in identifying where there is some slack time available within the project
plan for any unforeseen circumstances.
Another project technique is PERT (project evaluation and review technique). This is
a development on network analysis that P might find helpful in project planning. The
technique is designed to account for uncertainty in the project lifecycle. For each
activity in the project PERT uses three time estimates:
the optimistic time based on the duration the Hotel project would take if
conditions were ideal
the most likely/probable duration if conditions were normal or as expected
and
the pessimistic estimates which is the duration it would take if a number of

things went wrong.
These estimates are then converted into a mean time and standard deviation which
means it is then possible to establish the duration of the Hotel project using the
expected times, but also to calculate a contingency time allowance.
March 2011
10
Management Level
24 May 2011 - Tuesday Afternoon Session
The list of verbs as published in the syllabus is given for reference on page 7.
Enterprise Pillar
TURN OVER
SECTION A 50 MARKS

Question One
The Board of FF Supermarket is examining the company's current market position. As part of
the review, the Board has asked for an analysis of industry competition to be undertaken in
order to establish the attractiveness of the industry and sources of competition.
Required:
Discuss the contribution of Porter's Five Forces model in assessing the attractiveness of
the industry in which FF currently operates.
Question Two
Due to the complexity of the tasks involved in many projects, communication of responsibility for
those tasks is often helped by means of graphical planning techniques.
Required:
(a)
Describe the techniques of work breakdown structure (WBS) and Gantt charts.
(4 marks)
(b)
Explain the importance of both WBS and Gantt charts in the project communication
process.
(6 marks)
May 2011
Question Three
TR has recently been promoted to his first management position. In the past, he very much
enjoyed working as part of a team, but is having some difficulty in adapting to his new role as
leader of a team. In his recent appraisal he has acknowledged that his style of management is
not effective in all instances. In particular, he feels that he has not been very flexible in dealing
with some of the issues that he has faced. He has identified that he would benefit from
leadership training to help him better understand the alternative styles of management that he
could adopt to help him develop to become more effective in his role.
Required:
Explain to TR, with reference to theory, the different management / leadership styles he
could adopt to help him to become more effective in his role.
Question Four
Z Company is very successful as market leader in digital media products where it has
demonstrated its ability to innovate in new product development and design at a very fast pace,
creating new products that its customers had not yet imagined. At a press launch for its latest
product, the Chief Executive was asked about the company's impressive performance in recent
years. She responded by saying that the company is committed to a resource-based approach
to strategic development, with a desire to challenge itself to constantly stretch its capabilities.
Required:
Discuss the main characteristics of the resource-based approach to strategic development
that the Chief Executive of Z Company referred to at the press launch.
TURN OVER
May 2011
Question Five
K is a kitchen and bathroom design and installation company which currently has showrooms in
one region only of Country T. The company has enjoyed considerable success since it was
established five years ago, using high quality products and computer-aided design techniques.
This has now encouraged K Company to target other regions of Country T where it hopes to
open more showrooms.
Since the company will, as yet, be unknown to potential customers, it recognises that it may be
difficult to break into a competitive market in the other regions that are already being served by
other well-established local and national companies. In order to help determine whether to
pursue the expansion strategy, the owners of K Company have decided to try to collect as much
intelligence information as possible on its potential competitors in other regions of Country T.
Required:
Describe what would be involved in K Company gathering competitive intelligence
information, making reference to the type of information that is needed and the different
sources that could be used.
End of Section A
Section B starts on the opposite page
May 2011
SECTION B 50 MARKS
Question Six
P Company manufactures and sells a range of children's clothing through its retail shops and is
currently designing a website in order to allow customers to purchase products online. The
project is a major investment for P Company and it is seen by the Board of Directors as being a
critical strategic development to ensure the continued success of the business in a highly
competitive market.
The project team consists of staff from different departments of P Company. This is seen to be
important by the Board of Directors, as a number of different business areas in P Company are
dependent on the new website going live successfully and on time. The Board of Directors has
also appointed G to be the project manager responsible for the development and
implementation of this new website. G only joined P Company six months ago as an IT
Manager, and she has never previously taken on the role of a project manager. She was chosen
by the IT Director to be the project manager on the basis of her strong technical knowledge and
experience in website development.
However, G has expressed concerns to the Board of Directors about her appointment as project
manager on this strategically important project. She feels that she has a very limited
understanding of the roles and responsibilities of a project manager. She is used to the day to
day operations of the IT Department and is most comfortable with the technical aspects of the
project, but feels that she does not have the range of skills necessary to lead such an important
project.
Required:
(a)
Distinguish the characteristics of the website development project in P Company

from the characteristics of 'business as usual' work.
(10 marks)
(b)
Explain to G the role and responsibilities of the project manager for the new website
development project.
(15 marks)
Section B continues on the next page
TURN OVER
May 2011
Question Seven
PR has recently joined FPC Company as the new Finance Director. He is required to work
towards getting the finance staff to play a fuller role in the company, becoming more integrated
into the strategic and business activities of the organisation. However, PR is aware that this will
not be an easy task since his impression is that the Finance Department has a very poor
reputation in the company, and current relationships between the finance staff and other
departments are not good.
Having discussed the poor perception with other department heads, it is clear that the finance
staff are generally viewed as being unhelpful. Many of the complaints surround poor
communications. A consistent comment made is that messages received from the Finance
Department are too complicated and that too much financial jargon is used. Another common
observation is that at inter-department meetings, the finance team use 'financial speak' which
other members of staff find hard to understand. The finance staff have an obsession with
financial indicators, and do not appreciate that there are other factors which inform decisions. It
is also felt that too many emails are sent from the Finance Department, and it is often difficult to
find the relevant information on some of the financial spreadsheets circulated which are
supposed to help in decision making.
PR has noted that many of the staff in the Finance Department are de-motivated. None of them
appear to have clear targets and objectives, and they have told him that they have had no
feedback on their performance and staff development simply has not existed. PR has
established that, whilst there is a company-wide staff performance appraisal system in place,
none of the staff in his department have had an appraisal in recent years.
PR has identified a number of immediate actions to improve the performance of the Finance
Department. He has decided that all staff in the Finance Department need training to improve
their communication skills. He also intends to make sure the company's appraisal system is
implemented and that all staff in his department will have an appraisal in the next three months.
Required:
(a)
Discuss what should be covered in the series of training sessions to help members of
staff in the Finance Department improve their communication skills.
(15 marks)
(b)
Explain how implementing FPC Company's staff appraisal system in the Finance
Department could help improve the performance of staff.
(10 marks)
May 2011

LEARNING OBJECTIVE
Level 1- KNOWLEDGE
Level 2 - COMPREHENSION
VERBS USED
DEFINITION
List
State
Define
Make a list of
Describe
Distinguish
Explain
Identify

Make clear or intelligible/State the meaning or purpose of
consideration
something
Illustrate
Level 3 - APPLICATION
Apply
Calculate
Demonstrate
Prepare
Reconcile
Solve
Tabulate
Level 4 - ANALYSIS
Level 5 - EVALUATION
May 2011
Analyse
Categorise

practical means
Find an answer to
Arrange in a table
Construct
Discuss
Interpret
Prioritise
Produce

between
Build up or compile
Advise
Evaluate
Recommend

Enterprise Pillar
May 2011
Tuesday Afternoon Session
May 2011

SECTION A
Some of the answers that follow in Sections A and B are fuller and more comprehensive than
would be expected from a well-prepared candidate. They have been written in this way to aid
teaching, study and revision for tutors and candidates alike.

Porter's Five Forces model is a useful framework that FF Supermarket could use to help it
assess the attractiveness of the supermarket industry. Industry attractiveness refers to the
potential for profitability that derives from competing in that industry. Each industrys
attractiveness, or profitability potential, is a direct result of interaction of different environment
and industry forces that affect the nature of competition.
The model brings together the following five competitive forces:
Threat of new entrants/barriers to entry

Bargaining power of suppliers
Bargaining power of buyers
Threat of substitute products/services
Competitive rivalry
It is the collective strength of these forces that will determine the profit potential of the
supermarket industry. For example:
Barriers to entry are those factors which will need to be overcome by new entrants if
they are to compete successfully in the supermarket industry. Barriers for the
supermarket industry might include, high capital requirement to entry, access to
supply channels, customer or supplier loyalty, experience, expected retaliation by
existing players. Understanding whether the barriers to entry are high or low would
help FF Supermarket appreciate the likelihood of new entrants moving into its
industry and how it could increase barriers.
The bargaining power of suppliers is primarily related to the power suppliers have to
raise their prices. If the suppliers have high power then this could influence the
margins of FF Supermarket in an unfavourable way and hence have direct
consequences for the profitability of the supermarket. Power of suppliers will be
higher where the supply is dominated by a few firms, which is an unlikely scenario for
the supermarket industry. Power will also be higher where there are significant
switching costs associated with moving to another supplier.
The bargaining power of buyers is gained through their ability to force prices down, or
get improved product quality. It also depends on the size and number of buyers.
Power will be greater when buyer power is concentrated in a few hands and when the
offering is undifferentiated. In terms of the supermarket sector, there are low
May 2011
switching costs for buyers, so supermarkets have tried to differentiate on bases other
than range of products to reduce buyer power.
Pressure from substitutes is where there are other products that satisfy the same
need. For the supermarket general substitution is prevalent. FF Supermarket will
need to understand how to retain customers, perhaps for example through the use of
a loyalty card.
Rivalry amongst existing competitors refers to direct competition between an

organisation and its immediate rivals, i.e. those organisations offering similar
products/services. It will be influenced by the number of firms operating in the
industry, and industry growth rates. If there are numerous organisations, particularly
with strong brands, and there is low industry growth then this will not be an attractive
industry. FF supermarket will need to develop aggressive strategies to compete in
such industry conditions.
The outcomes from the analysis can be used to derive conclusions about the potential
opportunities and threats facing the supermarket sector. The information from the analysis
would also help in identifying the factors driving profitability and inform the competitive
strategy needed.
May 2011

