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THE PUBLIC ACCOUNTANTS EXAMINATIONS BOARD
A Committee of the Council of ICPAU
CPA(U) EXAMINATIONS
LEVEL THREE
BUSINESS POLICY AND STRATEGY - PAPER 14
TUESDDAY, 25 AUGUST 2015
INSTRUCTIONS TO CANDIDATES
1. Time allowed: 3 hours 15 minutes.
The first 15 minutes of this examination have been designated for reading
time. You may not start to write your answer during this time.
2. Section A has one compulsory question carrying 50 marks.
3. Section B has three questions and only two are to be attempted. Each
question carries 25 marks.
4. Write your answer to each question on a fresh page.
5. Please, read further instructions on the question paper and answer book
before attempting any question.
© 2015 Public Accountants Examinations Board
Business Policy & Strategy – Paper 14
25 August 2015 Page 2 of 6
SECTION A
This section has one compulsory question to be attempted
Question 1
Biskam Confectionery Ltd (BCL) has been in business for over 20 years. The
company’s products include biscuits, bread and doughnuts among others. BCL’s
business success in the recent past is largely attributed to the existence of a
reliable source of inputs, especially wheat which is imported from Kenya under
the just-in-time (JIT) replenishment system. Owing to the good relationship built
with the suppliers, BCL has been able to secure long-term supply contracts. The
company also has a stringent quality inspection mechanism for all inputs, a
measure that has enabled it to consistently deliver good quality products. Since
the introduction of JIT five years ago, BCL’s inventory holding costs and business
financing costs have reduced by approximately 40%. However, the factory
equipment has continued to breakdown regularly, therefore requiring regular
repairs. Management accountants have observed that the costs of breakdown
and paid idle time have been on the rise over the last five years. This
notwithstanding, the company has a highly trained, loyal and experienced inhouse
factory maintenance team which repairs the equipment whenever it
breaks down.
Recently, the National Environment Authority (NEA) carried out inspection at the
factory and observed that the carbon emission from the factory equipment was
above NEA’s regulatory limits. The inspectors also observed that BCL had not
complied with environmental conservation measures approved by NEA in the
previous environmental impact assessment. As a result, heavy fines were
imposed on the company, while other directives were also issued for immediate
implementation. The directives were immediate overhaul of the factory
equipment, appointment of an environmental officer, among others.
BCL’s competitiveness has been greatly facilitated by a healthy liquidity position
and a well managed value chain. The company is reported to have cash reserves
that are in excess of Shs 5 billion. The cash reserves have, however, been under
strain lately owing to the need for re-branding and increased marketing
activities. This initiative started after government rolled out the prosperity for all
(PFA) programme. Under the PFA programme, farmers are organized into
cooperatives and supported to start foods and beverages industries throughout
all districts. The idea is that every county should have a cooperative, and that
every district should have a small scale foods and beverages industry. Through
this PFA programme, big factories have been established in the four regions of
Uganda with a mandate to produce confectionaries such as biscuits and bread,
Business Policy & Strategy – Paper 14
25 August 2015 Page 3 of 6
out of local agricultural produce. In addition, the factories are to produce
substitute products such as banana and potato crisps. These products have
significantly affected BCL’s market share in Uganda, especially in the rural areas.
In order to ensure success for the PFA initiatives, Government has also
introduced a 2% excise duty on imported confectionaries and confectionery
products made out of imported raw materials. In line with the manifesto of the
ruling political party, all national and local political leaders are required to
promote the PFA programme.
In order to remain afloat, BCL has decided to adopt market based strategies
through market penetration and market development. The company still has
high market share among the affluent people in Uganda, and has already
expanded to the rest of the East African countries using the re-branded products.
These new products are already being rigorously marketed in new markets in
East Africa. BCL has also instituted a responsive research and development unit
to meet changing customer needs. A recent market survey of the East African
market indicated an increasing demand for the company’s products.
As part of the changes required to accommodate the new products, BCL shall
implement a restructuring plan in an effort to remain profitable, with the staffing
levels reducing to 40% of the current workforce. However, the loyal and
trainable employees shall be retained and retrained to fit in the new roles. The
company will also establish and maintain high quality control standards and
practices that supersede expectations of the East African Community customers
and authorities. BCL shall produce its own packaging materials and even sell the
excess to other manufacturers.
