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Question 1:

Introduction

C is a large civil engineering company which carries out various building contracts within both its

home and overseas markets. Its main area of work, particularly overseas, is in road construction.The company has a strong financial track record and successfully survived a major recession

within its home market about ten years ago.

Economic circumstances in overseas markets

During the last three years, the overseas markets in which C has been carrying out building

contracts have suffered a serious economic recession. Business confidence in these markets has

been seriously weakened over this period. One country, which has been affected by adverse

economic circumstances, is Eastlandia. C has been engaged in carrying out contract work in

Eastlandia for several years. Government action in Eastlandia to protect its ailing economy has

also had an adverse impact on foreign contractors such as C operating in this country.

The concern felt by Cs directors regarding the economic situation in Eastlandia has been

increased as a result of recent events involving a large development company (D) which C has

worked with in the past. Company D, which is wholly owned by Eastlandian shareholders, had

previously received Eastlandian government backing. However, it has recently been allowed to

go into receivership without any further government support. The government announced that

partial repayment of debts owed by the development company to local investors would take

priority over those it owed to foreign investors. The result of this is that foreign investors areunlikely to see any recovery of their loans.

The serious economic situation developing in Eastlandia has threatened to result in an economic

recession. There has been a consequent negative effect on related industries within the country,

such as steel, building materials and transport. Another major concern for Cs directors is the

constant threat posed by currency fluctuations and the possibility of the Eastlandian government

being forced into currency devaluation.Work-in-progress

Currently, C is engaged in the construction of a major road linking two parts of a new Eastlandian

city, bypassing the central congested area. C is engaged as a subcontractor to a major Eastlandian

development company a different company from D which went into receivership recently. Thecontract was accepted by C after estimating that it would provide a high positive net present

value. At the time the investment appraisal calculation was made, the expected currency

exchange rate between Eastlands (Eastlandias currency) and sterling (Cs home currency) was

7.26 to the in the current year and 7.54 to the next year. In fact, the current exchange rate is

7.74 to the and the forward rate in 12 months, time is quoted at 8.56 to the .

As far as Cs overall business is concerned, the contract represents about 10% of total turnover

for the company. The contract commenced three months ago and payment to C is to be inEastlands. Progress payments for the work done so far have been delayed without any

explanation. The contract is about 15% complete and is expected to be finished in another 21

months, which is three months later than planned. This will result in penalty payments being

incurred by C.

The directors of C have expressed to the contract manager for the road development in Eastlandiatheir concern regarding the need to undertake remedial work on what has been completed so far.

This has resulted from the use of faulty materials obtained from an Eastlandian supplier. The

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remedial work has already consumed the total amount of the financial contingency which was

allowed within the contract estimates.

Strategic information and market size

C uses external databases to establish the levels of its own share of the market and overall

patterns of market growth and development. In addition, the management accounting department

of the company provides internal information on market share and growth and internal capacity tomeet its future contractual demands. Over the last two years, there has been a general decline in

market opportunities, but C has in fact managed to increase its overall market share. This has

been achieved because of its strong reputation for using good quality materials and applying high

standards of workmanship.

One of the major criticisms being made in Eastlandia is the poor quality of the civil engineeringprojects which have been completed quickly. There have been reports of numerous casualties

among the site workers during the construction process. Some buildings have partially collapsed

after completion and there have been instances where roads have begun to break up shortly after

they have been opened. This has caused civilian casualties with some fatalities and resulted in

noisy public protest in Eastlandia about the lack of attention to safety in civil engineering and

building work.

C is well regarded by the Eastlandian government. It has taken a long time for the directors of C

to build the companys reputation and gain recognition in Eastlandia for its workmanship.

Possible future development

The Eastlandian government has invited Cs directors to tender for other civil engineering work.

C has taken the invitation and, if the company is successful in all its tenders, the total

commitment in Eastlandia would represent about 40% of its order book.