Requirement (a)
A Work Breakdown Structure (WBS) is a hierarchical way of organising the project work to be
done into manageable units referred to as work packages. It is a technique used in project
management to divide a project into packages of work which have defined deliverables and
responsibilities. The work packages can then be used to construct a comprehensive list of
activities, set out into a logical sequence of project events.
A Gantt chart can use the information from the WBS process to construct a graphical
representation of the activities of a project shown as a bar chart. Each bar in the graph
represents the period over which a particular activity is scheduled to be performed. It
illustrates the start and finishing time of the various tasks and the resources required for each
activity at a particular point in time of the project.
Requirement (b)
Both WBS and Gantt charts have a role in the project communication project process. For
example:
The WBS process enables work packages to be put into the project plan as a
comprehensive list of tasks and activities that must be undertaken in the project
lifecycle. This can assist the project manager in communicating to the project team
specific responsibilities and work elements that need to be undertaken. It can be used
by the project team to identify and understand project priorities. WBS also provides a
framework for monitoring and control of resources and costs as part of project
progress reporting.
Gantt charts can be used in project communication as a reporting tool in the

monitoring of actual progress of the project against projections/forecasts, for
example, on a week-by-week or day-by-day basis. Gantt charts provide visual
representation of activities and provide an overview of responsibilities of the progress
of the project for the project team, assisting in project coordination.
May 2011

A number of researchers have contributed to theories which have been developed to help
explain the different leadership styles that managers can adopt. One such theory which could
help TR in understanding the alternative styles he could use is Tannenbaum and Schmidts
continuum of leadership behaviours. The continuum is based on the degree of authority used
by a manager and the degree of freedom for the subordinates in decision making.
Tannenbaum and Schmidt identified a range of various styles along the continuum ranging
from boss-centred to employee-centred. Boss-centred tends to be associated with an
authoritarian approach whereas employee-centred is associated with a more democratic or
participative approach.
This theory identifies four different styles labelled, 'tells', 'sells', 'consults' and 'joins' which
reflect the degree of authority used by a manager and the degree of freedom for the
subordinates in decision making. Taking each style in turn:
'Tells' is where TR would make all the decisions and tells the subordinates what to do.
The advantage of this style is that decisions can be made comparatively quickly. The
downside is that staff may resent simply being told of the decision by TR and this
could result in getting compliance rather than commitment from his staff.
'Sells' is where TR would make the decision, but rather than just announcing it or
telling his staff, he would try to persuade them to accept it. As with 'tells', this style
means that decisions can be made quickly by TR, who would have to use his skills of
persuasion in selling the decision. However, staff may feel they have been
manipulated and controlled.
'Consults' is when TR does not make the decisions himself until he has presented the
problems to his staff, hears their views and suggestions and then adopts the solutions
suggested. This approach should mean that staff feel that they have been involved in
the decision making process and hence are more likely to support TR. However,
consulting can be time consuming. TR will need to be willing to take on board the
suggestions made, otherwise staff may feel that they have not really been listened to
and this can be damaging.
'Joins' is where TR would define the problem but then delegates the decision-making
power to his staff. He would indicate the limits within which the decision must be
made. Staff should feel empowered in the decision making process. However, they
may disregard the limits and TR could find a decision made which is unacceptable to
the organisation. Depending on how it is handled, staff may feel that TR is not taking
on responsibility as their leader.
(Marks can be awarded where candidates have used alternative but appropriate theoretical
frameworks to answer the question, for example Blake and Moutons grids; Lewins
leadership styles; Likerts four systems of management)
May 2011

The Chief Executive puts the impressive performance of Z Company down to adopting the
Resource-Based View (RBV) to strategy development.
The RBV is based on the fundamental principle that competitive advantage is derived from
some unique assets or competences possessed by a company. This takes an inside-out
approach to strategy since it is based on harnessing the internal capabilities of the company
to achieve sustainable competitive advantage. This is in contrast to the more traditional
positioning approach which views the external environment as the critical factor in
determining an organisations strategy. The strategic choices when adopting the RBV are not
dictated by the constraints of the external environment but influenced more by examining how
the organisation can best stretch its core competences relative to the opportunities in the
external environment.
The RBV posits that it is the resources and capabilities that reside within an organisation
which help an organisation to develop to achieve competitive advantage. It has developed
from the work of Prahalad and Hamels work on core competences which focuses on the
strategic intent of an organisation to leverage its internal capabilities and core competences to
confront competition. Adopting the RBV would mean that superior performance and
profitability is dependent on the possession of a set of unique resources or abilities that
cannot be easily imitated by its rivals.
The resources of the organisation are essentially the inputs that enable it to carry out its
activities and can be catergorised into two types: tangible and intangible resources.
Tangible resources are essentially the physical inputs into an organisation that can be seen,
for example plant and equipment, raw materials, finance, employees. Intangible resources
range from intellectual property rights such as patents, trademarks and copyrights,
technological resources, brand and reputation.
It is suggested that intangible resources are the most likely source to achieve competitive
advantage, as is probably the case for Z Company. This, it could be argued, is because
intangible resources are more difficult to imitate than tangible resources and therefore, more
likely to be a source of sustainable competitive advantage. For resources to be unique,
Barney (1991) suggests that they must add value, be rare, difficult to imitate and cannot be
easily substituted.
Resources alone, however, are not a basis for competitive advantage. Differential
performance is based on how an organisation utlilises its resources. For example, one of the
most important resources for an organisation is the skill and knowledge possessed by the
organisations employees. It is this skill and knowledge acquired over time and embedded in
the organisations culture that influences how it operates and determines its success.
Competences become core competences if they are difficult for the competition to acquire.
When competences are rare, difficult to imitate, non-substitutable, and allow opportunities to
be exploited or threats neutralised, then they can be considered core competences and serve
as the basis of an organisations sustained competitive advantage.
Z Companys capabilities appear to be its ability to innovate at a fast pace, its design
capability and ability for fast product development. Capacity for innovation is not something
that can easily be acquired so could be viewed as providing sustainable competitive
advantage.
May 2011

The overriding purpose of gathering competitor intelligence is to identify the specific
competitive advantage of rival organisations. This would help K Company in developing a
better understanding of the strengths and weaknesses of its potential competitors and to help
predict competitor behaviour were it to follow through with its plans to open up showrooms in
other parts of the country.
Having identified which part of the country to concentrate on, the first step would require K
Company to make a choice on which competitors it should collect information about. This
could be based on which of its competitors it perceives as posing the greatest threat. This is
likely to include both local businesses and other larger chains like K Company itself.
K Company would need to collect intelligence to help it understand the strategic resources of
its main competitors. In other words, those resources which set competitors apart from other
players in the industry. It would involve undertaking competitor profiling. This is the basic
analysis of key competitors investigating, for example, their objectives, resources, market
strength, products and services and current strategies. In terms of the types of intelligence
that would be helpful, this might include:
Information on current products and services. It is important to collect information not

only about the competitors products/services, but also their segmentation strategies,
branding and image, and customer segments targeted.
Understanding of the present strategies of key competitors. This could be identified
from what the company actually does. Information on explicit statements of intent
could be gained from annual reports and presentations to financial analysts.
Indentifying competitors objectives. For example, is a particular competitor seeking
sales growth or market share growth in an aggressive manner? Is it investing in new
premises?
Identifying the competitors resources and capabilities. This will therefore involve
gathering information on their management profiles, organisational structure, financial
strength and technologies to understand not only what they are doing now, but also
what they are capable of doing in the future. The scale and size of the companys
resources are both important indicators of the competitors threat.
To find out the above information will involve collecting both qualitative and quantitative
information. The gathering of information should be viewed as a continual process, hence
competitor rivals should be continuously monitored for signs of activity and the industry
scanned for the emergence of potential new rivals.
There are a range of different sources available to K Company which could be accessed to
gain information about its potential competitors, for example:
Web based Home pages of competitors
Annual report and accounts
Newspaper articles and on-line data sources on company information using, for
example, LexisNexis
Magazines and journals including trade media, business management and technical
journals
On-line data services such as FAME to collect financial and statistical information
Directories and yearbooks covering particular industries
Market research reports and reviews produced by specialist firms such as Mintel,
Economist Intelligence Unit, which might provide information on market share and
marketing activity.
Customer market research could be independently commissioned to establish
consumer attitudes and awareness towards K Company's potential competitors in the
various regions.
May 2011
SECTION B

Requirement (a)
The website development project will have a number of characteristics or attributes that
distinguish it from 'business as usual' work:
A project is usually undertaken to meet two sets of objectives: one relating to the
accomplishment of the customer requirements of scope (i.e. the deliverables),
quantity, quality and cost, and the other relating to the achievement of the
organisation's objectives of profitability and reputation etc.
The project will have a clearly defined start and end time and will usually be
determined in terms of the scope, schedule and cost. In this case, the objective of the
project is to develop a new website. The project will be focussed on the tasks needed
to design and implement the new website within the stated time period. All tasks must
be scheduled to meet this pre-determined end date.
The project will also have stakeholders, i.e. all those who are interested in the
progress and final outcome of the website. For example, the project will have a
project sponsor, that is, the individual or group who will provide the funds for the
project and who may also chair the project steering committee (or project board) to
which the project manager reports. Other project stakeholders will be the project
customer/end users and the project owner.
The project will have a lifecycle, in that it will pass through a number of phases,
starting with the identification of need, followed by the development of the product,
implementation and completion. The project is also finite as it has a fixed timescale.
The website development project will have a budget allocated to deliver its objectives.
The project manager must plan the project activities within this budget for costs and
resources needed.
A key feature of a project is that it is unique, in other words it is a non-repetitive