Despite the opportunities enshrined in the restructuring plan, most employees
are upset by the proposed changes and have formed a grievances association
(BCL aggrieved employees association). The employee morale is quite low with
rumours that a sit down strike is imminent.
Having failed to agree on a common approach to the challenges at hand,
management at BCL has engaged you as a Strategic Management Consultant to
review the current state of affairs and propose solutions.
Required:
(a) Guided by a SWOT analysis, assess the current operating environment at
BCL.
(15 marks)
(b) Discuss the factors responsible for the employees’ resistance to the
proposed changes at BCL.
(6 marks)
Business Policy & Strategy – Paper 14
25 August 2015 Page 4 of 6
(c) Assess how the balanced scorecard can be applied in evaluating
performance at BCL.
(15 marks)
(d) Examine the factors that should be considered for the proposed
restructuring plan at BCL to succeed.
(6 marks)
(e) Examine the various forms of quality control that could be adopted by BCL
if the company is to achieve its market development strategy.
(8 marks)
(Total 50 marks)
SECTION B
Attempt two of the three questions in this section
Question 2
Zifamuhiika Carpentry Group Ltd (ZCGL) was incorporated in Uganda 30 years
ago. The Company is one of the leading manufacturers of high class furniture for
offices and flourishing homes. In order to be effective in supplies and storage,
ZCGL acquired Amazon Timber Ltd (ATL) of Democratic Republic of Congo
(DRC). ATL lumbers and stores timber in bulk in Kisangani, DRC, before
transporting it to ZCGL’s warehouses in Namanve on just-in-time basis.
In the past three years, ZCGL‘s cost of operations has risen by 30% compared to
an average of 10% by competitors in East Africa. Due to high costs, ZCGL has
become expensive to its customers who are deserting it. Consequently, ZCGL has
experienced a decline in annual sales over the last 3 years. The major cost
drivers have been identified as; high costs of lumbering by ATL, higher cost of
timber storage in Kisangani than in Kampala, high cost of maintaining a fleet of
trucks for transporting timber and high administration costs both at ATL and
ZCGL. The administration costs include; paid idle labour hours, factory
maintenance, and utility costs. Information available indicates that competitors
enjoy lower cost of inputs due to importation of seasoned timber at factory
gates, use of newer technology in smoothening, vanishing, and general finishing
works of furniture.
The competitors also do not own any warehouses for the finished furniture,
unlike ZCGL which runs several warehouses and show rooms.
Business Policy & Strategy – Paper 14
25 August 2015 Page 5 of 6
Required:
(a) Discuss the importance of operations management to a company like ZCGL
(8 marks)
(b) With the help of the value chain analysis tool:
(i) Critically examine the current operations of ZCGL.
(12 marks)
(ii) Suggest strategies to improve ZCGL’s operational efficiency.
(5 marks)
(Total 25 marks)
Question 3
Lorna, George & Musa Ltd (LGML) was founded in 1998 and soon after became
the leading producer of sugar, electricity, molasses and paper in Uganda.
However, since March 2013 they started experiencing a lot of challenges.
First, was the sudden death of Mr. Mugulusi, the CEO of LGML. He was replaced
by Mr. Wamato, a fresh graduate from MUMS University. Mr. Wamato recently
recruited a number of his former classmates as marketers even though they do
not to have any practical experience.
The second challenge was the resignation and expulsion of some key staff that
later joined Kokoro Sugar Works Ltd. They have since helped it to regain market
leadership. Commenting on the expulsions, the CEO asserted that LGML was
bigger than any individual and that he did not care how many staff he could
dismiss as long as their attitude was poor.
Third, is the introduction of new technology which has left the ‘old employees’
less productive. These employees have vehemently opposed plans by
management to take them for further training in an effort to have them embrace
technology. There is also high de-motivation of staff due to salary cuts
introduced by the new CEO and supported by management. This followed poor
financial performance in which the company made a lot of losses. The production
system is ineffective due to old technology which makes it very costly to produce
paper and fertilizers.
Then there are prolonged dry seasons which have reduced cane production
resulting into a shortage of raw materials. LGML’s irrigation system broke down
two years ago and has since not been repaired.