In recognition of the importance of the Eastlandian market and in order to reduce the potential

losses from developers which engage their services becoming insolvent, the directors of C haveproposed that a strategic alliance be formed. It is proposed that this alliance will be established

with an Eastlandian civil engineering contractor who, it is expected, will have an insight into the

financial integrity of potential customers. The alliance partner would be able to give clear adviceas to which of these Eastlandian customers would be suitable for the establishment of contractual

arrangements.

Required:

a) Prepare a corporate appraisal for C in respect of its strengths, weaknesses and

opportunities.

b) Discuss the threats posed to C by its involvement with the road-building project in

Eastlandia and explain how it can reduce the impact of these threats on its own strategic

position.

c) Discuss the strategic logic and practical considerations for C of entering into an alliance

with an Eastlandian civil engineering contractor.

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Question 2:

A multinational company which makes and sells consumer durables is reviewing the future

organisational structure of its European operations, which employ over 100,000 people.

Development of the company

The company has expanded rapidly in the late 1940s and 1950s. Separate marketing companieswere established in all the main European countries to serve the distinctive needs of the markets

in each individual country, with some manufacturing facilities in the larger countries. Some

exports to other smaller European markets had also been made. A divisional structure was

adopted which permitted considerable freedom to individual country managers, who were

responsible for all operations in their country. They could decide what models to design, make

and sell, the marketing and pricing strategy, and the sourcing.

The industry background

There has been progressive integration of European economies, making cross-border transactions

easier. The consumer durable industry has also become much more competitive and cost-

conscious, and is faced with considerable overcapacity. New product models can no longer be

justified for one country only, but are designed for sale in all countries, and made in one or twochosen plants (possibly in Eastern Europe, with cheaper labour) to serve all markets.

The company now

Although the country-based divisional structure is still in place, most key decisions are now taken

at European Head Office. These include the selection of new models to make and sell, and the

plants at which these models are to be made, whether these are existing plants or new plants in

cheap labour areas.

Local markets are still distinctive with different taxation, distribution costs and pricing structures.Individual country managers still set country selling prices, although comparisons of prices across

Europe reveal considerable anomalies. Manufacturing facilities are still operated in major

countries, even though it is difficult to justify continuing investment without government subsidy.

Required:

a) Discuss the potential problems of the present country-based divisional structure and its

effectiveness as Europe becomes more integrated and cross-border transactions become

easier.

b) Recommend, with reasons, whether the present divisional organisational structure shouldbe retained, and if this is not supported, recommend an alternative.

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Question 3:

Nikki Photocopiers manufactures and sells photocopiers to businesses throughout Europe. The

market is highly competitive with major global players present.

Despite earlier success, the firm has recently seen a downturn in its performance as typified by

the following customer ratings in European Business Photocopier Magazine:

Rating

Current year Last year

Value for money

Features

Reliability

Servicing and maintenance

2nd

2nd

3rd

7th

1st

3rd

2nd

5th

Last year the firm introduced a customer relationship management (CRM) software system so thefall in the service rating was a surprise. Before this survey had been published the directors had

planned to redesign research and production processes but, based on this feedback, decided to

look at the customer servicing and maintenance process first. Outsourcing was rejected as anoption and the focus was placed on reengineering the process instead. Following changes were

proposed:

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Current process:

CUSTOMER ENGINEER CALL CENTRE ADMIN. CRM SYSTEM

Customer

ask forservice

Call-takerphones

engineer and

passes on job

details

Call-takercreates

job in

CRMsystem

Engineer

visitscustomer

and

completesjob

Engineerrecordsdetails

Call-taker

recordsdetails,

checks

engineeravailability

and confirms

appointment

date

Engineer

phones call

centre whenfinished

Two copiesof work

orderprinted one posted

to engineer

and oneoutput on

file.

Admincloses job

on system

Each week

engineer

hands incompleted

work sheet

Admin

checks worksheet against

work orderand sends a

copy to

accounts

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Proposed New process

CUSTOMER ENGINEER CALL CENTRE ADMIN. CRM SYSTEM

Call-taker

recordsdetails,

checks

engineeravailability

and

confirmsappointment

date

Customerasks for

service

Engineer

visitscustomer

and

completes

job. Inputsdata on

PDA.