activity and does not usually involve routine work. Development of the new website
will be a one-off activity. Each project is unlikely to have occurred in the organisation
before and each project will differ in some way or other from other projects, even if
they have similar outcomes and deliverables.
A project will inevitably have some degree of uncertainty as the uniqueness of it will
lead to some degree of risk in the deliverables and the activities to achieve the
deliverables.
Requirement (b)
G, as the project manager, will play a key role in the success or failure of the website
development project. She will be the person ultimately responsible for ensuring that the final
desired website is achieved on time and within budget to the satisfaction of the project
stakeholders (i.e. P Company's customers, the internal department users and the Board of
Directors as the project sponsors. As the project team is multi-disciplinary, she will have a
complex role in co-ordinating, managing, controlling and communicating the project tasks.
A key role of the project manager is the management of the team members, so G must take
responsibility for the whole project team which is carrying out the various project tasks in
order to achieve the project objectives. G will be responsible for planning, team building,
communication and co-ordinating the various project activities, monitoring and controlling,
problem resolution and quality control.
May 2011
G will also have responsibilities, as the project manager, to the project sponsor (i.e. the Board
of Directors) in ensuring that resources are used efficiently. G will need to keep the project
steering committee informed and up to date with timely and accurate project comunication. G
will also need to co-ordinate the communication process between the various project
stakeholders.
G will also be responsible for co-ordinating the project from initiation to completion, by making
use of a wide variety of project management tools and techniques so that activities are
performed on time, within budget and to the quality standards set out in the project plan.
G will also have responsibility for taking the lead in the planning and organisation of work for
the project team throughout the project. She will be responsible for ensuring that the
necessary resources (people, finance, information, materials, time, etc.) required for
performing the project tasks are available. She will also be responsible for assigning particular
tasks to the project team members to carry out. She will need to delegate responsibility for
performing certain project tasks to team members who will then be accountable to her for the
accomplishment of those tasks.
G will be responsible for building a cohesive and productive project team and also for
supervising the activities of individual team members throughout every stage of the project.
She will need to provide advice or make appropriate decisions in the case of technical
difficulties or problems, and must be able to respond and take appropriate action to keep the
website development project on target for successful completion.
G is responsible for monitoring and controlling the progress of the project towards its
successful completion. She must take corrective action and solve any problems as they arise
in the project and communicate the implications of any changes to planned activities.
From the above, it is clear that in view of the various responsibilities of the project manager's
role, G cannot rely solely on her technical skills in website development, but rather needs a
wide range of skills. For example, G needs strong leadership and team building skills,
communication, negotiation, good interpersonal skills and also problem solving skills. These
may be lacking from her previous experience in other organisations.
May 2011

Requirement (a)
If the finance staff are to play a fuller role in FPC Company they will require a broader
understanding of business. They will need to be trained not just to furnish and assemble
financial information but draw insights and to communicate these effectively to support other
functions in the company in decision making. To achieve this, developing effective
communication skills will be crucial.
The training on communication could start by getting the Finance Department staff to explore
the barriers that currently exist in their communications with other members of the company.
For example, helping them to appreciate that the messages they currently send are often too
complex and are not fully understood by the other members of staff because of the technical
jargon used. Also, that the receivers feel that they are overloaded with emails from the
Finance Department and it can be difficult to find relevant information on the spreadsheets
they receive. Hence, they may not be picking up the most important elements of the message
to inform decisions.
The training could make reference to the communication process model (see diagram below)
as a framework to help the finance team understand the different elements in the
communication process which could help them improve their skills.
NOISE
SENDER
Coded
Message
Medium
Channel
Decoded
Message
RECEIVER
The training should provide an explanation of the things the sender needs to do to be
effective in communication. This would include ensuring that the sender of the message is
clear on its purpose with the receiver in mind. The sender of the message should have a clear
objective in terms of what he/she wants to achieve from the communication. For example, is
the communication aimed at providing information, or does it require specific actions to be
taken. This needs to be coded into messages in a way that is understood by its audience.To
make communication effective the sender of the message should plan the communication.
For example, the sender needs to think about what is to be communicated, to whom it is to be
communicated and the best medium to use for the message. For instance should the
message be communicated verbally or written, formal or informal etc?
The training could also cover issues associated with the medium used. It is important to select
the most appropriate language and medium for the message thinking about the situation that
the receiver will be in when the message is received. When creating a message, care needs
to be taken so as not to cause confusion in the communication process through the overuse
of jargon or lack of fluency in the message to ensure that communications are not being made
unnecessarily complex.
Moving through the process of the communication to the receiver, the training should help the
finance staff to understand the need to anticipate possible reactions by the receivers to the
message and cater for these through the message or choice of medium. For example, if the
message from the Finance Department relates to bad news about the financial position or
budgets then this could upset the recipient and it would therefore be appropriate to use face
to face communications.
Finance staff should also be made aware of the concepts of individual bias and selectivity and
the implications of this for the receiver, i.e. people often hear and see what they want to. To
help minimise this problem they should view communication as a two way process,
May 2011
encouraging feedback from the receiver. Feedback is often a neglected part of the
communication process, but provides a crucial check for the finance staff to ascertain if their
messages have been correctly understood and interpreted.
The training should highlight the concept of noise that can occur in the communication
process. This refers to any distractions or interference in the environment in which the
communication is taking place and which can impede the transmission of the message. It
happens when the message becomes distorted by extraneous factors between the sender
and the receiver of the message such as distractions in the environment, information
overload, such as the overuse of emails for complex messages. People can feel weighed
down by the high volumes of information that are being transmitted, and hence ignore the
communication.
The training should also cover non verbal communication. For instance, it is important that
any non verbal communication reinforces verbal messages and does not undermine them. If
the medium channel selected involves personal presentations, such as finance briefings, then
it is important to ensure that all elements of communication, for instance words used, tone
and non verbal signals (gestures, facial expressions, and posture) all fit with each other rather
than contradict, so as not to confuse the receiver.
The overriding aim in terms of improving the communication skills of staff in the Finance
Department should be to improve relationships enabling them to make a greater contribution
taking on a partnership role in decision making, rather than simply a provider of information.
Requirement (b)
A staff performance appraisal system can be viewed as a method of internal control which
can be used to assess employees performance, potential and development needs. It could
be used in the Finance Department of FPC Company to help influence the behaviour of staff
in order to improve effectiveness and performance in the drive to achieve the departments
objectives.
An appraisal system consists of a number of elements which together will help improve
performance of staff in the following ways:
Clearly Defined Performance Standards
Appraisals are designed to measure an individuals contribution to the organisation in as
objective a way as possible. The process involves setting criteria for assessment and the
agreement of objectives with members of staff. Therefore, staff in the Finance Department
should be clearer on their key deliverables with greater clarity on what they are trying to
achieve.
The performance measures should link an individuals objectives with those of not only the
Finance Department but also with key strategic objectives and priorities of FPC Company.
This would help individuals in having a better understanding of their responsibilities and how
their contribution fits with the strategic business objectives of the company, to provide a
unifying framework.
Effective monitoring system
As an example of an internal control system, staff appraisal would provide a system whereby
their performance is measured against objectives. Through the appraisal process individual
performance can be compared against the objectives set. Performance appraisal should
therefore help staff in the Finance Department to be aware of how they are progressing in
relation to the agreed targets set and can be used to ensure any problems are identified.
Where there are gaps, the reasons can be discussed to help staff understand the areas they
need to focus on to improve their performance, to correct problems and encourage better
future performance.
Regular Discussions on Performance
Research has shown that individuals have a strong need to know how they are doing, but to
date this does not appear to have been happening in the Finance Department. The appraisal
May 2011
10
process should provide the opportunity for open communications between staff and the
manager. If carried out properly, it should be motivational since it is an opportunity for staff to
reflect on their performance, reviewing past performance, receiving feedback from their
manager with discussions on how to improve. In addition, a good appraisal system should be
a continual process with regular discussions and feedback. This should provide for a positive
experience for all staff, strengthening management/subordinate relations and raising the self
esteem of staff, through helping them to improve performance and develop.
Development of Appropriate Action Plans
An effective performance appraisal system should be viewed as a problem solving,
participative and developmental activity rather than just a management tool of internal control.
The appraisal process should provide the opportunity to recognise and agree individual
training and development needs and discuss future career aspirations necessary to achieve
future goals. Appraisal will therefore help identify potential and inform decisions on promotion,
and help employees in think about their career development. This can be instrumental in
keeping employees motivated through recognition which should increase staff satisfaction
To derive the benefits it is important that there are jointly agreed outcomes from the appraisal
process and there is good follow up. Actions need to be agreed by both the appraiser and
appraisee and monitored to make sure they do take place. For example, if training needs are
identified, and the member of staff in the Finance Department does not actually receive the
training, this failure to follow up may lead to cynicism on the part of staff.
An appraisal system can have a profound effect on the levels of employee satisfaction and
motivation through management recognition and interest in individual performance.
If the appraisal system is properly used then it should help improve the motivation and
performance of individuals and enhance the effectiveness of the Finance Department.
11
May 2011
Management Level
Friday 2 September 2011
Enterprise Pillar
TURN OVER
SECTION A 50 MARKS

Question One
When J was promoted to be the new Sales and Marketing Manager for Company L, after
working there in different capacities over the last ten years, it was a popular choice among her
co-employees. J was always a good team player and enjoyed helping individuals. However, in
the six months since her promotion, although staff morale has never been higher, sales have
dropped and targets have not been met.
J is now under pressure from senior management to improve the level of performance of the
sales and marketing team which she leads. It has been suggested to J, by a senior manager,
that her management style has not been as effective as it could be, and that she needs to
change her approach to leadership, paying more attention to the task. J disagrees and claims
that it is outside factors that are to blame for the poor performance, rather than her leadership
style.
Required:
Compare and contrast J's current style of management with the one it is suggested she
should adopt. You should support your answer with reference to relevant management
style/leadership theories.
Question Two
Porter's Diamond is a useful framework that can help an organisation in identifying the extent to
which it can build on home based national advantages to create competitive advantage, when
compared with its industry competitors from different countries.
Required:
Discuss the four interacting determinants in Porter's Diamond framework that explain the
sources of national competitive advantage.
September 2011
Question Three
C Consultancy Company provides management consultancy to a range of organisations. It
employs staff who have different industry backgrounds and who also offer different specialisms,
for example, in finance, marketing, IT, leadership, change management and logistics. The
Company is currently organised around these specialist areas, with each specialism having a
senior manager in charge. However, for some of its project work it is necessary to adopt a
matrix structure to meet the clients requirements.
Required:
(a)
Describe the key characteristics of a matrix project structure.

(4 marks)
(b)
Explain the advantages and disadvantages of a matrix project structure for C

Consultancy Company's project work.
(6 marks)
Question Four
S is enrolled on T Company's management development programme. Although S has a
financial background, the aim of the management development programme is to help him to
gain a better appreciation of the external and competitive environment in which T Company
operates. As part of the management development programme, S has been asked to make a
presentation to his peers on the importance of undertaking competitive analysis and the types of
information that need to be collected for this purpose.
Required:
Explain what S's presentation should include on:
(a)
why undertaking competitive analysis is important.

