Transferring some part of an organisation's activities to a subsidiary in another country is an example of

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1 General Comments This represented the third paper under the revised syllabus. All questions in the paper are compulsory. In common with previous sessions, candidates scored heavily on Section A (Question1) multiple choice questions, moderately in Section B (Question 2), six five mark subquestions and poorly in Section C, Questions 3 and 4, each worth 2 marks. SECTION A 20 MARKS ANSWER ALL TEN SUB-QUESTIONS Each question is worth 2 marks Question 1.1 Transferring some part of an organisation's activities to a subsidiary in another country is an example of A B C D free trade. outsourcing. offshoring. delegation. The answer is C Question 1.2 'Servqual' relies on feedback from A customers. B managers. C careful business process re-engineering. D a 360 degree appraisal. The answer is A Question 1.3 Attempts by a country to help local producers by restricting international trade is known as A B C D factor conditions. enterprise management. governance. protectionism. Question 1.4 The answer is D Total productive maintenance involves A maintaining worker satisfaction and high productivity. B a cycle of PDCA. C a prevention of quality failures through equipment faults. D eliminating non-value adding activities from a process. The answer is C The Chartered Institute of Management Accountants Page 1

2 Question 1. The ABC system is a method of A managing inventory. B selection criteria. C production improvement. D quality compliance. The answer is A Question 1.6 A computerised payroll package is an example of a A data processing system. B management information system. C decision support system. D web dependent application. The answer is A Question 1.7 The acronym SDLC normally relates to A skills, deliverables, limitations and capability. B collaborative quality orientated activities. C standard data listed code. D a system (or software) development lifecycle. The answer is D Question 1.8 Electronic data interchange relies on A structured data and standard business documents. B networking and creativity. C social networking and intelligence sharing. D software development skills. The answer is A Question 1.9 Corrective, adaptive and perfective are forms of A rewards and punishments used in people management. B performance management variables. C systems maintenance. D stock control methods. The answer is C The Chartered Institute of Management Accountants Page 2

3 Question 1.10 Data integrity and elimination of duplication are key features of A effective databases. B end user flexibility and autonomy. C autonomous (independent) working by different functions. D all Web 2.0 tools. The answer is A Question One sub-questions 1.1 to 1.10 test candidates knowledge of a wide variety of topics across the syllabus through the use of objective test questions (OTQs) in a conventional multiple choice format. Suggested Approach/Marking Guide Sub-questions 1.1 to1.10. These sub-questions have been constructed on the basis that there is only one correct answer. Marking is therefore on the basis of 2 marks for a correct answer and 0 marks for an incorrect answer. 0 or 2 Examiner s Comments Most candidates scored well on this question. The Chartered Institute of Management Accountants Page 3

4 SECTION B 30 MARKS ANSWER ALL SIX SUB- QUESTIONS. Question Two General suggested approach Question two represents 30% of the paper and tests topics from across sections A, B and C of the syllabus. Responses for each sub-question are expected in a form that might include a few headings, sentences and bullet points over a page or so per sub-question. Questions are direct and are not complicated by detailed scenarios. As such, accuracy, brevity and clarity are called for and hopefully candidates should not spend a disproportionately long time on each sub-question. Guidance on what constitutes a good answer and indication on what represents a weak/fail answer: Weak answer: Limited or some knowledge of the concepts involved. Possible confusion. Sketchy notes or bullet points, a failure to demonstrate comprehension. Good answer: Demonstrates knowledge, comprehension and, where applicable, analysis through a series of clear developed notes relevant to the requirements of the sub-question. Question Two (a) Explain the relationship between organisational competences and decisions relating to the contracting out of activities. ( marks) This question examines learning outcome A1(b) 'explain the emergence and importance of outsourcing and offshoring'. Suggested approach/marking guide Identify relevant categories of organisational competences. Explain the appropriateness of each in turn. Explanation of what an organisational competence is Explanation of what core competences are Explanation of why they should never be contracted out Explanation of non-core competences (e.g. complementary and residual) Explanation of contracting out issues Describe the relevance of Quinn and Hilmer's contribution Maximum mark awarded Max 1 mark each The Chartered Institute of Management Accountants Page 4