Work order

generated and

automaticallysent to

engineers

PDA

Call-taker

creates job

in CRMsystem

CRM

automaticallyinforms

accounts andcloses job

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Required:

a) Discuss whether service and maintenance should have been prioritized for re-

engineering.

b) Assess the likely impact of the proposed changes on Nikki Photocopiers competitive

advantage.

c) Outline the IT/IS implications of the proposal.

d) Outline the arguments for and against outsourcing maintenance.

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Question 4:

The Institute of Information System Administrators (IISA) holds examinations all over the world.

Every six months 200,000 students in 450 centres in 75 different countries take one or more papers in the Institutes six-paper qualification. The examinations are conventional three-hour

examinations with the candidates writing answers in script answer books similar to those used by

ACCA. The current system (described below) is both costly and time-consuming and so theInstitute has set up a project to look at the feasibility of on-line marking, where markers

download images of the scripts and mark them on a Personal Computer. An outline of the

proposed system is also described below.

Current System

At present the script answer books completed by the students are taken from the examination

room by the invigilator and sent by secure courier to the IISA head office in London. From here,

the scripts are sent by courier to examiners, who select and despatch scripts (again by secure

courier) to markers. Once the scripts are marked they are returned to the IISA head office who

arrange for them to be checked. This is an arithmetic check, making sure that the total for each

question and script is correct. Once scripts have been checked, the marks for each question

answered on the script are entered into a computer system. This system provides statisticalanalysis of the marks as well as printing certificates for successful candidates. A selection of the

scripts is sent (again by courier) to the examiners for moderation, i.e. to check that markers havecorrectly applied the approved marking scheme. The examiners are also sent scripts where

arithmetic errors have been found. All scripts are stored at the IISA head office. There are

currently 6 examiners, 500 markers and 250 checkers.

Proposed System

The On-Line MArking Project (OLMAP) proposes that all script answer books are taken from the

examination room by the invigilator and sent by secure courier to a document-imaging centre in

Singapore. Here, the hand-written scripts will be scanned into a computer system. Examiners will

be provided with on-line access (via the Internet) and they will be able to allocate a script to a

particular marker. Once this allocation has taken place, the script is available for on-line marking.The marker is given access via the Internet and is able to download allocated scripts on the

computer screen, where they may be marked using simple mouse movements. The software

assists the marker by adding up the marks automatically, so no arithmetic script checking isrequired. At any time an examiner can download marked scripts to undertake moderation. This is

made particularly effective by the system allowing the hiding of marks given to the script by the

original marker. Certificates will also be printed from this system.

Project Issues

The project manager for the project is Margaret Mendoza. She is impatient to progress the project

and has identified a software package Emark, marketed by a multinational software company,

which appears to fulfill the requirements. She believes that all examination subjects should usethe package commencing with the examination session in 12 months time. She is committed to a

direct changeover/conversion approach as parallel running is just not a possibility in this

situation. However, the package is comparatively expensive, is untried in a world-wide

application, and has received some criticism from an IT examiner, Sue Yorke, who has attended a

demonstration of the Emark software.

The sponsor of the project is Mike Palmer. Mike is concerned about Margarets enthusiasm and

impatience and wants a slower and more reflective approach to the project. He would like to see

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the software used in a pilot run, employing it on just one or two examinations at first. One of the

reasons for this is his concern about the performance of the software, as he is worried that a slow

response time will make the system unusable. Sue Yorke has suggested that it could be used on

her IT paper, where markers are IT literate and enthusiastic to adopt the new marking software. In

contrast to Margaret, Mike is in favour of a bespoke development (either in-house or using anexternal software house) with the eventual goal of making the software commercially available to

other examining bodies.

Required:

a) Margaret Mendoza advocates the purchase of a software package, whilst Mike Palmer

wishes to go for a bespoke application. Discuss whether a software package or a bespoke

solution should be used.

b) Mike Palmer has already expressed concerns about potential performance problems with

the software. Explain how the on-line marking application could be tested.

c) Discuss whether parallel running or direct changeover is more appropriate in this

situation.