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Global Chartered Accountants - GCA

30 January, 2013

Business Management Exam Kit
This kit is designed to help ICAP Module E business management students to get the following:
 ICAP Syllabus Grid
 Complete Revision Notes from PBP
 Past Papers Analysis
 Topic wise past papers with answers and examiner comments
 All up to date past papers given with solutions attempt wise

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Final Examination

Business Management

Module E
P AP ER E 16 : Bu s i ne s s M a n a g e m e n t

(100 marks)

The ob ject ive of t his p aper is t hat the ind ivid ual s hould b e ab le to:

Identify the principles and concepts in the theories and practices of strategic business
Asses the impact of environmental forces such as global microeconomic forces, international trade
and financial system on organizational strategies and plans;
Understand the importance of linking information systems development and management to
business goals and needs;
Understand the interplay of marketing with other vital functional areas in business management and
to understand the accountant»s role in servicing the needs of marketing and other functions of
Recognize the role of global marketing and international business;
Assess the importance of human resources development to organisations and identify methods of
managing people effectively;
Evaluate ways in which change can be managed successfully;
Appreciation of social and ethical implication of strategic policies in business;
Understand the aims of corporate codes of conduct and their role in improved corporate
governance; and
Understand the manager»s role and responsibilities in relation to the working environment.

Case studies / scenario based questions will be set in the examination.

Indicative Grid
Syllabus Content Area


1. Strategic management and planning
2. Corporate social responsibility and business ethics


3. Human resource management
4. Management of the working environment


5. Marketing Management
6. International Business



The weightages given above are for guidance purposes only and some deviations in setting
of papers could be expected.

The Institute of Chartered Accountants of Pakistan

Final Examination

Business Management

1. Strategic management and planning:

The purpose of strategic management and business planning and their inter relationship
The methods which organisations use to plan for the future including the role of information
Pos ition ap prais al and analys is :

Identifying the organization»s strengths and weaknesses, opportunities and threats
Identification and quantification of the planning gap
Closing the planning gap through the identification and evaluation of alternative courses
of action: improved efficiency; improved product(s);or service(s); introducing new
product; entering new markets; merging with or acquiring other organisations
iv. Use of alternative strategies
v. Quality and a strategic variable; its implementation and management
vi. Performance against operational and strategic targets; flexibility» economy, efficiency and
vii. Performance against that of competitors; benchmarking; use of inter-firm comparisons;
the limitations of external data
viii. Performance of costs, profit and investment centres using financial and non-financial
ix. Problems of measuring divisional and subsidiary company performance
x. International and multinational trading; transfer pricing of goods and services and their
impact on trading results
xi. Impact of changing price level on current performance and the future projections
xii. Customer outlets, including customer profitability analysis

The eff ect of ex ternal environm ent on st rateg y and p lans and ap prais ing t he env ironment :


Scanning the environment of the organisation and the context in which it is set for
changes, developments and opportunities
Forecasting trends and developments in relevant areas through the use of relevant
quantitative and qualitative analysis
Future basing (i.e Anticipating long-term prospects for the business and its likelihood of
survival) and other scenario-building techniques
Impact on the organisation of changing national and international influences:
demography; technology (progressional alternative / acceptability); economic resources;
social attitudes and aspirations; legislation and regulation; political forces; government
and other agencies, including pressure groups
Competitive advantage:

its meaning in different markets and industries of nations and the implications of this
for organisational success
the different approaches used by organisations and management in different
countries and the lessons which can be applied to Pakistan
the effect on organisations of working in an international environment, the key
aspects of that environment and methods of entry into it

The Institute of Chartered Accountants of Pakistan

Disclosure and confidentiality d. implication of «short-termism» g. Profit motives versus other corporate objectives e. Es tab lishing the corporat e object ives: i. Use of renewable and non-renewable resources including the ethical implications of such use. Organizational missions. the effect of the environment on corporate performance vii. Methods of gaining support and commitment for strategies f. both private and public. Formulating and evaluating plans with an awareness of the various techniques available to managers h. goals and objectives Long-term (strategic) and short-term (operational) objectives: quantitative and qualitative evaluation Application of decision theory Problems of achieving balanced growth and development Internal and external factors effecting decisions. in carrying out the business and professional activities b. Reviewing strategy for the effect it will have on the organisation and the local and global community 2. including databases. Corporate social responsibility and business ethics a. Goal congruence and corporate performance measurement f. consideration thereof in the formulation and implementation of strategic planning and management decisions c. Impact of innovation. iii iv v. ii. Understanding and managing the risk of a proposed business plan for the plan itself and for all the aspects of business which it will influence i. and their usefulness to the organisation viii. Understanding of obligation towards society by business organisations and the individuals associated with it. Understanding ethical and social implications of business strategic policies and decisions and their impact on the stockholders. substitution and obsolescence on business process (including marketing and production) ix. Comparative organizational performance: market share production capacity e. External sources of information. aims. The role of professional bodies in regulating the activities of members The Institute of Chartered Accountants of Pakistan . services and labour x. Impact of international market integration on the transfer of goods.Final Examination Business Management vi.

applying and monitoring best practices for managing the working environment National Legislation which affects the working environment The role and purpose of health . ii. i. Areas include: a. The role of employee group in promoting the welfare of personnel k. the purpose of marketing philosophy and concepts in providing for customer needs. Management of the working environment a. S trat egy in t he m arket place i. the role of internal and external specialists in the process j. market intelligence. the relevance of branded merchandise The Institute of Chartered Accountants of Pakistan . Human resource management a. e. b. Assessing threats and opportunities to the marketing plan. management. iv. relevance of the product life cycle The product portfolio. selection. g. procedures and guidelines Roles and responsibilities of management for managing and improving the working environment 5. c. b. d. f. while achieving the right price. d. iv. determining the need for change in the planning area Development of marketing strategies to meet organisation objectives Assessing the nature and size of the market using internal records. h. market research The process of creating. The management of organizational and personal changes m. selecting and marketing the right product in the right place. The purpose and forms of personnel specifications in the recruitment of personnel Methods of identifying competencies and other attributes required Specifying personnel requirements Evaluating and determining the benefits and costs of new or additional personnel Identifying and determining suitable methods of recruitment Selection methods and their use Methods of motivating and supporting personnel Staff appraisals and the assessment of competence Warning and dismissing personnel: legal and organizational policies and procedures. Interpretation. to the right customer at the right time. formulation. The role which individual and team development can play in growth and development The different concepts and models of competence Methods of encouraging and supporting individuals and teams to grow and develop The effect of internal and external factors on development Human relations management 4. employment and dismissal of personnel l. c. National legislation which affects recruitment. iii. Marketing Management An introduction to marketing principles. v. ii.Final Examination Business Management 3. reviewing. n. iii. safety and security requirements. Concep ts and princip les of hum an resource dev elopm ent i.

applying the appropriate techniques. acquisitions and divestments viii. Strategic management of markets through mergers. and the consideration of the major issues in the decision-making process. difficulties in International business and alternative approaches to managing the process b. Problems associated with the acquisition of the foreign subsidiaries especially in respect of performance appraisals b. and developing a marketing plan 6. Analyzing the impact of globalization on marketing to assess competitive advantage c. Alternative methods of financing imports and exports The workings of international money and capital markets and the opportunities that they offer to companies as a source of finance and as a repository for the investment of funds The management of financial resources within a group of companies including: • • • • • iv. including the use of branches versus subsidiaries the different methods of financing foreign investments the effect of taxation on foreign investment decisions repatriation of sales amounts. distribution channels. ii. payments between companies cash management transfer pricing judging the performance of companies within a group the financial control of a group of companies The appraisal of international capital investments. earnings and charges to foreign operating companies political risk analysis The Institute of Chartered Accountants of Pakistan . International Business a. Techniques for analyzing the market. The environment of global marketing. Int ernational f inancial m anagem ent d ecisions i. iii. choosing the target market and the appropriate marketing mix.Final Examination Business Management vi. promotions. Consumer power within the marketing environment vii. global opportunities and threats. The development of multinational organisations and transnational corporations and their role in the world economy c. including: • • • • • • • strategic objectives the principle of foreign home country versus host country returns the form of foreign investments.

Human Resource Management by H. Business Management Study Text and Revision Series by AT Foulks Lynch Pakistan. Principles of Marketing by Kotler Armstrong. John Bernardin. The book gives an in-depth knowledge of the principles of marketing and a good explanation of basic marketing concepts. 4. The book is a good guide for concepts in the field of organizational behavior. 3. Mullins.Final Examination Business Management Recommended Reading PAPER E 16: Business Management Book Name & Author About the Book 1. Business Studies by Dave Hall Rob Jones and Carlo Raffo. 5. 6. The Institute of Chartered Accountants of Pakistan . 2. The book is relevant for various syllabus topics under the mentioned grid. A comprehensive and detailed explanation of managerial practices is given in this book. Supplementary Study Material 1. David. marketing and human resources. Business Management Study Text and Revision Series by Professional Business Publications (PBP). The books comprehensively cover the following topics: Business Strategy and environment. } AS Level and A Level Business Studies by Peter Stimpson. The book ensures concept building for the topics on strategic management. Management and Organizational Behaviour by Laurie J. Strategic Management Concepts and Cases by Fred R. 2.

gcaoffici al.Asif) www.org .Global Chart ered Accountants .GCA Revision Notes (An effort by Mr.

gcaoffici al. Cleaner Technology 3. to achieve a specific objective‖ Influences on /Determinants of Strategy:  External o Society o Organized groups  Nature of business o Market situation and conditions o Products of company o Technology used  Organization‘s Culture o Organizational system and structure o Leadership style o Organization‘s history o Organization‘s founder  Stakeholders‘ powers (mapping) and Internal coalition  Economic objectives  Social responsibility Environmental conditions affecting Strategic Planning: 1. Eco – Balance 2. Matching: Matches activities to environment & resources capability.  Welfare of Society o Profit retention. Resources (mineral) 2.GCA Chapter 1 : Objectives of Organisation Introduction to Strategy Strategy: ― Course of actions. Lifecycle assessment 4.)  Financing decisions (Capital structure and Working Capital Management)  Dividend decisions (Cash or Bonus share)  Financial objectives: Non financial objectives:  Primary. Strategic Financial Management: It is identification of strategies able to maximize NPV and to allocate scarce resources.  Welfare of Employees Government organizations: External Financing Limit. to maximize wealth of shareholders  Service provision. Efficiently and Effectively. Affect: Affected by values.org . Performance appraisal 5. Logistics 4.  Welfare of M anagement o Sales growth. and implementing and monitoring of such strategy. Allocation or reallocation of resources. beliefs and powers of people in organization. www. Financial management decision: (Also see end of chapter 9)  Investing decisions (merger. divestment etc. To create Value for Money. o Decrease in debt. & Affect operational decisions. Disaster 3. including specification of resources required. funds must be applied Economically. Government Environmental M anagement Accounting is a solution: examples are 1. Corporate liabilities (a factor in PERT) Characteristics of Strategic Decision: Scope: Overall long-term direction. Complex in nature.  Others are  Fulfillment of responsibility to suppliers & customers. Implications for change.Global Chart ered Accountants . Budgetary planning and control 6.

e. through value chain analysis Focus involves a restriction of activities to only part of the market (a segment) through Providing goods/services at lower cost (Cost focus) Providing a differentiated product/service (Differentiation focus) www. quality and accumulated experiences of an organization/product relative to competition. 2. c).Brand name e).Global Chart ered Accountants . Broad Target Niche Focus Lower Cost Cost Leadership Cost Focus Differentiation Differentiation Differentiation Focus (for luxury goods) Differentiation is ―creating value through uniqueness‖. Augmented Product i. Packaging. Downsizing c. b). Features. Warranty iii. Defensive/Non growth strategies a. It could be at following levels of product i. There are following Competitive Strategies for companies to achieve Competitive Advantage. After sale service Cost Leadership is ―having lowest cost of producing‖. costs. Growth direction a.g. 2. 1.GCA Chapter 2 & 4 : Strategy Formulation and Choice Strategy formulation/choice 1.Actual Product a). Competitive advantage is anything which gives one organization an edge over competitors. Quality level. Installation iv. Porter‘s Generic Strategies (5 forces) Which Direction to go i. and to cope with competitive forces yielding superior ROI. How to gain competitive advantage?(question of survival) i.org .gcaoffici al. It could be achieved by:  Mass Production (economies of scale)  Latest Technologies  Favorable access to raw materials  Automation  Minimizing overhead by exploiting bargaining power  Constantly improving efficiency and economy e. Joint development ii. Design. d). Divestment Porter’s Generic Competitive Strategies (to achieve competitive advantage): Competitive position is the market share. Organic growth  Ansoff‘s Product-Market Matrix b. Capital Restructure Scheme b. Delivery and credit ii. Competitive strategy is taking offensive or defensive action to create a defendable position in an industry. prices.

 Vertical integration (control over supply chain)  Forward integration (control/ownership over distributors or retailers)  Backward integration (control/ownership over suppliers)  Horizontal integration (control/ownership over competitors) Unrelated diversification is where development is beyond industry and product is entirely new having no relation with existing technology.g. market or products. Franchising Unrelated Diversification Forward Vertical Related Growth Backward Horizontal Organic Growth Joint Development Strategi es        Take Over/ Acquisition Mergers Joint Ventures Strategic Alliance Licenses Agency Agreement Franchising www.g. Supplier may raise prices but higher margin offsets it.org . requires investments and new competence) Related diversification is when product is new but still within broad confines of industry. Customers won‘t switch. Distribution)  Knowledge of customers and habits Cost of entry will go up for competitors. Ansoff’s Product-Market Matrix: Present Market New Market Present Product Market Penetration Market Development New Product Product Development Diversification Market Penetration: (low risk.gcaoffici al. e.GCA Advantages/Comparison of Competitive Strategies: Competitive Force Rivalry New Entrants Substitutes Customers Suppliers Cost Leadership strategy Profitable even in price competition. Brand loyalty is weapon. Customer loyalty is entry barrier. Advertising. Diversification (high risk. Differentiation strategy Reduces direct competition. Low price sensitivity. less investment) New geographical area New segment New packing size Product Development: (riskier. no capital investment) To increase usage by existing customers or To increase market share through Competitive pricing. Low price is entry barrier.Global Chart ered Accountants . High bargaining power because of market share. Firm is less vulnerable than competitors. Promotion. Sales promotion taking share of competitors Market Development: (low risk. requires investment) Company can exploit followings  Existing marketing arrangements (e.

 It may be Positive or Negative. Identify objectives Identify available strategies Evaluate each strategy Choose strategy (course of action) Implement long-term plan in the form of annual budgets Risk factors in planning: Types of risks:  Physical  Economical  Political  Financial  Business  Product lifecycle Accounting for Risk: Required rate of return.GCA Chapter # 3 : Planning and Control Planning Planning: ― Planning involves making choices between alternatives and is primarily a decision making activity‖ 2 approaches to planning: Top-down approach means strategic management starts from top management and flows down the structure.  Actual results are compared with Budgeted (i. Alter the plan or target Feedback: ― The process of reporting back control information to management and the control information itself‖  It may be Single Loop or Double Loop.org . 2.gcaoffici al. 4. Feedback is reported to management. Do one of three things i. 5. out of profits) Quantification risk:  Rule of Thumb (best estimate of value within worst to best possible range)  Probability Theory (likelihood of occurrence of a forecast result)  Standard Deviation (calculate Standard Deviation of Expected Value. Feed forward Control:  Control actions taken in advance.e. 3. adjusted by past results) www. Actual results are recorded and analyzed for each responsibility center. 4. Decide to do nothing ii. adjusted by  Return %age  Payback period  Finance (strict rules of financing i. Take control actions iii.e. Bottom-up approach means information is accumulated at lower level and presented to top management along with summary and options available. 2. 3. Planning cycle 1. the higher it is the higher risk is) Budgetary Control Control: ―Control is comparing actual results with planned performance and taking appropriate actions‖ Control Cycle 1.Global Chart ered Accountants . Management compares actual results with plans or targets.

Controllability of fixed cost:  Committed fixed cost (e. There are 3 different areas of responsibility. Type of responsibility center Manager has control over… Cost Center  Controllable cost Profit Center  Controllable cost  Sales Price  Sales volume Principal measures Variance analysis Profit performance Investment Center  Controllable cost  Sales prices  Sales volume  Investment in fixed and current assets Return on investment and residual income Responsibility Center is a unit of organization headed by a manager who has a direct responsibility for its performance. Coordination 7. Controllable Cost is an item of expenditure which can be directly influences by a given manager within a given time span. Compel planning Responsibility Accounting: Each manager has a clearly defined area of responsibility and authority to make decisions within that area. Decreasing Supply Cost. IT/IS as competitive advantage: With Porter‘s generic strategies for competitive advantage. 2. No uncertainty as to who is responsible for what (sometimes dual responsibility exists).org Generic strategies 7.g. Differentiating Product/Service 8.Global Chart ered Accountants . Establish system of control 3. Motivates employees 2.controllable in short term) Role of IT in Strategic Management IT as changing industry: With Porter‘s 5 forces model. R. 3. Budget Center: ―Each section of the organization for which budget is prepared‖ Objectives of budgeted planning and control: 1. 5. . PPE-------non-controllable in short term)  Discretionary fixed cost ( e. or Advertisement ---------. 4.gcaoffici al.&D.g.  Clearly defined responsibilities. Responsibility accounting 4. Achievement of goals 5. Ensure competitive pricing Establish entry barrier (cost of entry) Using information as a product Limiting access to distribution channel Affecting cost of switching Building close relationship with supplier and customer.  Responsibilities for Cost. Communication 6. Revenue. www. and Capital Employed. & With Peppard’s 9 ways 5 forces 1.GCA Well organized system of control should have:  Hierarchy of budget center. Increasing Cost efficiency 9. 6.

Scenarios o Analyzing internal environment (Situation analysis/Position audit) i. Improves stakeholders‘ perception Problems with rational model: (M intzberg criticizes it) 1. Corporate level first 2. Production. M ission and Objectives (Strategic Direction)  Corporate appraisal (where we are) o Analyzing external environment i. Organizations are incapable of having objectives because i. Resources Audit ii. Finance. Objectives may conflict with each other.g. Basis for strategic control 6. Value chain iv. Corporate Strategy determines the overall purpose and scope of the organization. Traditional approach to make strategy: (through Planning in a systematic way) o o o o Strategic analysis  Analyzing Vision. ii. Partial ignorance (Ansoff) ii.gcaoffici al. Provide a common thread 4. Defining aspects of corporate strategy: Scope of activities (whole organization) Faces environment (opportunities and threats) Resources (how to obtain and allocate them) Values (of people in power in organization affect it) Time scale (long term) Complexity (uncertainty of future) 2. Functional/Operational strategies deal with specialized area of activity within an SBU e. Marketing. It is concerned with what types of business the organization is in. Objectives will change from time to time www. Policy is a general statement providing guidelines for management of decision-making. choice. BCG and GEBS matrices iii. SLEPT analysis ii. Business Strategy is how an organization approaches a particular product market area (applied at SBU level). Porter‘s 5 forces model iii. Risk is inevitable (Drucker) 5.GCA Chapter 4 & 5 : Strategic Management : Traditional & other models Traditional and other models of S trategic Management Strategic Management: ―Strategic M anagement is the analysis. implementation and control of agreed strategies‖ Strategy is a course of action including the specification of resources required to meet a specific objective. 3. Levels of strategy: (by Hofer and Schendel) 1.org .Global Chart ered Accountants . HRM. System structure o SWOT Analysis o Gap analysis Strategy formulation/Choice (how we can go) Strategy implementation Strategy evaluation and Control Favor of rational model: (Ansoff and Drucker support it) 1. Strategies are best generated from Top -Down 3. Tactics is the deployment of resources to execute an agreed strategy. Enables decision making in conditions where i.

Pattern .  Crafting strategy---.  Control of strategy direction is possessed by autocratic or charismatic leader.approach towards world Strategy and managerial intent: (Johnson and Scholes) not emergent The Command view:  Strategy develops through the direction of an individual or group. 4. 5. 3. precise intentions) 2. Consensus strategies ( groups shares common patterns) 7. means are emergent.setter.―environmentally fit‖ & relationship with other organisations 5. Objectives are unlikely to be directly related to economic benefits of shareholders. not just plan o Obsession to change is dysfunctional.gcaoffici al. Plan . know when to change  Manage patterns o Detect patterns and help them shape. grow positives and eliminate negatives.Global Chart ered Accountants . Intended Strategies Deliberat e Strategies Realized Strategies Unrealized Strategies Patterns of behavior Unexpect ed Contingencies Emergent Strategies Activities affecting Crafting Strategy:  Manage stability o Implement. www. influential customers) 3. In reality formulation is not a simple step by step process. Ideological strategies (collective vision of organization‘s members. 7.g discouraging competitors to enter) 3.a competitive game (e.GCA 2. shared values) 4.  Strategic M anagement is to control and shape/craft these emergent strategies as they arise. Umbrella strategies (ends are defined. Senior management should not be only strategy . Over reliance on formalization. Planned strategies (imposed by central leadership.requires natural synthesis of past. but not necessarily through formal planning.  Know the business operations  Detect discontinuing and significance of environmental changes. Strategies that firms follow are not the same as ones they set in plans.ideas of emergent strategies 4. Position .g. Disconnected strategies (members mind their own business.consciously intended course of action 2. 8. iii. Ploy . target based) 5. Predetermination Failure in practice (suitable for only stable environment) Hinders innovation and radical change.org . strategies are deliberate for sub-units but emergent for organization) 6. Process strategies Mintzberg’s 5 ways to describe strategy: 1.  Emergent strategy is a non-conscious strategy arising from patterns of behavior. Entrepreneurial strategies (visioned from strong leadership) 8. of controls. Perspectives . Other models of(making strategy) Strategic Management Mintzberg’s emergent strategy model: (Considers random shocks)  It is unlikely that a firm‘s environment is totally predictable. 6. (reconcile change and continuity) Mintzberg’s 8 styles of strategic management: 1. present and future. large no. Imposed strategies (imposed by environment e.

Learning organization is one which is skilled at creating.GCA Paradigm and Politics:  Paradigm (basic assumption and beliefs common in organization‘s decision makers) is inhabitant and conservative than culture.  Organizations can create the future. during which time. Not suitable where radical new approaches are needed. 2.gcaoffici al.Global Chart ered Accountants . Double loop learning is where purpose is also reviewed. 4. Incrementalism: (Lindblom)  It involves small-scale extension of past practices. Disadvantages of Incrementalism: 1. Diagnostic: Diagnostic statement Senior management. Learning organization will generate a flow of fresh ideas and insights. information and skills. Applicable to stable environment only. This will promote renewal and prevent stagnation. Incrementalism: Bounded Rationality Theory: (Herbert Simon)  Mangers are limited by time. Knowledge as a source tacit knowledge Learning based strategy: Knowledge creation explicit knowledge    Strategy development is a learning process. the company Competitive advantage is pursued by Protect the past Reactive Re-engineering current practices Engineers of present Anxious Operational efficiency Follows the rules Catching up with competitors Agenda for change is set by Competitors www. o Issue awareness (by internal results. (derived from control theory) Future will change incrementally Future Orientation: (Hamel and Prahalad) Future will be radically different  Future is not just something that happens to organization. spending most time on Are managers…… Are employees….. strategies form gradually.  They satisfice rather than maximize. view about future Senior management.  Eliminate unacceptable plans (politics) b) Managers do not pursue the  Endorsement to junior management whole rational model but take small-scale decisions. 3. The company is better at Within the industry. and transferring knowledge. Logical Incrementalism: (mid way) Managers have a vague notion as to where the organization should go.org Create the future Distinctive Regenerating core strategies Architect of future Hopeful Building new businesses Makes the rules Creating new sources competitive advantage Vision of future of .  Process by which Paradigm and Politics influence process of strategy development. and at modifying its behavior to reflect new knowledge and insights. customer response or environmental change) o Issue formulation (analysis of issue to get its root) o Solution development Summary:  Memory search (from past experience) a) Managers do not take best  Passive search (time will tell) decisions but satisfactory o Solution selection ones. Ignores influence of corporate culture. but strategies should be tested in small steps because of uncertainty about future.  Organizations change incrementally. They offered a ‗diagnostic‘ to indicate how future oriented an organization is.  Politics is process of bargaining and negotiation of strategy among powerful stakeholders. acquiring. Some changes are dramatic not incremental.

Global Chart ered Accountants - GCA

How to cope with future:
Simply more far-sightedness
Imaging products and services that do not exist.
Spend less time in positioning in competitive environment
Future orientation is embodied in the corporate culture.
Environmental Fit: (Hofer and Schendel)

Strategy is a mediating force between organization and environment.
Fit or Suitability means ‗ Organizations are successful when they intentionally achieve internal harmony and
external adaptation.
Strategic logic requires that strategy must:
o Be consistent with objectives
o Match organization‘s capabilities with environment.
Survival and growth are process of adoptation :
Why : because environment gives physical resources and financial resources
Hence : choice of strategy must follow a strategic logic.

