DO NOT OPEN THIS QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO. Enterprise Pillar. 28 August Thursday Session

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1 DO NOT OPEN THIS QUESTION PAPER UNTIL YOU ARE TOLD TO DO SO Enterprise Pillar E3 Enterprise Strategy 28 August Thursday Session 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 will not be 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 submitted electronically, using the single Word and Excel files provided. Answers written on the question paper and note paper will not be submitted for marking. You should show all workings as marks are available for the method you use. The pre-seen case study material is included in this question paper on pages 2 to 7. The unseen case study material, specific to this examination, is provided on pages 8 to 10. Answer the compulsory questions in Section A on page 11. This page is detachable for ease of reference. Answer TWO of the three questions in Section B on pages 14 to 19. Maths tables and formulae are provided on pages 21 and 22. The list of verbs as published in the syllabus is given for reference on page 23. Your computer will contain two blank files - a Word and an Excel file. Please ensure that you check that the file names for these two documents correspond with your candidate number. E3 Enterprise Strategy TURN OVER The Chartered Institute of Management Accountants 2014

2 Pre-seen case study Introduction P plc is based in the UK. It is one of the world s leading distributors of plumbing, heating and building materials employing over 35,000 people. It operates its own retail outlets, some of which share a common trading name and are organised as separate business units. P plc also sells directly to building and plumbing contractors and merchants through its external direct sales units. P plc was founded in the early 20 th Century as a plumbing and buildings materials manufacturing business and enjoyed very rapid growth in the 1970 s and 1980 s. In 1985, P was listed on the UK stock exchange and at this time first ventured into the USA by acquiring a building materials distribution company based in New Jersey. In 1990, P plc acquired a building supplies business in the UK and, later in that decade, made acquisitions of other European based plumbing and heating and building materials distribution companies. In the early years of the 21 st Century, P plc sold off all its manufacturing business units and concentrated solely on being a distributor and retailer of plumbing, heating and building materials. Corporate values P plc is proud of its history and traditions of distributing and retailing good quality products in locations which are convenient to its customers. It has developed a series of core values which are: Trading fairly and honestly; Being responsive to customer needs and market changes and not being satisfied with standing still, but seeking to continuously improve; Employing committed people and providing training opportunities to develop their skills; Having respect for cultural diversity across all the company s stakeholders. Business operations P plc s head office is in the UK which also contains its centralised treasury. It has two operating divisions which are: Plumbing and heating Building materials Products: Baths, showers, toilets, sinks, heating systems, general plumbing parts such as water taps, pipes and drainage systems. Products: Concrete building blocks, bricks, tiles, flooring products, roofing materials and wooden roof beams and other timber, as well as upvc products, such as doors and window frames. Each division s operating arrangements are similar. Each division has two distribution warehouses, one each in Europe and the USA. Each division uses these warehouses to fulfil sales orders placed by its external direct sales units and retail outlets. The external direct sales units sell to building contractors, plumbing contractors and merchants who supply small building and plumbing companies with materials and parts. P plc s retail outlets sell directly to the public and to the building and plumbing trades. Some of these retail sales outlets were set up or acquired as chains of retail outlets each with a common trading name and these have been retained as separate business units. The retail outlets that have been acquired continue to operate under their own trading names so that P plc can retain the benefit of the goodwill the retail outlets developed. Each has a specific line of business, such as the sale of complete bathrooms and kitchens through chains of showrooms. September Enterprise Strategy