A management meeting was convened to discuss possible ways of overcoming
losses. The marketing manager proposed that LGML adopts Ansoff’s productmarket
matrix in implementing its strategic actions. He also suggested that LGML
invests in unrelated products like the growing of eucalyptus and pine trees since
these are more resistant to adverse weather than sugarcane. The CEO strongly
Business Policy & Strategy – Paper 14
25 August 2015 Page 6 of 6
opposed the marketing manager’s suggestions. He believes that it is the ‘old
employees’ who are failing the company due to their old age, failure to use
technology and inexperience in new methods of work.
Required:
(a) Assess the actions undertaken by the current CEO in an effort to address
the human resource challenges at LGML. (16 marks)
(b) Examine the marketing managers’ ideas regarding the application of the
Product-Market Matrix in addressing the challenges of LGM Ltd.
(9 marks)
(Total 25 marks)
Question 4
Pix Ltd has mooted a plan which will see it cash in more money by enjoying
economies of scale that come with international business expansion. The
company is, however, unsure of the current multinational/international strategies
that can be considered. Mrs. Nyinizo, the Managing Director (MD), has indicated
that PIX Ltd should adopt a globalization strategy which can enable the supply of
a standardized product. It is understood that management is only willing to make
very minimal modifications where need be. The move to internationalize is
largely meant to address the current challenge of slow movement of finished
products currently being faced in the local market. The MD has further suggested
that a new position of information manager be created and filled as soon as
possible. She has envisioned that the declining company sales, increased
litigation, increasing inter-departmental conflicts and declining public image of
the company could be associated with inefficiencies in the information
management processes at PIX Ltd. The human resource (HR) officer has,
however, opposed the MD’s suggestion insisting that issues related with
information flow do not need a specialist and that such issues can be handled by
the human resource department. The HR officer argues that a new information
manager will instead leak the company’s secrets to the public, use the
information to his own advantage, create bureaucracies around access to
information and increase the expenditure on labour force.
Required:
(a) Evaluate the international strategies that PIX Ltd can adopt in pursuit of
globalization. (16 marks)
(b) Critically assess the role of the proposed information manager and the
ethical considerations to observe in order to overcome the fears of the HR
officer (9 marks)
(Total 25 marks)
http://www.accountingpdfbooks.com
THE PUBLIC ACCOUNTANTS EXAMINATIONS BOARD
A Committee of the Council of ICPAU
CPA(U) EXAMINATIONS
LEVEL THREE
BUSINESS POLICY AND STRATEGY - PAPER 14
TUESDDAY, 25 AUGUST 2015
INSTRUCTIONS TO CANDIDATES
1. Time allowed: 3 hours 15 minutes.
The first 15 minutes of this examination have been designated for reading
time. You may not start to write your answer during this time.
2. Section A has one compulsory question carrying 50 marks.
3. Section B has three questions and only two are to be attempted. Each
question carries 25 marks.
4. Write your answer to each question on a fresh page.
5. Please, read further instructions on the question paper and answer book
before attempting any question.
© 2015 Public Accountants Examinations Board
Business Policy & Strategy – Paper 14
25 August 2015 Page 2 of 6
SECTION A
This section has one compulsory question to be attempted
Question 1
Biskam Confectionery Ltd (BCL) has been in business for over 20 years. The
company’s products include biscuits, bread and doughnuts among others. BCL’s
business success in the recent past is largely attributed to the existence of a
reliable source of inputs, especially wheat which is imported from Kenya under
the just-in-time (JIT) replenishment system. Owing to the good relationship built
with the suppliers, BCL has been able to secure long-term supply contracts. The
company also has a stringent quality inspection mechanism for all inputs, a
measure that has enabled it to consistently deliver good quality products. Since
the introduction of JIT five years ago, BCL’s inventory holding costs and business
financing costs have reduced by approximately 40%. However, the factory
equipment has continued to breakdown regularly, therefore requiring regular
repairs. Management accountants have observed that the costs of breakdown
and paid idle time have been on the rise over the last five years. This
notwithstanding, the company has a highly trained, loyal and experienced inhouse
factory maintenance team which repairs the equipment whenever it
breaks down.
Recently, the National Environment Authority (NEA) carried out inspection at the
factory and observed that the carbon emission from the factory equipment was
above NEA’s regulatory limits. The inspectors also observed that BCL had not
complied with environmental conservation measures approved by NEA in the
previous environmental impact assessment. As a result, heavy fines were
imposed on the company, while other directives were also issued for immediate
implementation. The directives were immediate overhaul of the factory
equipment, appointment of an environmental officer, among others.