(4 marks)
(b)
the types of information that should be collected when undertaking competitor

analysis.
(6 marks)

TURN OVER
September 2011
Question Five
There are different views on how an organisation can gain competitive advantage, but
contemporary research is placing greater emphasis on the resource-based view.
Required:
Explain the concept of competitive advantage AND what is meant by the resource-based
view.
End of Section A
September 2011
SECTION B 50 MARKS
Question Six
DG Company has made a significant investment in a project to develop a new client
management IT system, which when implemented should help give the company a competitive
edge. However, all is not well with the management of the project and B, the project sponsor, is
particularly concerned about the progress.
There appear to have been a series of problems throughout the project which B feels she should
have been alerted to. The result has been that the project manager she had appointed has now
resigned, complaining that he was unclear on his role in the project, and that B was constantly
interfering.
B has now appointed R, an experienced project manager, to get the project back on track, and
is keen that, from the start, they are both clear of their roles and responsibilities.
R has reviewed the project and is preparing for his first meeting with B. However, he has found it
difficult to establish the status of the project, which seems to have been previously run without
adequate controls in place. He is finding it hard to track down the project documentation, and it
would seem that the project is running significantly over budget and time. In addition, the project
team appears to be de-motivated and is unclear on what each member of the team is doing.
R intends to suggest to B that a formal project methodology such as PRINCE2 should now be
used.
Required:
(a)
Explain how using a project management methodology, such as PRINCE2, could

help minimise the problems that have occurred in the client management IT system
project.
(15 marks)
(b)
Distinguish between the roles of B as the project sponsor and R, the project
manager.
(10 marks)
TURN OVER
September 2011
Question Seven
In response to changing customer demands and strong competition, the new product
development team of Z Company has been working on a new product range. However, the
process has not been easy and conflict between different interest groups is a major problem.
For instance, the Marketing Department staff are complaining that the research and
development staff are not working quickly enough in translating their ideas into possible
products. Production staff are saying that no consideration has been given to the implications of
the new product designs on the production process.
A hastily convened meeting by the Finance Director of Z Company to discuss the financial
viability of the new range of products has not helped. This ended in chaos with no agreement
being reached as to how to proceed. Members of the Marketing Department returned to their
desks complaining that the finance team had not brought along the relevant information on
which to base the discussions. They also felt they had not been allowed to voice their views
during the meeting, which was dominated by financial speak. Members of the Production
Department were unclear on why they had been asked to attend at all and felt they had wasted
their time. It is clear that the meeting was poorly run.
Required:
(a)
Explain the sources of conflict between the different groups involved in the new
product development process.
(13 marks)
(b)
Discuss what the Finance Director should do to ensure that future meetings are
effective in achieving satisfactory outcomes for all members.
(12 marks)
September 2011

LEARNING OBJECTIVE
Level 1- KNOWLEDGE
VERBS USED
DEFINITION
List
State
Define
Make a list of
Describe
Distinguish
Explain
Identify

consideration
something
Illustrate
Apply
Calculate
Demonstrate
Prepare
Reconcile
Solve
Tabulate
Level 4 - ANALYSIS
September 2011
Analyse
Categorise

practical means
Find an answer to
Arrange in a table
Construct
Discuss
Interpret
Prioritise
Produce

between
Build up or compile
Advise
Evaluate
Recommend

Enterprise Pillar
September 2011
Friday Session
September 2011
The Examiner's Answers September 2011

SECTION A

There are a number of different management styles and leadership theories which could be
used to compare and contrast Js approach and the approach senior management thinks she
should adopt.
It would seem from the scenario information that Js approach is more people centred than
task centred. Adairs action centred leadership model is based on the premise that effective
leadership requires the bringing together of task, team and individual needs. In Js case,
senior management is suggesting that J has a focus on the needs of the individual and the
group, but has not paid sufficient attention to the task achievement.
The Blake and Mouton managerial grid provides a useful framework for understanding and
applying effective management. The grid was developed from the precept that management
is essentially concerned with production and people. The grid suggests that any combination
of concern for production and concern for people may be present in an organisation.
Using the Blake and Mouton grid, perhaps J could be viewed as adopting the country club
approach to management where the emphasis is on people. People are encouraged and
supported and any inadequacies are overlooked on the basis that they are doing their best
and that coercion or a more authoritive/directive approach would not improve things.
It could be argued that senior management wants J to adopt a task oriented style where the
emphasis is on achieving the task, without concern for people. J would be responsible for
planning, directing and controlling the work of her subordinates, treating people as
commodities or machines.
In fact the most effective approach would bring together both Js current approach and the
approach her senior management team suggests. This is a team style, and whilst it might be
viewed as idealistic it advocates a high degree of concern for both production and people. It
endeavours to discover the best and most effective solutions aimed at the highest attainable
level of production to which all involved contribute and in which everyone finds a sense of
achievement. In adopting this approach J would assume that employees are committed to the
organisation, and that any conflict which occurs can be successfully managed.
Note from examiner: Although this answer has been based on Adairs action centred
leadership, and Blake and Mouton Managerial Grid, alternative management style and
leadership theories could be used to develop the answer.
September 2011

Porter's Diamond is based on four interacting determinants that assist the country, and hence
individual organisations operating in that country, to be more competitive in international
markets. These are factor conditions; home demand conditions; related and supporting
industries; firm strategy, structure and rivalry.
Taking each determinant in turn:
Factor conditions refer to the factors of production that go into making a product or
service. Different nations have different stocks of factors which can be categorised as
human resources; physical resources; knowledge; capital; infrastructure. It is not
sufficient to have an abundance of the factors, rather it is the efficiency with which
they are deployed that is important.
Porter also distinguished between basic factors, which he claims are unsustainable
as a source of competitive advantage, and advanced factors.
Home demand conditions refer to the nature of the domestic customer becoming a
source of competitive advantage. Dealing with sophisticated and demanding
customers with high expectations in an organisation's home market will help drive
innovation and quality, which in turn will help an organisation to be effective in other
countries.
Although economies of scale are relevant, it is not necessarily about the quantity of
home demand but the information that the home market gives organisations and the
impetus to innovate. If the customer needs are understood in the home market earlier
than in the world market, the firms benefit from the experience.
Related and Supporting Industries. Porter proposes that a nation's competitive

industries are clustered, where a cluster is a linking of industries through relationships
which are either vertical (buyer-supplier) or horizontal (common customers,
technology, skills).
Related and supporting industries of local clusters of related and mutually supportive
industries can be a source of competitive advantage. In other words, competitive
success in one industry is linked to the success in related industries. Having a
domestic supplier industry can be preferable to a good foreign supplier as proximity to
managerial and technical people along with cultural similarity can facilitate free and
open information flows.
Firm strategy, industry structure and rivalry are related to the fact that nations are
likely to secure competitive advantage in industries that are more culturally suited to
their normal management practices and industrial structures. For example, industries
in different countries have different time horizons, funding needs and infrastructures.
Fierce domestic rivalry and competition will drive innovation, force down costs and
develop new methods of competing. This can enhance global competitive advantage.
September 2011

Requirement (a)
A matrix structure is based on a dual chain of command and is often used as a structure in
project management. In the case of C Consultancy Company, it would involve establishing
cross specialist teams, as necessary, to work on particular consultancy projects.
Since the consultancy projects will be time bound, a matrix structure provides a way of
resourcing and organising work, bringing people together to work on a particular client project
and then returning to their specialist area.
Consultants would have a dual role in terms of belonging to their specialist area as well as
being a member of a project team. This would mean reporting to both the senior manager of
the specialist area and the project manager for their work on a particular consultancy project.
Requirement (b)
The matrix structure could bring a number of advantages to consultancy project work. For
instance, it would bring together a wide range of expertise cutting across specialisms to work
on a client project. This would also enable the company to offer a broader portfolio of
consultancy interventions. From an employee perspective, it can facilitate the development of
new skills and adaptation to unexpected problems, broadening a specialists outlook by
working with others.
Whilst there are benefits, there can be disadvantages to the matrix project structure. One of
the main problems is associated with the lack of clear responsibilities and potential clashes
and tensions between the different priorities of the project tasks and the specialist area.
Employees may end up being confused by having to report to two bosses and deciding
whose work should take precedence. Conflicts may arise due to the differences in the
backgrounds and interests of staff from different specialist areas working together, and some
attention will be required to assist team development in the early stages of the project.
The project manager may be reluctant to impose authority as they may be subordinates in
later projects.
September 2011

Requirement (a)
In explaining why undertaking competitor analysis is important, the presentation should
include points on the following:
The overriding purpose of gathering competitor intelligence is to identify the specific

competitive advantage of rival organisations. This would help the company in
developing a better understanding of strengths and weaknesses of its potential
competitors and to help predict competitor behaviour.
It should also help management in understanding the competitive advantage (or

indeed disadvantage) of the organisation relative to competitors.
It can help in generating insights into the past, present and potential strategies of its
competitors and how they have reacted. This in turn will provide an informed basis for
developing future strategies to sustain and establish advantage over competitors and
to assist with the forecasting of the returns on strategic investments when deciding
between alternative strategies.
Requirement (b)
The second part of the presentation should include points to highlight the types of information
that should be collected on competitors.
The first point would be to identify the competitors for which information should be collected.
This could be based on which competitors it perceives as posing the greatest threat.
Other types of information that should be collected as part of competitor analysis include:
The present strategies of key competitors, for example; how is the firm competing
and where the firm is competing.
Identifying competitors' current goals and objectives. For example, is a particular

competitor seeking sales growth or market share growth in an aggressive manner? Is
it investing in new premises?
Information on competitors' current products and services. Also their segmentation

strategies, branding and image, and the customer segments targeted.
Identifying the competitors' resources and capabilities. This will therefore involve
gathering information on their management profiles, organisational structure, financial
strength and technologies to understand not only what they are doing now, but also
what they are capable of doing in the future. The scale and size of the company's
resources are both important indicators of the competitor's threat.
September 2011