3 The plumbing and heating division carries out its retail operations through established chains of showrooms. These showrooms sell products to local tradesmen and also directly to the public. The building materials division s retail activities are carried out through small-scale retail outlets which are usually located on industrial estates and those that have been acquired retain their local building supply trading names. Overall, P plc has well over 90,000 suppliers and sells to over 1.2 million customers across the world. Each of the two divisions operates its own large logistics and distribution network. They operate their own fleet of road transport vehicles to distribute products in Europe and the USA and use rail, sea and air networks for distribution to their external direct sales units and retail outlets in other parts of the world. Board of Directors and Executive Board composition The Board of Directors comprises a Non-executive Chair, a Chief Executive, the five directors covering the functions of Finance, Logistics, Procurement, Marketing and Information Systems, the Managing Directors of the two divisions, the Company Secretary and six nonexecutive directors. In addition, P plc has an Executive Board comprising the Chief Executive, the five functional executive directors, the Managing Directors of the two divisions and also the Chief Human Resources Officer, who is not a main board member. The Executive Board reports to the Board of Directors. Divisional Management Structure Each of the two divisions operates with a Divisional Executive Management Team (DEMT), based in the UK. These comprise chief divisional officers for the functions of finance, human resources, information systems, logistics, marketing and procurement. Each DEMT is led by the relevant Divisional Managing Director. In the USA, there is also a Senior Executive Team for each division which comprises chief officers covering the same functions as are represented on the DEMT and chaired by the company s divisional Vice President (Plumbing and Heating or Building Materials as appropriate) for US sales. The senior executive teams in the USA report to their appropriate DEMT in the UK. An organisational structure chart is presented at Appendix 1. Financial structure There are 500 million GBP 0.10 shares in issue. The ownership of the company is split in the following proportions: Financial institutions: 90% Individual investors: 9.5% Board members and employees: 0.5% The share price has ranged between GBP 9 and GBP 6 over the last year. The dividend in the last financial year was GBP 0.25 per share and represented an increase of 20% over the previous year. The Chairman commented on this improved dividend stating that the Board had strong confidence that the company would continue to grow. TURN OVER Enterprise Strategy 3 September 2014

4 Chairman s statement on P plc s strategic objectives P plc s Chairman has declared three strategic objectives for the company which all combine with the aim of improving shareholder value. These three strategic objectives of P plc are: 1. To be the market leader in the regions of the world in which it operates; 2. To deleverage the company by disposing of business units or individual retail outlets which do not contribute sufficiently to the aim of P plc becoming market leader or are failing to meet minimum performance targets; 3. To continuously strive to improve its products and customer services. The business acquisition strategy employed by P plc has led to high levels of goodwill. In some cases, newly acquired businesses have underperformed and not met profit expectations. Some impairment of goodwill has been necessary in respect of certain business units. Those which have seriously underperformed have been disposed of. The net value of goodwill, after impairment, is shown in the company s statement of financial position in Appendix 2. Comparative performance and assets employed by the divisions The divisions measure performance at external direct sales unit and individual retail outlet level. Where retail outlets are organised into business units under a common trading name, then the performance of the retail units are consolidated enabling performance to be measured at the business unit level. The performance of the divisions for the financial year 2013 and the assets they employed as at 31 December 2013 are as follows: Performance: Plumbing and heating Building materials GBP million GBP million Revenue 7,040 6,837 Operating profit Assets employed: Plumbing and heating Building materials GBP million GBP million Non-current assets: Intangible assets Property, plant and equipment Trade and other receivables Current assets: Inventories Trade and other receivables 1,075 1,052 Non-current assets employed by P plc at its head office were GBP 40 million at book value. Source of products P plc prides itself on operating an efficient supply chain and developing strong relationships with a wide range of suppliers across the world which offer quality products. It grants preferred supplier status to most of its suppliers and enters into long-term supply contracts. All P plc s external direct sales units and retail outlets are supplied from its warehouses in Europe or the USA. This means that some of its products which are sourced from Asia and Africa are shipped to the company s warehouses in Europe and the USA. External direct sales units and retail outlets in Asia and Africa then receive shipments from the company s warehouses. This means that some products, which P plc sources from suppliers located in Asia and Africa, cross the world, are stored in warehouses and then cross the world again to be delivered to their destinations in Asia and Africa. September Enterprise Strategy