BCL’s competitiveness has been greatly facilitated by a healthy liquidity position
and a well managed value chain. The company is reported to have cash reserves
that are in excess of Shs 5 billion. The cash reserves have, however, been under
strain lately owing to the need for re-branding and increased marketing
activities. This initiative started after government rolled out the prosperity for all
(PFA) programme. Under the PFA programme, farmers are organized into
cooperatives and supported to start foods and beverages industries throughout
all districts. The idea is that every county should have a cooperative, and that
every district should have a small scale foods and beverages industry. Through
this PFA programme, big factories have been established in the four regions of
Uganda with a mandate to produce confectionaries such as biscuits and bread,
Business Policy & Strategy – Paper 14
25 August 2015 Page 3 of 6
out of local agricultural produce. In addition, the factories are to produce
substitute products such as banana and potato crisps. These products have
significantly affected BCL’s market share in Uganda, especially in the rural areas.
In order to ensure success for the PFA initiatives, Government has also
introduced a 2% excise duty on imported confectionaries and confectionery
products made out of imported raw materials. In line with the manifesto of the
ruling political party, all national and local political leaders are required to
promote the PFA programme.
In order to remain afloat, BCL has decided to adopt market based strategies
through market penetration and market development. The company still has
high market share among the affluent people in Uganda, and has already
expanded to the rest of the East African countries using the re-branded products.
These new products are already being rigorously marketed in new markets in
East Africa. BCL has also instituted a responsive research and development unit
to meet changing customer needs. A recent market survey of the East African
market indicated an increasing demand for the company’s products.
As part of the changes required to accommodate the new products, BCL shall
implement a restructuring plan in an effort to remain profitable, with the staffing
levels reducing to 40% of the current workforce. However, the loyal and
trainable employees shall be retained and retrained to fit in the new roles. The
company will also establish and maintain high quality control standards and
practices that supersede expectations of the East African Community customers
and authorities. BCL shall produce its own packaging materials and even sell the
excess to other manufacturers.
Despite the opportunities enshrined in the restructuring plan, most employees
are upset by the proposed changes and have formed a grievances association
(BCL aggrieved employees association). The employee morale is quite low with
rumours that a sit down strike is imminent.
Having failed to agree on a common approach to the challenges at hand,
management at BCL has engaged you as a Strategic Management Consultant to
review the current state of affairs and propose solutions.
Required:
(a) Guided by a SWOT analysis, assess the current operating environment at
BCL.
(15 marks)
(b) Discuss the factors responsible for the employees’ resistance to the
proposed changes at BCL.
(6 marks)
Business Policy & Strategy – Paper 14
25 August 2015 Page 4 of 6
(c) Assess how the balanced scorecard can be applied in evaluating
performance at BCL.
(15 marks)
(d) Examine the factors that should be considered for the proposed
restructuring plan at BCL to succeed.
(6 marks)
(e) Examine the various forms of quality control that could be adopted by BCL
if the company is to achieve its market development strategy.
(8 marks)
(Total 50 marks)
SECTION B
Attempt two of the three questions in this section
Question 2
Zifamuhiika Carpentry Group Ltd (ZCGL) was incorporated in Uganda 30 years
ago. The Company is one of the leading manufacturers of high class furniture for
offices and flourishing homes. In order to be effective in supplies and storage,
ZCGL acquired Amazon Timber Ltd (ATL) of Democratic Republic of Congo
(DRC). ATL lumbers and stores timber in bulk in Kisangani, DRC, before
transporting it to ZCGL’s warehouses in Namanve on just-in-time basis.
In the past three years, ZCGL‘s cost of operations has risen by 30% compared to
an average of 10% by competitors in East Africa. Due to high costs, ZCGL has
become expensive to its customers who are deserting it. Consequently, ZCGL has
experienced a decline in annual sales over the last 3 years. The major cost
drivers have been identified as; high costs of lumbering by ATL, higher cost of
timber storage in Kisangani than in Kampala, high cost of maintaining a fleet of
trucks for transporting timber and high administration costs both at ATL and
ZCGL. The administration costs include; paid idle labour hours, factory
maintenance, and utility costs. Information available indicates that competitors
enjoy lower cost of inputs due to importation of seasoned timber at factory
gates, use of newer technology in smoothening, vanishing, and general finishing
works of furniture.