Ecology Model:
Organisation‘s environment changes radically, it will only survivor if it adopts its environment and evolves i.e finding
niche areas which provide both demands for output and resources to be used as input to the system.
Pattern and Competencies: (Andrew)
 Corporate strategy is the pattern of management decisions in a company
o That determines and reveals its objectives, purposes or goals,
o That produces the principal policies and plans to achieve those goals,
o Defines the range of business, and
o Kind of human and economic organization it is or intends to be.
 Strategy is exploitation of competencies.
o The distinctive competence is what it does well, uniquely or better than rivals. It comes through
Quality of co-ordination
Talents and potentials of individuals
Strategic Thinking: (Kenichi & Ohmae)
 Strategy is a creating process
 Success business strategies result not from rigorous analysis but from a particular state of mind.
 Aspects of strategic thinking
o Flexible thinking (what if ?questions)
o Keeping details in perspective (specially uncertain)
o Focus on key factors and distinctive competences)
 How strategic thinking operates
o Ask right question
o Find solution of problem, not remedy or symptom.
o Observe the problem
o Group problems together (e.g. by brainstorming) to see key factors.
Competition: (Ohmae & Porter)
Competitive strategy is the taking of offensive or defensive actions to create a defendable position within an
industry------ and a superior return on investment.
Successful strategy is the interplay of 3 Cs (strategic triangle)
1. Competitor
2. Customer
3. Company
3 assumptions of theory: (focus: survival in competitive environment)
1. Survival of business is impossible without a competitive strategy.
2. Actual strategy will be unique.
3. Marketplace is a battlefield.
www.gcaoffici al.org

Global Chart ered Accountants - GCA

Competitive strategy:
― A strategy by which a firm can have significant ground on its competitors at an acceptable costs‖
Competitive Advantage:
Re-adjust current resources  i.e identify key success factors
Relative superiority
 i.e exploiting competitors weakness
Challenge assumptions
Degree of freedom
 i.e segmenting
How to create sustainable strategic position:
operational effectiveness
doing unique things
doing trade-off
combining good individual activities
making own choices i.e not blindly imitating competitors

Realised Strategies
Intended or planned strategies

Emergent strategies

- Senior management decisions
- Imposed from top
- Well planned
- Well thought-out
- Time consuming
- Deliberately planned

- not planned
- not fore throught
- not the result of management intentions
- caused by pattern of behavior

Implicit & Explicit S trategies
(Depends upon extent to which strategies are
deliberate or emergent)
Implicit  Only in head of chief executive
Explicit  Properly documented

Purely deliberate strategy p revents
learning from experience.
A purely emergent strategy defies

Descriptive and Prescriptive Strategies
Descriptive : ―what is actually happening in the organisations i.e paradigm, politics, pattern of decisions, incremental approach
Prescriptive : ―to prescribe something‖ i.e rational model, strategic thinking, learning based environment, resource based

www.gcaoffici al.org

Global Chart ered Accountants - GCA

Chapter # 6 : SWOT Analysis ad gap analysis
Corporate Appraisal
Corporate appraisal (where we are)



Analyzing external environment
iv. SLEPT analysis
v. Porter‘s 5 forces model
vi. Scenarios
Analyzing internal environment (Situation analysis/Position audit)
i. Resources audit
ii. BCG and GEBS matrices
iii. Value chain analysis
iv. System structure
SWOT Analysis
Gap analysis

Corporate appraisal is assessment of SWOT in relation to internal (SW) and external (OT) factors affecting
organization to establish long term plans.
OT Analysis---Analyzing external broad environment:
 Social factors
 Legal factors
 Economic factors
 Political factors
 Technical factors
What Social factors affect:
Changing values and lifestyle
Changing pattern of work and leisure
Demographic change
Why social factors are considered:
• Stakeholders are members of society --assessment of their values and beliefs
• Good (ethical) reputation
• Avoid restrictive legislation
• Change = opportunities
Legal factors:
o Health and safety legislation
o Employment laws
o Environmental legislation
o Information about performance.
Economic key forces affecting organizations:
 Economic Growth
 Interest Rates and Tax rates
 Availability of Credit
 Inflation Rates
 Govt. fiscal policies (taxation, govt. spending, borrowing and repayment) and monetary policies (control of
money demand and supply through rates)
 Foreign Exchange Rates
 Foreign Trade Balances
 Consumer income, debt and spending
 Govt. Subsidy
 Unemployment rate
International economic issues:
o Extent of protectionist measures
o Comparative rates of growth, inflation, wages and taxation
o The freedom of capital movement
o Exchange rates
o Economic agreements
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Global Chart ered Accountants - GCA

Exchange rate is the rate at which a national currency exchanges for other national currency.
Determinants are:
Demand and supply of currencies in foreign exchange market (Floating exchange rate)
Govt. (Fixed exchange rate)
Synthesis of above two (Managed exchange rate)
Types are:
Spot exchange rate (rate set for immediate delivery of a currency)
Forward exchange rate (rate set for future exchange of a currency)
Closing rate (Spot exchange rate at Balance Sheet date)

Political factors:
 Type of Govt.
 Stability of Govt.
 Govt. attitude i.e. privatization or nationalization
 Amount of bureaucracy
 Pricing, dividend, tax, employment issues
Political risk is the risk that political factors will affect an organization e.g. war, corruption, nationalization, political
Jeannet and Hennessry developed a checklist to assess political risk:
1. How stable is Political system.
2. How long will govt. remain in power.
3. How strong is govt.‘s commitment to specific rules of game.
4. If present govt. is succeeded, how specific rules of games would change.
5. What would be the effect of change in specific rules of game.
6. In light of these effects, what decisions and actions should be taken now?
Technological factors:
o Change in production techniques
o Invention and innovation

OT Analysis ---Analyzing external specific and direct environment:
(Porter’s 5 forces model)

i) When costumers have powers:
•Small number of cus tomers
•T hey make high volume purchases
•Products t hey are buy ing are undifferent iat ed
•Alt ernat ive sources of supply are available (subs t it ut e or sw it ching)
ii) When Suppliers Have Power:
•Small number of supp liers
•Few subst itut es exist
•Supp liers are not dep endent on t he buy er for a lot of t heir s ales
•Supp liers have different iat ed t heir products
•It is cost ly t o swit ch suppliers
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machinery .  Companies can take environmental management perspective i. www.gcaoffici al. •Hist ory of aggressive ret aliat ion t oward new entrant s v) Indirect Competitors/Substitutes •Close subst it ut es place a ceiling on t he p rice t hat can be charged for a p roduct or service •Close subst it ut es also set indirect performance comp arisons •M ain p roduct is sens it ive t o price of s ubst it ut e.Global Chart ered Accountants .e. p artnerships. subsidies.org . Responding to the Organization/Marketing environment:  Companies can passively take environment as uncontrollable and they must adapt to.GCA iii) When Rivalry Among Existing Competitors Is Intense: •Slow industry growt h •High fixed costs (p lant s. companies should try to be proactive rather than reactive. out lets) •Undifferent iat ed products •A large number of comp et itors •High exit barriers (w hat y ou lose if y ou leave t he bus iness) •Small changes in market share have a big p ay -off iv) Barriers That Block New Entrants •Economies of scale •Large cap it al requirements •Product different iat ion •High swit ching cost •Limit ed access to dist ribut ion channels •Some government policies and regulat ions •Other advant ages t hat are hard to dup licat e such as pat ents . which enables an organization to anticipate changes and design appropriate strategies that will create business value for customers and profit for co. great locat ions. et c. Strategic Intelligence: Strategic Intelligence is the knowledge of business environment. actively working to change the environment.  Wherever possible. Process of creating strategic intelligence: Sensing (Identify appropriate external indications of change) Collecting (Gather information in ways that ensure it is relevant and meaningful) Organizing (Structure the information in the right format) Processing (Analyze information for implication) Communicating (Package and simplify information for users) Using (Apply strategic intelligence) Sources for strategic intelligence = Sources of information S W Analysis ---Analyzing internal environment: Internal analysis consists of:  Resources Audit  BCG Matrix  GEBS matrix  Value Chain analysis  Core Competence (critically underpins organization‘s competitive advantage)  Critical Success Factors (CSF are factors on which strategy is fundamentally dependent for its success.

creating alternative ways of the future environment. Identify issues arising. Decide on the driver for change i. Profit Gap (Target profit – Forecast Profit) Forecasting is the identification of factors and quantification of their effect on an entity as a basis for planning.gcaoffici al. strong or weak? Is equipment in good condition? Communication between R&S and other units? Are present products technologically competitive? Turnover and absenteeism Training provided? Under or over staffing? Continuous improvement? Effective promotion? Quality control policies and procedures. Write the scenario. E. Environmental analysis ii. 5. 4. Macro scenario uses macro economic or political factors. effective? Is machinery technically updated? Labor relations User friendly IS? Product priced appropriately? Accounting ratios. It includes quantitative factors.g. 6. effective? Brand strength Products Product quality and brand reputation Age and life of products Price elasticity of demand Margin and contribution Market share and growth HRM Efficient Or experience manpower Recruitment and Training MIS Is IS updated regularly? Contribution by all functional managers? Effective passwords for entry? How much expensive? Stocks Sources of supply Turnover periods Storage capacity Obsolescence and deterioration Miscellaneous concepts: A Cruciform chart summarizes significant SWOT. Important issues and degree of certainty (time horizon is 10 years) 2.org .GCA Marketing Is market and share increasing? Finance/Accounting Sufficient working capital? Operation Production capacity R&D Adequate R&D facilities? Segmented effectively? Can we raise capital or borrowings? Economies of scale Outsourcing is cost effective? Channel of distribution reliable and cost-effective? Return on investment & Cost of capital Are R&D resources allocated effectively? Communication Conduct market research? Effective budgeting process? Inventory control policies and procedures. Gap analysis (objects – existing strategies = Gap) is a comparison between objectives and expected performance of projects both planned and underway. Bring drivers together into a viable framework 3. It includes judgment. 6 steps in planning scenarios: 1. Group mini scenarios into two or three larger scenarios containing all topics. Extrapolation is a technique of determining projection by statistical means.Global Chart ered Accountants . www. Provide 7 to 9 mini scenarios. Critical Success Factors are those components of strategy in which organization must excel to outperform competition. Scenario Planning: ― A scenario is an internally consistent view of what the future might turn out to be‖ An industry scenario is concerned with the future of industry. Projection an expected future trend pattern obtained by extrapolation.

variable costs . Market share 7.g. Competences in separate activities through analyzing activities 3. Residual Income (measure of center‘s profit after deducting notional or imputed interest cost) Benchmarking: (adoption of best practices) Benchmarking is establishment of targets and comparators (through data gathering) through which relative levels of performance can be identified. Competitive Benchmarking information about direct competitors is gathered through techniques e. Resources through resources audit 2.gcaoffici al. Number of employees 8. ROI/ROCE 2. Revenue 2. Assets 4. Cash Flow 5. Types of Benchmarking: Internal Benchmarking comparing one operating unit with another within same industry.Global Chart ered Accountants . as both side of balance sheet will be inflated . Number of products Costs: Fixed costs Variable costs -------------------------------------Directly attributable costs Shared general overheads -------------------------------------Controllable costs Uncontrollable costs 4 profit concepts to measure performance of divisions:  Contribution (sales – variable cost)  Controllable profit ( sales . Profits 3. Competences in linked activities through analyzing overall performances. ROCE/ROI 6. reverse engineering. Strategic Benchmarking aimed at strategic action and organizational change.Fixed cost controllable)  Controllable margin ( Controllable profit – other costs directly traceable)  Net Profit/Margin ( Controllable margin – allocated service center costs and general management overhead) Value added is cost of material and bought in service. Levels of Benchmarking: 1.org   Need for working capital Borrowing benefits in period of inflation Comparability of financial figures  Ratios for control  historical costing problem increased profits but low stock turnover (overstated profits) real value of loan decreases over times figures are ditorted ratios will be unaffected.GCA Chapter 7 : Performance Appraisal & Analysis Performance Appraisal Measurement of Performance: Measurement of Growth and effects of inflation: 1. Measuring performance of Profit Center: 1. Functional Benchmarking internal functions compared with best external regardless of industry. Inflation: - Effect of inflation on accounting system Effect of inflation on strategy in reference to operating in competitive market and exporting goods overseas Performance measurement and inflation: i) Fixed asset values & depreciation ii) Cost of sales and inflation iii) iv) v) vi) www.

―To provide best satisfaction to customers and fair return on investment. Place of mission statement: Annual reports Publicity materials In chairman‘s office Communal work area Elements of mission statement: Purpose ( e. product. realistic. e. Competence.g commitment) Characteristics of mission statement: Bravity Flexibility Distinctiveness Problems with mission statement: Ignorance in practice Only for public showment and not for internal decision making Only rationalising existence of organisation Wish list. Product. Strategic Scope. Mission statement includes Purpose. specific. Targeted customers. practical problems  It can degenerate into wishful thinking Strategic intent: ―Vision with an emotional core to energize and stretch‖ similar to vision stretch current competencies gives sense of direction gives coherence to plans Mission Statement: This is a statement purpose of existence-What it wants to accomplish in the larger environment. It should be market oriented.gcaoffici al.g creating wealth. keeping environment healthy and clean and promising secure future to employees‖.Global Chart ered Accountants . full of generalisations www. satisfy shareholders) Strategy ( e. and Values of various stakeholders.g.org . service) Scope Politics & behaviors Values & culture (e. motivating and consistent with market environment.GCA Chapter 8 : Mission Goals and Objectives Analyzing Vision. Mission and Objectives Hierarchy Vision--------M ission----------Goals (objectives and aims) at 3 levels----------strategy at 3 levels Vision: ― Where the organization wants to be‖ Advantages of vision: gives general directions to organisation gives hope and motivation establishes scope and boundaries enables flexibility in choice Problems with vision  It ignores real.g logic.

ROCE 8. Profit (Accounting Profit = Economic Profit = Sale price – Explicit Cost – Implicit Cost i. Industrial relations Long-term Short-term 7. fire station. Quality of product 6. EPS Unit Objectives:  Commercial sector Increase number of customer by 15% (sales department) Decrease number of rejects by 50% (production department)  Public sector To provide cheaper. Communicates nature of organization to insiders and outsiders Problems with mission = Problems with Rational model of Strategic Management Goals: Goals could be  Objectives (quantifiable)  Aims A goal must be SMART. Contributes to profitability 3. Ideological Goals 3.g. Market share and growth Objectives 3. from Shareholder‘s] [Consensus b/w individual and collective goals] System goals (subverting Mission)  Survival  Efficiency  Control  Growth Dealing with goal conflict (inter departmental):  Rational evaluation (financial criteria)  Satisficing (not aiming to maximize profit)  Bargaining (b/w different goals of managers)  Sequential attention (one by one)  Priority setting www. S M A R T Goals  Specific  Measurable  Attainable  result-oriented  time-bounded Operational goals Non-operational goals Measurable not measurable 3 levels of goals/objectives and strategy:  Corporate level  SBU level  Operational level Corporate level objectives: (trade off between objectives) 1. Focus for strategic decision making 4.org . Shared Personal Goals [Derived from organization‘s existence] [Focus on organization‘s mission] [Imposed goals. Employee motivation 2. subsidized bus traveling (local transport department) Responding more quickly to calls (police. Replaces national or divisional subculture with a corporate culture 5.gcaoffici al. e. Cash flow 4.e. Formal Goals 4. Opportunity Cost) 2. Customer satisfaction Primary Secondary 5. System Goals 2. hospital) Types of Goals: 1.GCA Functions/Importance of mission 1.Global Chart ered Accountants .

Weak view (Primary objective is profit. Stakeholder Shareholders Lenders Trade creditors Employees Retailers customers Management and Society Govt.g. Influences on organization’s culture:  Organization‘s founder  Organization‘s history  Leadership and management style  Structures and Systems Levels of Culture: There are 3 levels of culture in an organization: 1. capital gain of shares. stakeholders are satisfied indirectly) Stakeholders’ mapping: (Mendelow) High Interest High  Key Players Power  Strategy must be acceptable for them  E. EPS.gcaoffici al.] [Based on importance. Basic. major customer Low  Influence powerful stakeholders Power  Should be kept informed  E. display of trophies etc. Overt beliefs (expressed by organization and its members) 3. knowledge. customs. Visible artifacts (e. Objectives To maximize wealth  Increased by (dividend. Community representatives/Charities Low Interest  Pessimist  Should be kept satisfied. Strong view (To balance all stakeholders is important) 2.Global Chart ered Accountants . ROCE)  Measured by (increase in Retained earnings.) www.  E. underlying assumptions (guide the behavior of individuals and groups in organization) 2. attitudes.] Stakeholders Stakeholders are Groups or Individuals whose interests are directly affected by activities of a firm or organization. norms.g. Market Value listed or non-listed) Timely repayment of interest and principal  Timely payment  High prices  Continuing profitable relations  High wages  Job security  Job satisfaction  Continued supply  Quality products  Maximize own reward  Training and career development  SHE Issues  Level of employment  Taxes  Legislation compliance 2 approaches to stakeholders: 1.g. large institutional stakeholders Negligible Organization’s Culture Culture/Organization’s Culture: ― Culture is sum total of belief.g. style of offices. values and peculiarities that prevail in a society/ an organization‖. [One at expense of other.GCA Goal Congruence Trade off between objectives: Primary and secondary objectives: State of individuals to take actions which are in their own interest and also in best interest of organization.org .

Staff (own concerns and priorities) 6. McKinsey’s 7-S model Explains relationship of different aspects of business: [Link b/w organizational & individual behavior] 3 Hard elements: [Formal Aspects] 1. MIS) 3.GCA Some Important concepts: Belief is what we feel to be the case on the basis of objective and subjective information. feelings. belief. Products v. Informal interactions iv. Ethics is a set of moral principles to guide behavior.g. Attitude.gcaoffici al. Structure iii. attitude of management) 7. System (technical system e.e. Structure (division of tasks and hierarchy of authority) 2. HRM. Policies and procedures iv. Shared values 5. Financial resources  Covert informal aspects ( = 4 soft S) i. www. Value iii. Skills French and Bell’s iceberg:  Overt formal aspects (= 3 hard S) i. Customs is culturally accepted behavior in response to given situation. achieving objectives) 4 Soft elements: [Informal Aspects] 4. founder of business  For small entrepreneurial companies ii) Task Culture (Athena)  No dominant leader  Principal concern is to get the job done iii) Role Culture (Apollo)  Organization has formal structure and well established rules and procedures  People do their jobs as specified in their contracts  For large organizations where work is predictable iv) Person/Existential Culture: (Dionysus)  Organization‘s purpose is to serve interest of individuals within it. Accounting. Artifacts are physical tools designed by human beings for their physical and psychological well being including works of arts and technology. Rituals are activities which take on symbolic meanings. Miles and Snow’s Work: (models of strategic culture) There are 4 approaches to strategy in organizational culture.org . Goals ii. Strategy (org plans. Group norms Theories on Culture Harrison and Handy’s Work: (gods of management) There are 4 types of culture in organizations: i) Power Culture (Zeus)  All decisions are centered on one person i. Values are beliefs which are relatively general and widely accepted as culturally appropriate behavior. tackling competitors.Global Chart ered Accountants . perception ii. Style (ways of working.

Reactors  Do not have viable strategy Denision’s model: Stable environment Changing environment Strategic orientation of firm towards environment Focus on internal Focus on external Consistency Culture Mission Culture Formal ways of behavior. Orchestra) Focus on external environment which is changing. predictability and Customer oriented. Defenders (doing things right)  Low risk. Analysers  Balance risk and profit  Using core stable products & markets  Follow the change.g. low profits  Secured niche market  Tried and trusted solution 2.g. Simultaneous loose-tight properties (competition between individuals and group within organization) www.g. do not initiate change e. Consultancy Work hard/Play hard culture ―Find a need and fill it‖  All action and fun  Team spirit  Computer companies Peter and Waterman’s Excellence Culture: ―Dominance and coherence of culture was an essential feature of excellent companies‖. Aircraft company.  Risk management  Procedures and Status symbol  Banks. engineers etc e. church) reliability(bureaucratic) Involvement Culture (satisfied employees give Adaptability Culture ( fashion co. Employees are loyal and make efforts if:  Cause is great.GCA 1. (hospital. Financial services.  They can satisfy dual needs of team and own interest. Government Fast feedback Hard ‗Macho‘ Culture ―Find a mountain and climb it‖  Entertainment. high profits  Move into new ways  Take initiatives e. Deal and Kennedy’s work: (Association of culture & risk) Culture is function of ―willingness of employees to take risk‖ and ―Their feedback‖ High risk Low risk Slow feedback Bet your company Culture ―Slow and steady wins the race‖  Long decision cycles  Stamina required  Oil company.Global Chart ered Accountants .  They are treated as winners.g. accountants.gcaoffici al. Advertisement. Simple organizational structure 6.org . Architects Process Culture ―It is not what you do. managers 4. designers 3. Customer orientation 4. Bias for action 3. it is the way you do‖  Attention to excellence of technical detail.) performance e. Key attributes of excellence 1. Autonomy and Entrepreneurship 2. Stick to core activities 5. Prospectors (doing the right thing)  High risk.

Global Chart ered Accountants . www.org . Product related 2. Functional SEP can be developed only if culture supports it.GCA Pumpin’s dynamic company (Cultural characteristics of dynamic companies) ―Dynamic company is one that considerably increases the benefits for its stakeholders within a relatively short time‖ 4 aspects of such a culture  Speed  Productivity  Expansion  Risk taking Weak areas in a dynamic company  Customer service  Innovation  Technology  Attitude to workforce  Company spirit and loyalty Strategic Excellence Position: (similar to excellence) SEP will fall into 3 fields: 1. Market related 3.gcaoffici al.

Global Chart ered Accountants - GCA

Chapter 9 : Mergers and Acquisitions
Take Overs:
―Purchase by a company of a controlling interest in the voting share capital of another company‖
―Merger is a business combination that results in the creation of a new reporting entity formed from the combining
parties‖ (Mutual sharing of risks and benefits)
Reasons for Mergers/Take Overs:
1. Synergy (1+1=11)
2. Eliminating competition
3. Entry in new market
4. Spread risk (diversification)
5. Acquisition is cheaper than internal expansion
6. Assets backing
7. Management acquisition
8. Operating economies (by eliminating duplicate and competing facilities)
9. Improvement of liquidity and finance-raising ability
Deciding factors in a takeover decision:
1. Cost
2. Value
a. Earning basis
b. Assets basis
c. Prospects for sale and growth basis
d. Saving brought and additional expenditure basis
3. Will it be desirable for shareholders and stock market
4. What will be form of purchase consideration
a. Cash (borrowed)
b. Equity shares
c. Debentures
d. Convertible Loan Stock
5. How takeover would be reflected in published accounts
Risks for shareholders of acquiring company in takeover:
1. Decrease in EPS of own company
2. Decrease in Share Price of own company
3. Decrease in Assets backing per share (decrease in net assets)
4. Entry in risky industry
When takeover resisted by Target Company:
 Unwilling to sell
 Under bidding
 Unattractive after tax value
 Terms are poor
 Opposed by employees
 Founder appeals loyalty of shareholders
Counter steps by Target Company:
1. Issuing a forecast of attractive future profits and dividends.
2. Launching advertising campaign against the takeover bid.
3. Finding a ―White Knight‖, i.e. a company which will make a welcome takeover bid.
4. Making a counter bid for the predator company.
5. Arranging a management buyout
6. Introducing a ―Poison-Pill‖ , i.e. anti takeover advice
Tactics by Acquiring company:
 Persuading dissatisfied shareholders
 High prices

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Payment Methods
Cash Purchase
Share exchange
Use of convertible loan stock
Earn out arrangements
Methods are affected by
Availability of cash
Desired level of gearing
Changes in control
Changes in structure
Choice of Cash or Paper offer or Both for payment depends on view of parties:
Acquiring company and its shareholders:
 If purchase consideration is in equity shares, EPS might fall.
 If purchase consideration is in debentures (or cash borrowed elsewhere), it will be cheaper because Interest
will be allowable for tax purposes and earnings will not be diluted.
 Issue of additional loan stock will be unacceptable for parties if company is highly geared.
 Issuance of large new shares will significantly change controlling structure.
 Payment in shares preserves cash available.
 Company might have to increase authorized share capital or borrowing limits.
Target Company:
 If Cash is received, tax on capital gain will become payable immediately.
 If other consideration is received, it is to be ensured that
o Existing income is at least maintained, and
o Shares retain their value.
 If shareholders want to have stake in business, they will prefer shares.
Mezzanine Finance: (by biding company; to pay for shares)
 Lies between equity and debt finance.
 It is short to medium term, unsecured, high rate of return loan
 It has option to exchange loan for share after takeover.
 It is also used in MBO.
Earn-out arrangement:
When consideration is payable upon the target company reaching certain performance targets.
EPS before and after a takeover:
Share purchased at higher P/E ratio will give fall in EPS, and vice versa.
Company may accept dilution of earnings on acquisition if:
 There is increase in net assets backing.(from a company having more assets and less earnings)
 Quality of earnings is superior.
Post acquisition integration: (Drucker’s 5 golden rules)
1. There must be common core of unity.
2. Acquirer must ask, ―What is in for us‖ and ― What we can offer‖
3. Acquirer must treat product, market and customers of acquired company with respect.
4. Acquirer must provide top management with relevant skills within one year.
5. Cross company promotions should occur within one year.
5 steps of Integration sequence: (C S Jones)
1. Decide and communicate initial reporting relationships
2. Achieve rapid control of key factors which will require access to right, accurate information
3. Human and physical Resource audit to get a clear picture
4. Redefine corporate objectives and to develop strategic plans
5. Revise the organizational structure
Failure of mergers and takeovers:
1. Strategic plan fails to produce expected benefits
2. Over optimism about future market conditions
3. Poor integration management
4. Cultural differences
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Global Chart ered Accountants - GCA


Little or no post acquisition planning
Lack of knowledge of target company or industry
Little or no experience of acquisition.

Impact of mergers and takeovers on stakeholders:
On acquiring company‘s shareholders
 EPS may fall especially in equity -financed bids and first time players
 Cost of mergers exceeds gains.
On target company‘s share holders
 Greatest benefit through significant premium over market price.
Acquiring company management
 Increased status and influence
 Increased salary and benefits
Target company management
 Key personnel will be kept others will be fired
Other employees
 Economies of scale will be achieved by loss of job and eliminating duplication of services.
Financial institution
 Outright winners
 The more complex, longer and problematic the deal is, the greater their fee income regardless of result.

Joint Ventures
Joint ventures: (1st step of acquisition)
― It is an arrangement where two or more firms join forces for manufacturing, financial and marketing purposes and
each has a share in both equity and management of business‖
 Joint contribution of
o Production technology
o Corporate expertise
o Market knowledge
 Access to foreign markets
 Eliminating competition
 Cheaper than internal expansion
 Spread risk
 Suitable for smaller companies
 Conflict of interests
 Where profits will go (in resident company or shareholders of foreign company)
 Local partners may wish to export to other countries where foreigner is already supplying.
 Transfer pricing issues (on transfer of expertise, technology and components)
 Cultural differences e.g.
 Equal employment opportunity
 Commercial practices
 Short term and long term planning
 Lack of smooth coordination, control and decision making
 Who will lead
 Who is responsible
 Confidentiality issues

Strategic Alliances
Strategic Alliance:
― When two or more firms agree to work together to exploit common advantages‖
e.g. alliance between national airlines to cross-book passengers.
Licenses are very similar to Franchising in their financial aspects, however degree of central control and support is
usually less.
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This gives limited right to franchisee (e.g. in a geographical area) to exploit patent product or production process,
brands, manufacturing know how and/or technical advice and assistance. e.g. KFC, McDonald
 Franchiser grants permission.
 Franchisee pays for permission and assistance.
 Franchisee is responsible for day to day running of franchise.
 Franchiser may impose Quality Control M easures to ensure that goodwill is not damaged.
 Franchisee supplies capital, personal involvement and local market knowledge.
Benefits to Franchiser:
 Rapid expansion (franchisee provides capital).
 Local knowledge.
 Economies of scale.
Problems to Franchiser:
 Limited control over quality.
 Conflicts of interest.
 Franchisee may become competitor.