Competitive advantage refers to the significant advantages that an organisation has over its
competitors. It can be gained on the basis of price or through some form of differentiation,
such as quality of service, product design or branding which allows an organisation to charge
higher prices for its products/services.
The resource based view (RBV) to achieving competitive advantage is a more recent
paradigm of strategic management. This is an inside-out-view where competitive advantage is
gained from the exploitation of an organisation's resources, competences and capabilities. In
other words, it refers to the distinctive groups of skill that would allow an organisation to
provide particular benefits and deliver competitor advantage and is not dictated by the
constraints of the external environment.
The RBV approach emphasises the development of strategy based on internal capability,
hence an organisation would need to use strategic management frameworks that would help
it in understanding the internal aspects of the organisation. In other words, to determine what
it is good at, what its strengths are and what its weaknesses are.
Adopting the RBV means that superior profitability would depend on its possession of unique
resources or abilities that cannot be easily imitated by its rivals. The assumption here is that
an organisation is a collection of resources, capabilities and competences that are relatively
unique. These can provide the basis for an organisation's strategic development and its ability
to compete better than those of competitors.
The RBV has developed from the work of Prahalad and Hamels work on core competences
which focuses on the strategic intent of an organisation to leverage its internal capabilities
and core competences to confront competition. This is sometimes referred to as strategic
stretch.
Resources can be tangible, such as plant and equipment, access to raw materials and
finance, trained/skilled workforce or intangible such as brand and intellectual property.
However, it is the way the resources are used which provides the capability to compete. For
resources to be unique, Barney (1991) suggests that they must add value, be rare, difficult to
imitate and cannot be easily substituted.
Intangible resources are often the most likely to create sources of competitive advantage, as
it is argued that they are more difficult for competitors to understand and imitate. In addition, it
is the way resources are integrated with each other to perform a task or activity that provides
the capability or competence for an organisation to compete. Therefore, one of the most
important resources for an organisation is the skill and knowledge possessed by the
organisation's employees, which is acquired over time and embedded in its culture.
September 2011
SECTION B

Requirement (a)
PRINCE2 is an acronym for Projects In Controlled Environments and is a structured approach
to project management. Essentially it provides a project framework with a set of project tools,
guidelines and standards. It includes bureaucratic controls on the planning and execution so
that any potential problems that may arise are identified and can be resolved early in the
process. Whilst it could be argued that aspects of PRINCE2 could be considered to be just
good project management, the difference is in the level of structure and documentation
required.
The key processes of PRINCE2 methodology offer a number of features that would help the
client management IT system project, including:
A defined management structure of roles and responsibilities

A system of plans
A set of control procedures
A focus on product based planning
The key processes and documentation of PRINCE2 would provide the project team with a
clear structure of authority and responsibility between members in the project team, so that
each party has clear objectives. As part of this, the control responsibilities of the various
members of the project team would be determined.
The methodology can help in the future planning of the project, which R will need to do to get
the project back on track. The PRINCE2 hierarchy of plans include:
The overall project plan.
Individual work plans for each project team member.
Stage plans - which involves preparing plans for each stage. This assists in managing
stage boundaries in terms of ensuring that all deliverables planned in a current stage
have been completed as defined before authorising the next stage.
The exception plan which is used when there are signs that the project is slipping
behind schedule or deviating from budget or quality targets. If the project is going to
exceed its tolerance, for example variances in time, cost or quality, this would be
reported to the project board including B, the project sponsor. The implications on the
whole project deliverables would then be discussed and plans amended to reflect any
changes needed to ensure the project delivers its objectives.
PRINCE2 has a set of progressive documents for a project and control is achieved through
the authorisation of work packages. These include controls on quality, time and costs and
identify reports and handover requirements, all of which appear to be problems with regard to
the client management IT system project.
The methodology also includes a series of management products, for example, project
initiation documents, project budget, quality plan and various checkpoint and progress reports
which would improve controls for the project.
PRINCE2 would divide the project into:
Technical products, which are the things the project has been set up to provide to
users.
Quality products, which define the quality standards the technical product must
achieve.
September 2011
Management products, which include project management structure planning

documentation and reports.
Requirement (b)
B, as the project sponsor, is the person who will initiate the project and appoint the project
manager. She will make the resources available for the project and would be responsible for
approving the project plan. B will also expect to receive status reports as the project
progresses to see that key milestones have been reached. If any changes are made to the
plan during the project lifecycle, then the project sponsor will need to be informed.
The project sponsor will primarily take the role of watching over the project, she will not get
involved in the day to day operational aspects of project management. However, she will
provide support and senior management commitment to the project, acting when appropriate
as a champion for the project. B will also be responsible for overseeing the financial aspects
of the project, and may need to approve any capital expenditure if it is over a certain budget.
In contrast, R, as the project manager, will take responsibility for planning the various
activities of the project. He will want to ensure the success of the project in terms of delivering
its objectives on time and within budget. He will need to secure stakeholder approval, inform
key stakeholders of progress and manage the different expectations of the various
stakeholders including, for instance, the project sponsor and the project customer.
R's role will involve co-ordinating, controlling and communicating project activities on a day to
day basis. This will involve securing and allocating project resources, monitoring project
progress and controlling costs. He will need to keep B, the project sponsor, informed of
progress and alert her to any serious problems which could impact on achieving the project
objectives, should they occur.
As project manager, R will be responsible for leading and motivating the project team and
fostering a collaborative working environment. He may need to manage any conflicts within
the project team.
However well planned a project is, if problems do occur it will be the responsibility of the
project manager to be the negotiator and to resolve problems.
September 2011

Requirement (a)
Organisational conflict can occur on a number of different levels and can have a detrimental
impact on the business. The conflict in Z Company is best characterised as horizontal conflict.
This is where conflict occurs between groups or departments at the same level in the
hierarchy. A number of factors play a part in creating the conflict:
Goal incompatibility is often the main cause, where the goals of one area block the
achievement by other areas. In Z Company, the functional structure of the organisation could
encourage employee loyalty to particular departments with employees wanting to concentrate
on their own goals. The goals of different departments are often seen as mutually exclusive.
This can result in conflict and lack of cooperation between different departments during the
New Product Development (NPD) process.
Goals of innovation often can cause more conflict than other goals since the NPD process
requires departments to co-operate. However, where there is an increase in task
interdependence between different departments, then the potential for conflict increases. This
is because the greater interdependence means that departments may exert pressure for fast
response because the work in one department has to wait on other departments. Employees
will need to spend time sharing information and communicating. As a result, differences in
goals and attitudes can emerge leading to conflict. There appears to be a lack of
understanding and appreciation of the pressures and needs of other departments during the
NPD process.
For example whilst the Research & Development (R & D) Department wants to come up with
the best possible product range from a technical perspective, in doing so it may not take
account of the cost aspect, nor of the implications for the production of the new products,
which will be of concern for the Production Department.
The marketing sales staff will want a new product range ready for the sales team. The
Finance Department is viewed very much as a controller and an obstacle to the NPD process.
The marketers and R&D staff may see finance as only taking a short term view rather than
investing for the future of the company.
Another source that can lead to horizontal conflict are the differences in the personalities,
attitudes and experience of managers in different functional departments. This is often
apparent between the different values of those working in marketing, finance and R &D. This
stems from the different skills, qualifications and time horizons of the people working in these
different areas.
Requirement (b)
Meetings can take up a significant amount of time and should, ideally, be seen to benefit
those who attend. However, as in the scenario, people often leave meetings feeling frustrated
at the time spent without any useful outcomes for them.
As a first step, the Finance Director should prepare for the meeting, set clear objectives on
the purpose of the meeting, and establish who from the project team needs to attend. This
should ensure that the time is not wasted for people who do not need to be there and to
ensure the objectives of the meeting can be achieved. A practical aspect is to make
arrangements in terms of the location and time of the meeting to encourage attendance.
An agenda should be drawn up by the Finance Director in advance and circulated to those
attending. The agenda should provide a focus for the discussion and allow people to prepare
before coming to the meeting, ensuring that they have relevant information with them. In the
scenario, it is likely this had not been done since the necessary information from finance was
not brought along to the meeting.
September 2011
Other common problems that can occur during the meeting stem from having an ineffective
chairperson, which can then result in the domination of discussion by a few people, conflict
between attendees and the agenda items being unrealistic or badly structured. These
problems can be addressed by the Finance Director acting as an effective chairperson.
Ideally there will also be a secretary or administrator who will be responsible for taking the
minutes at the meetings.
The Finance Director should impose some order on the meeting and ask participants to
contribute in accordance with meeting protocols, such as time constraints. His role is to
facilitate discussion at the meeting. The Finance Director should also be able to manage
conflict should it arise in a meeting and control any disruptive elements. Whilst encouraging
constructive debate the skill is in limiting the scope of the discussion to agenda items.
Throughout the meeting the Finance Director should summarise and clarify key points made,
explaining any jargon used and check understanding by all attending the meeting. He should
note the actions that need to be taken, by whom and when, so that it is clear who is
responsible for what. At the end of the meeting, a summary of the results should be gone
through so that all participants are clear on the action points and their commitment is gained.
The Finance Director needs to bear in mind that the level of attention of participants
diminishes towards the end of a meeting, particularly when it goes on too long. People may
agree to anything towards the end of the meeting simply to get away.
After the meeting, the main problem is that actions are not always carried out. Therefore,
minutes should be distributed to the attendees and other interested parties so that the
outcomes are not lost, and team members are reminded of their responsibilities, priorities and
action points. This should be kept as brief as possible to improve the chances of the minutes
being read and action points acted upon. The minutes should form the basis of the next
meeting so that failure to carry out actions is identified.
September 2011
Management Level
22 November 2011 - Tuesday Afternoon Session
Enterprise Pillar
TURN OVER
SECTION A 50 MARKS