5 Corporate Responsibility Aims P plc aims to provide excellent customer service across its two divisions. This excellence in customer service is underpinned by its: provision of high levels of staff training and development, with strong concentration on safety management; adherence to the highest ethical standards both internally and with respect to supplier relationships; concern to cause the least environmental damage possible within its operations in terms of emissions, waste management and recycling activities by employing environmental performance management methods; promotion of product integrity through selling only safe and reliable products which are of the required standard of quality and partnering with key suppliers. Strategic developments: P plc aims to increase its market share by making repeat sales through its external direct sales units and retail outlets to existing customers and attracting new customers away from competitors. It places customer service as its key critical success factor. The Board is constantly seeking improvements in the company s logistics particularly in sourcing products and their delivery to its external direct sales units and retail outlets wherever they are in the world. It is actively considering acquiring logistic resources in parts of the world where it does not own warehousing and distribution facilities at present and also pursuing the concept of virtual warehousing by which its external direct sales units and retail outlets will still place their orders with P plc but will obtain their supplies directly from the manufacturer. Other areas of strategic development concern reviewing the life expectancy of its products so as to give greater value for money to final customers and benchmarking its performance in different countries in order to improve operating efficiency. TURN OVER Enterprise Strategy 5 September 2014

6 May Enterprise Strategy Appendix 1 External Sales Note: Some of the retail outlets were established, or were acquired as chains of retail outlets, operating as business units with a common trading name. The remaining retail outlets are individual business units in their own right comprising a single outlet. Retail Outlets P plc ORGANISATION STRUCTURE P plc Board of Directors Executive Board Plumbing and Heating Division Divisional Executive Management Team Building Materials Division Divisional Executive Management Team USA Plumbing and Heating Division Senior Executive Team USA Building Materials Division Senior Executive Team USA Warehouses Europe Warehouses Europe Warehouses USA Warehouses External Sales Retail Outlets External Sales Retail Outlets External Sales Retail Outlets

7 Appendix 2 Extracts from P plc's statement of profit or loss and statement of financial position Statement of profit or loss for the year ended 31 December 2013 GBP million Revenue 13,877 Cost of sales 10,128 Gross profit 3,749 Operating costs 3,302 Operating profit 447 Net finance costs 68 Profit before tax 379 Tax 116 PROFIT FOR THE YEAR 263 Statement of financial position as at 31 December 2013 GBP million ASSETS Non-current assets Intangible assets: goodwill (net) 1,748 Property, plant and equipment 1,366 Trade and other receivables 135 Total non-current assets 3,249 Current assets Inventories 1,784 Trade and other receivables 2,127 Cash and cash equivalents 418 Total current assets 4,329 Total assets 7,578 EQUITY AND LIABILITIES Equity Share capital (GBP 0.10 shares) 50 Share premium 25 Retained earnings 3,396 Total equity 3,471 Non-current liabilities Bank loans 1,000 Current liabilities Trade and other payables 2,905 Bank loans and overdrafts 202 Total current liabilities 3,107 Total liabilities 4,107 Total equity and liabilities 7,578 End of pre-seen material The unseen material starts on page 8 Enterprise Strategy 7 September 2014

