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 C’s 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 are
unlikely 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 C’s 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. The
contract 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 (Eastlandia’s currency) and £ sterling (C’s 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 C’s 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 in
Eastlands. 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 Eastlandia
their 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
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 to
meet 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 engineering
projects 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 company’s reputation and gain recognition in Eastlandia for its workmanship.
Possible future development
The Eastlandian government has invited C’s 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 have
proposed 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 advice
as 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.
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 companies
were 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 two
chosen 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 should
be retained, and if this is not supported, recommend an alternative.
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 2nd 1st

Features 2nd 3rd
Reliability 3rd 2nd
Servicing and maintenance 7th 5th

Last year the firm introduced a customer relationship management (CRM) software system so the
fall 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 an
option and the focus was placed on reengineering the process instead. Following changes were
proposed:
 Current process:

CUSTOMER ENGINEER CALL CENTRE ADMIN. CRM SYSTEM

Call-taker
records Call-taker
Customer creates
details,
ask for job in
checks
service CRM
engineer
availability system
and confirms
appointment
date Two copies
of work
Engineer order
records Call-taker printed –
details phones one posted
engineer and to engineer
passes on job and one
details output on
file.

Engineer
Engineer phones call
visits centre when Admin
customer Each week
finished closes job
and engineer
on system
completes hands in
job completed
work sheet

Admin
checks work
sheet against
work order
and sends a
copy to
accounts
Proposed New process

CUSTOMER ENGINEER CALL CENTRE ADMIN. CRM SYSTEM

Call-taker
Call-taker creates job
Customer records in CRM
asks for details, system
service checks
engineer
availability
and
confirms
appointment Work order
date generated and
automatically
sent to
engineer’s
PDA

Engineer
visits
customer
and
completes CRM
job. Inputs automatically
data on informs
PDA. accounts and
closes job
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.
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 Institute’s 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 the
Institute 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 statistical
analysis 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 have
correctly 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 is
required. 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 use
the 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 Margaret’s enthusiasm and
impatience and wants a slower and more reflective approach to the project. He would like to see
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 an
external 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.