Key Financial management decisions:


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Selection of products and markets
Required level of profitability
Fundamental fixed assets
Efficient and effective use of
Working capital management

Target debt/equity mix

Capital growth or
high dividend payout

Lease Vs. Buy






(MBI) where purchase of a business is made by group of managers from outside the business. Management Buy Out.  Demerger  Sell off  Liquidation  Spin off  Management Buy Out (MBO)  Privatization Reasons for Divestment:  To concentrate on a particular part of business  Selling a loss making unit  Liquidity problems  Selling a subsidiary with high risk  Selling a subsidiary at profits  Provide an exit route for investors  Remove value gaps to avoid takeover Demerger is splitting up of a corporate body into two or more separate and independent bodies. Check that the company is financially viable. Spin Off : a new company is created whose shares are owned by the shareholders of the original company which is making the distribution of assets.org . Assess possible sources of finance 3. Liquidation is extreme form of liquidation where the entire business is sold and funds are distributed to shareholders in their proportion. Exit strategies for a venture capitalist: 1.(selling of business) ―Divestment is a proportional or complete reduction in ownership stake of an organization‖ e. Sale of shares to public or institutional investors following a flotation 2. Management Buy Out. Sale to institution management Downs izing Divestment. (MBO) management buyout is the purchase of all or part of a business from its owners by its managers. Procedure of designing a capital restructuring scheme: 1. Calculate what each party‘s position would be in a liquidation 2.Global Chart ered Accountants .GCA Chapter 10 : Corporate Reorganisation De fe nsive Strate gie s Capital Restructuring Scheme ― A capital reconstruction scheme is a scheme whereby a company reorganizes its capital structure‖. Sale of shares to another company 3. www. Design the reconstruction 4. Assess each party‘s position as a result of the reconstruction 5.gcaoffici al.g. Sell off is a form of divestment involving the sale of a part of a company to third party usually another company. Sale to company itself or its owners 4.

gcaoffici al.Global Chart ered Accountants .GCA Management Buy Out: Possible reasons for MBO:  All reasons of Divestment  Best offer from management  Sale can be arranged quickly  Group can still maintain relations Success factors of MBOs: (Advantages)  Favorable buyout price  Personal motivation and determination  Quicker decision making and more flexibility  Saving in overheads  Healthy relationship with subsidiary Questions in evaluating MBOs for investment:  Does management has full range of skills?  Why is the company for sale?  Projected benefits and cash flows?  What is being bought?  Price?  Fund availability?  Exit routes? Problems faced by MBOs: (Disadvantages)  Little experience of financial management  Tax and other legal complications  Changing the attitude of employees  Deciding the bid price  Cash for maintenance of fixed assets  Change in HR (loss of key employees)  Maintenance of relations with suppliers/customers Going Private ―A public company goes Private when a small group of individuals buys all of the company‘s shares (possibly including existing shareholders)‖ Advantages:  Cost saving (cost of meeting statutory requirements are saved)  Limited number of members  Similar objectives of shareholders  Shareholders are close to management  Protection against volatility in share price Disadvantages:  No trading of shares on stock exchange  Loss of repute  Loss of some value of share Disadvantages of De-Merger  Loosing economies of scale  Lower turnover  Higher overhead cost  Less ability to raise finance www.org .

g. culture Org.gcaoffici al. an organization faces following problems: SHE Issues (Safety. and mission statement) 2 approaches to manage ethics: Compliance based approach aims to remain within letter of law by establishing system of audit and review so that violations are prevented. This approach incorporates ethics in organization‘s culture in which managers will do the right thing e. Environment) Extra payments to govt. political. ii) Protective :they sustain value of customer services iii) Integrative :aim through consensus through people iv) Adaptive :changing culture as per new environment Social Responsibility Objectives of a company: Economic objectives Social/Ethical objectives Boundaries (Imposed rules.g part of ethical sys. System Ethical problems faced by organization: While achieving a higher ROI.Global Chart ered Accountants . Individual Levels of Practicing ethics Personal ethics professional ethics Organisation Org.g putting others to competitive disadvantage) Ethical systems in an organization: Personal ethics (e. fit and proper criteria) Organization culture (e.g. detected and punished. job satisfaction) Good Public image (e. officials  Extortion (when officials threaten company with complete closure)  Bribery (where organization is not entitled to services)  Grease money ( where organization is entitled but unable to receive services)  Gifts Honesty in advertisement (e.g M arketing ethics) Competitive behavior (e.g good working environment. Integrity based approach combines a concern for the law with an emphasis on managerial responsibility. customers first) Organization system (ethics must be contained in formal code e. medical ethics. personality ethics) Professional ethics (e. charities) Social/Ethical objectives of a company: SHE Issues (e. such leaders create ethical style. Health.g CA code of ethics. Charity. sound behavior. It concerns with what is right and what is wrong. job security) Good employer (e. they restrict management‘s freedom of action) Responsibilities (Voluntarily undertaken obligations e. defining values.g minimum wages.g shared accountability.org . Sports) www. It works from within the system Whistle blowing: It is the disclosure by an employee of illegal. Four types of ethical leaderships in organisations: i) Creative :reflecting founder. It works from outside the system. immoral or illegitimate practices on part of the organization.g good quality products) Society well being (e.g regular order and timely payments to suppliers)  Pollution  Financial assistance (e.g.GCA Chapter # 11 : Ethics and Social Responsibility Ethics Ethics: Ethics is a set of moral principles to guide behavior.g religious.

g.  Business success and development as part of society.System for employees .gcaoffici al. Decisions by organization affects society Externality is a social/environmental cost of organization‘s activities not borne by organization.Review .improving quality of life . Boundary Management: .Questioning .Global Chart ered Accountants .Disciplinary procedures (lawyers) www. charity) improves:  Public relations.g .Internal commitment .protecting minorities Compliance Based Approach e. Shareholders are part of society.Protect environment from pollution . AGAINST: Organizations should concern wealth only because Shareholders own assets. Businesses exist for profit.Welfare of local community . Taxes on revenues are given to build society.GCA (For other objectives see Stakeholders’ objectives) Arguments against and favoring Social Responsibility recognition: Social responsibility is expected from all types of organizations. Govt.g .Share accountability (managers) .Pattern of thoughts . FAVOUR: (by M intzberg) Most shareholders are passive.Good employer .securing political environment . Pollution Responsibility recognition (e.org Integrity Based Approach e.Audit . Ultimately consumer pays taxes via higher prices.Guiding values .g.Good public image . support Firms produces 2 outputs:  Goods and services  Social consequences of activities e.

 Rewarding managers with shares  Executives Share Option Plans Non-executive directors are directors not running the day to day operations of the company. Various objectives in holding shares. Individual rationality. Key shareholders to consult in the event of takeover bid. commission.Global Chart ered Accountants . Individuals are risk-averse.org . www. incentive etc.)  Profits related pay e. Knowledge of shareholders‘ preference about Dividend Policy. Individuals vary in their access to funds and their entrepreneurial ability. Agency Problem: Arises from separation of ownership from management.g. bonuses. Agency Theory: ―Although individual members of the business team act in their own self-interest. Goal Congruence: (solution for agency problem) It is accordance between objectives of agents (acting within organization) and objectives of organization as a whole.GCA Chapter 12 : Corporate Governance Corporate Governance is the system by which companies are directed and controlled. To explain recent share price movement. Why knowing shareholders: To get support by exchanging views.   Investments are not infinitely divisible. Patterns of share ownership: (Who are shareholders of company) Types of institutional investors:  Pension funds  Insurance companies  Investment trusts  Unit trust  Venture capital organizations Range of shareholders: Advantages: Greater activity in firm‘s shares No individual controlling whole firm Less effect on share price if anyone sells No threat of takeover Disadvantages: Administrative cost is high. the well being of each individual depends on the well being of other team members and on performance of the team in competition with ot her teams‖ Assumptions of theory: Behavioral Structural    Individual welfare maximization.gcaoffici al.g. Shareholders‘ attitude to risk and gearing. Via (e.

Objectives of HRM:  Cooperative Relationships  Development of motivated employees  Effective response to change  Fulfilling social and legal requirements Advantages of HRM:  Decrease in Staff Turnover  Increase in Productivity  Increase in Group learning  Increase in initiative  Decrease Absenteeism  Lesser conflicts  Increase quality  Increased co-operation  Increased commitment HRM Theories  Scientific management  Human Relation  Rational  Contingency theory [Clearly defined principals] [Fulfillment of needs] [Division of authority] [Change according to situation] 4 Roles/Areas of HR Planning: (by Tyson as per new strategic viewpoint)  To represent organization‘s central value system www. Redundancy HR Development:  Performance Appraisal  Career Planning  Training  Development Motivation/ (Individuals):  Job Analysis and Design  Pay and Promotion Leadership and Groups:  Creating effective teams  Managing conflicts between teams Other Aspects:  Health and Safety  Workforce diversity (Equal Employment Opportunity)  Maternity  Compliance with legal and other standards  Personnel record and Information System Necessity of separate HR Department depends on Size and Activities of organization.gcaoffici al.GCA Chapter 13 : Human Resource Management Human Resource Management-Introduction Human Resources Management is concerned with people at work and their relationship as they arise in working environment.Global Chart ered Accountants .org . Resignation. Roles/S cope of HR Manager: Staffing:      Job Analysis HR Planning Recruitment Selection Retirement.

Organization‘s objectives c. Manpower‘s SWOT Job Analysis a. So basically HR Plan deals with recruitment. Employee‘s relations and service. How many employees needed. job evaluation & performance management. HR Plan Job Analysis The process of collecting. Type of information needed  Purpose of the job  Content of the job  Relations to other job  Performance criteria  Responsibility  Accountabilities  Organizational factors  Development factors  Environmental factors Job analysis results in:  Job description  Job specification www. Employee specification Forecasting of a. housekeeper. Proactive and constructive role Employee‘s Commitment is obtained. 3. Internal Demand and Supply b. downsizing & training of workforce. forecasting its supply and closing gap between demand and supply‖ It considers When employees needed. retention.gcaoffici al. It dealt mainly with Hiring and Firing. HR Planning Human Resource Planning: ―HR Planning is forecasting demand of human resources. 4. Process of Human Resource Planning 1. 2.Global Chart ered Accountants . Job specification c. Environment b. Job description b. social worker and fire fighter. Strategic Analysis (of) a.org .GCA    To maintain boundaries of organization To provide stability and continuity To adapt the organization to change Views of HRM: Traditional Odd Job view ―It is a collection of incidental techniques without much internal cohesion‖ (Drucker) Manager was partly a Clerk. Motivation. External Supply Implementation a. Reactive and defensive role Employee‘s Consent was obtained. training. New Strategic Viewpoint It is concerned about Organization. Systematic way to gather and analyze information about the  Content  Context  Human requirements of the job. analyzing & setting out information about the contents of job in order to provide basis for job description and data for recruitment.

Alternative to Job Description is Role Definition.  Detailed list of duties and responsibilities. Purpose of Job description:  Organizational--------.Defines job‘s place in organizational structure (job evaluation). Forecasting Demand and Supply of manpower: Demand is estimated from:  New markets  New product/service  New technology www. skills. written document.  Supervision received (to whom the jobholder reports). Motivation 3.Performance objectives can be set.  Related meetings to be attended and reports to be filed.  Job summary (a synopsis of the job responsibilities). Following characteristics are assessed: (Fraser’s 5 point to assess pattern of personality) 1.  Principal contacts (in and outside the organization). abilities. if any (who reports to this employee).GCA  Employee specification Job Description A written statement of duties.  Job Status (full-time or part-time.  Supervision exercised.Provides basis for contract of employment  Performance----------. knowledge. (wider) Job Specification Minimum acceptable qualification (i.org .  Competency or position requirements.Global Chart ered Accountants . judgment. responsibilities and tasks of job.  Career mobility (position[s] for which job holder may qualify next). planning)  Interpersonal Competence (managing staff)  Adaptability (flexibility with change)  Results Methods of Job Analysis:  Logos/Diaries  Interviews  Observations  Questionnaires HR managers write job description & specification for review by managers Managers identify performance standards based on job analysis information. Impact on other 2.e.Provides person specification  Legal-------------------. innovative) 5. Acquired knowledge or qualification 4. Innate ability (initiative. It should include t he following:  Date written. Adjustment and emotional balance Competencies Capacity of a person that leads to behavior that meets the job demands. salary or wage). experience and other characteristics needed to do a particular job. usually from one to three pages long.gcaoffici al. Contents of Job description: A job description should be a formal. It should be written in outputs and performance levels.  Intellectual Competence (Strategic.) Person Specification Identifies the type of person needed to do a particular job.  Required education and experience.  Recruitment-----------.  Position title.

Organizational database (HRIS) to sort employee data according to job requirement. Employee referrals 3. EEO and Diversity issues Systematic approach to recruitment and selection:  HR Planning  Job analysis  Identification whether employee is to be recruited from outside or promoted inside (from HR Plan)  Evaluation and use of Sources of Recruitment  Selection  Notification of result  Induction training Sources of Recruitment: Internal Search: 1. Transfers (Redevelopment Plan) and Training (Training Plan) etc. Regular Vs. (Grade. Outsourcing 2. Contractual Vs. Organization with individual Disadvantages:  No new blood.Global Chart ered Accountants . Leased 3.GCA   Divestment Organizational restructuring Supply is estimated from:  Current workers‘ Stocks and Flow analysis  External labor market A Position Survey compares demand and supply. Reducing Labor turnover (Retention Plan) Overtime (Productivity Plan) External recruitment (Recruitment Plan) Meeting Surplus of HR (Less Demand More supply)    Restricting recruitment Part-time working Redundancies (Redundancy Plan) Recruitment(a part of HR plan) Definition: ― Recruitment is the process of generating a pool of qualified applicants for organization‘s job‖ Strategic Recruitment Decisions: 1. skills. Individual with organization and policies ii. Organization based Vs. no innovation and new perspectives  Political fight for promotion  Morale problems of those not promoted www. Promotion and Transfers Advantages:  Good employee relations  Encourages ambitious individuals  Less costly  No adjustment or orientation time required.org . location etc) Closing the gap between Demand and Supply. 2. because already familiar i.gcaoffici al.HR Plan: (along with subsidiary plans of HR Plan) HR Plan is prepared on the basis of personnel requirements. productivity and cost. Internal Vs. External recruitment 4. Meeting Shortage of HR (Less supply More Demand)     Internal Promotions.

2.gcaoffici al.org . 6. 4. Employer website Professional career websites Advantages:    Cost saving Time saving Global in nature Disadvantages:  Non-serious application  Difficult to process large number of application  Not accessible to all Selection: (part of Recruitment) ―The process of choosing individuals who have needed qualification to fill job in an organization‖ Purpose of selection: ―Filling a right person to the job‖ ensuring  Person fits job (matching people with job characteristics)  Person fits organization (Objectives. 2. values etc.GCA   Diversity lacking Requires training External Search: 1. Colleges and Universities Unsolicited applications Creative recruitment methods  Banners  Announcing prizes for Referee Applicants What must be included in job advertisement:  Information about organization  Primary business  EEO Employer  Information about job and application process  Title and responsibility  Job location  Starting pay range  Contact address  Closing date for application  Desired qualification of candidate  Experience  3----5 Characteristics needed Internet Search: 1. 3.  Net Agencies and Professional organization Blind Box ads Schools. culture.V.Global Chart ered Accountants . of organization) Steps in selection process:  Initial screening  Complete application (on specific form)  Employment tests  Comprehensive interview (keeping in mind job description & job specification)  Background information (depends on nature and sensitivity of job) www. 5. Advertisement (method depends on organization and nature of job)  Newspaper  T.

hairstyle. Induction Training: Identify area for later learning or training (e. Plan and implement training program. www.g.GCA    Medical examination Conditional job offer Permanent job offer Why and What tests are conducted  Cognitive ability tests o Thinking.gcaoffici al. reasoning o Mathematical abilities o Communication abilities  Physical ability tests  Writing analysis  Performance simulation test (requiring to perform actually a small segment of the job) Advantages of interview  Most valid to determine applicant‘s  Organization fit  Level of motivation  Interpersonal skills Limitations of Interviews  Unreliable assessment (wrong decision)  Fail to provide accurate prediction (error of judgment)  Halo and Horns Effect (based upon single attribute)  Stereotyping candidates on the basis of dress.org . detailed technical knowledge) Explain nature of job and goal of each task Explain working hours Explain structure of organization hierarchy and his position Introduce with people in office. memory.6 or 12 months. Appraise after 3.Global Chart ered Accountants . accent etc. Discrimination in selection is justified only if required by law.

rather than passivity 6.levels of risk taking . Deepening and more stable interests Factors affecting personality differences: Authoritarinism Self-esteem Feedback on performance Moderately difficult tasks Psychological success Commitment Moti vation . feeling and behaving that constitute the individual‘s distinctive method of relating to the environment. Diversification of behavior patterns 5. they accept responsibility. An increasing tendency to activity.gcaoffici al. Increasing self awareness 2. Personality is the total patterns of thinking. Acceptance of equal or superior relationship to others 3.Need of achievement .controls and standard .Attitude .org . threatened. www. they give way to consultation and self growth.  Theory Y---Work is as natural as play and rest. as people mature they display certain characteristics: 1. punished to get work done.willingness (Content theories VS Process Theories) Moti vational Theories McGregor’s theory X and theory Y:  Theory X---People dislike work and responsibility.challenging goals and achievement . According to Chris Argyris.GCA Chapter 14 : Motivation and Performance Individuals Variables affecting Job performance: Organizational and Social variables  Social environment  Type of Incentives  Type of Training and Supervision Situational variables  Characteristics of Organization  Physical environment Physical and Job variables  Methods of work  Work space and arrangements  Designing and condition of work equipment Individual (non work) variables  Age  Sex  Physique  Education  Experience  Intelligence  Aptitude  Motivation  Personality Personality and individual Development: (Individuals are different because their personality is difference and personality differences affect work behavior). A tendency to move from dependence towards independence 4.Global Chart ered Accountants . they have to be controlled.

status. fairness.g. bonus) Equity theory: Reward of 1/Output of 2 = Reward of 2/ Output of 2 Satisfaction = (atleast fair reward. power authority and responsibility) Vroom’s expectancy theory: Motivation shall depend upon expected results of his efforts i. shelter) Alderfer’s ERG theory:  E-----Existence  R---Relatedness  G---Growth McClelland’s needs:  Need for achievement. strength for preference of outcome) * E (Expectancy i.e. freedom. respect.  Hygiene factors (remove dissatisfaction e. Psychological contracts ―Members will expend efforts and organization will reward them in exchange‖ Coercive contract (returns are inadequate compensation. Working conditions.org . Top management  Power Entrepreneur  Achievement Employees  Affiliation Herzberg’s two factor theory: There are 2 groups of work related factors. threat)  Physiological needs (food. gaining knowledge)  Social needs (relationship. Status. expectation that performance will lead to outcomes) Porter and lawler’s model: (extension of expectancy theory) Force Valence Ability Satisfaction Expectancy Understanding Actual Performance Importance of reward Intrinsic rewards (interest.GCA Maslow’s hierarchy of needs: ( A ranked structure of behavior stimulating within individual which explains motivation)  Self actualization (fulfillment of personal potential. Interpersonal relations)  Motivators (creates satisfaction e. enjoyment) Success/Failure Extrinsic rewards (pay.e. Job security. Need for affiliation  These needs could be taught from top to lower managers. justice)  Esteem needs (Independence.Global Chart ered Accountants . growth in job. Salary. not maximum reward) people compare results and rewards people get upset if inequity in rewards Goal theory: Goals can motivate. motivation) = V (valence i. belonging)  Safety needs (security.g. involuntary contribution) www. affection. F (Force i.e. Need for power. cloth.e value attached to an outcome.gcaoffici al.

voluntary contribution) (employees participate also in decision making) Pay and Job satisfaction Under Herzberg‘s theory.gcaoffici al. Change in job design may be :  Job enrichment  Vertical expansion of responsibilities  Change in the content and responsibility of job to provide greater challenge  Job enlargement  Horizontal expansion of duties  Provides greater variety of tasks Job Components: Occupation------Jobs-----------Position----------Duties------------Tasks (Responsibilities) Job restructuring and redesign: Job redesign  Job rotation  Job enlargement  Job enrichment  suiting of jobs according to motivational factors. External factors may affect output and reward. Pay is the most important of all hygiene factors. Types of incentive schemes: performance related pay (PRP) i. Pay motivates if pay is linked with performance and is valued by individual. Absenteeism and Turnover.org  flexible working arrangement  multi-skilling  flexitime  job sharing  home-working (distant working) Numerical flexibility Financial flexibility Task flexibility . development of extra skills adding extra and related tasks to current job increases depth of responsibility by adding planning and control of current job. Under Expectancy theory. Not suitable in groups Assessment of satisfaction and moral: Through Productivity. Working arrangements:  attitude and values  high performance work systems  empowerment  compressed week  part-time work i) ii) iii) www.  methods used in performing these tasks (training and indoctrination in organizational values).g opportunity of being member of the company. and  how job relates to other works in organization (regulation of behavior).e commission bonus schemes profit sharing e.Global Chart ered Accountants . allowing variety and understanding. Difficulties in incentive schemes: No motivation if employee already enjoys good package. Job Design (with parameters of Mintzberg) ―Job design is the process of  determining the specific tasks to be performed (Job specialization).GCA Calculative contract Cooperative contract (returns are defined.

Grading.] Types: (What could be assessed)  Traits  Behavior  Performance Methods: 1.GCA Employee Appraisal ―Appraisal is a systematic review and assessment of an employee‘s performance‖ Why: Employee Development:  Specific Job performance feed back  Career opportunity information  Assessing employee potential Decision Making for Action by Administration: (Results of appraisal)  Promotion  Demotion  Transfer  Termination Organizational Research: (Importance of appraisal)  HR Planning (Promotability and Potential)  Evaluation of Selection and Training methods  To motivate employees giving feedback  Inventory assessment for planning  To assess training needs Purpose of appraisal:  Reward review for deserving employees  Performance review to confirm whether any training is required or not  Potential review to confirm whether any management career planning is required or not. Essay appraisal/ Overall assessment (paragraph) 4. and self appraisals An appraisal system: i) ii) iii) iv) v) vi) www.org Identify criteria for assessment Preparation of appraisal report Appraisal interview Review assessment Action/plan preparation Monitoring progress (follow-up) . Objectives:      Achieving objectives Performance levels Training needs Identifying lacking areas Communication 360-degree feedback -Sources:  Self  Senior  Peers  Juniors  Assessment centers  Customers [Upward appraisal is better. result oriented schemes. Check list appraisal (yes/no) 2. Forced choice appraisal (MCQs) 3.Global Chart ered Accountants .gcaoffici al.

Difference between Functional Manager and General Manager: Goals Orientation Role Information www.  Effort. and then try to gain acceptance) (manager tells. the subordinates responds.org Functional Manager Short term Task oriented Organizer   Defined sources Formal channels General Manager Long term Goal oriented  Facilitator  Coordinating interdepartmental activities  Obtaining and allocating resources  Poorly defined sources  Informal channels . problem solving activity  Regularly conducted.gcaoffici al.GCA Methods of appraisal: i) Upward appraisal ii) Customer appraisal iii) 360 degree appraisal  sub-ordinates upraise their seniors  internal & external Mair’s 3 approaches to appraisal interview: The tell and sell method The tell and listen method The problem solving approach Effective Appraisal:  Job related criteria  Standardization  Trained appraisers  Employee access  Purpose must be understood by both  It must be participative. and consensus is achieved) (manage becomes counseller. Central tendency (giving average rating to anyone) Sampling Error (available information is insufficient or inaccurate) Interview and counseling: 1) Tell and sell method 2) Tell and listen method 3) Problem solving approach (manager tells. integrity and ability of line managers.Global Chart ered Accountants . Recency effect (weighting recent events) Disagreement on long term prospects One sided process Central tendency Many targets at annual meeting become out of date. Lockett’s appraisal barriers: Lack of agreement on performance level Rater is biased. and ask work problems) Managing Careers: Career management is a technique whereby the progress of individuals within an organization from job to job is planned keeping organization needs and individual capacity in mind.

training.GCA Chapter 15 : Training Appraisal and Career Management Training and Development HR Development: ―The process of extending personal abilities and qualities through development activities e. Characteristics of learning organization: www.org .gcaoffici al. Development purpose: Ensures firm meet current and future performance objectives by  Maximizing people‘s potential  Continuous improvement Development activities: Training (on job and off the job) Career planning Job rotation Appraisal Other learning opportunities Benefits of training and development: For Organization Training supports business strategy Higher productivity Management of SHE issues Less need for detailed supervision Multi skilled people Succession planning Increased commitment For employees: Enhanced skills Psychological benefits (valuable) Social benefits (e.g. appraisal. A learning organization creates.g. exploits and shares knowledge. career planning.g. contact) Job management When training does not work: Bad management Poor Job design Poor equipment Motivation Poor recruitment Other characteristics of employee (e. job rotation etc.Global Chart ered Accountants .‖ Training: ―The process of providing employees with specific skills to carry out work effectively or to correct deficiencies in their performance‖ Development: ― An effort to enhance a person‘s abilities that organization will need in future‖. intelligence) Types of training courses:  Day release  Distant learning  Evening classes  Revision courses  Sandwich course  Full time course Learning organization: An organization that facilitates the learning of all its members and continuously transforms itself.

discussions. Evaluation of training means comparing costs incurred with benefits obtained to redesign/withdraw scheme.org . specific. Implement the training Methods of training Formal training   On Job Training         Course training (lectures. exercises. role-plays. Plan training program Step 5. Training needs are identified: Training need analysis Current state Desired state Existing knowledge and skills Required knowledge and skills Individual performance Required standard Organization‘s current results Desired results Difference between two columns is Training Gap. measurable. case studies) Computer based training Instructions/Demonstrations Coaching Job rotation Temporary promotion ‗Assistant to‘ Positions Action learning Committees Project work Step 6.GCA Learning approach to strategy Participation in decision making Information is used as a resource Formative accounting Reward flexibility Enabling structural responsiveness to external changes All employees are environmental scanners Intercompany learning Learning climate Training Process: Step 1. skills and competence required: Step 3. Training surveys  Corporate strategy  Appraisal and performance review  Attitude surveys  Evaluation of existing training programs  Job analysis Step 2. and observable. Step 4. Personnel Development Plan: ―Development plan for individual‖ www. Specify knowledge.gcaoffici al. Evaluate the training Ways to evaluate. Define training objectives: These objectives should be clear. Organizational changes as a result of training Trainees‘ learning test Trainees‘ reaction to experience Changes in job behavior following training Impact of training on organization‘s goals Validation of training means observing results of training and measuring whether training objectives have been achieved.Global Chart ered Accountants .

take risks and get bored.Global Chart ered Accountants . Oral communication  Adaptability results i.org . Analytical Judgment iii. Liking of skills High Low Performance High Likes and does well (M otivated) Dislikes but does well Low Likes but does not do well (Requires training) Dislikes and does not do well Learning cycle by Kolb: Concrete experi ence Applying/testing the implications of concepts in new situations Observation and refl ection Formation of abstract concepts and generalizations Learning styles of individuals by Honey and Mumford:     Theorists Reflectors Activists Pragmatists    Understand underlying concepts Preference for concepts or analysis Take intellectual ‗hand-off‘ approach based on logical argument    Observe phenomena. Business sense www. new projects Flexible. Managing staff ii. Competence of managers:  Intellectual i. Persuasiveness iii. Competence ― Capacity that leads to behavior that meets job demands within organizational environment and brings desired results‖ Types of competence: 1. Work based/Occupational competence: (expectation of work performance and outputs and standards that are expected by people in specific roles) 3. Initiative ii.g. Interpersonal sensitivity v.gcaoffici al. Tend to be fairly slow. Assertiveness and Decisiveness iv. Strategic Perspective ii. Personal/Behavioral (Personal characteristics and behavior required for successful performance). Motivated iii. non participative and cautious.    Require training on hand-on Excited by participation and pressure e. Generic competence can apply to all people in an occupation. rush without preparation. optimistic. 2. Planning and Organizing  Interpersonal i. think about them and then choose how to act Find learning difficult if forced into hurried program.GCA Skill analysis: Aim is to put interest into actual role.    Good at learning new techniques in OJT Aim is to implement action plans and/or do the task better May discard as impractical good ideas which require development.

gcaoffici al.org .Global Chart ered Accountants .GCA www.

Huneryager and Heckman: Dictatorial Autocratic Democratic Laissez-faire   Manager makes decisions and enforces them Manager makes decisions and announces them   Manager sells his decisions Manager suggests own ideas and asks comments   Manager suggests his idea and amends as per comments Manager presents problem.org . Leadership is an interpersonal process and is affected by behavior. characteristics of followers should match with characteristics of leader.Global Chart ered Accountants . Style theories: A manager’s style is the way in which the manager handles his relationship with the task and with subordinates. Participative style www.gcaoffici al. No close supervision 4. Leadership: Definition Management vs Leadership Manager VS Leader Key leadership skills Developing managers as leaders Theories of leadership i) Trait theory ii) Style theory iii) Contingency theory Leadership skills: Entrepreneurship Interpersonal skills Decision making Time management Self development skills Competitive Goal oriented Team empowering motivated Wholly task oriented Leaders Wholly people oriented Lickert’s 4 elements presented in effective managers: 1.e certain traits makes a person good leader. Employee centered 3.GCA Chapter 16 : Management and Human Resource Leadership Trait Theories: Leaders have certain qualities (Inborn or Acquired) e. Expect high level of performance 2. Manager allows his subordinates to act freely within prescribed limits. To create an effective group.g. Helicopter factor i. asks for ideas and makes a decision   Manager presents a problem and asks to solve it.