Question One
TF Company is about to embark on a restructuring programme which will mean significant
changes to the roles and responsibilities of staff in the Finance Department. It is anticipated that
there will be some resistance to the proposed changes, so the Board of TF Company has asked
KK, a senior manager in the department, to lead the changes. The Board has chosen KK
because she is generally well liked and respected by her colleagues. She is also held in high
regard for her expert knowledge and her interest in, and support she gives to, all those who
work for her.
Required:
Describe the different sources of power KK possesses and which could help her to manage
the changes in the Finance Department.
Question Two
Project control processes cannot be overemphasised in their importance to the success of a
project. The project manager must continually take a pro-active approach in controlling a project.
Required:
Discuss the actions the project manager should take as a project progresses to ensure
effective project control.
November 2011
Question Three
The Head of Insurance at JKL Bank has been considering how to make efficiencies in the
operation of the Car Insurance Business Unit. One option under consideration is to outsource
the Customer Contact Centre (CCC) for its car insurance business. The work of the CCC
currently involves dealing with customer telephone enquiries on issues such as insurance
claims, policy changes, renewals and premium/payment information.
To help him make a decision on whether or not to proceed, the Head of Insurance has asked for
an evaluation of the proposed outsourcing of the CCC.
Required:
Explain how transaction cost theory could help the Head of Insurance on deciding whether
or not to outsource the Car Insurance Business Unit's Customer Contact Centre.
Question Four
D is a CIMA member and financial controller for a local government authority. D has recently
undertaken an analysis of expense claims for the local authority and believes that the Finance
Director, also a CIMA member, has been claiming for non-business related expenses which the
authority does not permit. D is unhappy about the situation and has approached the Finance
Director with her concerns but has failed to get the answers needed from him.
The Finance Director has offered D a large personal bonus in exchange for her silence. As a
member of CIMA, D knows that any action taken should be compliant with CIMA's code of
professional ethics.
Required:
Discuss how the fundamental principles of the CIMA Code of Ethics for Professional
Accountants might be compromised if both D accepts the bonus and the Finance Director is
allowed to claim non-business related expenses.
Note: You should refer to both D and the Financial Director in your answer
TURN OVER
November 2011
Question Five
T, a member of the finance team, has been constantly arriving late to work and in recent months
he has consistently made significant errors in his work. A number of colleagues have
complained to P, their line manager, about T's aggressive behaviour towards them and V, a
junior administrator, has suggested that T has bullied her.
P knows he must take action to deal with the situation.
Required:
Explain to P what is involved in the process of taking disciplinary action.
End of Section A
November 2011
SECTION B 50 MARKS
Question Six
VRC is a family owned business which has been manufacturing racing cycles for over a century.
Over the years, the company has been relatively successful, although its growth has tended to
happen in what can only be described as an unplanned, ad hoc, and opportunistic way. To
some extent the developments have been as a result of the personal interests of F, the owner
and Managing Director, who was a former road racing cyclist.
Two years ago, R, who is F's son, joined the company. The plan is for him to succeed as
Managing Director when his father retires. To date he has spent his time working in the various
departments to familiarise himself with the operations of the company. More recently, R has
taken on a more strategic role and, in particular, is trying to form a view on the longer term future
strategic direction the company should take. He acknowledges the company has built up a
strong brand but feels this could be used to expand into other product areas.
R has approached a Business Consultant for advice on strategic planning. In the first meeting,
the Business Consultant has suggested that the company should adopt a more formal/rational
approach to business planning and strategy development.
The Business Consultant has recommended that, as a first step, R should undertake a strategic
analysis of the company in order to help R better understand its current position.
Required:
(a)
Distinguish between the way strategy is currently developed in VRC Company and
the approach the Business Consultant is recommending.
(12 marks)
(b)
Discuss the strategic management models\frameworks that R could use in

undertaking his analysis of the strategic position of VRC Company.
(13 marks)
TURN OVER
November 2011
Question Seven
J Company is a retailer of fashion goods operating in a highly competitive market place. The
Board of the company has given the go-ahead to redesign the companys website to make it
more convenient for customers to use.
The project is currently at week 12 and there are problems with the functionality of the site and
the fact that it is not easy to navigate. The Project Manager, CW, has expressed concern about
the rising costs of the project and the time needed to improve the functionality. He estimates that
the change to the functionality will delay the project by three weeks. CW understands that
improved customer satisfaction (by making the website easy to use) is important. There will also
be diminishing returns since the increased levels of customer satisfaction obtained by the
change in functionality will be offset by the increased time and cost spent.
The Board has had feedback from the project team members who have complained that there
has been a lack of visibility of CW. Team members have said that they were unaware of any
deadlines as they had not been shown any plan or schedule of work and this had made it
difficult to prioritise tasks and understand how they can contribute to the project.
The Board of J Company has called an emergency meeting with the Project Manager in order to
come up with some immediate solutions which address the project slippage. It has been
recommended that CW needs guidance on how to improve his management of project teams
before he leads any future projects.
Required:
(a)
Analyse the strategies available to J Company to address the issue of time, cost and
quality in the website project.
(12 marks)
(b)
Explain to CW the factors he should consider to ensure the project teams he

manages in future are effective.
(13 marks)
November 2011

LEARNING OBJECTIVE
Level 1- KNOWLEDGE
VERBS USED
DEFINITION
List
State
Define
Make a list of
Describe
Distinguish
Explain
Identify

consideration
something
Illustrate
Apply
Calculate
Demonstrate
Prepare
Reconcile
Solve
Tabulate
Level 4 - ANALYSIS
November 2011
Analyse
Categorise

practical means
Find an answer to
Arrange in a table
Construct
Discuss
Interpret
Prioritise
Produce

between
Build up or compile
Advise
Evaluate
Recommend

Enterprise Pillar
November 2011
Tuesday Afternoon Session
November 2011

SECTION A

Leaders have a number of sources of power that they can use to influence the behaviour and
actions of others. A useful framework that can be used to describe the different sources of
power that KK could use in managing the changes to the Finance Department is that
proposed by French and Raven which includes referent, reward, coercive, expert and
legitimate power.
Referent power, sometimes referred to as charismatic power, is found in a person

who is respected, likable and worthy of emulation. The scenario mentions that KK is
well liked and respected, and also highly regarded for the interest in and support she
gives to those who work for her. It is, therefore, likely that she will have referent power
which will help her in the change process, since people are often motivated to comply
with requests made by a charismatic leader since they will want to please her and
gain her approval.
Another source of power is reward power. This is where the leader is able to directly
influence the intrinsic or extrinsic rewards available to followers. For example, this
would include the ability to provide incentives for individuals who behave in a
particular manner and the control over the organisations resources such as salary,
bonuses or promotion. This type of power is usually used in a positive manner. It is
worth noting though that it can be used in a negative way through the threat or
removal of rewards. As a senior manager, KK may have reward power that she could
use to encourage people to adopt the changes in roles and responsibilities. As well
as financial rewards, KK could use intrinsic rewards such as verbal praise and even,
perhaps, recommendations for promotion.
Coercive power, as the term implies, is the ability to threaten, punish or deprive
people of things that they value. This includes the use of penalties or sometimes
physical punishments to enforce compliance. It is based on fears and the use of the
stick or sanction, making life unpleasant for people. It is doubtful that KK would want
to resort to using this type of power, unless there is strong resistance to the changes,
in which case she may have no choice. Whilst the immediate response might be
compliance, it is unlikely to result in long term commitment by staff, but rather
resentment, anger and possibly retaliation.
Expert power is based on the followers belief that the leader has certain expertise
and knowledge relevant to a particular problem or issue. It will only work if staff
acknowledge the expertise. The scenario suggests that KK is respected for her expert
November 2011
knowledge so this should assist her in introducing the new roles and responsibilities
and should encourage respect from staff.
Legitimate power, sometimes referred to as position power, is the power which is

associated with a particular job and formal position in the organisational hierarchy
which gives an individual authority to make decisions and command the action of
others. It is when followers accept that the leader has the right to influence them in
certain areas or aspects of behaviour. Since KK is a senior manager and leader of
the change, she will be deemed to have legitimate power and hence the right to issue
instructions to staff.
The list proposed of sources of power identified by French and Raven is not exhaustive and
there are other sources of power, such as resource power, personal power and connection
power, the latter resulting from personal and professional access to key people and
information.
November 2011

As a project evolves it is important that the project is kept on track. A process of project
control will ensure that performance is checked at regular times throughout the project
process.
Project Planning
The early stages of the project must be spent carefully establishing a baseline plan that
provides a clear definition of how the project scope will be accomplished on time, to budget
and using available resources. The plan is establishing the targets that need to be controlled
throughout the project.
The resource plan checks peaks and troughs of workload to ensure the plan is feasible and
will list purchases to be bought. This enables the control of limited resources.
The time plan lists all of the activities, who will do what and how long each activity is planned
to take. This includes the milestone finish dates of each stage of the project lifecycle and the
estimated completion date of the whole project. This enables the control of critical activities.
The cost plan will include cost of products from the product breakdown structure, costs of
purchases from the resource plan, plus any contingency in order to create a budget for the
project. This enables the control of expenditure.
Calculate updated project timings, budget and resources
It is important for project control that all data is collected about the actual progress of the
project. This should be collected on a regular timely basis. As the project evolves, it is
important to monitor it continually in order to ensure that it is progressing towards the final
objective.
This requires a continual measurement of actual activities, including monitoring activities
started and completed, how long it has taken so far (and how long it is estimated to take up to
completion), and how much money has been spent on each activity.
Analyse current status compared with plan.
When the update information has been collected a comparison needs to be made with the
baseline budget and timings in order to determine whether any variances have occurred.
One of the most important aspects of project control is ensuring that monitoring progress is
carried out on a regular basis. More complex projects are likely to require more frequent
progress assessment.
Reports from the project manager to the project board should be made on a regular and
frequent basis. Areas covered in the report would focus on progress in terms of cost, scope
and time, with any variances from plan highlighted.
Identify corrective actions and incorporate into revised schedule.
The next part of the project control process would be to establish any corrective action
required. If it is considered that the project is satisfactory and on target then no corrective
action is required. If corrective action is required then how to revise the schedule or budget
needs to be established. The project manager must report the deviation and, following
authorisation if necessary, take corrective action to get the project back on target.
These control decisions may be very difficult as they will require a trade off of cost, time and
scope. For example, getting the project back on time may require extra resources and
therefore additional costs or a compromise on the original scope. Reducing excess
expenditure may mean using fewer or lower quality resources which may again affect the
overall scope and performance of the final project.
Once a decision is taken the changes must be incorporated into the schedule and budget.
This project control process should be carried out continually throughout the duration of the
project.
November 2011
Ensure the revised schedule and budget is sent to all project stakeholders.
The updated schedule and budget need to be sent out, on a timely basis, to all project
stakeholders. This control is important to ensure that all stakeholders are working with the
correct updated version. The new version should be given a unique number so that everyone
is clear about the items within the correct configuration. If any project stakeholder is working
with an incorrect version of the plan this might take the stakeholder off in the wrong direction
and result in a waste of time and effort.
November 2011