8 SECTION A 50 MARKS [You are advised to spend no longer than 90 minutes on this question] ANSWER THIS QUESTION Question One Unseen case material Building Materials (BM) Division Market Sector Analysis BM operates a network of retail outlets and external sales units located throughout the world. BM analyses its sales in terms of the type of market sector. This helps BM to understand the activities that it must undertake to manage the external environmental influences upon these market sector types. An analysis of each type of market sector for the year ending 31 December 2013 is presented below. 1. Repairs and Maintenance sector (RM) - 60% of total BM sales revenue. The repairs and maintenance sector products are largely purchased by independent builders, local tradesmen and individual Do-It-Yourself (DIY) customers. The demand for repairs and maintenance products in most countries is largely influenced by the age of the houses and buildings. In the last five years there has been an increase in BM s sales revenues from this market sector compared to the other sectors. BM believes this increase has been driven by global economic factors. Competition in this sector is high with many businesses offering similar products at a comparable price and giving customers a range of incentives. BM aims to be the market leader in this sector in all of the countries in which it operates, through providing the widest range of products and offering the highest level of customer service in comparison with its competitors. Customer loyalty to BM in this sector is strong due to its focus on excellence in customer service and responsiveness to customer needs. 2. New construction sector (NC) 35% of total BM sales revenue The new construction sector products are mainly purchased by building construction companies, normally for use in large infrastructure projects and housing developments. Demand in this sector is driven largely by economic cycles and by demographic trends such as the increasing average age of the population and fewer people per household. BM has identified that in some countries, in particular in northern Europe, revenue earned from the NC sector has fallen dramatically in the last 5 years. However, in key markets such as Asia and the Middle East, revenues earned from the NC sector have increased. NC sector customers expect prompt and accurate delivery of high quality products. Competition is less intense in this sector than in the RM sector but BM believes that this will change, as economic growth and population increases occur in its key markets of the world. BM aims to be the market leader in this sector in all of the countries in which it operates. 3. Sustainable building development sector (SB) - 5% of total BM sales revenue Sustainable building development is a relatively new sector for BM. In the last decade there has been an increasing demand across the world for sustainable new building development and the preservation and renovation of existing buildings. Examples of sustainable building products include solar panels and sustainably grown and sourced timber products. New building technologies and developments in sustainable building materials have resulted in a greater focus upon discovering ways to construct and maintain environmentally sustainable buildings. However, sales revenues are currently low in this sector and only a few of BM s retail outlets and external sales units sell sustainable building products. However, BM is confident that this area of business will continue to grow with the increasing environmental awareness of customers and governments around the world. There are currently only a few competitors to BM in this market sector. As this is a relatively new sector for BM, the Divisional Executive Management Team (DEMT) has set a target for BM to be the market leader in this sector in both Europe and the USA within the next 5 years. Country Performance analysis BM s DEMT is reviewing the division s comparative performance in two specific countries, A and B, for the year ended 31 December BM is trying to identify the critical success factors which will enable it to maintain its strategic position in these countries. September Enterprise Strategy

9 Country A GBP million Country B GBP million Financial Information: Sales Revenue Gross Profit Operating Profit Capital Employed Other Information: Country A Country B Number of stores Employees (Full Time Equivalents 1, (FTE s)) Training Days 19,110 6,000 Staff Turnover 1.0% 3.5% Product returns (% of revenues) 0.3% 2.1% On time deliveries (as a % of total deliveries made in the country) 97.8% 92.5% Results per market sector in 2013 Country A Country B RM NC SB RM NC SB % Sales revenue per sector 76% 16% 8% 30% 68% 2% Cost of sales (GBP million) Customer Satisfaction Rating* 97% 96% 99% 94% 96% 90% Market Share % (Market position) 38% (1) 20% (2) 8% (3) 20% (2) 18% (2) Unknown Market Share of nearest competitor 22% 30% 13% 18% 22% Unknown *Note: BM s DEMT has set a target for customer satisfaction of at least 96% in all countries in which it operates. Country A BM has operated in Country A, a northern European country for over 20 years. Country A has a well-established residential housing stock, with over 75% of residential property being over 40 years old. A large proportion of the population of Country A own their own homes. Industrial and residential new construction projects have slowed down in the last 5 years in Country A. Currently, most of BM s customers in Country A are small independent builders and tradesmen who value the wide choice of products offered and the high levels of customer service the company provides. BM has well trained and dedicated employees with vast local knowledge operating in Country A. There has also been a significant increase in the number of DIY sales in Country A over the last 10 years. The Government of Country A is actively promoting the development of sustainable building projects and investment in large scale regeneration of derelict residential housing. Country B BM has operated in Country B, an Asian country, for the last 10 years. Country B has a developing economy which has achieved steady growth in the last 5 years. A large proportion of the population live in rented accommodation. There are many new residential and nonresidential building projects underway in the country. Most of BM s revenues in Country B are generated through sales to large building contractors, working on large scale building projects. BM faces strong competition from two large nationally based building materials suppliers, which provide locally sourced, highly competitively priced products. In particular, Country B s NC market customers demand prompt and accurate delivery of high quality products. All of the products sold by BM s retail outlets located in Country B are supplied from BM s warehouses which are located in Europe and the USA (Pre-seen page 4). TURN OVER Enterprise Strategy 9 September 2014