Manager presents problem. Blake and Mouton’s managerial grid: High Country club Concern for people Team Middle road Task Low Impoverished Low High Concern for production Contingency approach to leadership: (by Charles Handy) Factors which contribute to the success of leader:  Leader‘s personality  Subordinates  Task  Environment Power. Resource power (reward power)  Enjoyed by senior management  Control over resources and power to grant them e. Expert power  Enjoyed by middle/low management  Power based on expertise Negative power  Enjoyed by middle/low management  Use of disruptive attitude to stop things.  It is associated with particular job. Leader and followers make decisions on consensus. authority and responsibility: Power is ability to do. (decision-making power) Responsibility is obligation to do.GCA 4 styles of leadership: Style Tell (autocratic) Characteristics Manager makes decisions and enforces them Sell (persuasive) Manager makes decisions but convince staff to motivate them. promotion Physical power (coercive power)  Enjoyed by senior/middle management  Power of superior force but mostly absent.org .       Reasons are told to staff.Global Chart ered Accountants .    Slow decision making Staff may not be mature. They have better idea of what to do Employees contribute knowledge and experience. it may be destructive. www. asks for ideas and makes a decision Consults Joins (democratic) Strengths  Quick decision making  Suitable for routine work. Following are different forms of powers in an organization: Position power/legitimate power  Enjoyed by senior management.gcaoffici al. almost authority. Personal power  Power in personality of individuals Authority is right to do. Initiative and commitment High motivation and commitment Shares knowledge and experience Weaknesses  No initiative and commitment  One way communication  No initiative and commitment  One way communication  Slow decision making  Staff may not be mature.g. Conflict may arise.

Disciplinary problems:  Absenteeism  Poor punctuality  Poor job performance  Poor attitudes  Breaches of safety regulations  Refusal to carry out legitimate instructions Disciplinary actions:  Informal talk  Oral warning  Written or official warning  Disciplinary lay-offs or suspension  Demotion  Discharge Warning Action Retirement. Fair grounds for dismissal: Redundancy o Employer has ceased to carry on business all or in part o Requirements of employees have ceased or diminished. Discipline Discipline promotes good order and behavior in an organization by enforcing acceptable standards of conduct.org . Maternity Pay. Early retirement is an alternative to Redundancy. Age structure may become unbalanced. Work place nurseries www.GCA Influence is ability to change behavior of others. Accountability managers are accountable for their action. Redundancy Why retirement is encouraged: Promotion opportunities for younger. Legal impediment Non-capability Misconduct Other substantial reasons Unfair Dismissal (See PBP) Discrimination and Equal opportunities Discrimination could be  Direct  Indirect  Positive (law protected) Measures to address underlying problems of equal opportunity:  Support from the top  Appoint equal opportunity managers  Encourage disadvantaged groups to apply  Monitoring of minority  Maternity leaves. Resignation: Exit interview Period of notice.  Employee is of pension-able age or has less than 20 years of continues service. o No compensation if  Suitable alternative offer made. Cost of pension rise with age.Global Chart ered Accountants . Delegation of authority sharing of decision making power. Resignation.gcaoffici al.

1. Fund could be maintained. Hazard and risk information should be shared. 6. Leaves iii.  Statement of principles  Detail of safety procedures  Detailed instruction of how to use equipment  Training requirement  Compliance with law Risk assessment should be made. i. Allow the employer to carry out his duties. transfer. www.org . Compensation + Repair cost + Increased insurance premium ii. Work practices must be safe. Plant and equipment must be maintained to standard. Subsequent performance is reduced. Recruitment and training of replacement has cost. There must be safety and health advisors.Global Chart ered Accountants . Accidents cost money i. Rules for pension Company Profit (Workers Participation) Act 1968. promotion ii. iv. Use all equipment properly. Employee Social Security Ordinance 1965 i.GCA    Flexible hours Career break Accommodate wheelchair users Health and Safety Importance of Health and Safety at work: 1. 4. Termination vi. 3. Medial expenses ii. Legal obligation 2. Appointment. Employer’s Duties: Work environment must be safe and healthy. Health and Safety Policy should be communicated to all employees. Identify employees who are especially at risk.gcaoffici al. Corporate image is improved. 3. Time lost iii. Gratuity Industrial Relations Ordinance 1969. Compensation in lieu of wages during illness Employee Old age Benefits Act 1976 i. Inform the employer of any situation which may cause danger. 5. 2. Insurance iv. Workers Welfare Fund Ordinance 1971. 5% of net profit + adjustments ii. Controls must be introduced to reduce risks. Bonus v. Employee’s duties: Take reasonable care of themselves and others. National legislation on important labor matters Industrial and Commercial Employment (Standing Orders) Ordinance 1968 i.

performance goals for which they hold themselves accountable‖ A team could be:  Multi-disciplinary teams  Contains specialists in different areas  Freer and faster communication between disciplines in organization  Multi skilled teams  Contains people who possess many skills  Tasks can be shared in flexible way. task oriented) Plant (introverted. source of ideas) Monitor evaluator (analytical rather than creative) Resource investigator Implementer (administrator not leader. planning) Team worker (supportive.Global Chart ered Accountants . scheduling. individual requirements and expectations)  Performing (execution of task) Members/Roles of team: (by Belbin) Coordinator (presides and coordinates) Shaper (dominant. Conflict in roles and relationship Personality problems Rigid leadership Not suitable for all jobs Too much harmony (group think) or differences of opinion Creating an effective team work: (A contingency approach by Handy) The Given  Group‘s members  Group‘s task  Group‘s environment Intervening factors  Motivation  Leadership  Process  Procedure The Outcomes  Productivity  Effectivity  Objective is met within time  Group satisfaction Management can operate on both ‗givens‘ and ‗intervening factors‘ to affect the ‗outcomes‘.GCA Chapter 17 : Groups in Organisation Groups: ―A group is any collection of people who perceives themselves to be a group‖. extrovert.  Sense of identity  Loyalty to group  Purpose & Leadership Team: ―A team is a small number of people with complementary skills who are committed to a common purpose.gcaoffici al.org . Development of team: (by Tuckman)  Forming (collection of individuals)  Storming (targets are set and trust increases)  Norming (work sharing. noticed in absence) Finisher Problems with team: Group norms restrict individual personality. www.

GCA Indications of Effective Team: Quantitative factors Productivity Absenteeism Turnover rate Accident rate Targets Interruption to work rate Qualitative factors Commitment Understanding Communication Feed back Job satisfaction Motivation Conflict in organizations: (Indi vidual / Group level) Different views conflict in organizations: The happy family view:  Organizations are essentially harmonious. The evolutionary view:  Conflict is seen as a useful basis for evolutionary change and not for revolutionary change. (Close competition) Effects of Conflicts within groups: (Sherif and Sherif) PTCL vs.Global Chart ered Accountants .  Conflict could be destructive if not handled carefully. Objectives may be subverted for secondary goals. Climate becomes task oriented. Causes and tactics of conflicts between departments:  Operative goal incompatibility  Personality differences  Task interdependence (if managed badly)  Scarcity of resources  Power distribution (Boundaries of authority)  Uncertainty (in change)  Reward systems (not being fair) Conflict – constructive and destructive How constructive Different solutions Creativity and testing of ideas Attention on individual contribution Brings emotions into open Motivational factors brings out How destructive Distract attention from task. status and reward. Leadership moves from democratic to autocratic with group‘s acceptance. Union Within a group: Group becomes more structured and organized.  Members battle for limited resources.  There are cooperative structures to achieve common goals with no systematic conflict of interest. The conflict view:  Organizations have conflict on individual and group level. Members eliminate their differences. Winning group: Cohesion Relaxation www.org . Members‘ individual needs are subordinated to achievement. Disintegration of the group Emotional/ Win-lose conflicts may arise. get close and demand loyalty.gcaoffici al.  Could be constructive if handled by arguments or competition(Handy).

conciliating) (emphasis must be put on task and individuals must modify behavior) To reduce conflict behavior: Limited communication Structural separation Bureaucratic authority (use of) To encourage cooperative behavior: Job rotation Inter-group training Integration devices (e.gcaoffici al. Loses cohesion.g.GCA Return to group maintenance and concern for members‘ needs. Political behavior: Organizations are political systems because people within them have their own objectives and priorities. Mutual support to guard the decision. Group subculture: Subcultures are cultures which exist within cultures. Turn to regrouping.  Game resist authority  Game to counter this resistance  Game to build power basis (control over resources and superiors. Reevaluates perception of itself and other group. colleagues. Losing group: It may deny defeat or blames on others.Global Chart ered Accountants .  Way of life has somehow become traditional.)  Game to defeat rivals (interdepartmental)  Game to change the organization At senior level political activities occur in following cases Allocation of resources. Political behavior is concerned with competition.  Learned from others in the group. subordinates etc. beliefs. rivalry and power relationships in organization.org . problem solving teams. Political Game: Mintzberg identifies various Political Games played in organization which can be useful or harmful. conflict. that suppresses dissent and appraisal of alternatives in cohesive decision making groups‖ Symptoms of group think: Moral blindness (might is right) Perception of unanimity Strong group pressure to quit dissent Rationalization for inconsistent facts. force to work together) Group think: (IL Janis) ―Psychological drive for consensus at any cost. negotiating. Might become cohesive and effective unit if defeat is accepted. Assertion for group self-concept with little reevaluation. Characteristics:  Group share distinctive way of life. Managerial response to conflicts: (by Hunt) Denial/Withdrawal Suppression Dominance Compromise Integration/Collaboration (if conflict is trivial) (preserve working relations despite minor conflicts) (application of power to settle the conflict) (bargaining. Management Succession Interdepartmental coordination Structural change www.

Small organizations Issues/problems in large organizations: Organization’s structure: Sharing roles and responsibilities (who does what?) How much specialization How many levels of management Delegation of authority (centralized or decentralized) Planning and control: Vague accountability MIS should be in place Coordination Reward Slow adoption to change Motivation is down No self-esteem Slow decision-making Solutions: Decentralized and delegation of authority Fair pay policies with bonus. awards and rewards MIS Delayering in hierarchy Job design Issues/problems in small organizations: Over reliance on a few key persons No economies of scale Small market area/ restricted range of products Low bargaining power Cannot raise money Can not afford help (from experts) Solutions: Growth Specialist servicing Key person‘s insurance Corporate decline 3 types of decline: 1.e. Declining company (i. Declining industries (i.Global Chart ered Accountants . Vulnerability SLEPT Porter‘s 5 forces 3.org .GCA Chapter 18 : Strategies for Critical Periods Large Vs. organization atrophy) Symptoms (by Stuart Slatter)  Decrease in sales revenue  Decrease in profitability  Decrease in liquidity  Decrease in market share www. environment is no longer supportive) Temporary decline (product revitalization) Permanent decline (end game) 2.gcaoffici al.e. Environment entropy.

Turnaround of decline: Visionary leader required. www. Mistakes are viewed as failure not learning Outcomes are uncertain. Humiliation of climb down.) Restriction on dividend policy 4 stages in the crisis (by Stuart Slatter)  Blind stage/Crisis denial  Inaction/Hidden crisis  Faulty action/Disintegration  Crisis/Collapse/Dissolution Causes of decline and strategies to overcome: Causes Poor management Poor financial controls High cost structure Poor marketing Competitive weakness Big projects/acquisition Escalation of commitment of bad decisions Reasons for escalation: They think decision was right. auditors etc. Contraction and cost cutting. Consistency is valued.gcaoffici al.GCA       Lack of planning Increase in gearing Top management fear Change in senior executive Financial engineering (change in accounting policies. Reinvestment in organization‘s capability. Rebuilding with innovation. implementation was wrong.Global Chart ered Accountants . Failure to understand principle of relevant cost.org Strategies New management + restructuring Tighter controls + delegation of responsibilities Cost focus strategy + Ansoff‘s matrix Redevelop marketing mix + motivate sales force Porter‘s generic strategies Feasibility reports .

transfer. Passive resistance. training .gcaoffici al.org Resistance to change Active resistance passive resistance . regulations Change in M anagement: New style of leadership Participation in decision making Collaboration between management staff & unions Change in Personal policies: Change in rules and procedures (e. Make a final decision (Coercive or Adaptive) Establish time table for change.g. Review the change Approaches to change: i) Unfreeze – Move /Shake– Refreeze ii) Adaptive change approach iii) Coercive change approach iv) Using Change agent v) Integrative VS segmentalist vi) Theory E & Theory O www. Prepare tentative plan (via Brainstorming) Analyze probable reactions to change. development Change in structure and size: Due to Takeovers Delegation of authority Centralization Downsizing Nature of strategic change: Incremental Change may be Transformational Reactive Management may Be Types of Changes Pro-active Step change Planned change Emergent change Model for change: Determine need/desire for change in a particular area. Factors forcing change: Changes may occur due to Threat of new entrants Bargaining power of suppliers Bargaining power of customers Threat of substitutes Rivalry between competitors Environmental factors: SLEPT Porter‘s 5 competitive forces Changes in Technology: Computerization New products Better MIS Change in Working conditions: New offices Varied work times Emphasis on health Govt. Active resistance)  Driving and Restraining forces (Force Field Analysis) Communicate the plan for change Implement.GCA Chapter 19 & 20 : Change Management and Changing Environment Change Types of change: Changes in environment (Cause) Changes in organization (Effect)  Changes in products/services  Changes in technology and working conditions  Changes in management and working relations  Changes in organizational structure and size Change is small and gradual whereas Transformation is crucial and significant. smoking) Promotion. Adaptive or Managed resistance change)  Reaction of people (Acceptance. review and modify change. Indifference.Global Chart ered Accountants . Speed of implementation will depend on:  Type of change (Coercive.

Organizational life cycle: Handy’s sigmoid curve: Application of concept of lifecycle to organization with 4 broad stages: 1. rituals. Founder retired. employees become rigid and insular. 3. Organization begins to decline. working environment and working relations) Psychological effect (e. innovation. 5. Speed. risk of rejection. concern for survival and customer disappeared. walking and sleeping habits) Circumstantial effect (e.Global Chart ered Accountants . Look at symbols. Organization grows in size and scope. Pattern of unhealthy culture: (by Edwin Baker) Flourished initially by founder. Change must be sold to people concerned. Such a lifecycle is not inevitable.g. Discuss culture with members (play out corporate drama) 4. 3.GCA Force Field Analysis: (Lewin) It is an interplay of restraining and driving forces that keeps things in equilibrium. images. pattern of shift working affect eating.gcaoffici al. Brings conflicts in open. Introducing change: 3 factors to consider to minimize resistance.g. Give motive for change. Reinterpret the corporate myths. Change process: (by Lewin/Schein) Unfreeze existing behavior: Most difficult and neglected stage. www. Uncertainty affects sense of competence) Changing culture: Hamper Turner suggests 6 modes of intervention: 1. Encourage individuals to own change. flexibility. 6. Behavior change: Identify new behavior. Create a new learning system. if organization is able to adapt. Period of maturity 4. Insecurity. Find the dangers (locate black sheeps) 2. feeling of disorientation.org . Manner of change: Resistance should be welcomed. Individuals must be helped to learn. feeling of misfit) Effect on Self concept (New psychological contract. Scope of change: Small or Transformation. Pace of change: Adapt strategy according to time available. Refreeze new behavior: Through positive or negative reinforcement Effect of change on People: Physiological effect (e. Formalization Departmentalism/ Sub optimization Coercive actions needed to compete.g. Selling the change. Reasons and results of change should be circulated. The organization is established. 2.

of markets served. of outlets  No.)  Sales revenue  Profit (in absolute term or ROCE)  No. (crisis to pass to enter next phase)  Growth (―Move‖ Stage)  Crisis (―Unfreeze‖ Stage) Phase 1: (Focus) Evolution (Small organization focusing on operations. www. (i. Measurement of Growth: (how Adamjee is the largest insurance co. This growth takes place in 5 discrete phases. (i. Too many issues for growth and control.gcaoffici al. of goods/services sold. lack of detailed control. personnel issues and innovation) Revolution (Need for leadership skills) Phase 2: (Management/group) Evolution (Management is professionalized.e it ignores environment)  Effect of competition in market is also ignored. Each phase has 2 characteristics i.e not always founded by visionary ppl.e. control is cultural rather than formal) Revolution (Crisis of psychological saturation in which individuals become exhausted by teamwork) Criticism on lifecycle      models: Formation could also be by Merger or Joint venture. of countries reached.GCA Greiner’s growth model: (Growth & Organisational Development) As an organization ages. of employees  No. sub optimization occurs) Phase 4: (Internal Controls) Evolution (Internal control systems and procedures are developed for coordination and optimal use of resources) Revolution (new procedure inhibits useful actions) Phase 5: (Communication / collaboration) Evolution (Increased informal collaboration. i. culture) Growth is not the same as effectiveness. (i.e org. Evolution (distinctive factor that directs growth) and Revolution. (i. no initiation) Phase 3: (System) Evolution (decentralized decision making) Revolution (no coordination between departments.e Linear development) Growth seen as linear development over time.org . org. there might be different rates of growth at different times and even loss.Global Chart ered Accountants .  Model does not clearly indicate relationship with environment. there are more employees but less enthusiasm) Revolution (delegation is problem.  No.  No. structure.e not a normal state of affair) No idea of time scale involved in any stage. it grows in size.

Social definition: ―a social and managerial process by which individuals and groups obtain what they need and want through creating and exchanging products and value with others. Exchange. Elements of Marketing: Company Supplier Market Intermediaries Competitors ENVIORNMENT End user Customer’s life time value: Value of entire stream of purchases by customer over his lifetime. The societal marketing concept holds that the organization should determine the needs. Demand. by delivering superior value to customers. performance. Design.org . Social. Transaction is a trade of value between two parties. Marketing Management: Marketing management has four functions: Analysis. Wants  are satisfied : the form taken by a human need as shaped by culture and individual personality. It is done when product is not feasible from supplier or customers‘ point of view. The product concept states that consumers will favor products that offer the most quality. wants. : Managerial definition: Managing profitable customer relationships. focus on improving production and distribution efficiency.GCA Chapter 22 : The evolution of marketing concept ―the right product or service to the right customer. and features. Planning. devote its energy to making continuous product improvements. Transaction and relationship: Exchange is an act of obtaining a desired object from someone by offering something in return. It should then deliver the desired satisfactions more effectively and efficiently than competitors in a way that maintains or improves the consumer‘s and the society‘s well-being. Technological. Implementation and control.Global Chart ered Accountants . at the right time and right place‖ Marketing Department: Functions (Research. Economical. Demands  are extinguished : Human wants that are backed by buying power.e intentional and non-intentional reduction in demand. Value and Satisfaction Customer’s perceived value is the difference between the values that the customer gains from owning and using a product and the costs of obtaining the product. Needs. Marketing Management Orientations The production concept holds that consumers will favor products that are available and highly affordable and that management should.gcaoffici al.‖ Core Marketing concepts: Market: A market is the set of actual and potential buyers of a product. therefore. Customer Equity: Total lifetime value of all of company‘s customers. www. The selling concept is the idea that consumers will not buy enough of the organization‘s products unless the organization undertakes a large-scale selling and promotion effort. Demarketing’s aim is to reduce demand temporarily or permanently. therefore. wants and demands: Needs  are fulfilled : a state of felt deprivation. Ecological.Introduction Marketing. The marketing concept holds that achieving organizational goals depends on determining the needs and wants of target markets and delivering the desired satisfactions more effectively and efficiently than competitors do. Legal) Chapter 1. Satisfaction is whether performance meets or exceeds expectations. and interests of target markets. and that the organization should. i. at the right price. Selling) Marketing Environment: PES TEL (Political. Marketing Offer: Combination of good-service offered to market to satisfy need or want.

g which product of market to choose Short term. Web site visits. Consumerism is a term describing importance and power of consumers. Customer Database Customer Relationship Management: Customer Portfolio Defined narrowly as a customer database management activity. Companies look for touch points. and support calls. price Marketing Vs.Global Chart ered Accountants . performance. structural and cultural changes are required.org How to Get Customer Touch Points: Purchasing trend Payment trend Service obtaining trend Family trend History Support calls Website visits Emotional attachments .gcaoffici al. ―CRM is managing detailed information about individual customers and carefully managing customer touch points to maximize customer loyalty‖. the marketer must forego short-term profit maximization on individual transactions. not from competitors To reassess benefits to customers To convince that average customers‘ requirements are met Problems in introducing the marketing approach:  Understand what marketing orientation actually means  Organizational. level of services and marketing techniques  Organization wide dedication Types of Marketing  Working together as whole Scope of Marketing = Marketing Planning Strategic Marketing Tactical Marketing Tied with corporate strategy e. Selling: Selling concept Starting point Factory Focus Existing products Marketing concept Market Customer needs Means How to increase demand How to satisfy demand Ends Profits through sales volume Profits through satisfaction customer Despite adoption of market oriented approach. distribution efforts Continues product improvement Large scale selling. and focuses on place.GCA CONCEPT Production concept CUS TOMER WANTS Availability and affordability Product concept Selling concept Marketing concept Quality. promotion. Customers‘ needs and change in product specification tighten them. satisfaction surveys. These includes customer purchases. Elements of Marketing Mix: Controllable: Product Price Place Promotion Uncontrollable: (Marketing environment) SLEPT Analysis www. there is need for sales force: To create awareness To convince to buy from company. R&D department: Marketing has commercial and competitive atmosphere whereas R&D has University atmosphere with open-end work and consumption of substantial resources. service. etc.  Assessment of Product. promotion Effective & efficient than competitor Two S teps of marketing:  Determine Need. logistic. features No feelings to purchase Needs & wants of target market COMPANY SHOULD Improve production. Wants And Interest Of Target Market  Then Satisfy Them Effectively And Efficiently Marketing Vs. sales force contact. market research studies. credit and payment interactions. To be effective in CRM.

Expectation = Perceived value 2. Retain existing customer by providing satisfaction ii.” Marketing and other environmental stimuli: (i. The buyer‘s decision process itself affects the buyer‘s behavior. Relationship Marketing: To build long term relationship with existing customers.gcaoffici al. it encourages serviceoriented attitude. Hence when every department is satisfied ultimately the quality will be enhanced. A Customer buys the highest perceived value. price.e Stimulus – response model) Already discussed Consumer’s Black box: The “black box” has two parts. Pull Approach Focused on pulling resellers and customers by satisfying them. rather than focusing on products. focus is on relationship i. how and how much. place. 3. where.GCA Porter‘s 5 forces model i) ii) iii) iv) v) Threat of new entrants Threat of substitutes Bargaining power of customers Bargaining power of suppliers Rivalry among competitors Service industry: People Processes Physical evidence Important Points for discussion questions: 1. 1). 4. Model of Consumer behavior: A model of consumer behavior helps managers answer questions about what. Satisfied customers give benefits of i. Customers often do not judge product‘s value and cost accurately and objectively. Cultural o Culture o Subculture www. (Semi-controllable) Characteristics affecting consumer behavior: Marketer can not control them but should learn them. Attract and grow new customers by promising superior value Marketing Approaches Push Approach Focused on pushing goods to Reseller and customer. Loyal ii. Talk favorably 5. (Uncontrollable) 2). Two fold object of marketing i. Internal Customer Concept: Department in an organisation treat each other as ‗customers‘. Being less price sensitive iii. and promotion) and other environmental stimuli (Micro and M acro) center on the consumer’s “black box‖ and produce certain responses. The stimulus-response model of buyer behavior shows that marketing (made up of the four P‘s—product.e selling more products to same customer.org . Fulfilling their demands to attract Them to the company Three Important Concepts: Value-Chain : How activities of organisation contributes towards creating value in goods or services. rather than to new customers. Marketers must figure out what is “in” the consumer’s “black box.Global Chart ered Accountants . The focus Is on sale volumes. when and why they buy. The buyer‘s characteristics influence how he or she perceive and react to stimuli.

Global Chart ered Accountants - GCA

o Social class
o Reference group
o Family
o Roles and status
o Age and lifecycle stage
o Occupation
o Economic situation
o Lifestyle
o Personality and self concept
o Motivation
o Perception
o Learning
o Beliefs and attitudes
Culture is the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and
other important institutions.
Subculture is a group of people with shared value systems based on common life experiences and situations.
Subcultures might be nationality groups, religious groups, racial groups, or geographic area groups.
Social classes are society‘s relatively permanent and ordered divisions whose members share similar values, interests
and behaviors.
Reference group has a direct (face to face) or indirect points of comparison or reference in forming a person‘s attitudes
or behavior.
Aspirational group is one to which an individual wishes to belong.
Opinion leader is a person within a reference group who, because of special skills, knowledge, personality or other
characteristics, exerts influence on others.
Personality is a person‘s unique psychological characteristics that lead to relatively consistent and lasting responses to
his or her own environment.
A motive (drive) is a need that is sufficiently pressing to direct the person to seek satisfaction.
Perception is the process by which people select, organize, and interpret information to form a meaningful picture of
the world.
Learning is changes in an individual‘s behavior arising from experience.
Belief is a descriptive thought that a person holds about something.
Attitude is a person‘s consistently favorable or unfavorable evaluations, feelings, and tendencies toward an object or
Purchase Decision Process
i) Problem Recognition:
Perceiving a need.
It can be stimulated by:
Consumer‘s depleted assortment (e.g. empty paste) or
Marketing efforts
ii) Information Search:
To clarify options available to consumers.
o Internal search: Scanning of memory (experience) or knowledge about solution of problem/need sufficient
For frequent/regular purchases.
o External search:
 Personal sources (family, friends, neighbors, acquaintances)
 Commercial sources (advertisement, dealers, websites, salesmen)
 Public sources ( M ass media, consumer rating organizations)
For new products.
―Word of Mouth‖ or ―Personal sources‖ has 2 major advantages (through satisfied customers):
1. Convincing, i.e. of consumers by consumers for consumers
2. Costs are low.
At the end of this stage, customer arrives at a set of final brand choices.
iii) Evaluation of alternatives:
Assessing value.
Customer may be interested in many attributes. E.g. for Camera
Picture tube
www.gcaoffici al.org

Global Chart ered Accountants - GCA

Ease of use
However sometimes consumer has to base his decision only on one attribute.
iv) Purchase Decision: [The best rated camera will be bought.]
v) Post-Purchase behavior:
A policy by firms is to understate performance because customers are delighted with better-than-expected performance.
Why satisfaction of Customer/study of this stage is important:
1. To attract new customers cost more than to retain current customers.
2. Satisfied customers are less price sensitive.
3. Satisfied customers tell others (words of mouth). Bad words travel farther and faster.
Decision process for new product i.e. stages in adoption process (from hearing to adoption):
1. Awareness:
2. Interests: seek information i.e. through external sources
3. Evaluation: whether to try or not
4. Trial: on small scale to improve estimate of value
5. Adoption: decides to make full and regular use

Chapter 2 Company and marketing strategy
Strategic Planning Process:
―Strategic Planning is the process of developing and maintaining a strategic fit between organization‘s goals and
capabilities and its changing marketing environment.
Following are steps of strategic planning:
1. Defining mission
2. Analysis of Business Portfolio
3. Setting strategic objectives and goals
4. Developing Competitive strategies
i. Porter‘s 5 forces
ii. Cost-Differentiation-Focus Triangle
iii. Growth Strategies (product/market expansion grid)
5. Developing detailed marketing and departmental plans and strategies
Mission Statement:
This is a statement of organization‘s purposes- What it wants to accomplish in the larger environment.
It should be market oriented, specific, realistic, motivating and consistent with market environment.
e.g. ―To provide best satisfaction to customers and fair return on investment, keeping environment healthy and clean
and promising secure future to employees‖
Designing the business portfolio:
Business portfolio is the collection of businesses and products that make up the company.
Business portfolio planning involves 2 steps:
1. Analysis of current business portfolio.
2. Developing strategies
1. Portfolio Analysis:
A tool by which management identifies and evaluates SBUs to determine which business should receive more, less or
no investment.
BCG growth-share matrix is used to evaluate a company‘s SBUs in terms of market growth rate and relative market
SBU is a unit of company that has a separate mission and objectives and that can be planned independently from other
company businesses.
2.Developing strategies for growth and downsizing:
The product/market expansion grid is a portfolio-planning tool for identifying company growth opportunities through:
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Existing Market

Existing Product
Market Penetration

New Product
Product Development

New Market

Market Development


When a firm reduces business portfolio by eliminating products or business that is not profitable or no longer fit its
overall strategy..
Setting strategic objectives and goals:
Firm‘s mission is translated into set of objectives for the current period for each SBU.
Developing plans and strategies
Marketing Process:
The marketing process is the process of
1. segmenting the market,
2. selecting target markets,
3. marketing positioning
4. developing the marketing mix, and
5. managing the marketing effort.
Marketing mix:
The marketing mix is the set of controllable factors that the firm blends to produce the response it wants in the target
market. i.e. Product, Price, Place, Promotion
Managing the Marketing Effort:
Marketing M anagement has four functions of analysis, planning, implementation, and control..
1. Marketing Analysis
o Analysis of company‘s Strength and Weakness
o Analysis of environment‘s Opportunities and Threats. [External]
2. Marketing Planning involves deciding on marketing strategies to attain its overall strategic objectives of company.
3. Marketing Implementation is the process that turns marketing strategies and plan into marketing actions in order to
accomplish strategic marketing objectives. Implementation addresses the who, where, when, and how.
4. Marketing control is the process of evaluating the results of marketing planning and its implementation, and taking
corrective action to ensure that marketing objectives are attained.
Two broad forms of control are important:
1). Operating control involves checking ongoing performance against the annual plan and taking corrective
action when necessary.
2). Strategic control involves looking at whether the company‘s basic strategies are well matched to its
opportunities. The major tool for accomplishing this form of control is the marketing audit.
The marketing audit is a systematic analysis and evaluation of organization‘s marketing position and performance. It
may cover all marketing activities or some of them.
Audit will focus on 3 things:
1. Marketing capabilities
2. Performance evaluation (are sales meeting forecasts?)
3. Competitive effectiveness (competitive advantage, product differentiation)
Partnership relationship management:
―Working closely and jointly with
 Other departments of company
 Other companies
to bring greater value‖.
Value Chain and Value delivery network:
Value Chain is series of departments within the company carrying out value-adding activities e.g.
 Designing
 Producing
 Marketing
 Delivery
 Supporting
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Value delivery network is network of suppliers, company, intermediaries, and consumers who partner with each other
to improve performance of entire system.