Transaction cost theory was originally proposed by Williamson and is concerned with the way
in which resources are organised for producing a product or delivering a service. The
foundation of the theory is based on how best an organisation can achieve economic
efficiency.
The theory proposes that whilst asset specificity may drive vertical integration, outsourcing
activities that are not viewed as core should be considered by the organisation. In the case of
JKL Bank the key issue will be to determine whether or not the activities of the CCC are
designated as a core business. It would also need to investigate whether the activities of the
Car Insurance Customer Contact Centre (CCC) could be performed at a lower cost by
external providers.
Transaction cost theory is essentially based on a more complex development of make or buy
decisions. In other words, JKL Bank can choose between two mechanisms to control and
carry out the activities of its customer contact service. The two mechanisms are hierarchy
solutions, where the service is within the organisation using a hierarchical arrangement, or
market solutions, where services are bought in, obtained through the market. Developing this
further:
Hierarchy solutions occur when management decides to own the assets or employ
staff directly, in other words, internalise transactions. The policies and procedures of
the Bank in this case would be used to control all resources and its performance.
This is the way JKL Bank has operated to date.
In contrast, market solutions are when the management of a company decides to

buy in the uses of assets or staff capability from another organisation under the terms
of a contract. This mechanism involves an increased reliance on the market and will
result in the company incurring transaction costs.
The proposal to outsource the CCC would suggest that JKL Bank is looking to shift from a
hierarchy solution to a market solution. Adopting this solution is based on the assumption that
CCC activities can be provided at lower transaction costs by markets, and hence achieve the
efficiency gains the Bank is requiring.
In making the decision on whether or not to outsource, JKL Bank needs to look beyond the
fact the outsourced company can perform the activities of the CCC function more cheaply but
must also consider the transaction costs. These will include those costs associated with
performing a transaction with the organisation to which the CCC activities are being
outsourced. The proposal will create reliance on an outside provider to provide the quality and
reliability of service JKL Banks car insurance customers expect. Therefore, the decision to
use external providers will need to take into consideration the costs connected with managing
the transactions and setting and monitoring service standards.
Other additional transaction costs JKL Bank will incur if it outsources are those associated
with selecting a suitable partner, specifying what is required, writing and managing the
contract, enforcing the contract, and communications with the partner organisation. A further
consideration, given the nature of the outsourced activities, concerns the confidential nature
of the information given to the external provider, such as bank account details.Therefore JKL
Bank will need to put in place security measures as part of the contract to limit the risk of any
breach in the use of confidential customer information.
November 2011

Like many other professional bodies, CIMA has adopted a professional code of ethics which
is designed to regulate the conduct of its members and, in doing so, protect the individual
client or employer and the public interests more generally. A number of fundamental
principles are in danger of being breached by the actions of the Finance Director and D, if she
accepts the bonus, as outlined in the scenario.
The Finance Directors claim for non-business related expenses does not observe the
principle of professional behaviour. This states that a professional accountant should
comply with relevant laws and regulations (in this case the regulations of the tax authorities).
This could also be regarded as damaging public interests since in effect, as a local
government authority, it is the public through payment of rates and taxes, who would
ultimately be paying for the Finance Director's non-business related expenses. In condoning
the behaviour of the Finance Director, D would also be taking action that could discredit the
profession. In not informing the relevant authorities she is not carrying out her duties as a
financial controller.
If D accepts the bonus from the Finance Director and remains silent, then the principle of
integrity is compromised. D is not being honest in dealing with the non-business related
expenses claims and is accepting a bonus to which she is not entitled. In making the claim in
the first instance, the Finance Director is also in breach of the integrity principle because he
has not acted in an honest way.
In addition, the principle of professional competence and due care is contravened since D
is expected to deliver a competent behaviour towards her employer and act diligently in
accordance with applicable technical and professional standards.
Whilst there is a principle of confidentiality with regard to the information acquired as a result
of professional and business related relationships, in this particular case D would be
expected to disclose the claim of non-business expenses to her employer, the local
government authority. It is part of her professional duty to disclose to the local government
authority the infringement of regulatory requirements by the Finance Director.
The principle of objectivity requires a professional accountant not to allow bias, conflict of
interest or undue influence of others to override professional or business judgement. This
could be compromised since D may feel she is under undue influence from the Finance
Director. In accepting the bonus this could create a conflict of interest in that D may feel she
needs to do whatever the Finance Director requests, because she may be worried that he
might report her acceptance of the bonus at some point in the future.
In offering D a large personal bonus, the Finance Director could be guilty of the charge of
bribery and attempting to corrupt a fellow employee if no action is taken. This could have the
effect of damaging the standing of CIMA as a professional body.
November 2011

Disciplinary action requires a manager to use authority to deal with situations whereby an
employee has made some offence. For example as in the scenario, T constantly arriving late
for work, poor work performances, aggressive behaviour towards others and bullying. The
main purpose of undertaking disciplinary action is to achieve a change in the behaviour of an
employee so that future action is unnecessary. Whilst this should be viewed as a positive
approach, in reality it is often seen as carrying out the threat of punishment rather than as
remedial and corrective.
In advising P what is involved in the process of discipline, P must first check that T has been
informed that certain behaviours could lead to disciplinary action, what constitutes misconduct
and gross misconduct and what the consequences are. In large organisations this is usually
covered in the employee handbook.
The starting point of the disciplinary process, in this case, would be for P, as T's line manager,
to give T an informal warning. This would involve having an informal discussion to explore the
issues and establish why T is behaving in an unacceptable manner and to try to determine
how to resolve the problems. At this stage, it is important that P carries out a full investigation
in order to be clear on what 'rules/regulations' have been broken, how frequently and the
implications for other members of staff. T must be made aware of the complaints, and also
provide his version of events. After the meeting a way forward should be agreed on and
progress reviewed.
T should be advised that if, following the informal discussions, there is not an improvement in
his behaviour, then it may be necessary to implement formal disciplinary proceedings. The
HR Department should be involved and kept informed of what is happening.
If Ts behaviour does not change P will need to move to the formal process, the first step will
be to issue a formal verbal warning via an interview. This would highlight to T the seriousness
of the situation and that he is on notice that his conduct will not be tolerated. At this stage it is
important that T is asked if he wants to be represented or accompanied by a colleague. The
purpose of this meeting should be to help T correct his behaviour and to prevent the need for
future formal action. A written record should be kept, detailing why the action has been
invoked and what level of improvement is required.
During the disciplinary interview P should explain its purpose and outline the charges
regarding Ts offences in an unambiguous manner, so the employee is clear on the reasons
for the action. P should go on to explain the companys position with regard to the disciplinary
issues involved. He should then explain the expectations on the individual with regard to
future behaviour, for instance there must be no repetition of the offence, or performance must
improve.
P should explain the reasons for the penalties, and explain that an entry of the formal warning
will be made on Ts personnel record. A record of the interview should be kept in Ts staff file,
for formal follow-up review, and in case of any future necessary action. There should be clear
warning given about the consequences of Ts failure to meet the improvement targets or
continuation of inappropriate behaviours. The appeals procedure should then be explained.
The next step, if there is no improvement by T is a written warning, which is more formal in
nature and will become a permanent part of the T's staff record. The nature of the offences
will be stated and it should specify the future disciplinary action that will be taken if there is no
improvement in T's behaviour. A copy of the written warning will be placed on T's staff record.
The documentation is necessary in case of grievance procedures. As with the verbal warning,
T has the full right of appeal.
If performance and behaviour problems continue it may be possible to demote T or to transfer
him to another part of the organisation. The ultimate stage of disciplinary action is dismissal
which could lead to T exiting the organisation.
November 2011
In the UK, the Advisory Conciliation and Arbitration Service (ACAS) publishes booklets on
internal disciplinary procedure, so P could also refer to this information to help him
understand the process of discipline.
[Note: Candidates may refer to practices governing disciplinary proceedings that are specific
to their country]
November 2011
SECTION B

Requirement (a)
The way strategy currently develops in VRC Company would seem to be characterised by the
emergent approach to strategy development. This perspective was suggested by Mintzberg
and is based on the notion that most of what organisations intend to happen, often does not
happen. Indeed very few strategies followed by organisations are consciously planned but
rather emerge.
Emergent strategies result from a number of ad-hoc choices or responses to circumstances.
They can be described as developing out of patterns or behaviours that are realised despite,
or in the absence of, specific intentions. This means that they just happen along the way with
differing degrees of management intervention. The role of the manager is to craft a vision
through moulding the organisation and its strategy.
Mintzberg argues that strategy formulation is a continually evolving process in which
strategies emerge, as a result of the processes of negotiation, bargaining and compromise,
rather than due to a deliberate planning process. He contends that intended strategies often
becomes invalid and not implemented because the pace and unpredictability of developments
in the business environment overtake it. The claim here is that strategy should not be
considered a linear process, but rather an iterative process in which problems raised in
implementation are fed back so that the strategy can be adjusted to take account of changing
circumstances.
Mintzberg further maintains that the strategy development process is not so much about
thinking and reasoning, as it is about involvement, a feeling of intimacy and harmony,
developed through long experience and commitment. This is perhaps the case for F, who has
adopted an opportunistic approach to strategy formulation which to some extent represents
his own personal interests in the development of racing cycles.
In contrast, the formal/ rational approach that is being proposed by the Business Consultant,
assumes a step by step organised approach to strategy development which requires a
systematic analysis of competitors and markets. It involves the careful and deliberate
formulation, evaluation and selection of strategies for the purpose of preparing a cohesive
long term course of action to attain objectives. The three main stages are strategic analysis,
strategic choice and strategic implementation.
The process is iterative and is often linked to an annual planning cycle. Strategic analysis
helps in understanding the current position of VRC Company in terms of its internal and
external environments in which the company operates. In other words, what its strengths and
weaknesses are and what opportunities and threats exist. It also helps in formulating what the
Company's mission and objectives should be which can then be communicated to employees.
The next stage in the linear process involves generating strategic options for VRC, exploring
how it might develop in the future, given its current position. The different options would be
evaluated in terms of whether each is feasible, suitable, and acceptable to VRCs key
stakeholders.
The strategies selected need to be implemented, in other words strategy needs to be
translated into action plans to make the strategies happen.
November 2011
Requirement (b)
Analysing the strategic position of the VRC Company will involve an assessment of both its
internal and external environment since the future strategy of VRC company needs to achieve
a 'good fit' with its environment.
An external appraisal will involve scanning the external environment for factors relevant to the
Company's current and future activities. A number of strategic management tools could be
used to assist in this process. For instance the PESTEL framework could be used to analyse
factors in the general environment for cycle manufacturing. This framework is used to
categorise the environmental influences into headings, political, economic, social,
technological, ecological and legal. This will assist in the assessment of the external factors
that might impact on VRCs future strategic development and can help in identifying key
trends and drivers for change in the industry for cycles.
As well as the general environment factors, part of the external analysis also requires an
understanding of the competitive environment in order to establish what are likely to be the
major competitive forces in the cycle industry in the future. A well established framework for
analysis and understanding the nature of the competitive environment is Porter's Five Forces
model. The basis of the model is that competition in an industry is determined by its basic
underlying economic structure - the five competitive forces:
Rivalry among existing firms

