POLYTECHNIC OF NAMIBIA

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1 POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGEMENT SCIENCES DEPARTMENT OF MANAGEMENT STRATEGIC BUSINESS MANAGEMENT: ANALYSIS & DECISION BACHELOR OF BUSINESS ADMINISTRATION 21BBAD SUBJECT CODE: SBM422S DATE: NOVEMBER 2015 DURATION: 3 Hours MARKS: Maximum 100 EXAMINER CHRIS VAN ZYL MODERATOR: RAINER RITTER 1 5 r OPPORTUNITY EXAMINATION QUESTION PAPER (This paper consists of 7 pages including this front page) INSTRUCTIONS 1. Write clearly and be tidy. 2. Answer all the questions IN Section A and Section B. 3. Questions 1 to 15 should be answered on the attached multiple choice answer sheet. 4. Choose only one option when answering the multiple choice questions. 5. Include the Multiple Choice Answer Sheet in your Examinations Answer Book.

2 SECTION A 1 Matching external and 6 For the BCG Matrix, the internal critical success relative market share factors is not done with: position is defined as: a. SWOT Matrix 4 To determine the strategic b. SPACE Matrix position of a firm by means a. Sales divided by total c. IFE Matrix of the SPACE Matrix the sales. d. BCG Matrix two scores on the x-axis is b. The ratio between a e. None of these. calculated using the firm's own market scores of: share to the market share of the largest 2 Strategies on the SWOT a. FS and CA. rival. Matrix use the firm's: b. CA and IS. c. The ratio between a a. Internal strengths to take c. IS andes. firm's profits to the advantage of external d. CA andes. industry's total profits. opportunities. e. None of these. d. Profits divided by total b. Internal weaknesses to profits. take advantage of external e. All of these. opportunities. c. Internal strengths to reduce external threats. d. Internal weaknesses to avoid external threats. e. None of the above. 5 If the directional vector in a 7 The following is an SPACE Matrix is located in example of a possible the bottom left quadrant, strategy for a firm that was 3 The following is an the following strategy is identified as a Cash Cow: example of a firm's not recommended: competitive advantage: a. Product development. a. Backward integration. b. Retrenchment. a. Working capital. b. Retrenchment. c. Market penetration. b. Leverage. c. Liquidation. d. A+B c. Growth potential. d. Divestiture. e. B+C d. Customer loyalty. e. None of these. e. All of the above. 2

3 ) 8 If the relative market share 11 The vertical axis of the 14 The key opportunity of a firm has position of a firm is Grand Strategy Matrix is: a weight of 0.08 and an AS of 2 calculated as 0,55 and the (two). TheTAS value is therefore: industry sales growth rate a. IFE total weighted scores was determined to be +1% versus CPM weighted a (plus one), the following scores. b strategies are b. Rapid market growth c recommended: versus slow market d growth. e a. Liquidation & Divestiture. c. Strong competitive b. Market penetration and position versus weak 15 The Sum Total Attractiveness Retrenchment. competitive position. Score of one strategy has a value c. Product development & d. Meek competitive position of 3.75 and the STAS of another Diversification. versus mild competitive alternative strategy has a value of d. Product development and position This can be interpreted as: Horizontal integration. e. None of these. e. All of the above. a. The STAS value of Quadrant I of the Grand indicates the preferred strategy. 9 The IE Matrix uses total Strategy Matrix does not b. The STAS value of 3.75 weighted score inputs include the following demands more alternative from: strategy: strategy formulations. c. The STAS value of 2.52 a. SWOT & PACE matrices. a. Related diversification. indicates the preferred strategy. b. IFE & CPM matrices. b. Unrelated diversification. d. The STAS value off 3.75 should c. CPM & EFE matrices. c. Product development. be divided by 2.52 to determine d. BCG & PACE matrices. d. Market development. the best strategy. e. None of the above. e. Forward integration. e. The STAS value of 2.52 demands more alternative 10 A Hold and Maintain 13 The technique that strategy formulations. strategy may use the determines the relative following: attractiveness of feasible alternative actions is called: SUBTOTAL: 15 X 1 = 15 a. Forward integration. a. SPACE Matrix b. Market penetration. b. QPSM Matrix c. Harvesting. c. BCG Matrix d. Grow and build. d. QSPM Matrix e. All of these. e. IE Matrix 3