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Will try new products 2. gender. ambitious i. Occasion segmentation: dividing market according into groups according to occasions when buyers get the idea to buy. Upward mobile. characteristics or behavior and might require different marketing mixes. Security and Status seeking i. Market Segmentation Market segmentation is dividing a market into smaller group of distinct buyers who have different needs. counties. race. Market segment is a group of buyers who respond in a similar way to a given set of marketing mix. cities. or use purchased item. Benefit sought: Dividing market into groups according to different benefits that consumers seek from the product. Higher standard of living iii. Seek better or more affluent lifestyle ii. education.gcaoffici al.g. actually make their purchase. Psychographic segmentation calls for dividing a market into different groups based on social class. Stresses security and ego-defensive needs ii.org . or responses to a product. religion.nonuser status (heavy. for a laundry detergent. occupation. from cleaning and bleaching to economy. Traditional and sociable i. Purchasing pattern will be ‗conformist‘ 3. or neighborhoods. regions. family life cycle.g. medium or light user) Customer capabilities (many services or few services) Purchasing approaches  Purchasing function organization (centralized or decentralized)  Power structure  Nature of existing relationship www. E. uses. or personality characteristics. generation. lifestyle. and nationality.Global Chart ered Accountants .g. Emphasis on ―enjoying life now‖ ii. Hedonistic preference i. strength or mildness etc. User status and user rate Loyalty status Segmenting Business Markets Demographic segmentation  Industry (which industry)  Company size (what size)  Location Operating variables    Technology (what technology to focus) User. Consumers seek unique combination of benefits e. family size. There are four possible lifestyle categories: 1. Immediate satisfaction of needs and wants Behavioral segmentation involves dividing a market into groups based on consumer knowledge. fresh smell. income. Basis of segmenting markets: Segmenting consumer market Geographic segmentation calls for dividing the market into different geographical units such as states. Insurance 4.GCA Chapter 23 : Strategic Marketing & Planning 1. attitudes. Compliant and conform to group norms ii. Purchase of known and established products and brands e. Demographic segmentation calls for dividing the market into groups based on variables like age.

Measurable—Size. values. purchasing power. behavioral patterns. Concentrated marketing (or niche marketing) a market-coverage strategy in which a firm goes after a large share of one or a few segments or niches. Target marketing strategies: (Product affecting Promotion) The firm can adopt one of four target marketing strategies: A. Market offers can be differentiated along the lines of:  Product  Service  Channels  People  Image Considerations while choosing strategy:  Company. etc. variability Evaluating Market Segments  Segment size and growth  Segment structural attractiveness www.org . C. 4). Geographic location: location or region 2). Differentiated marketing (or segmented marketing) a market-coverage strategy in which a firm decides to target several market segments and designs a separate offer for each. Differentiable—It must be conceptually distinguished and should have the ability to respond differently to different marketing mix elements and programs. religion. service contracts.GCA Situational factors   General purchasing policies (leasing. Target Marketing Target market is a set of buyers sharing common needs or characteristics that the company decides to serve. or sealed bidding) Purchasing criteria (quality. strategies  Product o stage in the life cycle o variability  Market. Undifferentiated marketing (or mass marketing) a market-coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer B. Actionable—It should be possible to design effective programs for attracting and serving market segment. Requirements for Effective Segmentation Substantial—segment must be substantially large or profitable. Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific individuals (individual marketing) and local customer groups (Local marketing). attitudes. 2. Political and legal factors: Type / stability of government. Accessible—segment must be reached and served easily. The chief factors that can be used are: 1). Cultural factors: Language. Economic factors: Population income or level of economic development 3). customs. and profiles of a market segment should be measurable.Global Chart ered Accountants . service or price)    Urgency (quick delivery/service?) Specific application Size of order Personal characteristics  Buyer-seller similarity of values  Attitude towards risk (risk taking or averse)  Loyalty (to companies who show high loyalty to suppliers) Segmenting International Markets Companies can segment international markets using one or more of a combination of variables. monetary regulations. D. amount of bureaucracy.gcaoffici al. resources and objectives  Competitor.

2) Choosing the right competitive advantages: How many to promote: Only one difference. Choosing right competitive advantages 3. soft-drink consumers who have little time for sleep. Product Positioning Product positioning is imaging the product in the minds of consumers relative to competing products. Aggressive approach More than one differences. Selecting an overall positioning strategy 4. Identifying possible competitive advantages 2. Which ones to promote:  Important for buyers  Distinctive than competitors offer  Superior  Communicable and visible difference  Competitors can not copy easily  Affordable for buyers  Profitable for company 3) Selecting an overall competitive positioning strategy: What offer to make in relation to competitor‘s offer (Use 2x2 or 3x3 Grid) Price More Same Quality More Same Less Premium brand Average Cow bow brand Less Super bargain brand Bargain brand Economy brand Other strategies are: More for same (Penetration) Same for less Less for much less 4) Developing positioning statement: Positioning statement is a statement that summarizes company or brand positioning.GCA   Level of competition  Substitute products  Power of buyers  Power of suppliers Company objectives and resources 3. However it risks disbelief and a loss of clear positioning. either through lower prices or by providing more benefits that justify higher prices.gcaoffici al. Where more than one firms are claiming to be the best at same attribute.org . ―To young. www. Positioning task (or choosing a positioning strategy) consists of following four steps: 1. it takes following form: ―To (target segment and need) our (brand) is (concept) that (point of difference)‖ e. active.g. M ountain Dew is the soft drink that gives you more energy than any other brand because it has the highest level of caffeine‖. Developing a positioning statement 1) Identifying possible competitive advantages: Competitive advantage (making a difference) is an advantage over competitors gained by offering consumers greater value.Global Chart ered Accountants .

Management decision www. Designing the research (basis of research objectives) 3. Reducing risks c. Decision making Types of Marketing Research: Market research: Study and analysis of Characteristics of market Market share Market trends Sales forecasting for all products Market potential for existing products Likely demand for new products Product research: Comparative study between competitive products Studies into packaging and design Forecasting new uses for existing products Customer acceptance of proposed new products Development of new product lines Test marketing Price research: Analysis of elasticity of demand Analysis of cost and profit margins Effect of change in credit policy on demand Customers‘ perception of price and quality Place (Distribution) research: The location and design of distribution centers Analyzing the packaging for transportation and shelving Cost of different methods of transportation and warehousing Dealer supply requirements Dealer advertisement requirements Promotion research: Analyzing the effectiveness of sales force Analyzing the effectiveness of advertising on sales demand Establishing sales territories Research procedure: The marketing research process consists of following steps: 1. Presentation of report 6. Defining the problem 2.gcaoffici al. recording. Regulating systems b. Collection of data 4.Global Chart ered Accountants . and analyzing of all facts about problems relating to the transfer and sales of goods and services from producer to consumer or user‖ Marketing research helps in a.org .GCA Chapter 24 : Marketing Research Marketing Research Marketing Research: ―It is the objective gathering. Analysis of data (Pre and Post testing etc) 5.

the manager and researcher must set the research objectives. press releases.gcaoffici al.  Mail questionnaires  Telephone interviewing  Personal interviewing Individual interviews Group interviews (including focus-group interviews)  Online (Internet) marketing research  Mechanical instruments i. business publications. A galvanometer measures strength of interest or emotions aroused by a subject‘s exposure to different stimuli. MkIS) Advantages Quick access Cheaper Regular & Reliable Confidentiality Disadvantages Incomplete Wrong form Ages quickly Not expert External sources:  Information about Competitors (annual reports. Collecting primary data:( Field research) Primary data is information collected for the specific purpose at hand. purchasing agents)  Trade suppliers  Outside suppliers  Online databases  New patents or applications for patents 2.org . Collecting secondary data: (Desk research) Secondary data collection is information that is neither direct nor specific. 1. sales force.  Observational research  Survey research  Experimental research Research methods  EPOS (Electronic Point of Sale system)  DSS (Decision Support system)  Data Warehousing  Internet Contact methods.GCA Defining the problem and designing the research After the problem has been defined carefully. Supermarket scanners iii.)  Analyzing competing products  Rival companies‘ personnel (executives. www.Global Chart ered Accountants . iv. Sources of secondary data: Internal databases: (i. advertisements etc. Collection of data (Research work) Marketing Research data comprises of  Primary Data (Field search)  Secondary Data (Desk Search) Researchers usually start from secondary data. web pages. Eye cameras are used to study respondents‘ eye movements to determine at what points their eyes focus first and how long they linger on a given item. People meters ii. engineers. A plan for primary data collection calls for a number of decisions on Research approaches. such as an ad or picture.e.

4—Interpreting and Reporting the Findings Distributing the information: MkIS : ―Marketing Information System represent a systematic attempt to supply continuous. Cluster (Investigators are told to examine every item in a small population that fits the required definition) Potential faults in sampling: Insufficient data Unrepresentative data Bias (where chance of occurrence is not equal) Omission of an important item in questionnaire Carelessness Misinterpretation of data 3—Implementing the Research Plan This involves processing. Internet is a vast public web of computer networks.gcaoffici al. Systematic (Every nth item is selected) 2. E. age groups and selecting random samples from each group. Quota (Different categories of populations are made and a specific quota from each category is selected) 5. audio. and analyzing the information. It includes only Business and Consumers. Extranet connects a company with its suppliers.Commerce. distributors. which connects users of all types all around the world to each other.  Sample is a segment of population selected for marketing research to represent population as a whole. graphics Shopping at home (Consumer) No physical barriers (Consumer) www. Company efforts to communicate about. Advantages:      Geographical reach Speed Information sharing of any kind e.Global Chart ered Accountants . video. animation.  Sample should be a true representative of population and should not be biased Types of samples: Random sampling: Every member has a known and equal chance of selection) Non-random sampling: 1. useful.g.g. It is the ability to buy and sell goods and services electronically primarily by internet.GCA Sampling plans  As surveying the whole population would be too expensive & time consuming.org .Commerce is more specific than E. text. 3. so a sample is selected. E. Audits: Trade audits: count of stock at wholesalers and retailers Retail audits: count of stock at retailers only Marketing in the Digital age E. Stratified (Population is divided into mutually exclusive groups e. usable marketing information within an organization to decision makers often in the form of a database‖. promote and sell products and services over internet. Marketing is the marketing side of E.Business. Multistage (Process of subdividing population and selecting sample again and again till a suitable selection is made) 4. and other outside partners.Business is the all electronic based information exchange within company or between companies and consumers using following platforms:  Intranet  Extranet  Internet Intranet is a network that connects people within a company to each other and to the company network.

Business Models: Government Business Consumer Employee Government G2G G2B G2C G2E Business B2G B2B B2C B2E Consumer C2G C2B C2C X B2C E.g.com) through a website to buy shoes or books online or making inquiries. Expense Claims. H/O receiving and processing Timesheets. adding specific features to jeans like colorful patches.  EBay  Chat rooms for information and advertisement  Over personal websites  Advertisement on E.Commerce is companies doing business electronically with other businesses e. E.  Change in address. smelling a perfume or fitting clothes (consumers)  Logistic.Commerce is use of intranet technology to handle activities that take place within a business. Such as All Pakistan Textile Association Mills B2E E. Using B2E E. marital or family status  Submission of tax returns  To cast vote Customization and Customerization: Customization is individualizing the marketing offer. exchange data and information and access in-house database.Commerce technology by the government to handle activities electronically in which govt. is involved with.g.org .Commerce occurs when an average citizen interacts with a company (like Bata Pakistan or amazon.Commerce is the use of E. and Absent forms.gcaoffici al.g. E. market news and competitive analysis. Its need arises when branching out and spreading business across geographical areas.g. shipping. down or across the supply chain involving business partners.g.GCA   Doing business 24 hours (Business) Paperless business (Business) Disadvantages:  Security concerns (consumer)  Whom to complaint (consumer)  What you see is sometimes not what you get (consumer)  Sometimes physical presence is necessary e.Commerce employees collaborate with each other. B2B E. allowing customers to be prosumers rather than consumers. taking measurement of jeans for a customer. New technology in Distribution: DRTV Internet (B2C) o Websites o Email www. a business selling up.  To publish and disseminate information by Govt.Global Chart ered Accountants . Customerization is leaving it to individual customers to design the marketing offer.Commerce is consumers selling goods directly to consumers in an auction process. C2C E.g.news papers G2C E.g. E. E. E. sales information. distribution and delivery challenges (business)  Availability of secure and affordable communication network E.

GCA Chapter 25 : Product Product A product is anything that can be offered to a market for use. Delivery and credit c. ii. or consumption and that might satisfy a want or need such as soap. organizations Services are a form of product that consist of activities. b.gcaoffici al. such as a doctor‘s exam. The augmented product includes any additional consumer services and benefits built around the core and actual products.g. Product includes:  Goods  Services  Other entities e. Consumer Products i.  Features  Style and design. They are:  Quality level. Rolex watches Aggressive advertising and personal selling Life insurance Red cross blood donation .  Packaging. Installation e. Convenience Shopping Specialty Unsought Types of consumer products Marketing Consideration Consumer buying behavior Convenience Shopping S pecialty Unsought Frequent purchase Little planning Little effort and involvement Little comparison Special effort Little comparison Strong brand loyalty Low price sensitivity Either no awareness or no interest Price Place Low Intensive distribution at convenient locations Less frequent purchase Much planning Much effort & involvement Much comparison Higher Selective distribution in fewer outlets Varies Varies Promotion Mass promotion Advertising and personal selling Very high Exclusive distribution in only one or few outlets per market area Targeted promotion by producer and reseller Examples Tooth pastes Magazines Televisions Furniture Clothing 2. iii.g. Capital items iii. Supplies and Services www. After sale service Classification of products: 1.org Luxury goods e. Levels of Products and services: The core product. Industrial (Business) Products. iv. idea. Warranty d.Global Chart ered Accountants . What is the buyer really buying? The actual product may have as many as five characteristics that combine to deliver core product benefits.  A brand name. Material and parts ii.: i. places. People.. benefits offered for sale that are essentially intangible and do not result in the ownership of anything.

or design. A product line is a group of products that are closely related because they function in a similar manner. An organization with several product lines has a product mix. successful Needs less investment Dog Enough to maintain themselves No future Relative market share www.org . are sold to the same customer group. Long/short depends on increase of profit by adding/deleting items. or fall within given price ranges. or a combination of those that identifies the maker or seller of a product or service. of product lines of a company) o Depth (No. sign. distribution channels. symbol. Boston Consulting Group‘s Growth-Share M atrix 2. or in some other way.Global Chart ered Accountants . of items per product line) o Consistency (how closely related the various product lines are in end use. Packaging is the activity of designing and producing the container or wrapper for a product. General Electric Business Screen (GEBS) 1) BCG growth-share matrix is used to evaluate a company‘s SBUs/Product in terms of market growth rate and relative market share. are marketed through the same types of outlets.GCA Key Decisions about product: Individual product o Standardized or adapted Market offers can be differentiated along the lines of:  Product  Service  Channels  People  Image o Product attributes  Tangible Quality Features Style and design Brand name Packaging  Intangible Image Perceived value o Packaging & Labeling o Product support service Product Line Decisions o Product line length Product M ix/Assortment/Portfolio Decisions o Width (No. product ion requirements. Growth rate (%age) Star Needs heavy investment to finance rapid growth potential Question Mark Requires a lot of cash (Problem Child) Cash Cow Established. Labeling is also part of packaging and consists of printed information appearing on or with the package Product support services are the services that augment actual products.gcaoffici al. Product line length is the number of items in the product line. A brand is a name. Product-Market Matrices: It is a simple technique used to classify a Product/Business according to the features of the product and market to determine the Relative positions of Businesses/Products and Strategies for resources allocation between them. There are 2 commonly used techniques: 1.

Service perishability (cannot be stored) 5). competitive climate.e. Matrix classifies products according to:  Industry attractiveness (market size. Satisfied and loyal customers v. 1. nature of regulation. Process 3. 5). Such approaches. profitability)  Company strength (market share. Service inseparability (from provider) 3). 2). company image. Service variability (standard will vary each time) 4). People (sometimes people and services are inseparable. They can be time consuming. have limitations: 1). They can be difficult. production costs. control over prices/margins. Internal service quality ii. The approaches focus on classifying current businesses but provide little advice for future planning. Healthy service profits and growth It requires more than just traditional external marketing:  External marketing (B2C)  Internal marketing (B2E)  Interactive marketing (E2C) www. level of investment. first line importance) 4. ease of market entry. 3). 4). following strategies are available: Build Hold Harvest Divest The BCG and other formal methods revolutionized strategic planning. 2) General Electric Business Screen (GEBS): This approach is like BCG matrix but includes a broader range of company and market factors. Strategy for an individual SBU/Product is then suggested on the basis of the position of the matrix. 4 extra Ps are also required i. stability of demand. however. financial strengths. market growth. Physical evidence ( remedy for intangibility) Service Profit Chain: ―Profit of service firm is linked with satisfaction of employees and customers‖ i.org Unattractive Develop for income Harvest or Divest Divest . information and reliance required) 2. Service ownership (not transferred to service taker) Marketing mix of services: Along with 4 normal Ps. Personal selling (greater reassurance.Global Chart ered Accountants . benefits of patent protection) Classification is highly subjective assessment. Business Strength Strong Average Weak Market attractiveness Attractive Average Invest for growth Invest selectively for growth Invest selectively and build Develop selectively. production capacity.GCA After determination of position of a SBU in BCG matrix. SBU is a unit of company that has a separate mission and objectives and that can be planned independently from other company businesses. They can be costly to implement.gcaoffici al. build on strength Develop selectively for income Harvest Nature and Characteristics of a Service 1). Satisfied and productive service employees iii. Greater service value iv. product quality. industry capacity. Service intangibility (cannot be touched) 2). distribution systems. Management may find it difficult to define SBUs and measure market share and growth.

3). External sources (customers. Internal sources (R&D) b. When an old product can be new: Introduced into a new market Packaged in different way Different marketing approach is used Mix variable is changed. 2). Result based on poor market research findings. long term sales. 6).e. Degree of newness: Unquestionably new product Partially new product Major product change Minor product change Sources for new products: Licensing Internal product development Customers External innovators Competition Acquisition Academic institutions Patent agents Why so many new products fail: 1). 4). 5 product characteristics affecting rate of adoption for new product: Relative advantage i. Idea screening Evaluation against criteria to spot good ideas and drop poor 3. 5). Concept development and testing Product concept is a detailed version of the new-product idea stated in meaningful consumer terms. Business analysis www. This is a statement of the planned strategy for a new product that outlines the target market. competitors. The costs of producing the product may have been higher than expected. Idea generation which is the systematic search for new product ideas rather than haphazard? a. promoted or positioned.org . 5. market mix and market share.GCA Product Development: (New Product) What is a new product: That opens up an entirely new market That replaces an existing product That broadens the market of an existing product. Sometimes competitors fight back harder than expected. placed. positioning. new technology making it superior Compatible with values and experience of potential consumers Ease of understand and use Trial option Communicability of results of using product. Marketing strategy development A marketing strategy statement should be produced. suppliers) 2.Global Chart ered Accountants .gcaoffici al. profit goals and marketing budget for the first few years. Overestimated market size. 4. Concept testing involves testing the concepts with a group of target consumers to find out if the concepts have strong consumer appeal. distributors. Poorly priced. Poorly designed product. Product Development Process 1.

Global Chart ered Accountants .Characteristics. stop or change strategy. costs. www. Decline Exceptions are Fad. and profit projections for a new product to find out whether these factors satisfy the company‘s objectives 6. Strategies change with change in stage of PLC. Stages can not be easily defined. phase out unprofitable Reduce to minimal level Reduce to needed to core-loyals level retain . service. Test marketing The basic purpose is to test the product itself in real markets. Growth 3. Style.org Reduce expenditure and milk the brand Go selective.gcaoffici al.GCA Review of the sales. 8. Criticism on PLC approach: Relevant only for products where consumer demand is high Underlying stage of PLC is determined by marketing actions. Commercialization Introducing a new product into the market. and Fashions. Product development Developing the product concept into a physical product in order to ensure that the product idea can be turned into a workable product 7. objectives and strategies: [very nice table] Introduction Growth Characteristics Sales Cost Low High per customer Profit Customers Competitors Negative Innovators Few Rapidly rising Average cost customer Rising Early adopters Growing Marketing objectives Create product awareness and trial Maximize share Strategies Product Offer Basic product Price Use cost-plus Place Selective distribution Offer product extensions.Cost  Decide to continue. ----------------------Product life  Marketing staff-------------------Price and demand  Management accountant------. Product life cycle. Introduction 2. quality Price to penetrate/skim market Intensive distribution Promotion Use heavy promotion Targeting Early adopters (build awareness) sales per market Reduce to take advantage of heavy demand Mass market (build awareness) Maturity Decline Peak sales Low cost per customer High profit Middle majority Stable number beginning to decline Maximize profit defending market share Declining sales Low cost per customer Declining profit Laggards Declining number Diversify brand and model Phase out weak items or Repositioning Cut price Price to match or beat competitors More intensive distribution Increase to encourage brand switching Stress brand differences and benefits Assessment of PLC:  Regular review of existing products  Analysis of past trends  History of other products  Market research  Analysis of competitors  Estimate of future life and profitability should be discussed with experts  R&D Deptt. Maturity 4. Stages of Product Life Cycle (PLC) 1.

Cost effective Fitting for storage purposes Product Portfolio Planning All product lines and items that company offer for sale [Overall product range of organization] Width (No of product lines carried by Company) Depth (No of items carried divided by No of product lines) Consistency (closeness of items in range in terms of marketing/production characteristics) www. price.org . motivating.Global Chart ered Accountants . Qualities required of a packing: Size and variety should be minimized. regulations (e. expiry) Distribution Selling (Advertising.gcaoffici al. expiry etc. All functions of packing are also required.GCA ―S‖ shape does not always occur in PLC Strategic decisions can change PLC Packaging: Functions of packaging: Protection Quality standard (e. attractive. Attractive and distinctive to target consumer.) User convenience (value depicting) Conforms to govt.) Usually goods are packaged in more than one layer.g.g. ingredients.