5 Question two (b) An organisation is reviewing its decision-making information systems and has asked you to identify suitable assessment criteria for this review. ( marks) This question examines learning outcome B1(a) 'identify the value of information and information systems organisations'. Suggested approach/marking guide List suitable criteria. Elaborate so as to clearly identify each. Value for money Cost Timeliness Relevance Understandability Consistency Accuracy Completeness Bias free Question two (c) Briefly describe Hofstede's dimensions of national culture. Max 1 mark each ( marks) This question examines learning outcome A2(b) 'analyse relationships among business, society and government in national and regional contexts'. Suggested approach/marking guide Establish Hofstede's contribution. Identify the dimensions. Describe each in turn. Outline of Hofstede's research and its implications Description of dimension of uncertainty avoidance Description of dimension of masculinity Description of dimension of individualism Description of dimension of power-distance Description of dimension of long versus short-term orientation/confucian Max 1 mark each The Chartered Institute of Management Accountants Page

6 Question two (d) Describe, with examples, the TWO forms of IT/IS controls that exist to ensure complete, accurate processing of data and safeguarding of privacy and security. ( marks) This question examines learning outcome B2(b) 'discuss ways of organising and managing information system activities in the context of the wider organisation'. Suggested approach/marking guide Identify the two main forms of control. Describe the nature of controls under each heading with examples. Describe General controls Personnel controls Access controls Computer equipment controls Business continuity planning Describe Application or program controls Completeness checks Validity checks Identification and authorisation checks Problem management facilities Change management controls Input controls Max 1 mark per type of control ½ mark per example Question two (e) Describe briefly FIVE major developments over the past twenty years or so that have led to globalisation. ( marks) This question tests learning outcome A1(a) 'explain the emergence of major economies in Asia and Latin America'. Suggested approach/marking guide Identify the major developments. Describe each in turn. Description of relevance of: Reduced trade barriers / work of World Trade Organisation Improved transportation Low cost, efficient communication systems / Advances in and spread of new technologies Increased movement of capital and technology Production efficiencies Improved financial systems Emergence of BRIC economies Other Max 1 mark each The Chartered Institute of Management Accountants Page 6

7 Question two (f) Describe Reck and Long's purchasing development model. ( marks) This question examines learning outcome C2(e) 'describe ways to manage relationships with suppliers'. Suggested approach/marking guide Identify the model. Briefly describe each stage. Outline description of Reck and Long's organisational purchasing development model Description of passive stage Description of independent stage Description of supportive stage Description of integrative stage Max 1 mark each Examiner s Comments There were some encouraging candidate performances when responding to Question 2. Well prepared candidates applied their knowledge to the requirements of the sub-questions and scored heavily. Common Errors 2(a) - failure to link competences to contracting out; instead describing one or the other 2(d) - a lack of knowledge The Chartered Institute of Management Accountants Page 7

8 SECTION C 0 MARKS ANSWER BOTH QUESTIONS Question Three (a) (b) (c) Discuss the potential benefits of quality standard ISO 9000 certification to 2TW. (10 marks) Discuss the factors that should be taken into account by the HR department when redesigning the remuneration and reward package for SBU managers. (10 marks) Suitable measures of performance for SBU managers will be designed as part of the redesigned remuneration and reward package. Describe the desirable features of such measures. ( marks) (Total for Question Three = 2 marks) Question three requirement (a) examines learning outcome C2(a) 'apply contemporary thinking in quality management', requirement (b) examines learning outcome E2(c) 'describe the HR activities associated with improving the opportunities for employees to contribute to the firm, and requirement (c) examines learning outcome E2(a) 'explain the HR activities associated with developing the ability of employees'. Suggested Approach/Marking Guide Guidance on what constitutes a good answer and indication on what would represent a weak/fail answer: Weak answer: Limited or no knowledge of concepts involved. Possible confusion and a failure to demonstrate comprehension. Possible narrative answer descriptive and repetitive of given scenario or sketchy notes/bullet points made. Possible failure to expand upon points made fully enough. An inability to synthesise thinking to the context of the scenario. Good answer: Demonstrates knowledge and understanding through clear, well developed narrative relevant to the requirements of the question. Purposeful expansion of points made and good application of thinking to the context of the scenario. Requirement (a) Describe the basis of ISO 9000 Identify the potential benefits for 2TW Describe each benefit in turn with reference to the scenario Systematic approach: Explanation of ISO 9000 providing a systematic approach to managing business processes to manufacture products that conform to customer expectations so benefitting 2TW. Overcoming internal weaknesses of differing operating efficiencies between SBUs, and returned goods which require replacement or reworking. Customer satisfaction: Standardised practices will mean fewer returns and improved customer satisfaction. Enhanced company reputation will improve satisfaction and customer loyalty leading to repeat purchasing and an enhanced company reputation. Improved sales through repeat purchases, recommendations and guarantee of quality. New sources of business by acceptance on approved supplier lists. Standardised practices and processes will improve the efficiency of business processes and should reduce expenditure. Elimination of inefficiencies: SBUs will need to discuss and consider mutual learning and best practice. 1 to 2 marks per substantive point Cont. The Chartered Institute of Management Accountants Page 8