Bargaining power of buyers
Bargaining power of suppliers
Threat of new entrants
Threat of substitute products/services.
The results from the external and competitive environment analysis should help VRC gain a
better understanding of the opportunities and threats it faces.
In understanding VRCs strategic position an assessment of the companys internal
environment will also need to be conducted. This will involve appraising the company's
internal resources and capabilities in manufacturing cycles, identifying the things which VRC
is particularly good at in comparison to its competitors.
The analysis will involve undertaking a resource audit to evaluate the resources VRC has
available and how it utilises those resources, for example financial resources, human skills,
physical assets, technologies, brand and so on. It will help in assessing the company's
strategic capability, which is to establish the adequacy and suitably of the resources and
competences to survive and prosper in the bicycle industry.
The internal position of the company can be analysed by looking at how the various activities
performed in manufacturing cycles by the company add value, in the view of the customer.
To do this use could be made of the Value Chain model. The value chain of VRC can be
divided into its primary activities and support activities. Each of these activities can be
considered as adding value to the company's products or services.
The internal appraisal for VRC Company should highlight:
Strengths, which are the particular skills or distinctive/core competences which the
company possesses and which will give it an advantage over its competitors in the
bicycle industry. These are the things the company should seek to exploit. In
indentifying strengths it is important that it highlights not just what VRC Company is
good at, but how it is better, relative to the competition, for instance brand.
Weaknesses, which are the shortcomings in the company and which can hinder it in
achieving its strategic aims. For example, lack of resources, expertise or skill.
Strengths and weaknesses should relate to industry key factors for success and help VRC
Company to assess how capable it is in dealing with changes in its business environment.
November 2011
10
Having undertaken an analysis of the external environment and internal capability that may be
significant to VRC Company, the next step is to bring together the outcomes from the
analysis. This is often referred to as a corporate appraisal or SWOT.
The outcomes from the analysis could then be used to determine VRCs current position in
the bicycle industry and it will facilitate the identification and generation of possible future
strategic options for VRC.
11
November 2011

Requirement (a)
The successful accomplishment of the project objective is usually constrained by time, cost
and quality factors. Time and cost tend to be positively correlated in projects (i.e. when time
increases so does cost) as taking longer to complete a project generally means that human
resources are needed for longer.
Project decisions on the strategies to implement are difficult as they will often require a trade
off of cost, time and quality. For example getting the project back on time may require extra
resources and therefore additional costs or a compromise on the original scope. Reducing
excess expenditure may mean using fewer or lower quality resources which may again affect
the overall scope and performance of the final project.
Time
If there is a degree of urgency in a project it may be possible to reduce the timescale to
completion by adding additional resources. The timescale can also be reduced by scheduling
overtime working. Both of these situations will increase cost while reducing time.
Resources could also be asked to work smarter, eliminating any distractions and focusing
time on real output producing activities. The team should focus on activities that add real
value to the website project for example the website functionality and eliminate any non-value
adding activities.
Increasing the amount of resource will have an impact on profitability. The addition of
resources will reduce the profit margin and indeed, in the extreme, may make the project itself
unprofitable.
Although the deadline date is important to J Company, due to the revenues that might be
generated by the website, it is unlikely to be crucial. It is unlikely that the customers will know
that the website is being re-designed so will have no expectation of when the new site is due
to come on-line. The deadline is not crucial in the wider scheme of things and there is no
statutory requirement to deliver on time.
Quality
Project quality is usually about customer specification and requirement. Quality in terms of
computer systems can be measured in terms of the number of errors, response times and fitfor-purpose, i.e. matches the business process it is intended to support.
For J Company, quality is linked to customer convenience and it will be important that the
website is easy to use and navigate. A customer will want quick response times and a
guarantee of secure transactions.
Fit for purpose is an important concept for a customer facing process. It is important that J
Company has a clear understanding of the customer specification and requirements and that
the project plan ensures that sufficient testing is included to ensure that quality requirements
are fully met.
Costs
In order to manage the issue of costs, the website may have to have a slightly reduced scope
in terms of its functionality. Any reduced scope might have an impact on how many customers
use the site in the future. The importance of the customer perception has already been
discussed. Any reduction in scope is likely to have a detrimental impact on the revenues
generated by the website.
November 2011
12
Requirement (b)
The Board J Company has recommended that CW needs guidance on how to improve his
management of project teams. The following are some suggestions for CW:
Improve Leadership
As project manager, CW needs to dedicate time to a project and ensure they are visible to the
key project stakeholders including the project team. He must continually encourage
individuals and support progress. It will be difficult to achieve if he is not visible. CW must
make himself more available when managing future project teams.
CW should create an environment in which members can feel free to contribute and provide
feedback. He needs to determine the motivating factors important to each individual and
should ensure that the project environment is a motivating one.
Increased Communication
Communication mechanisms should be set up by CW to ensure regular, multi-directional flow
of information about plans, adjustments and progress of the project. CW could hold daily team
review meetings with regular progress reports.
Clear Goals and Objectives
It is the responsibility of CW to explain the project objective to the team. The goals of the
project need to be clear and the team needs to be focused on its achievement. CW must
ensure that all team members understand their goals and the benefits of achieving them.
Otherwise, they may work to their own objective rather than project objectives.
Team Building
CW needs to undertake team building throughout the life of the project. This will help with
improving communications between team members and understanding project objectives.
One way of helping with this would be to organise a social event outside the work
environment, so the project team can get to know each other. CW could also periodically call
team meetings (rather than project meetings).
Group Performance
CW needs to understand that effective group performance is affected by the manner in which
groups come together. According to Tuckmans analysis, groups typically pass through four
stages of development:
Forming is the first stage, in which members try to find out about each other and about how
the group is going to work. CW needs to understand that this awareness stage is essential
but not conducive to task effectiveness.
Storming is the second stage, this is more or less open conflict, but this may also be fruitful
as more realistic targets are set and ideas are generated. CW needs to resolve the conflict so
that the team can move forward to the next stage.
Norming is the next stage, team cohesion develops and the group establishes cooperation.
The final stage is performing, the team is now beginning to work smoothly and full
productivity is achieved. It is only once this stage is reached that effective team performance
is achieved.
Clear Team Roles
The team members need to be clear on how they can contribute to a project. CW must
communicate the role and responsibilities of each team member and make sure each
individual is clear on the specific role they are performing on the project. It is important that
roles are not duplicated leading to a waste of time and effort. This would help the team to
work smarter.
13
November 2011
Mixed Balance of Individuals

Belbin suggests that an effective team is made up of people who, between them, fill nine
roles. The model will help CW with team selection and management. Examples of team
members would include the Plant who is a creative, imaginative individual who solves difficult
problems. The Team Worker is cooperative, mild, and perceptive and who listens, builds,
averts friction and calms the waters. If there is not the right balance of team roles, work will
not be performed effectively.
Supervision of Team Activities
CW will be responsible for building a cohesive and productive team and also for supervising
the activities of the team members throughout every stage of the project. He will need to
respond to any difficulties and take appropriate action to keep a project on target for
successful completion.
November 2011
14

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The Chartered Institute of Management Accountants 2011

ANSWER ALL FIVE QUESTIONS IN THIS SECTION

Section A continues on the opposite page

Section A continues on the next page

Identify the earliest time the recruitment campaign can start.

Section A continues on the opposite page

(Total for Section A = 50 marks)

ANSWER BOTH QUESTIONS FROM THIS SECTION 25 MARKS EACH

Section B continues on the opposite page

(Total for Section B = 50 marks)

End of Question Paper

This page is blank

This page is blank

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LIST OF VERBS USED IN THE QUESTION REQUIREMENTS

Communicate the key features

Put to practical use

Examine in detail the structure of

Counsel, inform or notify

Management Level Paper

The Examiner's Answers

Answer to Question One

Answer to Question Two

Answer to Question Three

Answer to Question Four

Critical Path = B,F,G,H

Answer to Question Five

Answer to Question Six

Answer to Question Seven

Work Breakdown Structure. This technique is a critical part of project planning

Network analysis, sometimes referred to as critical path analysis, is an important

the pessimistic estimates which is the duration it would take if a number of

The Chartered Institute of Management Accountants 2011

ANSWER ALL FIVE QUESTIONS IN THIS SECTION

Section A continues on the opposite page

Section A continues on the next page

(Total for Section A = 50 marks)

ANSWER BOTH QUESTIONS FROM THIS SECTION 25 MARKS EACH

Distinguish the characteristics of the website development project in P Company

Section B continues on the next page

(Total for Section B = 50 marks)

End of Question Paper

LIST OF VERBS USED IN THE QUESTION REQUIREMENTS

Communicate the key features

Put to practical use

Examine in detail the structure of

Counsel, inform or notify

Management Level Paper

Tuesday Afternoon Session

The Examiner's Answers

Answer to Question One

Threat of new entrants/barriers to entry

Rivalry amongst existing competitors refers to direct competition between an

Answer to Question Two

Gantt charts can be used in project communication as a reporting tool in the

Answer to Question Three

Answer to Question Four

Answer to Question Five