Pricing is too cost-oriented. 3). Internal Factors Affecting Pricing Decisions 1.Global Chart ered Accountants . management needs to know how its costs vary with levels of production. Target costing is positioning of product on price and then tailoring other marketing decisions to the price they want to charge. place. Costs Set the floor for the price that the company can charge. and promotion decisions to form a consistent and effective marketing program. market segments. Companies often make their pricing decisions first and then base other marketing-mix decisions on the prices that they want to charge. Only element to produce revenues Most flexible element Could be Fixed or Dynamic Price Setting Cost Competition Demand (Elastic / Inelastic) Common Pricing Mistakes 1).gcaoffici al. 2). The experience curve (or the learning curve) indicates that average cost drops with accumulated production experience 4. Costs 4. intervention  To create excitement or draw attention of new customers  To help the sale of other product in product line 2. Marketing objectives 2. To price wisely.GCA Chapter 26 : Price PRICING CONSIDERATIONS AND APPROACHES ― Price is the sum of the values that consumer exchange for the benefits of having or using the product. and selling the product. Organizational considerations 1. Marketing mix strategy: Price decisions must be coordinated with product design. Marketing mix strategies 3. Marketing objectives: • Survival • Current profit maximization • Market share leadership • Product quality leadership • Other objectives  To prevent competitors  To keep loyalty and support of reseller  To avoid govt. (price below this is not acceptable) Companies want to charge a price that covers all its costs for producing. Prices are not revised often enough to reflect market changes. Prices do not take into account the other elements of the marketing mix. 4). Management must decide within the organization who should set prices. But remember that consumers rarely buy on price alone.  Small companies: CEO or top management  Large companies: Divisional or product line managers  Some companies have pricing departments www. Organizational considerations. and purchase occasions. 3. distributing. and provides a fair rate of return for its effort and risk.org . Prices are not varied for different products.

and profit goals. c). 3]. 3. and offers 3) Other environmental elements a). Pure monopoly Monopolists do not always charge a full price because: 1]. Social concerns may affect the firm‘s short-term sales.e. 2].Global Chart ered Accountants .e. Price is simplified being tied to cost. d). Monopolistic competition M arket consists of many buyers and sellers who trade over a range of prices because they can differentiate their products. and offers 3) Other environmental elements 1) Nature of market and demand Pure competition No single buyer or seller has much effect on the going market price. They fear government regulation. market share. The government (because of its regulatory power) must be considered. Oligopolistic competition Market consists of a few sellers who are highly sensitive to each other‘s pricing and marketing strategies. Reseller‘s policies (reactions) must be considered especially if they do not match the supplier‘s. They do not want to attract competition. Customer‘s value  Floor i.  Roof / Ceiling i. General Pricing Approaches/Methods Price will be set between 2 extremes. demand based ) Competitive based pricing  Going rate pricing  Sealed bid pricing Why Cost based pricing is popular 1. They want to penetrate the market faster. inflation. Economic conditions (such as boom or recession. Cost Price will be set between these 2 levels after consideration of Competitors‘ prices and Other internal and external factors Approaches    Cost based pricing  Cost plus pricing  Break even or target profit pricing Customer value based pricing (i.org . b). Price competition is minimized New-Product Pricing Strategies • Market-Skimming Pricing  ―Setting a high price for a new product to skim maximum revenues layer by layer from segments willing to pay the high price‖. Price-demand relationship  Demand curve  Price elasticity of demand Factors affecting Demand / Price elasticity of demand/ Consumer choice  Price  Price of substitute and complementary goods  Consumer income  Taste and fashion  Advertisement and Training  After sale services and grant of credit 2) Competitors’ costs. prices. Sellers are more certain about cost than demand 2. prices.gcaoffici al.e. Fairer to both buyer and seller 4.GCA External Factors Affecting Pricing Decisions 1) Nature of market and demand 2) Competitors‘ costs.  Product image must support price  Competitors must not be able to enter the market www. or interest rates).

or locations. and a CD changer. game cassettes with system. Psychological pricing Seller considers the psychology of prices and not simply the economics e. Assessing and responding to competitor’s price changes Has competitor cut prices? Hold current price and continue to monitor competitor‘s prices N Y Will lower price negatively affect our market share and profit? N Y Can/Should affective action be taken? Y N Some other concepts that could not be covered here in Details Price Leadership Price elasticity of demand Absorption & M arginal Costing and breakeven analysis www.GCA  • Prices are lowered when demand falls Market-Penetration Pricing  ―Setting a low price for a new product to attract a large number of buyers and a large market share‖. cruise control. Product Mix Pricing Strategies • • • • • Product Line Pricing  Setting price steps between product line items. Optional-Product Pricing  Pricing optional or accessory products sold with the main product  Car buyer may choose to order power windows. Captive. consumers usually perceive higher priced products as having higher quality in the absence of past experience or information. products.  Kodak prices different types of films at different level.  Setting a price for products that must be used along with a main product. Price adjustment strategies: ―To account for various customer differences and situation differences‖ Discount and allowance pricing Reduction in price to reward customer response for paying or promoting product.  Examples of captive products are blade with razors.gcaoffici al. By-Product Pricing  Pricing low-value by-products to get rid of them Product Bundle Pricing  Pricing bundles of products sold together  Theater and support teams sell season tickets. Geographical pricing Adjusting prices to account for the geographic location of customers.org Reduce price Raise perceived quality Improve quality and reduce price Launch low-pri ce ― fighting brand‖ .g.product pricing. Segmented pricing Adjusting prices to allow for differences in customers. International pricing Adjusting prices for international markets.Global Chart ered Accountants .  High volume reduces cost  Spare resources are utilized  Eliminates competition  May promote related products. Promotional pricing Temporarily reducing pricing to promote short term sales.

gcaoffici al. b.org . help to complete transactions: Information (Marketing research and intelligence information) Promotion (Developing and spreading persuasive communication) Reselling (Finding and communicating with prospective buyers) Matching (shaping and fitting to the buyers’ needs e. Importance includes: 1. 3. Intensive) Channel length (no. Indirect distribution channel has one or more intermediaries. Intermediaries don‘t get their share. Physical distribution (Transportation. Each organization performs a specialized and specified role. Selective. Key issues in Distribution Channel:: Coverage and density (Exclusive. Where no local knowledge of market Suitable for geographically spread buyers. 4. 2. of intermediaries between consumer and producer) Power and alignment of different elements Logistic and physical distribution Support and after sale service Channel design decision (Customer.Global Chart ered Accountants . experience. Channel decisions affect other marketing decisions 2. Channel members add value through a. Risk taking (Assuming the risk of carrying out the channel work) ―You can eliminate middle man. Financing (Acquiring and using funds) 8. Their contacts. Intermediaries don‘t get dominant Own sales force is best for geographically centered buyers. Product characteristics. 3. Supplier‘s own characteristics) Nature and Importance and Functions of Marketing Channels: Marketing Channel (distribution channel) is a set of interdependent organizations (intermediaries) involved in the process of making a product or service available for use or consumption by consumer or business user. Distributor characteristics. Channel choosed by competitors. Bridging Time. Involves long term commitments to other firms 4.g. Where resources are insufficient to finance large sales force. Types of Distributors: a) Franchisees: ―Trade in name of parent in exchange of initial fee + share of sales volume‖ www. Matching supply and demand c.GCA Chapter 27 : Place Place / Distribution Channels / Delivery System Place is selection of distribution channels to deliver goods to consumers. specialization and scale (economies) of operation. 5. Competitive advantage could be gained. but not middle man‘s functions‖ Types of Distribution channels: Direct distribution channel has no intermediary. storing and Inventory management) 7. Place and Possession gap Functions performed by members of marketing channel: Functions that 1. packing) Negotiation Functions that help to fulfill the completed transactions: 6. assembling.

g. Also provide after sale services.  Transportation  Promotion  Display New technology in Distribution: DRTV Internet (B2C) o Websites o Email www.  Inventory management o Managers must maintain balance between too little and too much inventory.  Outbound distribution (moving product form factory to reseller and ultimately to consumers) Downstream  Inbound distribution (moving products from supplier to factory) Upstream  Revere distribution (moving broken. conflict with dealers when opening online stores even though for hard to reach customers. c) Agents: (vs. e. implementing and controlling the physical flows of goods.GCA b) Distributors/Dealers: ―Buy and resell at profit‖ Dealing in narrow range of products.Global Chart ered Accountants . Disintermediation is eliminating or replacing intermediaries. roles and rewards (who should do what for what reward). conflict among firms at same level of channel e. services form points of origin to points of consumption. Sometimes exclusive distribution or dealing only one manufacturer. what types and where o Company might use either storage ware house or distribution centers.  Logistic information management. frequent and flexible delivery o Just in time substantial cost saving in carrying and handling cost and low obsolescence.gcaoffici al. conflict among firms at different level of channel e. It may be  Horizontal.g. Dealers) ―Consigned for commission on sale) d) Wholesaling: ―Selling goods to business buyers‖ e) Retailing: ―Selling goods to consumer buyers‖ f) Multiple Stores: ―Sell under the ‗own label‘ brand name‖ How do channel firms interact and organize to do the work of the channel: Channel Conflict is disagreement among marketing channel members on goals. unwanted or excess products returned by consumers or resellers) Major logistic functions/ Functions in distribution process:  Warehousing o Production and consumption cycles rarely match.  Vertical. how many. o Just in time requires accurate forecasting along with fast. opening online stores Marketing logistic and Supply Chain Management (SCM): Marketing logistic (or physical distribution) involves planning.g. o A company must decide. dealers may complain that others are pricing too low or selling beyond their territory.e.org . Marketing logistic addresses whole Supply Chain Management i. In VMI (Vendor Managed Inventory) customer share real-time data on sales and current inventory levels with supplier and supplier then takes full responsibility for managing inventories and deliveries.

GCA Chapter 28 : Promotion Two basic strategies of Promotion: Push strategy using sales force to push the product through the channels. Broadcast media (radio. Radio. M erchandizing) Advantages (Vs. TV. Advertising B. Nonpersonal communication channels. Cinema)  Below the line (Direct mail. Reinforcing knowledge and b. Display media (signs. i. consumers will ask their retailers for the product. In growth stage of PLC 3. Personal selling C. media that carry messages without personal contact or feedback. Reminder advertising a. if successful. Online media (online services. Sales promotion D. A) Advertising: ―Any paid form of nonpersonal presentation and promotion of ideas. Pull strategy spending a lot on advertising and consumer promotion to build up consumer demand. the retailers will ask the wholesalers. Person to audience iii. or services by an identified sponsor‖ Advertising objectives (AIDA) are as follows: 1. Websites) Marketing communication mix or Promotional mix It is a blend of A. Personal selling):  Mass communication  Expressive advertisement  Standardization and legitimacy  Seller is able to repeat a message many times Disadvantages (Vs. magazines) ii. Persuasive advertising a. Reminding of benefits c. the producer promotes the product to wholesalers. Print media (newspapers. Personal communication channels. goods. Informative advertising a. In Early stage of PLC or on modification 2.org . Over telephone iv. through which people communicate directly with each other.Global Chart ered Accountants . Through internet chat 2. television) iii. Through mail v. and the retailers promote to the final consumers. In M aturity stage of PLC Advertising media  Above the line (Press. and the wholesalers will ask the producers. Personal selling)  Costly  One way communication  Impersonal www. A range is better than only one. Package design. Public relations tools That a company uses to communicate with its customers. To communicate information b. the wholesalers promote to the retailers.gcaoffici al. posters) iv. i. To create a desire for a product and to stimulate actual purchase b. Communication media 1. Face to face ii. Exhibition. To create awareness c. Direct Marketing and E.

gcaoffici al. email. Free gifts Objectives of sales promotion: To increase in sales revenue To launch a new product To attract new customers To attract resellers to stock To clear out old stock Counteraction for competitors D) Direct Marketing: (one to one marketing) ―Direct connections with carefully targeted individual consumers to obtain and immediate response and cultivate lasting customer relationships‖ It is the use of mail. sweepstakes.Global Chart ered Accountants . term. Premiums (buy 2 get 1 free) 5. Samples 2. and building up a good corporate image‖ Publicity is non-paid. selling & advertising that stimulates customer purchasing‖ ― Short-term incentives to encourage the purchase or sale of a product or service‖. telephone. symbol or design intended to identify the product of a seller to differentiate it from those of competitors. Salary only 2. Direct mail marketing e) Public relations: ―Building good relations with the company‘s various publics by obtaining favorable publicity. Coupons 3. sign. www. Rebates 4. A Brand is a name. Outbound calls ii.org . Major tools are: 1. Characteristics of Direct marketing:  Non public  Immediate and customized  Interactive Forms of direct marketing: 1.e. Telephone marketing i. and games 6.GCA  Not so persuasive B) Personal Selling (face to face via sales force): ― Personal presentation by the firm‘s sales force for the purpose of making sales and building customer relationships i. fax. internet and other tools to communicate directly with specific consumers. Face to face selling 2. paid form of personal communication‖ Sales force structures: 1. Contests. Commission only C) Sales Promotion: ―Marketing activities other than personal. Salary with bonus 3. Inbound calls (toll free numbers) 3. Catalog marketing 4. Planning a Promotion campaign: Identify the target audience Specify the promotional message Select media Schedule media Set the promotional budget Evaluate promotional effectiveness Branding: Expenditures on promotion gives rise to brands. non-personal communication dealing mass audience.

GCA Reasons for branding: Product differentiation Conveying lot of information quickly and concisely Advertisement needs a brand name. but start of relationship. new flavors/sizes) can be introduced into brand name/range. Brand loyalty gives control over marketing strategy. DRTV (Direct Response Television) Interactive Internet websites Interactive Kiosk www.g. It may be called sometimes as Computerized Personal Selling e. Key account management: (Key Customer Database) Like relationship marketing but more specific It refers to how an organization manages its relationship with those customers identified as key to the organization in achieving its objectives. (Brand extension) Eases personal selling Eases market segmentation Brand strategies: Brand extension Multi branding (different names for similar nature goods serving similar consumer habits) Product----------------Names----------------Brands in each name Family branding Relationship Marketing: (Keeping customers. cheaper and profitable to retain old customers than to make new customers because: Old are valuable Old have trust in company Old are satisfied. It reduces price sensitivity. It facilitates self selection.e. the more branding is necessary. not getting customers) Sale is not end of process.org . Factors used to identify a key account:  Historic value of purchases  Expected future purchases  Other competitive factors o Status within the marketplace o Personal relationship of people o To prevent a competitor getting a hold in market Extra services given to key account  Time  Finance  Procedure  Hospitality Auditing Customer satisfaction: (why customers are not satisfied ? ) Customer satisfaction surveys Work won and lost Changes in market shares Revenue from newly released products Rude and unhelpful staff A policy is to encourage customers to complain( 96% do not) Technology Development – Interactive marketing: Interactive marketing in instant communication and responses between promoter and customers.Global Chart ered Accountants . Other products (i. It is easy.gcaoffici al. The more similar a product is to competing goods.

 Country should specialize in the production of those goods in which it has lowest opportunity cost.Global Chart ered Accountants . Factor conditions 2. act locally. Comparative advantage:  One step further than absolute theory introducing concept of opportunity cost. 1. Regiocentrism:  It is Geocentricism but that it recognizes regional differences. Opportunity Cost is the cost of sacrificed alternative. Labor. www.  Import restrictions are possible by other governments to develop self sufficiency.  No local research. Polycentrism:  Each country is unique and requires customization.e. Firm strategy.  Product and market programs must match with local environment.  Diversification protects fall in world demand. Related and supported industries Orientations of International Business Management (by Perlmutter) Ethnocentrism:  Company focuses on domestic market and export is secondary. Scarcity is the excess of human wants over what can be produced. Mercantilism:  Export > Import  Zero-sum game (benefit at the expense of other) Absolute advantage:  Absolute advantage is producing goods more efficiently than any other country. 4 scarce resources are Land.  Company establishes independent local subsidiaries and decentralizes marketing management. marketing mix is standardized. structure and rivalry 4. Demand conditions 3.org . Competitive advantage (national): Porter states that Comparative Advantage is too general concept to explain success of individual companies and industries.i. He believes 4 conditions (diamonds) within a country help firms to compete. Production Possibility Curve illustrates limits of possible production of two products within given resources.gcaoffici al.  Multi nationals may assemble or manufacture in different countries for political or logistic reasons.  Think globally.  Integrated approach to create a global strategy that is fully responsive to local market.GCA Part F : International Business Theories on International Trade Scarce resource is a resource for which the quantity demanded at a nil price would exceed the available supply.  Same products with same market programs.  Agriculture industry is subject to uncertainties of climate. Why countries avoid specialization  Comparative advantage is never stable. Capital and Enterprise.  Country should produce goods for which they have an absolute advantage and then trade these goods for other goods produced by other countries. Geocentrism:  Synthesis of two approaches.

Interest rates. Export (extension of home sales) 2. company is multinational) Geocentrism 5. Exchange rate: Purchasing Power Parity theory calculates exchange rate based on relative cost of purchasing same basket of goods in two countries. greater investment) 3. tobacco . Types: This can arise under any of three Exchange Rate Systems i.  Increased competition at home market  Mature or declining home market  To dispose excessive/discontinued products. local orientation) Other reasons: For Govt. The Global Company Reasons: 5 Cs 1. Exchange rate risk is the risk that foreign currency will exchange in smaller amount of domestic currency in future. Floating (depends on supply and demand) Managing exchange risk: Hedging devices Flow of money in both direction Design for global business (by Bartlett and Ghoshal ) High pressure Globalize to Low Pressure Globalize to www. Managed (Like fixed but allowed to vary between preset limits) 3. Construction International Environment  Ethnocentric orientation  International division  Paper. 1. Currency (exchange rate risk) 5. Speculation. motor vehicles (focus of organization is heteroarchy) Multinational environment  Polycentric orientation  National or regional divisions  Fast food. Overseas branches (when turnover is large.g.  Surplus deficit balance  Political advantages  To support govt.Global Chart ered Accountants . Balance of Payment) For Company  Large market encouraging economies of scale. Competition (Keeping up) 4. policies (e. policies and Balance of Payment.GCA Evolution and Reasons of Global Business (by Ohmae) Evolution: Ethnocentrism 1. Govt. Country (Absolute and comparative advantage. Overseas production (exploits cheap labor and reduces exporting cost) Polycentrism 4. A currency‘s exchange rate is also determined by Demand and Supply. Company (economies of scale) 3. Fixed (Central bank interferes to fix the rate) 2.gcaoffici al. Customer (market convergence) 2. They in turn are determined by Inflation.e. Insiderisation (full functional organization having production and distribution system is set -up overseas.org Low requirement for local adaptation and responsiveness Global environment  Geocentric orientation  Global product divisions  Chemicals. textile High requirement for local adaptation and responsiveness Transitional environment  Polycentric orientation  Integrated system and structure  Pharmaceutical.

Global Chart ered Accountants - GCA

Planning to enter Foreign Market
Phase 1: Preliminary analysis and screening:
Evaluation of available markets (to exclude obvious unfit)
Applying screening criteria to evaluate remaining markets (criteria might include Profit, Market Share,
Analysis of environment conditions in each country
 Porter‘s 5 forces analysis
Choosing country (i.e. Target Market)
Screening Process consists of : (by Jeannet and Hennessy)

Marco level research
 Environmental analysis
 Climate and demographic
General M arket factors
 Size of market
 Regulations
 Culture
Micro level research
 Competition
 Transportation
 Healthcare
 Education
 Labor
Target Market

Phase 2: Adapting the marketing mix to target markets:
Deciding Adaptation or Standardization
Phase 3: Developing the marketing plan:
Situation analysis
Strategic options
Action programs
Phase 4: Implementation and Control
Objectives and Standards
Assign responsibilities
Measure performance
Corrective actions
Problems in International Planning:
Foreigners don‘t know local culture, feelings, attitudes
Local level problems
 Different attitude to product and marketing task
 Lack of strategic outlook and marketing expertise
 Resentment at being bossed around
 Unclear goals
 Inadequate control
HR considerations to be managed at local level
Poor IS and Communication
Diversification of countries over population, income, development, education etc.
Time horizon

International Marketing Research
Availability and quality of information is enhanced for planning.
Change in customers needs and preferences is timely observed.
Competitors‘ plan and strategy
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Global Chart ered Accountants - GCA

Finding of new markets
Opportunities and Threats
Trends of market
SLEPT analysis
Technology – Quality of information
Information sources for International Markets:
Human sources
 Managers of subsidiaries, associates, branches (relevant + unpublished + biased)
 Consumers, Customers, Distributors, Suppliers and even Competitors
Documentary sources (Publications etc., not to the point)
Direct sources
 Direct observation and specialist knowledge
 Direct observation and background information
 Personal experience supporting indirect information
 Export publications
 Export Market Information Centers
IMR Process:
 Passive information gathering (M arket not yet targeted)
 Identification of market for which information needs to be gathered.
Investigation (accurate assessment of market opportunities)
 Existing demand; where customer‘s needs are already being served.
 Latent demand; where potential customers are currently recognized but are not being
 Incipient demand; where there is foreseeable, but not a present, market for products.
 Define scope of project
 Define projects, information needs
 Evaluate available sources for required information
 Undertake desk research
 Undertake field research
Using IMR data:
To estimate patterns of demand/consumption in individual markets by
 Demand pattern analysis
 Income elasticity of demand
To compare patterns of demand/consumption in different markets by
 Comparative analysis
 Intermarket timing differences
To identify clusters of markets with similar characteristics
To identify strategically equivalent segments
Problems in IMR:
Secondary data problems
 Lack of data
 Not timely, out of date information gathered on unpredictable schedules
 Not comparable, different data definitions in different countries
 Lack of reliability
Response problems (People‘s unwillingness to provide info)
 Tax evasion and avoidance of responsibilities
 Wish to preserve secrecy
 Cultural taboos and norms
General problems (developed vs. undeveloped)
 No suitable list (sampling frame)
 Inadequate communication infrastructure
 Low level of literacy
 Problems of language and comprehension

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Global Chart ered Accountants - GCA

Entry in International Market
Entry in International Market could be through:
 Foreign Direct Investment/Overseas production
 100% owned subsidiary
 Joint venture
o Industrial cooperation/Contractual (fixed period)
o Joint-equity venture (continued)
 Export
 Direct (greater control but lesser market knowledge)
o To Branch office
o To Agents between importer and exporter
o To Wholesaler, Retailer or Consumers
 Indirect (greater market knowledge but lesser control)
o Through Export houses
o Through Specialist export management firms
o Through UK buying offices of foreign stores and government
o Through Complimentary Export (i.e. Piggy back export)
 Licensing
 Giving right to use production process for Royalty.
Critical analysis of entries
Foreign Direct Investment is direct investment in business operations in a foreign country. It may be:
1. Horizontal FDI (investment in same industry abroad)
2. Vertical FDI (investment in an industry abroad which provides input to firm‘s domestic operations.
i. Backward Integration (to acquire raw material)
ii. Forward Integration (to establish final product)
Selection criteria for entry mode: (Factors to be considered)
Mode varies among firms, according to markets and over time.
 Firm‘s marketing objectives (in relation to volume, time scale and coverage)
Low ----------export
High----------produce locally
 Firm‘s size
 Mode availability
Govt. may restrict modes
 Mode quality
Qualified, trained staff is necessary for export of high technology goods.
 Human Resource Requirement
If staff is suitable---------Direct export
If staff is not suitable----Indirect export (agent based)
 Market information feedback
Is received in case of Direct export.
 Learning curve requirement
Heavy investment calls for learning curve i.e. close observation through direct export before
 Political risks
 Control needs


FDI vs. Export vs. License:
FDI(Foreign Direct Investment)
Lower production cost
Better understanding of
Market and Customers.
Lower transportation cost.
Overcomes tariff and nontariff barriers.

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Economies of scale
Consistency of product
International experiment on
small scale
Easiest, cheapest, most
Political risks are avoided.

Avoids costs and hassle of
setting up overseas.
Rapid penetration
No investment
No Political risk, No

Global Chart ered Accountants - GCA

Key Issues

Political risks.
Usually more involvement
but subsidiary may act

Exchange rates
Usually less involvement

Small cash inflows
Quality standards issues
Indirect competition where
both export
Licensee may
competitor (by transfer of
knowledge and technology)

If FDI, 100% owned subsidiary or Joint venture:
Wholly owned subsidiary (as compared to Joint venture)
Key Issues:
No sharing in profit
Heavy investment needed
No sharing in decision making
Suitable managers not available
No communication problem
Govt. discourages 100% ownership
Operation of integrated international
No local knowledge
Varied experience
Protectionism (discouraging imports) by Govt.
Government and Local producers get benefit not consumers.
1. Tariff (tax on imports)
2. Non-tariff barriers
a. Official
i. Subsidy
ii. Import Quotas/ Export Restraint
iii. Local Content Requirement (specific fraction must be produced locally)
iv. Anti-dumping policies (e.g. special duty)
v. Administrative policies (informal instruments or bureaucratic rules)
vi. Embargo (total ban)
b. Un-Official
i. Quality and inspection procedures
ii. Packing safety and documentation standards
iii. Restriction of distribution
3. Exchange control (making difficult to obtain required currency)
4. Exchange rate policies (e.g. competitive devaluation of currency)
Dumping is selling goods in foreign market below cost or market value to:
 Unload excessive production
 Capture market.
Political risk in FDI for multinationals
Political risk is the risk that political actions will affect the position and value of a company.
How Political actions can affect:
1. Tariff and non-tariff barriers e.g. Quotas
2. Govt. interference in contracts
3. Imposition of
i. Increased tax rates
ii. Price controls
iii. Exchange controls through
a. Rationing supply of foreign exchange
b. Blocking funds of foreign parent (counter ways)
Selling goods/services (volume and transfer pricing)
Loan and high interest rates
Management charges
4. Nationalization
How to cope with political risk:
1. Negotiation (agreement) with Government
i. Transfer of capital
www.gcaoffici al.org

Common Market:  Similar to customs union except it allows factors of production to move freely between countries.A way to overcome Protectionism and Political risks Regional trading group promotes trading between members of group. Deregulation (national barriers) 4. Taxation system 3. Securitization (Debt via issuance of securities e. interference Taxation Transfer policy Insurance Contacts with markets Management structure (joint venture or giving control to local) Financial management (obtain finance locally) Production strategies (giving control to local to produce Or to supply chain management) Regional trading groups/blocks--. iii.g. 4.      Capital S tructure Decisions Equity or borrowing If equity. Foreign tax credit avoids double taxation in both countries. Increased foreign exchange and interest rate volatility Benefits of international banks: 1. Euro equity) 2. Euro commercial papers) 3. Globalization (Trade of securities world wide e.  Each company determines its own external trade policy. Following are common types: Free trade area:  Internal barriers to trade are removed. Local finance cost 2. Tax havens is a country with exceptionally low or even no income tax but there should be:  Stable currency and Govt.  Common external trade policy is adopted. Parent‘s or Subsidiary‘s If externally. Providing full local banking services in different countries 5. International Cash M anagement services 6. Financing of foreign trade 2. Disintermediation (directly from investor) 5. Restriction on dividend remittance 4. Participation in syndicated loan facility 8. 6.GCA ii. 5. Economic Union:  It is Common market but more closer integration including establishment of common currency and tax rates. 3. Trading in foreign exchange and currency options 7. Provision for advice and information 4.g. Euro bonds. iv. Flexibility in repayment Global Capital M arket International banks (provide financial and other services) Factors affecting development of international banks: 1.gcaoffici al. 2. Financing of capital projects 3. tax advantages could be availed.org .Global Chart ered Accountants .  Adequate financial services support facilities. Lending and borrowing in foreign and euro currency markets www. v. Taxation issues in FDI By structuring the group. from host or other country What Currency (same to avoid fluctuation and symmetry) How much and what period Factors influencing choice of financing: 1. Access to local finance Govt. Customs Union:  Internal barriers to trade are removed.

Not developed like Euro bonds. Euro Currency loan: UK company borrows in US $ from a UK bank.g. Euro credits: like Euro currency loan Commercial papers:  An example of Securitization. Euro credits 6. Domestic market  Domestic banking is subject to tighter regulation  Domestic banking is subject to security requirements  Euro finance may have i. Commercial papers 7. MOFs Euro equity issue: Issue of equity in a market outside the company‘s own domestic market.GCA 9.  Short term financial instruments  Issued in the form of unsecured promissory notes with a fixed maturity date.g. Euro equity 2. Underwriting of euro bonds Borrowing in Euro market Vs. it is a Euro Dollar loan. Early redemption penalties iii.gcaoffici al. Euro bond 3. borrowings  Project financing www. Euro Currency loan 5. Syndicated credits 8. Rolling Put Option Euro bond: Currency differs country of issue (underwritten by international syndicate of banks and sold internationally) Euro bonds are suitable when: Large organization with excellent credit rating Requires long term loan for capital expansion Requires borrowing not subject to national exchange control Interest rates are fixed or floating with minimum. Flexibility in draw-down dates ii.Global Chart ered Accountants . Syndicated credit market: Provides credit at high rates over LIBOR. Euro currency 4. Suitable for  Takeover bids  Govt. Investors of Eurobonds will be concerned about:  Marketability  Anonymity  Return on Investment  Security Euro currency: Eurocurrency is any currency banked outside of its country of origin e. Commitment fee  Euro is suitable for very large finance requirements Euro Currency: Following types of currency is available in Euro Markets: 1. Eurodollars are dollars banked outside United States. hence ‗sweeteners‘ are added e.  Issued in bearer form  Issued on discount basis  Companies with net capital of 25 million can issue it.org .

Balance of Trade. Any fee paid to third party) Why Countries do Counter trade:  Countries lack commercial credit or convertible FCY. Types/arrangements of Counter Trade:  Barter (direct exchange of goods/services between two parties without a cash transaction)  Counter purchase (A reciprocal buying agreement between two parties whereby seller also undertakes to purchase a certain amount of merchandize from other country)  Offset (like counter purchase but party can purchase from any firm in the country)  Switch Trading (A third party trading house buys the firm‘s counter purchase credits and sells them to another firm that can better use them)  Buyback (One country supplies capital goods and receives its output as partial/full payment) Advantages of Counter Trade: 1. MOFs: Multiple Options Facilities (MOF) comprise variety of instruments through which company can raise funds and include:  Note Issuance Facilities (NIF)  Revolving Underwriting Facilities (RUF) Counter Trade Counter trade is a trade of goods and services for other goods and services. 2. Forfeiting 3. Financial problems in Foreign Trade Foreign Trade raises special financial problems i. (Cost includes Consultancy fee. Bank fee. Expensive and time consuming to develop a separate in-house trading department to dispose those goods 3. economical policies (e. or unprofitable. Goods received may be unusable.  Bad debts‘ risk is greater  Large investment appears in receivable and stocks Reducing bad debts’ risk: 1. relationships)  To boost developing manufacturing industries  To obtain more trade or new technology Which Countries do Counter trade:  Oil exporting companies. Export Credit Guarantee Schemes Export factoring: Factoring company provides administration of:  Client invoicing  Sales accounting  Debt collection  Credit protection Forfeiting: (providing medium term export finance)  Exporter sends Capital goods to overseas buyer who wants medium term loan.  Less developed and developing countries. Insurance.Global Chart ered Accountants . Disadvantages of Counter Trade: 1. Cost may exceed expectation. aviation and big advanced technology. Unrealistically high value may be impose on goods.GCA Credit is a facility whereas Loan is a transaction.g.  Unusual in industrial countries with exception of defense. 4.org . A mode to finance exports when other modes are not available. www. 2. Discount. Documentary Credit (L/C) 4.  Countries use it as an instrument of political. Competitive advantage over parties preferring cash transactions.e.gcaoffici al. International Credit Unions 5. Export factoring 2. poor quality.