10 Staff Training and Development in BM One of the key aspects of P plc s Corporate Responsibility aims (Pre-seen page 5) is the provision of high levels of staff training and development. BM considers that the skill development and the retention of its employees who deliver excellent customer service is fundamental to its business strategy and long-term success. BM provides skills training for all front-line employees. In 2013, BM launched its Culture of Customer Service Excellence training programme, which it intends to extend to all employees before the end of As part of a customer service and employee development drive, an online training academy has been set up in the UK. The academy offers a broad range of training modules and qualifications. All employees receive a detailed annual performance review and feedback from their manager. The results of these reviews will affect each individual s development plans and objectives for the next year. BM also conducts engagement surveys with each member of its staff in its retail outlets to assess the level of employee job satisfaction. End of unseen material The requirement for Question One is on the opposite page September Enterprise Strategy

11 TURN OVER Required (a) (i) Evaluate the impact and influence of the external environment upon each of BM Division's three types of market sector. (9 marks) (ii) Recommend, with reasons, the activities that BM should undertake to manage the impact and influence of the external environment upon each of the three types of market sector. (7 marks) (b) (i) Compare and contrast the relative performance of BM's retail outlets operating in Country A and in Country B. Note: There are up to 10 marks for calculations (22 marks) (ii) Recommend, with reasons, ONE critical success factor for Country A and ONE critical success factor for Country B that BM could apply in respect of the operation of its retail outlets in these countries. You should base the critical success factors you recommend on your analysis in part (b)(i) as well as any other considerations you think are relevant. (6 marks) (c) Recommend, with reasons, TWO performance measures which could be used by BM to evaluate the success of its staff training and development activities. (6 marks) (Total marks for Question One = 50 marks) (Total for Section A = 50 marks) End of Section A Section B starts on page 14 TURN OVER Enterprise Strategy 11 September 2014

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14 SECTION B 50 MARKS [You are advised to spend no longer than 45 minutes on each question in this section] ANSWER TWO OF THE THREE QUESTIONS 25 MARKS EACH Question Two F is a management and business consultancy company, based in Country S, an Asian country. F was founded in 2008 and offers a wide range of services including change management, business process innovation and leadership development. It has become very successful due to the growth in the economies and the highly developed financial and business service sectors within Country S and its neighbouring countries. F has several clients among the top 100 companies in Country S. F employs over 200 staff in its head office in the capital city of Country S. Also located within same city, are several information systems design consultancies, management and financial training companies and the country s largest Internet Service Provider (ISP), W. Many of F s staff were educated in Country S s top universities, two of which specialise in the teaching and research of management and business skills. Whenever F advertises for staff, it receives a large number of applications from highly qualified candidates. The directors of F recognise that the company s growth is limited by the size of the local market for its services and are reviewing F s current website. They are proposing to invest in the development of a more sophisticated website in order to pursue further international development of the company through greater use of the Internet. At present, F s website merely contains a description of the company, its staff and contact details. The site was originally designed by the staff of F, when it was first set up and is currently hosted by W. The directors hope that by improving F s website it will allow the company to develop new business in other parts of Asia initially, with a view to becoming a global company in the longer-term. The directors of F are considering developing a new website. This will contain case studies of previous contracts, blogs, video streams and detailed descriptions of key staff and the range of services offered by F. The website will also enable and messaging facilities between clients, potential clients and F s consultants. The directors of F are considering using the services of a specialist web design company, G, also based in the capital city of Country S to design and develop the new website. The directors of F are also considering the possibility of hosting the website themselves. The requirement for Question Two is on the opposite page September Enterprise Strategy