9 Mechanisms of quality control may help the Chief Executive overcome fears of a loss of control over SBU operations. Improved management information through the ISO 9000 encouragement in the use of statistical techniques. A stimulus to continual improvement by making the way in which 2TW operates visible. Improved employee morale with an enhanced company reputation, also workforce involvement in controlling processes and documenting will mean that it will feel valued. Other relevant substantive point 10 Requirement (b) Identify the factors associated with a redesign Discuss each factor in turn with reference to the scenario Appropriateness of basic pay as part of the remuneration and reward package. The need to balance basic and performance related pay in an appropriate way. Address recruitment and retention as well as targets of quality and profitability. Otherwise there may be problems of attracting and keeping good managers. Ability of package to influence behaviour: Rewards must be commensurate with effort and attainment. Control of total payroll costs: 2TW needs to decide how much it can afford. Levels of performance related pay should be no less generous than the previous bonus scheme and sufficient to make managers improve both quality and profit. Non-financial incentives (e.g. promotion, training and career development opportunities etc.) should be considered. Accounting for non-controllable factors that influence performance e.g. local economies, availability of technology, raw materials and financial resources, etc. Potential corruption of appraisal process: Performance appraisals may cease to be positive developmental processes and become defensive and/or confrontational. Impact upon other groups (e.g. directors and other members of the workforce). The new system should not undermine teamwork or create jealousies within SBUs. A need for consultation with SBU managers, trade unions and other relevant groups in order to get universal 'buy in'. Other relevant substantive point 1 to 2 marks per substantive point 10 Requirement (c) Identify suitable features Describe each feature in turn with reference to the scenario Specific measures devised which need to be agreed by SBU manager groups Measurable: Quantifiable measures are available for net profit. Appropriate metrics and evaluation criteria aligned to ISO 9000 standards and levels and cost of returns and reworking are also needed. Achievable: Individual managers need to have control over the reaching of performance targets. If a target is outside of their control there will be frustration and demotivation. Realistic targets which are recorded accurately and reliably. Time-bound: Pre set dates should be established when 'snapshots' of performance are taken and awards paid. Transparency of targets and awards given to avoid suspicion and a lack of trust. Other relevant substantive point 1 mark per substantive point The Chartered Institute of Management Accountants Page 9

10 Examiner s Comments A substantial 2 marks are available. As with previous papers, there was a lack of content in most cases indicating that insufficient time had been spent in addressing the issues in the scenario. Common Errors Not writing enough. Some answers were nothing more than outline notes when the question had more substantial requirements 3(a) - some candidates confused ISO 9000 certification with TQM 3(c) - a large number of candidates described actual measures rather than the features of the measures The Chartered Institute of Management Accountants Page 10