7. 5.  Risks covered are: o Insolvency of buyer o Political and Economic risks o Risks of refusal to take delivery o Risk of any loss (beyond control of buyer or exporter) Reducing large investment in Receivables and Stocks: Advance against collection Documentary credit Negotiation of bills or cheques International Marketing Mix Policies International    place policies: Exclusive Selective Intensive International    product policies: Standardized/Undifferentiated marketing (same product. Exporter ships and gives documents and draft to own bank. Documentary Credit (L/C): 1. Exporter‘s bank sends documents to importer‘s bank and gets the draft accepted. price. On maturity. Importer‘s bank informs importer about arrival of documents and merchandize. 8.   Costly Required to exploit market fully . Importer pays (or not pays) his bank. 4. 9. Importer orders. importer‘s bank pays to exporter‘s bank who pays to exporter.  ECGS will issue a guarantee specifying maximum amount covered and rate of premium. Exporter‘s bank authorizes exporter to ship merchandize. Communication Standardization Communication Adaptation Product Standardization  Occasional exporters  Also major companies seeking economies of scale  Same product for different uses in different countries Barriers to International Standardization:  Law www.Global Chart ered Accountants . 3.org Product Adapted  Single product meets the same need in all markets but need to be adapted.gcaoffici al. Exporter discounts them from Forfeiting bank.  Risks covered are: o Insolvency of exporter o Inability to repay or deliver on due date Postshipment Facility:  Exporter submits application with required particulars to ECGS.GCA    Buyer makes down payment and issues notes/ accepts draft. 6. Notes/drafts are guaranteed by Availising bank. marketing program for all markets) Adapted/Differentiated marketing Concentrated marketing Standardization Vs. International Credit Unions: These are organizations/associations of finance houses/banks in different countries having reciprocal arrangements for providing installment credit finance. 2. Exporter accepts. Adaptation: whether to adopt or not is linked with promotional issues. Export Credit Guarantee Scheme: (where L/C is not acceptable by strong importer) Preshipment Facility:  Guarantee is issued to banks to indemnify them against losses on finance given to exporters to manufacture and process goods for export. Importer‘s bank issues L/C to exporter‘s bank.

More developed Asian 4. Less developed Latin 3. It covers  Provision of short term borrowings/ capital  Foreign Currency management  Banking  Collection  Money market investment www. Power distance how for superiors are expected to exercise power 2. Germanic 7. Uncertainty avoidance some cultures prefer clarity and order while others prefer novelty 3.  Homogenous market.GCA    Price control Product regulation Distribution restrictions Advertising and media restrictions Competition Nature of existing products Competitors‘ prices Culture Consumers‘ tastes and habits Language and attitude differences Economy Income level Media availability Domestic business as compared to International business: Social factors:  No language problem.  Similar purchasing habits. 4. roles of sexes are clearly differentiated. More developed Latin 2. Masculinity in such culture. Hofstede grouped countries into eight clusters: 1.Global Chart ered Accountants .  Rules of game are understood. Individualism in some cultures. it is individual achievement what matters. Economic factors:  Single currency  Uniform financial climate  Stable business environment Competitive factors:  Data collection is easy and accurate.org . Finance in International Business Treasureship: Treasureship is the function used with provision and use of finance. Anglo 8. Political factors:  Relatively unimportant Technological factors:  Standard production and measurement systems Motivating international agents: Communication Assuring long term business relationships Regular and frequent personal contacts Exclusivity Hofstede’s model of national culture: Hofstede pointed out that countries differ on following dimensions: 1. Near Eastern 6. Nordic Type of industry and size of company is also important.gcaoffici al. Less developed Asian 5.

Costly and Confidentiality than M ail Transfer.gcaoffici al. Treasury bills and Eligible bank bills are Negotiable and Resalable. issued weekly for 91 days to finance govt.  International M oney Orders www. projects)  Eligible bank bills (IOUs by those top rated banks whose bill Bank of England agrees to buy)  Bills of exchange  Local authority bonds  Commercial papers Certificate of Deposits.  Speeder. Any borrowing could be arranged in bulk at lower rates. Float is amount of money tied up between initialization and finalization of payment. Quick and more response to needs of individual operating units 3. Money brokers.GCA Treasury department should be cost center or profit center? Cash Management: Centralized Cash Management: 1. Great autonomy 2.org . Exchanges.  Telegraphic Transfer  Like mail transfer but instructions are sent by cable or telex instead of by airmail. Fund managers etc. 2. Foreign currency risk management in improved. 4. How Cash surplus arises By profitability By low capital expenditures By receipt from selling part of business How Cash surplus is utilized Takeover bids Buy back of shares Short term investments o Banks o Investment in listed shares o Investment in debt instruments  Certificate of Deposits (certificates by bank acknowledging deposit for specified time)  Treasury bills (IOUs by govt. Measures to reduce Float include: Lodgment delay should be minimum BACS CHAPS Standing orders/ direct debit for regular payments Lock boxes for international payments Cash Pooling is netting of Debit and Credit balances with same bank to reduce interest cost. Large volumes of cash are available to invest 3. More opportunities to invest on short-term basis. Specialist Treasury Department will employ experts.  SWIFT (Society for Worldwide Interbank Financial Telecommunication)  Provides rapid electronic fund transfer  In addition to banks.Global Chart ered Accountants . International payment modes:  Cheque  Lock boxes (speeds up payment by cheque)  Bills of exchange  Bank draft (cheque by a bank drawn on one of its own account)  Mail Transfer  It is a written payment order authenticated by official in sending bank which  Instructs by Airmail to pay a certain sum of money to a beneficiary. 5. Avoids mix of cash Surplus and overdraft. users include Security houses. Decentralized Cash Management: 1.

interpret and respond to buyer needs. Increased deregulation Changing business practices (e. Many products don‘t have equivalent market prices. Physical resources. natural resources) or Advanced (include modern digital communications. highly educated people and research laboratories etc. Expatriate or local management Expatriate (as compared to local) Advantages: Poor educational/technical opportunities in local market Greater control Better central communication Corporate picture is clear 2. 5. Lower cost of administration.org . Dependability of supply 2. 3.Global Chart ered Accountants .) Demand conditions The home market determines how firms perceive.. conferences and news letters etc. Better quality of services ii. HRM in International Business HRM issues in International Business: 1. outsourcing. Porter’s national competitive advantage: There are 4 determinants of national competitive advantage. 4. Market prices may be temporary. Factor conditions These are a country‘s endowment of inputs to production e. For both departments i. Human Resources. Buying department may enforce discount. Related and supported industries Competitive success in one industry in liked to success in related industries. 2. selling and transportation Disadvantages of having Market Price as Transfer Price 1.gcaoffici al. 3. Capital. and public. Disincentive to use spare resources as compared to incremental cost approach.g.) Changes in World marketplace: (by Jerry Wind) Globalization of businesses Science and Technology development Strategic alliances Changing customer value and behavior Increased scrutiny of business decisions by govt. customers and other stakeholders. Greater flexibility iii. Knowledge and infrastructure.g. employees. These factors could be Basic (inherited and creation involves less investment e. Key Issues: Costs more Lesser local knowledge Culture shock Language/Communication training required Recruitment and Training Career management within firm Appraisal schemes Communication with staff (e-mails. downsizing. 4. For buying department i. www. reengineering) Changing social and business relationship between companies.g.GCA Transfer pricing: Basis include  Standard Cost  Marginal Cost/ Full Cost/ Opportunity Cost  Market Price  Market Price – discount  Negotiated Price (any other basis) Advantages of having Market Price as Transfer Price 1.

org .gcaoffici al. structure and rivalry www.Global Chart ered Accountants .GCA Firm strategy.

and breakeven analysis Chapter 27 : Place Explanation Explanation Details Channel conflict – Horizontal and Vertical Confli ct Consideration in distribution Details Channel design decision Benefits of direct and indirect sales Explanation Details Distribution strategy Marketing and Information System Customer Dynami cs and internet as distribution channel Chapter 28 : Promotion Push and Pull Strategy Merchandising Planning a promotion campaign Relationship Marketing Chapter : International Business Explanation Details Details Competitive advant age Protectionism Details Explanation Explanation & exampl es Detail Details & exampl es Details Explanation Pg : 298 Details Concepts Details Explanation & exampl es Details Details Explanation & exampl es Details Explanation Explanation Explanation Explanation Explanation Details Explanation & exampl es Details Details Topic included in these notes and needs further detail from PBP Topic not included in these notes at all so needs to be read from PBP For examples relating to the topic.GCA Annexure ―A‖ Topic Chapter 4 & 5 : Strategic Management : Traditional and other models Levels of strategy Traditional approach to make strategy Activities affecting Crafting strategy Learning bas ed strategy Competitive strategy Chapter 6 : SWOT Analysis and Gap Analysis Porter‘s 5 Forces model Chapter 7 : Performan ce Appraisal & Analysis Measuring perform ance of profit center. Redundancy – Unfair Dismissal Chapter 17 : Groups in Organization Effects of conflicts within groups – Groups & Departments Chapter 18 : Strategi es for Critical periods Corporat e Decline – 3 types of decline Chapter 19 & 20 : Change Management and Changing Environment Nature of strat egic change Model for change Approaches to implement change Force Field Analysis Change process Pressure groups Chap 20 : Strategic intelligence Chap 20 : Environmental dat a *Details *Explanation *Example → → → PBP Reference Figure Explanation Explanation Explanation Overview Figure & Explanation Topic Chapter 22 : The Evolution of Marketing Concept Marketing management Elements of marketing mix – Promotion Value-chain Marketing process Chapter 23 : Strategi c Marketing & Planning Development in segment ation Benefits of market segm entation PBP Reference Explanation Details Explanation & examples Details Details Details Target Market Explanation Evaluating market segm ents – porter‘s 5 forces Explanation Competitive strategy options Identi fying gap in market through positioning Chapter 24 : Marketing Research Details Explanation Research procedures . Appraisal and Career Management Competence Chapter 16 : Management and Human Resource` Trait theory Leadership Discipline – Disciplinary problems in organi zations Retirement.Analysis of data Collecting secondary data – internal and external databas es Questionnaires Marketing Information System (MkIS) Marketing Decision Support System Market Sensing Service Quality (SERVQUAL) Sales Forecasting [Forecasting demands ] Marketing Communication Chapter 25 : Product Nature and charact eristics of a service Explanation Details Stages of product life cycl e Product Port folio Planning Chapter 26 : Pri ce Details Explanation Details Price leadership Price Elasticity of Demand Explanation & Exampl e Explanation & Exampl e Explanation Absorption and Marginal costing.Global Chart ered Accountants . Resignation. Inflation Chapter 9 : Mergers and Acquisition Strategic alliances – benefits to franchis er Chapter 10 : Corporate Re-organi zation Management buy-out Chapter 11 : Ethics and Social Responsibility Social responsibility – Favors . see PBP Details Explanation Explanation Explanation Explanation Explanation Explanation Explanation Details Details Explanation Details Details .Externality Chapter 13 :Human Res ource Management Di fferent concepts Termination Chapter 14 : Measurement and Performan ce Factors affecting personality di fferences Job restructuring & redesign Employee appraisal – working arrangem ents and types o f organi zations Types of incentive schemes Employee appraisal – Methods of apprais al Chapter : 15 Training.

see PBP .Global Chart ered Accountants .GCA *Figure → For graphical representation relating to the topic.

12 13. .13. Past papers . however the chapters from which there is frequent testing must be focused well.26 23.6 31 26 28 28 29 28. this chapter reference does not mean that all 19 marks questions are from ch 21.5 30 24 28.8 26 22.19.5 16.21 21.6 11 13. their suggested answers and the examiner comments are the keys for the effective preparation without which paper cannot be passed.5 6 3 9 18 8.4 13 21 19 20 16 17. so that they can find all these things at one place and their precious time could be save.Its explanation is as follows like in summer 2012 there are 19 marks from the marketing and the reference of chapter 21 is given infront of it.11.21 HRM (Marks) 26 29 33 33 32 30.1 6 2.17 10 6 5.24.5 5 3.5 9 4. In most of the cases a concept of question tested belongs to one chapter but characterisitics or merits .11 13.4 Strategic Chapter Mangament Chapter General of PBP & Planning of PBP (Marks) ( Marks) 9 23 6.4 13 9 7 6 9 10 3 14 6. So the point to be noted is that selective study should not be done at all.24 26.2 6 18 10.11 11. As it can be seen from the above done analysis that marketing and HRM accounts upto around 60% of the paper in each attempt.3 10 4 4 13.15 11.5 3. And students must try to refer the supplementary books recommended in the syllabus.gcaofficial.20 21 20.3 21 21.26 22.24 24.4 Chapter of PBP Management of the working Chapter environment of PBP (Marks) 13 11 13.21 21.20 19.19.26 24.23.13 International Chapter Business of PBP (Marks) 11.Global Chartered Accountants .demerits or any other thing enquired in the question is of general nature which cannot be found in the book and the student have to generate answer at its own based on the knowledge.11 13 3 16 GCA 0.GCA www.4 3.22 22 CSR & Business Ethics (Marks) 7 11 2.18 Mainly 21 21. so while peparing for BM these two areas should be prepared first.gcaofficial.3 9 9 19.5 3.18 20.5 42 19 35 28.1 26 19.2 Total Marks 100 100 100 100 100 100 100 100 100 100 Chapters of PBP shown infront of marks are for the guidance purposes.23 22. so these are given in next working sheets for the convenience of the students .24.4 9 15 1.24 22.org Business Managemnt Past Papers Analysis www.5 17 17 10 23 16 17 26 18.12. Similarly international business accounts upto almost 20 % of the paper and it has four main chapters in the PBP which should be prepared vey well and the rest of its chapter just need reading as it can be seen from the above analysis.8 7.5 4.org Marketing (Marks) Chapter of PBP Summer 2008 Winter 2008 Summer 2009 Winter 2009 Summer 2010 Weighted Average for 5 attempts Winter 2010 Summer 2011 Winter 2011 Summer 2012 Winter 2012 Weighted Average for 5 attempts 21 27 38.

swimming pools. a Thailand-based company with experience of managing of similar high profile luxury resort projects in several far-eastern countries has approached SRL and offered to provide guidance and expertise for implementation and operation of the proposed project under a franchise arrangement. The Company’s sales have been stagnant since the past two years due to intense competition and aggressive promotion by the competitors in the domestic market. the uncertainties associated with the hiring of an individual on contract basis and entrusting him with such far-reaching authorities and responsibilities was a source of grave apprehension for the sponsors. Give two examples of industries in which international alliances are most common and identify a logical reason for such an alliance. (09) Q2 Lazzat Foods Limited is engaged in the business of manufacture of packaged masalas. A cadre of highly trained and dedicated work force having diversified skills would be crucial for the successful operations of the project. (04) Q3 State six reasons why companies enter into international alliances. Oriental Resorts Inc. It would also have modern facilities of conference rooms and auditoriums for holding business meetings. The Management has proposed to explore new markets abroad and has suggested that the Company consider participation in a Trade Fair to be held in Colombo.GCA Topic wise past paper question BM Marketing Q1 Summer 2008 The sponsors of Seaside Resorts Limited (SRL) are considering to set up a major project on the sea coast at a distance of 85 kilometers east of Karachi. Give four advantages which are expected to be achieved by the Company’s participation in the Trade Fair. The project would have facilities of guest houses. conferences and symposia.gcaofficial. In the meantime. training courses. Explain what is a Franchise Arrangement? Also identify four advantages that would accrue to SRL by entering into a Franchise Arrangement with Oriental Resorts Inc. jellies and jams. The sponsors who were seized with these overwhelming problems were considering acquiring the services of an expatriate executive to implement this project and operate it in the initial years. golf courses.Global Chartered Accountants . However. This first-of-its-kind project in Pakistan would involve substantial capital investment and also require well-planned physical facilities and selection of state-of-the-art specialized equipment.org . tennis and squash courts and scuba diving. (08) www.

gcaofficial. Distribution and Sales Promotion which should be pursued to meet the requirements of the products which are in the introduction. (b) the rapid and dynamic growth stage of its existing business. The features of each of the different types of orientations are: Customer Orientation: Entire focus on customer e. branded edible oil. List six performance indicators. (06) Q5 Corporate and Business Strategies of marketing-focused organizations operating in different product lines pursue entirely different approaches depending on customer. Competitor Orientation: Emphasis on plans and actions of competitors as only few competitors dominate the market e.g. maturity and decline stages of their product life cycle.g. Inter-functional Coordination: Marketing is considered to be an all-encompassing company-wide responsibility and all the departments are geared to contribute towards the marketing efforts e. List four characteristics which. which in your opinion. in your opinion.g. The Company operates in a dynamic market environment dominated by four well-entrenched and strong companies competing aggressively to achieve leadership status and expand their respective share of the market.Global Chartered Accountants . Pricing. would determine the direction of marketing policies and efforts in each of the above three types of business orientations. (12) Summer 2009 Q7 Euro Motors Limited is engaged in the business of manufacturing and marketing of an extended line of motor cars catering to the varied needs of a wide segment of the automobile market. a shipyard manufacturing ocean-going vessels for major foreign buyers. State four dominant characteristics which would be apparent in a company which is in: (a) the start-up or initial stage of its business. growth. would help to measure the success of marketing strategy of Euro Motors Limited. List the type of marketing-mix strategies of Products. (09) Q6 Strategists involved in the marketing of Fast Moving Consumer Goods (FMCG) keep a close watch on the various stages of the Life Cycle of their products and adjust their strategies accordingly.GCA Winter 2008 Q4 It is widely realized that companies pass through various stages of growth during the different periods of their existence. Jeweler boutique selling expensive designer jewelry to a select niche market. competitor and inter-functional orientations. (06) www.org .

(06) (b) Give any four reasons why organizations generally prefer to achieve expansion through internal growth and not through policies of acquisition. Briefly describe six main objectives which are envisaged to be achieved through sponsorship of such high profile and attractive events? (09) Q 10 Briefly explain the following �Pull Strategy of Promotion �Licensing �Benchmarking (7. Sponsorship by leading companies.GCA Q8 Companies which seek expansion of business can achieve their objectives either through organic/internal expansion or by pursuing acquisition strategies. literary and sports events to a group.org . The Company strongly believes in a policy of giving “value for the customers money. (10) Q 12 Although Strategies of Cost Leadership and Product/Service Differentiation appear to be highly attractive. cultural.5) Winter 2009 Q 11 Red Balloon Clothing Limited (RBCL) is engaged in the business of manufacturing a wide range of children clothing since the past six years. as a promotional alternative.” At present. You are required to identify and explain briefly the different factors which RBCL should examine while evaluating the proposal for establishing its own network of retail outlets. continue to sell its products through the network of existing retailers also. (06) Q9 Companies which pursue market-driven business strategies consider that sponsorship of high profile and attractive events are communication techniques to create awareness and affiliation of their companies and brands with the target market.Global Chartered Accountants . many companies are often not able to achieve much success because they lack the necessary capabilities to implement these strategies successfully.gcaofficial. These companies enter into agreements and provide financial and non-financial support for social. www. RBCL markets its products through a widely dispersed network of independent retailers who sell the company’s brands along with the products of other manufacturers. RBCL is considering a proposal of forward integration and establishing its own chain of retail outlets for sale of its products. organization or an individual celebrity in anticipation of creation of a lasting awareness of the company’s name or its brand among the audience. (a) Explain the key differences between strategies of expansion by organic/internal growth and by acquisition. has gained world-wide prominence in recent years. The Company has built a reputation for good quality products of latest designs and its brand name is very popular in the middle class segment of the market. RBCL would however.

gcaofficial. each. experienced market researchers are aware of the limitations of the external databases and use them discreetly on a selective basis realizing fully the shortcomings of the information.GCA (a) Explain what do you understand by the term Cost Leadership Strategy.Global Chartered Accountants . Achievement of this target would launch DCL in the league of key market players and also significantly increase its profitability. 1200 million in the next 3 years. DCL’s products are well accepted in the market in Karachi and its adjoining metropolitan areas and two of its main brands are quite popular in the middle class segment of the market. The Marketing Director is confident that he would be able to achieve the sales target set by the Board of DCL. The incoming Marketing Director has a track record of good performance in the consumer goods industry and achieving high sales targets by pursuing aggressive marketing policies through deep insight of the market dynamics. Give reason for your selection of the particular example. However. (02) (b) What is meant by Product/Service Differentiation Strategy? (02) (c) In your opinion what kind of capabilities are of crucial importance for the successful implementation of a Product/Service Differentiation Strategy? (04) Q 13 (a) List and explain briefly any four important packaging features which would influence the decision of a consumer to purchase an edible consumer product. The management has now realized that in spite of substantial capital investment in fixed assets and good quality of its products. candies and sweets catering primarily to the market segment comprising of children in the age group of 6-15 years. (i) State four limitations of using external databases. Briefly explain the Marketing Penetration Strategies which the Marketing Director should pursue to achieve the sales target set by the Board. The Board has recently appointed a new Marketing Director and has given him a target to increase DCL’s annual sales from the current level of Rs.org . (ii) Identify one specific situation in which it may not be advisable to use external databases. (06) (b) Market researchers often place reliance on external databases as the information can be obtained readily with minimum of effort and at a low cost. In such a market www. (05) Q 16 In any market of significant size for products which have a widely diversified and dispersed customer base there are a large number of firms. DCL has not been able to exploit the full potential of the rapidly growing size of the market and achieve high level of operating capacity. (10) Q 15 State five different situations in which it would be advisable for a firm to pursue policies of Unrelated Diversification. (06) Summer 2010 Q 14 Dandy Candies Limited (DCL) are manufacturers of a wide range of chocolates. 600 million approximately in each of the preceding 2 years to Rs. competing for its respective share of the market by pursuing different competitive marketing strategies.

(06 marks) Note: Only list the key parameters – explanations are not required. (09) Winter 2010 Q 17 List and explain briefly four factors which in your opinion create Exit Barriers and prevent existing participants from quitting a loss-incurring industry.org . (08 marks) Q 18 (a) A well-established and successful Chinese company engaged in the business of manufacturing of a wide range of home appliances such as refrigerators.GCA environment. Identify and list at least twelve key parameters which should be considered by the company for an objective evaluation of the Export Market Potential. (05 marks) Q 19 (a) Explain the meaning of Brand Equity. (i) What is meant by Pull Strategy? (02 marks) (ii) Explain briefly what advantages SPL is seeking to achieve by launching an aggressive Pull Strategy. (b) Some companies enter into Licensing arrangements with the overseas companies as an alternative to direct exporting. commercial and industrial buildings. washing machines. (03 marks) Summer 2011 Q 20 Identify the force of competition which is relevant in the context of Michael Porter’s Five Forces Model of Competition in each of the scenarios presented below. microwave ovens and assorted juicers and blenders intends to launch its products in Pakistan.gcaofficial. Identify the advantages that such companies seek to achieve by following this strategy. You are required to list the distinctive characteristics of a firm which pursues Competitive Marketing Strategies of: (a) A Market Leader (b) A Market Challenger (c) A Market Follower and (d) A Niche Marketer. SPL intends to launch an aggressive “Pull Strategy” to counter competition from new entrants who are offering lucrative margins to the retailers to promote their products which are inferior in quality and priced much below the prices of SPL’s products.Global Chartered Accountants . an individual firm has to identify its distinctive role and positioning which then determines the type of marketing strategy which it would pursue to achieve its objectives. The Company’s management is of the opinion that its products have significant cost and quality advantages and can capture 4-5 percent share of Pakistan’s market in 5 years. (02 marks) (b) Silkfinish Paints Limited (SPL) are manufacturers of a wide variety of superior quality paints which are used in interior and exterior finishing of residential. Substantiate your www.

State the criteria which are essential for classification of markets in different segments. Both the existing manufacturers are earning exceptionally high profits in a market which is expected to witness growth in the future. (a) Horizontal Integration Strategy (04 marks) (b) Forward Integration Strategy (04 marks) (c) Conglomerate Growth Strategy (04 marks) Q 25 (i) Briefly explain what is meant by a Differentiation Strategy. (03 marks) Q 26 In highly competitive business environments dominated by relatively few equally powerful players. The medicines have been developed after a long period of research at a very substantial R&D cost and are highly effective. www. (05 marks) Q 23 Briefly discuss the following: Backward Integration Strategy (2. the participants make concerted efforts to implement effective Marketing Intelligence Systems. (ii) Soundhealth Pharmaceuticals and Goodcare Pharmaceuticals are manufacturers of two new medicines for treatment of cancer. (04 marks) Q 22 (a) What is Market Penetration Policy? Identify the conditions in which Market Penetration Policy may be pursued to achieve optimum results. Quality of this coal is most suitable for the cement plant and also costeffective due to low transportation costs.Global Chartered Accountants .GCA answer by highlighting the salient features of the Model of Competition selected by you in each of these scenarios. (iii) Lucky Coal Mines Limited is the sole supplier of coal to a cement plant located in close proximity to the mines.org .5 marks) Winter 2011 Q 24 Explain briefly the following types of Growth Strategies pursued by Business Organisations.gcaofficial. (02 marks) (ii) List six types of skills and resources which are critical for the pursuance of a successful Differentiation Strategy. Lucky Coal Mines has several buyers who are willing to purchase the coal because of its high calorific value. Give one example of each of these types of strategies. (06 marks) (b) Explain briefly what you understand by the term Market Segmentation. (09 marks) Q 21 (a) What is meant by Market Research? (02 marks) (b) Give four basic reasons why companies conduct market research. (i) Four companies of similar size and strength are engaged in the manufacture of detergent powder for washing clothes. The cement plant requires substantial quantities of coal for firing of its kilns. These companies are key market players and jointly share 95% of the aggregate market which is not expected to witness any significant growth in the foreseeable future.

shoes. Identify four different types of conditions in which it would be advantageous for the firm to pursue Market Penetration Strategy. (06 marks) (b) Household Furniture Co. etc (ii) Shopping Products readymade clothes. branded watches.GCA (i) What is meant by the term Marketing Intelligence System? (03 marks) (ii) List five different sources which help in the creation of an effective Marketing Intelligence System. (04 marks) Q 28 Horizon Limited (HL) is engaged in the business of manufacturing and marketing of a wide range of consumer durable products.Global Chartered Accountants . newspapers. quality and style • special purchase effort/brand loyalty • frequent purchase/less planning Promotion • advertising and personal selling by producer/resellers • mass promotion/advertising by producer • carefully targeted promotion by producer/resellers . The company’s products are in different stages of their Product Life Cycles. are manufacturers of a wide range of furniture products used primarily by customers in the middle income group. packaged milk. (ii) Growth. etc The marketing mix of each category of Consumer Products comprises of the following ingredients: Price • expensive • low price • high price Distribution • distribution in few outlets • widespread distribution at convenient locations • outlets in specialised markets/shopping malls www. The company follows a Market Skimming Strategy to achieve its profitability objectives.org Customer Buying Behaviour • less frequent purchase/keen comparison of price.gcaofficial. Consequently. refrigerators. State the types of Promotional Strategies which HL may pursue for marketing of its wide range of products in the (i) Introduction. (07 marks) Summer 2012 Q 29 Consumer Products are classified by marketers in different categories as follows: (i) Convenience Products detergents. soft drinks. (05 marks) Q 27 (a) Foresight Electronics is a knowledge-based company and is known for its ability to manufacture innovative and new-to-the-market electronic products and sell them in specifically identified niche markets. etc (iii) Speciality Products televisions. (iii) Maturity and (iv) Declining stages of their Product Life Cycle. Narrate four conditions which are essential for Foresight Electronics to be able to successfully adopt its Market Skimming strategy. carpets. furniture. HL pursues different promotional strategies for products depending on the stage of their Product Life Cycles.

org . maintain and update the database of its existing and prospective customers? (07) Q Identify the strategies/policies/objectives which are being pursued in each of the following cases: (i) Poshak Fashions (PF) are designers and manufacturers of superfine cotton garments and have their two outlets in Karachi and Lahore. Discuss the concepts of Market Challenger Strategy and Market Follower Strategy and briefly explain the circumstances in which a firm would prefer to pursue a particular market strategy. PF introduces new designs of garments for the coming season and the unsold inventory at the end of the previous season is sold at lower prices to other retailers in the country after removing PF’s prestigious labels. (ii) Super Beverages believes that the world is one big market for its products and its various subsidiaries and divisions pursue a uniform marketing strategy for sale of its products in different countries. in your opinion. Often these firms have to make strategic marketing decisions whether to challenge the Market Leader to achieve the top position or to continue to hold on to their Market Follower status. it is useful for a commercial bank planning to launch its credit card marketing scheme to create. PF is pursuing a __________ market strategy. (iii) Sarmad Group is a pioneer in the textile industry in the country.gcaofficial.GCA You are required to identify the most appropriate characteristics of each ingredient of the marketing mix for the above categories of Consumer Products. resulting in slow down of banking services and causing inconvenience to customers. The Group is now seeking to follow __________ strategy. electronic media and real estate development. (iv) To press for their demands. employees of Citizens Bank Limited have decided to work strictly according to the terms of their contract of employment and refuse to perform any extra tasks. The second generation entrepreneurs of this Group have ambitious plans to launch new ventures in telecommunications. (10 marks) Q 31 Winter 2012 (a) What is meant by the term Customer Database? (02) (b) Why.Global Chartered Accountants . PF produces only limited quantities of their exclusive designs of garments for the narrow niche market of the most fashion-conscious customers. (09 marks) Q 30 Firms ranking in second and third positions in highly competitive industries demonstrate significant business strengths and hold a sizeable share of the aggregate market. www. Super Beverages has adopted a __________ strategy for marketing its products in different countries.