15 Required (a) Discuss, using Porter's Diamond model, whether F might gain a competitive advantage as a result of being based in Country S. Note: You are NOT required to draw a diagram of Porter's Diamond model. (10 marks) (b) Evaluate the proposal made by F's directors to develop and host a more sophisticated website. You should use Johnson, Scholes and Whittington's framework of 'Suitability, Acceptability and Feasibility' to structure your answer. (15 marks) (Total for Question Two = 25 marks) Section B continues on page 16 TURN OVER Enterprise Strategy 15 September 2014

16 Question Three T is a website only retailer of printed promotional and marketing material, selling to small businesses and individual customers. Set up in 1998, T is now a global company employing over 3,000 people, operating with 20 localised websites, and shipping to more than 100 countries around the world. Since 2008, T has seen its revenues more than double to $400 million. T offers a variety of products that small businesses can use to promote and expand their businesses. T s range of products includes business cards, postcards and business signage products. T s business strategy is to target small businesses and individual customers which cannot afford the cost of using conventional large printing companies. T s mission statement is as follows: We are committed to providing our customers around the world with professional and high quality promotional and marketing products at an affordable price, that will make a long lasting impression. Our business is to promote our customers businesses. T uses the principle of lean production in its operations. T has three print production facilities; one in North America, one in Europe and one in Australia. T has developed its own technology which uses sophisticated software programs to aggregate and print large numbers of customised orders in its automated production facilities. This technology receives and stores thousands of individual print jobs on a daily basis. The computer software programs then intelligently sorts multiple individual print jobs for printing as a single print-run. The software programs calculate the optimal allocation of print orders that will result in the lowest production cost while ensuring on-time delivery to customers. This results in relatively inexpensive short runs enabling T to charge low prices to its customers. Jobs are routed for printing without any human intervention. T uses self-service design, proofing and ordering technology at the front-end of the process, through its website. T s website minimizes the number of options the customer can select for standard types of promotional and marketing materials. Within each category of product, T only supports limited specific sizes, paper stocks and ink colours. This results in higher numbers of similar jobs which can be grouped and printed together. Once printed, the products are cut down to size using a computerised robotic cutter, assembled, packaged and addressed using proprietary software driven processes, and shipped to customers. Using this process, T is able to print orders faster and at lower costs than conventional large printing companies. T values highly the relationship it builds up with its customers. T recognises that customer retention is a critical success factor in delivering its business strategy. T believes that it must use the Internet to deliver the drivers of customer satisfaction, as satisfaction results in customer loyalty. T uses the SERVQUAL approach to set, measure and monitor the standards for delivery of customer service and customer satisfaction. This approach focuses upon (1) Tangibles, (2) Reliability, (3) Responsiveness, (4) Assurance and (5) Empathy. The requirement for Question Three is on the opposite page September Enterprise Strategy

17 Required (a) Discuss the role of T's mission statement in supporting T's business strategy. (7 marks) (b) Evaluate how lean production enables T to achieve competitive advantage. (8 marks) (c) Advise T on how it should use the Internet to deliver the drivers of customer satisfaction. You should use the five 'SERVQUAL' factors to structure your answer. (10 marks) (Total for Question Three = 25 marks) Section B continues on page 18 TURN OVER Enterprise Strategy 17 September 2014