4 SECTION 8 Question 1 Sleep Well (SW) is an accommodation enterprise operating in Windhoek West, Namibia. SW has an annual turnover of N$ , 00. Other accommodation enterprises in the same geographical are of Windhoek West are: Khomas View (KV) which generates a monthly turnover of N$36 700, 00; Rise & Shine (RS) which generates a yearly turnover of N$ , 00 and, Good Night (GN) with a monthly turnover of N$18 000, 00. SW is experiencing an average annual growth rate of 5% over the last four years. GN is struggling because of poor service levels and has recorded a decline of 10% in monthly turnover over the last year. KV and RS have however experienced growth in their annual turnovers of 10% and 15% respectively mainly due to their excellent customer service and webmarketing efficiencies. Tourism is an NDP4 identified growth sector in Namibia. The competition in the accommodation industry is intense, but more and more competitors enter the industry despite all the existing competition. The industry growth rate of 11% is related to the increasing popularity of Namibia as a tourist destination. Tourists from Africa and all over the world enjoy visiting Namibia with its friendly people and beautiful ecology. International tourists from China have however declined drastically due to the new visa requirements by the South African authorities recently. Chinese tourists usually travel to South Africa and then visit Namibia as part of their tour plans. The Chinese economy furthermore experiences a slow-down currently which additionally influences the travelling of Chinese tourists negatively. However, the expansion and upgrading of the roads network from Walvis Bay through Henties Bay; Kamanjab to Oshikango in the North and between Windhoek and Okahandja facilitate access to more destinations for local and visiting travelers. As in other sectors of the Namibian economy, the accommodation industry experiences periods of uncertainty and turbulence, but there is still some good profit potential. The high cost of entry into this industry makes it unattractive to entrepreneurs who do not have sufficient access to the required levels of capital. The huge working capital requirements and irregular cash flows are further 4

5 deterrents for potential new entrants in this industry. Service quality and management efficiency are the main distinguishing factors that contribute towards competitive advantage. Due to the past challenges with regards to service levels, GN has decided to recruit well trained and experienced customer relations personnel. These employees are however also in high demand by competitors who could potentially offer better remuneration packages to them. It remains a challenge to keep them on board and committed to GN. GN plans to compete strongly in order to turn around the customer perceptions about service delivery and improve on its reputation in this market segment. The owner-management team of GN embarked on some training and education in order to improve their operational know-how recently. They are now motivated to succeed. But both the owners of GN are in their 60's and should therefore start thinking about their own retirement. They will therefore have to consider either a succession plan or alternatively they should consider selling the business. GN is considering investing more into their business for expansion purposes. They have determined that they would be able to increase their profitability if they could invest another N$ , 00 in the business. GN has entered into an agreement with the Bank to pay 12% interest on any loans advanced to them by the Bank. It has been recorded that GN pays tax at a rate of 35%. You are a member of a consulting company that was appointed as business consultants by GN. Carefully consider the above mentioned case and extract the relevant variables from this case for analytical purposes. Apply these variables making use of the following analysis tools in order to recommend a set of well substantiated growth strategies for GN. List the relevant variables in Tabular format and draw figures/diagrams for each of the Matrixes. Plot the respective coordinates onto the Matrixes. List the appropriate strategies as suggested by each of the Matrix analysis outcomes (interpretation): 5

6 a) SWOT Matching Matrix with at least 10 suggested strategies (15) b) SPACE Matrix (10) c) BCG Matrix (10) d) IE Matrix (10) e) Grand Strategy Matrix (10) f) QSPM: (consider building an extra three rooms OR refurbishing the enterprise with new furniture) (1 0) g) Assume that GN is a public listed company on the NSX with a share price of N$10 and the number of shares outstanding being If you had to advise GN on the best option to finance the N$ , 00 investment, which of the following four financing options would be the best: i. selling of shares only; ii. loan from the Bank only; iii. 20% through shares and 80% through debt agreement with the Bank; iv. 50% shares and 50% debt. (20) (85) TOTAL FOR THIS PAPER: 100 6

7 ' ' I Subject code: Student number: Surname: Initials: Date: Lecturer Name: FT/PT/Distance I Multiple Choice Answers a b c d e I ATTACH THIS MULTIPLE CHOICE ANSWER SHEET TO YOUR ANSWER BOOK 7