11 Question Four (a) Explain the reasons why a strong brand is so important to companies such as 99. (10 marks) (b) Describe the key aspects of the product and place mix involved in a deal between Z and 99. (10 marks) (c) Discuss the positive features of 99's past success which could help inform Z's review of its own HR activities. ( marks) (Total for Question Four = 2 marks) Question four requirement (a) tests learning outcome D2(e) 'explain the role of branding and brand equity'. Requirement (b) tests learning outcome D2(b) and (c) 'apply tools within each area of the marketing mix' and 'describe the business contexts within which marketing principles can be applied'. Requirement (c) tests learning outcome E2(b) 'discuss the HR activities associated with the motivation of employees'. The question tests candidates' knowledge and comprehension of these syllabus areas and the ability to apply this thinking to the context of the scenario. Suggested Approach/Marking Guide Guidance on what constitutes a good answer and indications of what represents a weak/fail answer is the same as for Question Three. Requirement (a) Identify the features of a strong brand Explain each feature in turn with specific reference to 99 Communication of the organisational vision: 99, through its brand, can share its vision for universally available clean water whilst respecting the environment. Differentiation of product from competitors by making 99 easily recognisable (as a charity brand). Leads to establishing a market niche against bigger competitors. Ability to command premium prices as many consumers choose socially and environmentally responsible products over others. 99 is a small player in a large bottled water market. Brand strength and customer loyalty mean that 99 can still remain competitive despite higher unit costs. Perceived superiority of the product therefore less price sensitive in the face of competitor actions such as price cuts. Connection with the customer base: The brand is important in captivating consumers and fulfilling their expectations. Perception management: Customers blame large retailers for not providing more environmentally and socially friendly products. 99's growth might be a result of being an independent small brand with unsophisticated promotion and packaging. Customer loyalty means repeat sales and habitual buying of 99's water which is important for FMCGs which are low cost and rely on sales volumes. Corporate assets: Brands such as 99 can be of substantial value. Two take-over bids evidence as much. A means of customers 'making a statement': In this case customers buying 99 shows they 'care' 1 to 2 marks per substantive point Cont. The Chartered Institute of Management Accountants Page 11

12 Reassurance over the purchase: It is the underlying ethics of the company that gives reassurance to a customer that they have made the 'right' purchase. Other relevant substantive point 10 Requirement (b) Outline the role of both the product mix and the place mix within the marketing mix variables Identify key aspects of the product mix as it relates to Z and 99 Identify key aspects of the place mix as it relates to Z and 99 Synergy of tie-up: 99 would strengthen its place mix (through improved distribution, environmentally cleaner transport and getting bottles into supermarkets). 99 would strengthen its product mix (through biodegradable bottles). Z would strengthen its product portfolio and hence its product mix. Product mix: For 99, the product range is currently modest. The key characteristic is the vision the products represent. The 99 brand has considerable strength already and Z has expertise to develop the brand still further. 99's products are FMCGs purchased for personal reasons and involving many relatively low financial outlays. Of particular relevance to FMCGs is advertising, branding and packaging, it is important therefore that brand is developed further. For Z, adding further products or product lines based on 99 will be less risky due to 99customers' brand loyalty. Z's portfolio of products does not presently include bottled water. Z's products have 'green' credentials and 99 fits in well with the portfolio ethos. Z's purchase of 99, rather than attempt to build market share itself through internal growth is quicker. There are a growing number of consumers with ethical concerns and 99's business ethos fits this thinking by providing products with green and ethical credentials. Other relevant substantive point 1 to 2 marks per substantive point Place: 99 is sold in a few garages, on airplane flights and in airport shops but not supermarkets. A tie-up with Z will extend place to supermarkets. Z's products are currently sold in supermarkets. Supermarkets are where large volumes of sales are achieved, which is important for FMCGs like 99. Z offers an improved distribution network, stock management and warehousing. Z's distribution involves the use of low-carbon vehicles. Other relevant substantive point. 10 The Chartered Institute of Management Accountants Page 12

13 Requirement (c) Identify and then discuss human resource activities within 99 that Z might consider Team working and empowerment: 99 has little specialism; more likely individuals will be multi-skilled and adaptable. Z might also learn from effective team working, empowerment and a shared focus on outputs with implications for organisational structuring and culture. Connecting workers to company outcomes: Z's policies for training and development could focus more on improving the way employees contribute to organisational values, goals and future direction of the organisation. Retention: The wages of 99 employees are modest but no-one has ever left the company suggesting that staff are engaged and content. So long as pay rates are reasonably competitive, work is engaging and Z maintains its credibility as a good ethical employer, then retaining key staff will be enhanced. Recruitment / Employer branding: Superior employer branding will improve recruitment possibilities, important in a battle for talented workers. Overall reward package: Reward is more than money; trips abroad and charitable work represent part of an enriching package for 99's workers. Z might learn the value of developing a broader reward package. Motivation: By publicising sending staff out to help with pump installation, a positive connection with the corporate cause is established. Such engagement can provide a motivational stimulus to workers. Other relevant substantive point 1 to 2 marks per substantive point Examiner s Comments Common Errors As before, a common error was not writing enough, particularly on sub-questions 4(a) and 4(b) Many candidates unnecessarily described all features of the marketing mix rather than the product mix and the place mix in part (b) Some candidates identified non-hr factors in part (c) The Chartered Institute of Management Accountants Page 13