18 Question Four M is a High Street travel agent, specialising in luxury holidays. It operates 20 travel agency branches located throughout Country Z. M does not take online bookings at all but does have a website which is for informational purposes. M achieved steady growth until four years ago, when it found that its market share was eroding due to holidaymakers in Country Z changing to more online holiday bookings. Such bookings for holidays, both through online travel agents or through independent channels have increased dramatically in recent years. Many holidaymakers find the speed and convenience of booking flights, accommodation or complete holidays online outweighs the benefits of discussing holiday alternatives with staff in a travel agency branch. However, the Board of M is convinced that there is still a huge demand for a personal booking experience for luxury holidays. Therefore, the Board of M considers that in order to win business, M must further develop its in-branch expertise and improve its level of customer service, so as to provide a unique selling point in the luxury holiday market. M employs 200 full-time equivalent staff. Staff turnover in M is low. High performance rewards in terms of bonuses are currently paid to staff in each branch if they meet or exceed branch quarterly sales targets, which are set by the Board. M s branch staff appreciate the high level of bonuses offered, and this has resulted in high staff loyalty to M. Changes that have been made to M s services or to working arrangements have always been introduced gradually and have generally had a low impact upon M s branch staff. Previously the Board of M has never involved staff directly in any change decisions it has made. M s Board is concerned that a decline in customer service may affect its survival in this highly competitive market place, particularly in the light of online competition. The Board of M has not yet announced what it intends to do but it has decided to implement with immediate effect, the following three changes in order to improve its customer service levels: 1. A change to the current bonus system whereby bonuses will be based upon achievement of targeted levels of customer service. This is to encourage its staff to strengthen its focus on customer satisfaction levels, rather than on branch sales targets. 2. A test every 6 months, which all branch staff must undertake, to assess their level of product knowledge and customer service skills. Those staff not meeting the required level of performance will have to undertake additional training or they will not receive their annual pay increase (which is additional to the bonuses earned by branch staff). 3. A system of short-term placements through which branch staff will be expected to work in other branches and at Head Office in order to gain experience and a better understanding of M s overall operations and activities. This may involve branch staff having to travel or to stay away from home for periods of time. There have been a number of rumours circulating around all of M s staff about these proposed changes. Many branch staff are very unhappy that they have not been consulted about them. Most of the branch managers support the changes and believe that they are necessary but recognise that effective leadership will be critical if they are to be successfully implemented. The requirement for Question Four is on the opposite page September Enterprise Strategy

19 Required (a) Explain the type of change which is being proposed by M's Board, in terms of its speed of implementation and extent. (4 marks) (b) (c) Evaluate, using Lewin's Force Field Analysis model, the driving forces and the restraining forces for change in M. Note: You are NOT required to draw the Force Field Analysis model. (12 marks) Recommend, with reasons, the change leadership activities that will be required for each of the THREE proposed changes in order to deliver improved customer service levels. (9 marks) (Total for Question Four = 25 marks) End of Question Paper Maths Tables and Formulae are on Pages 21 and 22 Enterprise Strategy 19 September 2014

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21 MATHS TABLES AND FORMULAE Present value table Present value of $1, that is (1 + r) -n where r = interest rate; n = number of periods until payment or receipt. Periods Interest rates (r) (n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Periods Interest rates (r) (n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% Enterprise Strategy 21 September 2014

22 Cumulative present value of $1 per annum, Receivable or Payable at the end of each year for n years n 1 (1+ r ) r Periods Interest rates (r) (n) 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% Periods Interest rates (r) (n) 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% FORMULAE Annuity Present value of an annuity of $1 per annum, receivable or payable for n years, commencing in one year, discounted at r% per annum: 1 1 PV = 1 n r [1 + r ] Perpetuity Present value of $1 per annum, payable or receivable in perpetuity, commencing in one year, discounted at r% per 1 annum: PV = r September Enterprise Strategy

23 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 VERBS USED DEFINITION Level 1 - KNOWLEDGE What you are expected to know. List Make a list of State Express, fully or clearly, the details/facts of Define Give the exact meaning of Level 2 - COMPREHENSION What you are expected to understand. Describe Communicate the key features Distinguish Highlight the differences between Explain Make clear or intelligible/state the meaning or purpose of Identify Recognise, establish or select after consideration Illustrate Use an example to describe or explain something Level 3 - APPLICATION How you are expected to apply your knowledge. Level 4 - ANALYSIS How are you expected to analyse the detail of what you have learned. Level 5 - EVALUATION How are you expected to use your learning to evaluate, make decisions or recommendations. Apply Calculate Demonstrate Prepare Reconcile Solve Tabulate Analyse Categorise Compare and contrast Construct Discuss Interpret Prioritise Produce Advise Evaluate Recommend 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 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 Counsel, inform or notify Appraise or assess the value of Advise on a course of action Enterprise Strategy 23 September 2014

24 Enterprise Pillar Strategic Level Paper E3 Enterprise Strategy September 2014 Thursday Session September Enterprise Strategy