The competitors also do not own any warehouses for the finished furniture,
unlike ZCGL which runs several warehouses and show rooms.
Business Policy & Strategy – Paper 14
25 August 2015 Page 5 of 6
Required:
(a) Discuss the importance of operations management to a company like ZCGL
(8 marks)
(b) With the help of the value chain analysis tool:
(i) Critically examine the current operations of ZCGL.
(12 marks)
(ii) Suggest strategies to improve ZCGL’s operational efficiency.
(5 marks)
(Total 25 marks)
Question 3
Lorna, George & Musa Ltd (LGML) was founded in 1998 and soon after became
the leading producer of sugar, electricity, molasses and paper in Uganda.
However, since March 2013 they started experiencing a lot of challenges.
First, was the sudden death of Mr. Mugulusi, the CEO of LGML. He was replaced
by Mr. Wamato, a fresh graduate from MUMS University. Mr. Wamato recently
recruited a number of his former classmates as marketers even though they do
not to have any practical experience.
The second challenge was the resignation and expulsion of some key staff that
later joined Kokoro Sugar Works Ltd. They have since helped it to regain market
leadership. Commenting on the expulsions, the CEO asserted that LGML was
bigger than any individual and that he did not care how many staff he could
dismiss as long as their attitude was poor.
Third, is the introduction of new technology which has left the ‘old employees’
less productive. These employees have vehemently opposed plans by
management to take them for further training in an effort to have them embrace
technology. There is also high de-motivation of staff due to salary cuts
introduced by the new CEO and supported by management. This followed poor
financial performance in which the company made a lot of losses. The production
system is ineffective due to old technology which makes it very costly to produce
paper and fertilizers.
Then there are prolonged dry seasons which have reduced cane production
resulting into a shortage of raw materials. LGML’s irrigation system broke down
two years ago and has since not been repaired.
A management meeting was convened to discuss possible ways of overcoming
losses. The marketing manager proposed that LGML adopts Ansoff’s productmarket
matrix in implementing its strategic actions. He also suggested that LGML
invests in unrelated products like the growing of eucalyptus and pine trees since
these are more resistant to adverse weather than sugarcane. The CEO strongly
Business Policy & Strategy – Paper 14
25 August 2015 Page 6 of 6
opposed the marketing manager’s suggestions. He believes that it is the ‘old
employees’ who are failing the company due to their old age, failure to use
technology and inexperience in new methods of work.
Required:
(a) Assess the actions undertaken by the current CEO in an effort to address
the human resource challenges at LGML. (16 marks)
(b) Examine the marketing managers’ ideas regarding the application of the
Product-Market Matrix in addressing the challenges of LGM Ltd.
(9 marks)
(Total 25 marks)
Question 4
Pix Ltd has mooted a plan which will see it cash in more money by enjoying
economies of scale that come with international business expansion. The
company is, however, unsure of the current multinational/international strategies
that can be considered. Mrs. Nyinizo, the Managing Director (MD), has indicated
that PIX Ltd should adopt a globalization strategy which can enable the supply of
a standardized product. It is understood that management is only willing to make
very minimal modifications where need be. The move to internationalize is
largely meant to address the current challenge of slow movement of finished
products currently being faced in the local market. The MD has further suggested
that a new position of information manager be created and filled as soon as
possible. She has envisioned that the declining company sales, increased
litigation, increasing inter-departmental conflicts and declining public image of
the company could be associated with inefficiencies in the information
management processes at PIX Ltd. The human resource (HR) officer has,
however, opposed the MD’s suggestion insisting that issues related with
information flow do not need a specialist and that such issues can be handled by
the human resource department. The HR officer argues that a new information
manager will instead leak the company’s secrets to the public, use the
information to his own advantage, create bureaucracies around access to
information and increase the expenditure on labour force.
Required:
(a) Evaluate the international strategies that PIX Ltd can adopt in pursuit of
globalization. (16 marks)
(b) Critically assess the role of the proposed information manager and the
ethical considerations to observe in order to overcome the fears of the HR
officer (9 marks)
(Total 25 marks)
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