Global Chartered Accountants . The independent units are __________ of Neptune Chemicals.gcaofficial.GCA The employees of Citizens Bank Limited are pursuing __________ policy. are continuously engaged in the planning of their marketing strategies to achieve specific objectives in their existing markets and also to identify and seize opportunities in new markets. has established independent units who would be responsible for development of their own marketing strategies within the company’s overall market and customer focus to be able to serve the needs of the various categories of customers more efficiently. a manufacturer of industrial chemicals. which have substantial share of the market. (v) Good Meats has recently established several retail outlets to sell selected cuts of choice meats and establish its own brand name in a high growth market before new competitors enter this market and set up their business on similar lines. ( 0 8 ) www. Good Meats wants to seize the __________ advantage of this market. (07) Q 34 Zest Dairy Company Limited intends to launch a new line of frozen fruit yogurts in the major cities which would cater to the tastes of the customers for packaged food products. (vi) Neptune Chemicals. Give one example of a Franchise Relationship between an international company and a Pakistani enterprise. Assume that you are their advertising media advisor and have to give a presentation on the advantages and disadvantages/limitations of placing advertisements for the new yogurt products on each of the following media channels: (i) Television (ii) Widely Circulated Newspapers and (iii) Billboards (Hoardings) Identify and list three advantages and disadvantages/limitations of placement of advertisements of each of these different types of media.org . (06) Q 32 Briefly explain the salient features of the terms which are usually incorporated in a typical Franchising Agreement. Explanations and illustrations are not required. Explain briefly the various objectives which these organizations aim to achieve through their marketing strategies in their existing markets as well as in the new markets. (05) Q 33 Progressive business organizations.

In your opinion what important benefits would accrue to OCL by introducing welfare– oriented labour policies? (06) Q5 Shakeel Ahmed. besides payment of partial fees for dependent children of the employees. an Assistant Manager in the Bank Square Branch.GCA HRM Q1 Summer 2008 As a Senior Manager in the Human Resources Department of Apex Bank Limited. has leveled charges of aggressive attitude and gross misbehavior against the Assistant Manager in dealings with his colleagues.gcaofficial. (05) Q3 Safety Engineers are convinced that industrial accidents are attributable to inadequate Human. who is a highly respected senior officer with considerable experience. is at the initial stage of his professional career in a leading insurance company. (a) What do you understand by Personal Development Plan? (03) (b) What are the principal advantages of adopting and pursuing a well-formulated Personal Development Plan? (04) www. He has an ambitious goal to reach senior management position within a period of seven years. provision of medical benefits.Global Chartered Accountants .org . you have been entrusted with the task of conducting a Disciplinary Enquiry against Mr. Environmental and Mechanical/Technical security factors. a competent and hard working young officer. State five objectives which are expected to be achieved through these laws. subsidized canteen facilities. He intends to plan his career path well in advance and pursue a Personal Development Plan (PDP) with a high degree of zeal and commitment. Hameed Khan. What steps would you take to ensure that the Disciplinary Enquiry is conducted in a fair and impartial manner and the final outcome is based on principles of equity? (12) Q2 The governments generally promulgate comprehensive laws for health. The Branch Manager. This would include construction of a housing colony. How can responsible management effectively reduce the risks of accidents in each of these categories? (09) Winter 2008 Q4 Orient Cement Limited (OCL) aspires to be included in the category of a select group of progressive companies in the country and is considering a proposal for introducing significant changes in its labour welfare policies which would offer tangible benefits to the workers. safety and security of the workers.

The Management is contemplating whether to promote personnel from the automobile division for certain middle-level technical positions in the tractor division and induct new entry level personnel in the automobile division. in your opinion. has triggered wide-spread resentment and agitation among the workers due to the poor safety conditions and they have demanded strict compliance with the Mine Safety Rules and Regulations. which occurred recently. the management and the Workers’ Union have agreed to enter into negotiations through a process of collective bargaining.GCA Q6 New Age Automobile Company Limited intends to diversify its operations by establishing a separate division for manufacture of a less-expensive brand of tractors. the management has been indifferent to the conditions of its workforce of 1500 employees. the Company has deployed private armed guards at a considerable cost. resulting in the death of 120 workers. (10) Q7 Briefly Explain (b) Core Competence (3) (d) Job Description (3) Summer 2009 Q8 Apollo Mining Company Limited owns and operates integrated facilities of mining of coal and iron ore along with power generation and distribution facilities.org . (b) Briefly describe five different measures that the management should take to satisfy the demands of the workers and help to achieve a conducive working environment. Due to the aggressive attitude of the striking workers and to safeguard its assets. or alternatively recruit foremen level personnel from external sources for the tractor division by advertising for the positions in the news media. what kinds of managerial competencies would you examine and seek in the prospective candidates for the position.gcaofficial.Global Chartered Accountants . Narrate and explain briefly the advantages and disadvantages of internal promotion and transfer of foremen level personnel for the tractor division from the automobile division. are responsible for the indifferent attitude of the management of Apollo Mining Company Limited towards its workers. Identify and explain briefly. (09) www. The tractors would be used primarily by agriculturists having small farm-holdings. Although these facilities have been developed at a substantial investment cost. The company has been established recently and is in the process of establishing marketing network for distribution of its products throughout the country. (a) State four factors which. A major accident in the coal mines. After 28 days of complete closure of all mining and other business activities due to stand-off and strikes. (09) Q9 You have been entrusted with the task of hiring an individual for the position of General Manager Marketing for Good Health Dairies Limited.

Global Chartered Accountants . there are certain weaknesses in this process. technology and social environment along with the pressures to produce more value-added products and services at lower costs compel organizations to adopt measures to utilize their resources in the most efficient manner.gcaofficial. The Company’s operations involve processes of procurement. In the context of Maslow’s Theory of Human Needs. including various types of highly corrosive acids. they play a critical role in the achievement of the Company’s business strategies. In your opinion what kind of limitations should be kept in perspective by Human Resource Manger while reviewing Performance Appraisal Reports? (06) Q 11 According to Maslow’s Theory of Hierarchy of Human Needs. Employee Counseling can help to create a secure and an enabling environment for mitigating the adverse effects of stress on employees and enabling them to perform at peak levels of efficiency. Knowledgeable Human Resource Managers are aware of these weaknesses and take measures to minimize their adverse impact. (08) Q 13 Excel Chemicals Limited (ECL) owns and operates facilities for the manufacture of industrial chemicals. which type of human needs would be satisfied by the following: (i) health insurance (ii) cosmetics (iii) flowers for a sick friend (iv) tandoori nan (v) burglar alarm system in a bungalow (vi) rare and expensive work of art (vii) membership of an exclusive golf club (viii) wages received by a daily worker (ix) sponsoring of a charitable hospital (x) a luxury car (05) Winter 2009 Q 12 It is observed that work-related stress often pose a heavy burden in organizations and is manifested by frequent absenteeism.GCA Q 10 (a) Rapidly changing economic. late-coming.org . In these situations. (08) (b) Although managers at various levels are frequently involved in the Performance Appraisal of their subordinates. accidents and decline in the ability of employees to perform in an efficient manner. production. physical injuries and other www. Competent marketing managers must have insight in the Hierarchy of Needs to be able to create appropriate promotional strategies for successful marketing of their products. Although Human Resources are not reflected as assets in the Financial Statements. all human beings have different kinds of needs. packaging. Identify the scope of Employee Counseling and explain briefly how such counseling sessions can help employees to reduce work stress. Explain how sound Human Resource Management and Planning policies can play an important role to enable a Company to successfully achieve its business objectives. storage and transportation of chemicals which can result in serious fire.

GCA environmental and health hazards in the event of any lapses in the safety procedures. Identify and explain briefly six safety steps which should be adopted and implemented by the management of ECL as a responsible employer. The staff is groomed and entrusted with increasing responsibilities after careful career-path planning for each employee. professional aptitude and career objectives.org . The commercial bank is a well-reputed organization known for its fair business policies. Consequently. Required: (a) What do you understand by the term Employee Compensation Package? (02) (b) List and explain the essential steps involved in the formulation and implementation of a well-conceived Employee Compensation Strategy which the Bank should incorporate in developing its overall HR strategy. knowledge and commitment of its human resources are of critical importance for the success of its business. The Bank operates in a highly competitive environment where the skills. managers at various levels have to acquire all-round competencies of external business environment awareness as well as deep understanding of the concepts of internal business management to be able to fulfill their responsibilities and perform in an intensely challenging and rapidly changing business environment.gcaofficial. (09) Summer 2010 Q 15 (a) Identify the important functions which have to be performed by the Human Resources Department of a commercial bank which has a strength of 17.500 employees deployed in a network of 800 branches located throughout the country. You are required to identify four different types of competencies each of external business environment and internal business management which in your opinion are most important for the present-day managers to enable them to perform successfully in the prevailing corporate environment. The competitors are always on the lookout to identify professional staff and hire them at more attractive compensation packages. progressive outlook and concern for development of a competent and well motivated cadre of employees. (06) Q 14 The pursuit of goals of achieving cost economies and operating with lean and more flat organizational structures has resulted in creation of an environment in which the staff at the managerial levels are required to perform with greater business competencies and responsibilities. (08) Q 14 A Capital Bank Limited is a leading financial institution and is well-known for its strength in rendering highly efficient professional services to its customers and keeping ahead of the competitors. (06) (b) Research Studies by Human Resource experts have shown that successful organizations create internal work environments in which the employees are able to operate at their www. their potential for advancement. The Bank follows a policy of recruiting staff at the entry level after careful evaluation of the qualifications of the candidates.Global Chartered Accountants .

gcaofficial. List six important items that should be contained in an advertisement to be placed by the hospital in a newspaper having wide circulation in several cities in the country. (b) What is meant by a Strategic Business Unit (SBU)? (03 marks) Q 21 One common factor which distinguishes well-managed and highly profitable service-oriented companies from their competitors is the competence and commitment of their human resources.Global Chartered Accountants .GCA optimal levels of productivity. Briefly describe qualities that a skilled recruiter should possess in order to be able to evaluate prospective candidates for recruitment in a performance–oriented organization. in your opinion. (06 marks) (b) A leading hospital which has a network of facilities at several locations in Karachi and also in other cities intends to invite applications for the posts of Laboratory Technicians at its various facilities.org (1 .000 employees in various cadres. undermines the morale of other employees and has adverse effects on the individuals themselves as they are misfit and unable to make worthwhile contribution towards the organization. (04) Winter 2010 Q 19 (a) Recruitment of the right type of staff is of critical importance for the short term as well as the long-term success of an organisation. Induction of unsuitable employees creates difficulties for an organization in the achievement of its goals. (03 marks) Q 20 (a)The role of Human Resource Managers in companies which have a very large workforce has assumed increasing importance and they are now more closely involved and proactive in the Formulation and Implementation of Strategies at the corporate level. contribute towards workforce optimization in a manufacturing plant with several integrated workshops and departments? (09) Q 16 What are the four main types of information that a properly designed Job Application Form is expected to provide to the recruiter in the preliminary process of screening of a prospective candidate? (04) Q 17 a) Describe briefly the following methods of selection of candidates: (i) Group/Panel Interview (ii) Structured Interview (05) (b) State two advantages of each of the above methods of interviews. www. (04) Q 18 List eight Health and Safety hazards which are often faced by workers in a typical manufacturing environment. State the areas of specific responsibilities which fall in the domain of a Senior Human Resource Manager involved in the Formulation and Implementation of overall Corporate Strategy of an integrated textile mill having over 15. What are the important Human Resource Management practices which.

training and up-gradation of the quality of human resources. (05 marks) Q 24 You have recently been appointed as Human Resource Manager of Fine Electrical Company Limited (FECL). at all levels.gcaofficial. (03 marks) (b) List the important considerations which should be kept in perspective by the HR Manager of the bank while pursuing a policy of downsizing. List five advantages which employers seek to achieve by encouraging Employee Participation in the affairs of the organisation. The company has over 800 employees working in the various departments involved in the manufacture of its different product lines.org . a leading manufacturer of a wide range of household appliances. SHPL‘s products have been developed after long periods of research at considerable costs and are prescribed by medical consultants for patients suffering from life-threatening diseases. (05 marks) Q 23 Symco Bank Limited has introduced significant changes in its organizational structure and downsized its operations so that it may be able to provide more efficient services to its customers and meet intense competition from other banks. (09 marks) Summer 2011 Q 22 Employee Participation is often considered to be vital for the growth and development of individuals and teams to enable them to make effective contribution towards achievement of the goals of the organisation.Global Chartered Accountants . is a continuous endeavour with active involvement of the senior management. (03 marks) (b) Briefly explain to the management of FECL the advantages of introducing a Formal Succession Planning Scheme in the company. Explain what competitive advantages these service-oriented companies expect to derive by committing resources towards training and development of a competent and committed workforce. Required: (a) Explain briefly what is meant by Formal Succession Planning.GCA The top companies assign very high priority towards the training and development of their staff and genuinely consider their human resources as their “key strategic assets. You have observed that FECL does not have a system of Formal Succession Planning Scheme in the company. As Director of www. (a) Define Downsizing and very briefly describe its impact on the Bank’s organizational structure.” In these companies. (05 marks) Q 25 List ten responsibilities/obligations which employers must fulfill to ensure that the issues of Health and Safety are addressed adequately in a manufacturing environment. (05 marks) Note: Explanations are not required Winter 2011 Q 26 Sound Health Pharmaceuticals Limited (SHPL) is a reputable international company engaged in the business of manufacture of a wide range of medicines with facilities located in several countries.

(08 marks) www. Recently. different types of tests are administered to ascertain the suitability of candidates for the positions for which they are being considered for appointment. Besides interviews.GCA Human Resources. a company which considers workers skills at the factory floor level to be critical for achieving the overall strategic objectives. (iii) Not yet competent to perform in the present position.Global Chartered Accountants . Identify five disadvantages which Accurate Engineering Limited would experience due to the unusually High Rate of Employee Turnover. the company has been facing an unusually High Rate of Employee Turnover which is a matter of serious concern for the management. Identify and explain briefly eight critical skills and competencies you would seek in the prospective candidates for this high-profile position in SHPL’s senior management hierarchy. (i) Intelligence Tests (ii) Proficiency Tests (iii) Aptitude Tests (03 marks) (b) State two qualities of a well-conceived Selection Test and indicate why they are important.* *Note: These employees are not incompetent Briefly discuss the Training Needs of employees in each of the above categories and explain how they would help Apollo Engineering Limited to improve motivation amongst the employees at all levels.gcaofficial. you have to recruit Director Public Relations and Media Affairs to replace the incumbent official who is expected to retire shortly. The HR Department classifies the factory employees in 3 categories as follows: (i) Competent to perform in the present position. (08 marks) Q 27 State five important factors which should be included in developing an effective Accident Prevention and Reporting System for a company involved in heavy mechanical and engineering operations. (05 marks) Q 29 Selection and recruitment of candidates requires careful assessment of the diversified attributes of the prospective candidates. (05 marks) Q 28 Accurate Engineering Limited is engaged in the business of manufacturing precision earth drilling tools used by the oil exploration industry.org . (ii) More than competent to perform in the present position. (05 marks) Summer 2012 Q 30 (a) Employee Training is an important function of Human Resource Department of Apollo Engineering Limited. (02 marks) (c) Identify the different situations in which it may be considered necessary for an organisation to dismiss an employee. The Company employs a high proportion of skilled and experienced workers for the smooth and efficient manufacture of its quality-sensitive high-value products. (a) Explain briefly the purpose of each of the following types of tests which are administered to candidates in the selection process.

the Human Resources Manager. rather than resort to immediate extreme punitive measures. Prior to recruiting the new workers. etc. The company has recently negotiated several long-term contracts for export of various items of sanitary fittings. These Compensation and Reward Packages comprise of salaries and fringe benefits. (05 marks) Winter 2012 Q 32 (a) Sitara Limited is a well-known manufacturer of a wide range of chromium plated sanitary fittings in Pakistan. self-respect and sense of achievement. the work force would have to be increased significantly in a short period to expand the production. pleasant working environment. Consequently. www. Briefly discuss the purpose. career growth opportunities.org . Adnan Khan. HR Managers have to exercise considerable discretion and provide proper guidance to the employees. usefulness and relevance of compilation of HR Skills Information Database in the areas of recruitment. most of them are not aware of the real costs of the high rate of turnover of their employees. intends to prepare a HR Skills Information Database of the existing employees. Identify the reasons why employees offer strong resistance to major organisational changes and prefer to continue with the existing status. (04) Q 33 HR Managers often deal with delinquent employees and encourage them to change their attitude and behaviour and adopt a positive approach towards their responsibilities to the organisation. Consequently.Global Chartered Accountants . training and development and succession planning of Sitara Limited (06) (b) A number of firms prefer to conduct Performance Appraisal of their skilled workers on a quarterly basis rather than as an annual exercise. Identify three advantages of pursuing this policy of quarterly Performance Appraisal of skilled workers.gcaofficial. challenging work.GCA (b) Appropriate Employee Compensation and Reward Packages are central to a healthy and enduring relationship between the employer and the employees. What principal objectives should an employer seek to achieve through a well-formulated Employee Compensation and Reward system for a service-oriented company operating in a competitive business environment? (06 marks) Q 31 Research in a number of organisational settings shows that efforts to introduce major changes for achieving the objectives of corporate turn-around and improvements invariably meet with strong resistance from employees at various levels. Briefly describe the different types of costs which are associated with high rate of turnover of employees. (03) (c) Although companies experiencing high rate of employee turnover are in a position to recruit new workers quickly to replace the outgoing employees.

As the Chief Executive Officer of the subsidiary. (06) What do you understand by transfer pricing in the context of multinational companies. The parent company’s principal office in Dubai is largely managed by expatriate executives who are committed to a policy of highly centralized control of the Company’s financial resources and are reluctant to delegate financial powers to the overseas subsidiary. The company takes considerable pride in the superior quality of its services. drivers and maintenance crew as it believes that the commitment of its staff is a critical factor for the success of its business.org . Identify four disadvantages of pursuing such a centralized policy. BTC accords a high degree of importance to the human relationship management of its employees. Describe the benefits that BTC expects to derive by pursuing a well-conceived policy of good human relations management between the employer and the employees. (04) Winter 2008 Q3 (a) Governments in developing countries are often concerned that global companies with substantial financial and technical resources are in a position to exploit the opportunities in a manner which are detrimental to the interests of the host countries. you are required to advise the parent company of the disadvantages of pursuing a highly centralized financial policy.Global Chartered Accountants .GCA Identify and explain briefly the various stages of dealing in a fair and equitable manner with employees involved in wrongful behavior/actions. comprising of the ticketing staff. (05) (b) What is meant by Competency–based Job Descriptions? (03) International Business Q1 Q2 Summer 2008 Tameer Construction Company. a UAE-based entity. List two advantages of adopting market-based transfer pricing policies. has ambitious plans to develop major real estate projects in Pakistan through a subsidiary company. (08) Q 34 (a) Blue Transport Company (BTC) operates a fleet of 150 buses which provides inter-city transport services. Identify and briefly explain six types of policy decisions which governments in www.gcaofficial. It is also feared that the domestic industries which are in the infant stages of their development may face grave problems due to the highly aggressive policies of the global companies.

However.org .gcaofficial. (06) Q4 Paragon Polyester Company Limited (PPCL). what are the distinctive advantages and disadvantages of undertaking overseas manufacturing operations through a wholly-owned subsidiary company? (08) \ Summer 2009 Q5 In the preceding five decades. These companies have achieved notable success in the expansion of their business globally and have manufacturing facilities and marketing networks spread in several countries. what types of complexities are generally encountered by parent companies in the planning and control of operations of their foreign subsidiaries? (06) Q8 (a) List the following steps involved in the operation of a typical Letter of Credit in their www. List the distinguishing characteristics of each of the above types of international companies. Malaysia and Cyprus have been able to satisfactorily fulfill the requirements of the foreign investors and achieve significant growth through these investments. (09) Q6 Competition for attracting direct foreign investments among countries has always been intense. (a) Explain what is meant by the term Political Risk in the above context. PPCL has considerable technology and expertise in its particular line of business which is available in only a few countries. a Korean company. (09) (b) Multinational Enterprises are classified as Ethnocentric. is considering a proposal for a substantial investment to establish a polyester plant in a foreign country. (b) What are the different types of Political Risks which have to be considered by a prospective investor while evaluating opportunities of direct foreign investment in a third world country? (07) Winter 2009 Q7 In your opinion. State and briefly explain six significant objectives of multinational companies in pursuing policies of Globalization.Global Chartered Accountants . Polycentric and Geocentric companies depending on the strategies and policies pursued by their top management. a large number of third world countries have not been so successful in attracting direct foreign investments mainly due to the high level of Political Risks perceived by the prospective investors. In your opinion. a significant number of companies have pursued wellconceived strategies of Globalization in order to seize the immense business opportunities by operating on a worldwide basis.GCA the developing countries may take to meet the threats from the global companies. PPCL is examining the pros and cons of setting the project as a wholly-owned subsidiary company or entering into a joint venture with one of the local entrepreneurs. Countries such as Singapore.

medical equipment and miscellaneous engineering industries.gcaofficial. (i) The exporter’s bank endorses the documents (bill of lading/airway bill) and delivers them to the importer’s bank. List the five Competitive Forces stated by Michael Porter. (06) (b) A Multinational Corporation has subsidiaries in several developing countries with majority shareholdings in each of them. The Company’s customers are sensitive to quality and require components conforming to most stringent tolerance standards. (iii) The importer obtains the bank’s promise to pay the specified amount on behalf of the importer. The MNC pursues a policy of centralized financial decision making and the subsidiary companies are required to retain only minimum balances to meet their immediate operating requirements and transfer surplus funds to the parent company. (ii) The importer’s bank pays the proceeds to the exporter’s bank. Narrate at least six different types of Political Risks which should be considered by Accurate Engineering Limited while evaluating an investment involving substantial capital with long-term implications. (09) (b) According to Michael Porter the nature of competitiveness in any industry is a composite of Five Forces. The Competitive Analysis model developed by Porter is widely followed for formulating business strategies in many industries. The Company is presently incurring high labour costs and is considering a proposal to locate a portion of its facilities in Asia to achieve cost economies. (05) Summer 2010 Q9 (a) Identify and explain briefly six factors which have contributed to the significant increase in importance of International Trade in the preceding 3-4 decades. (06) Winter 2010 www. (v) The exporter delivers the documents to his banker. (iv) The exporter ships the goods and obtains the Bill of Lading/Airway Bill. List various advantages the MNC seeks to achieve by pursing such a centralized financial decision making policy.org . (vi) The importer’s banker promises the exporter to pay the specified amount on behalf of the importer. (06) (b) Identify five advantages which a multinational corporation expects to achieve by establishing manufacturing facilities in foreign countries.Global Chartered Accountants .GCA logical order of sequence. (05) Q 10 (a) Accurate Engineering Limited is a company located in Europe and is engaged in the business of manufacturing a wide range of high precision metallurgical components for the automobile.

GCA Q 11 State the situations in which an MNC would prefer to operate in a foreign country as a branch instead of establishing a subsidiary company. (04 marks) Summer 2011 Q 13 (a) Distinguish between a global business strategy and a multi-domestic/adaptive business strategy.Global Chartered Accountants . (03 marks) (c) List four advantages of adopting market-based transfer pricing policies.org . State six different advantages that Alpha Equipments would achieve through the appointment of a Single Distributor for import and distribution of its products in Pakistan.gcaofficial. (04 marks) Q 12 (a) List the following methods of payment for the imported products which are most advantageous from the perspective of an importer in descending order. (05 marks) (b) Alpha Equipments is a Taiwanese manufacturer of various types of photocopiers and has recently decided to export its products to Pakistan. (10 marks) Winter 2011 Q 15 (a) Explain what is meant by Geocentric Orientation in the context of global business companies. Identify four factors which in your opinion may have influenced the MNC’s strategy of implementing highly centralized decision making policies for its subsidiary companies. Identify a real life example of each strategy and give reason for your choice. (06 marks) (b) What are the key financial decisions which should be made by the management while contemplating direct investment in a foreign country by formation of a subsidiary company? (05 marks) Q 14 A multinational company which has its headquarters in the UK pursues a strategy of exercising very close control and centralization of all important decision-making processes of all of its four overseas subsidiary companies. (05 marks) www. (i) Open Account (ii) Sight Letter of Credit (iii) Consignment (iv) Usance Letter of Credit (02 marks) (b) State six constraints which in your opinion act as impediments towards attracting foreign investments in an underdeveloped country. (06 marks) Q 16 (a) In your opinion what important factors have led leading Japanese companies to establish automobile assembling/manufacturing plants in selected developing countries? Identify five factors and substantiate them with brief explanations. Alpha Equipments is considering to appoint a Single Distributor in Pakistan who would represent the exporter and would be responsible for the entire marketing operations in this country.

not only by the joint venture partner but also by the government and other stakeholders. EL is therefore. keen to pursue corporate and business policies which would be perceived favourably.GCA (b) Describe briefly the Political Factors which should be taken into consideration by a multinational corporation while evaluating a decision to make substantial direct investment in a foreign country. Winter 2012 Q 20 Explain briefly the factors which have contributed to the creation and significant expansion of Global Markets during the preceding 20-25 years. (04) www. EL foresees attractive opportunities for development of its business in Centralia. Adoption of these policies would facilitate EL to expand its business in future. Explain the advantages which MNCs seek to achieve through centralised cash management policies and pooling of all excess cash balances at prominent international financial centres.org . (03 marks) Summer 2012 Q 17 All leading global business organisations possess certain distinctive capabilities and competitive advantages which set them apart from those companies whose operations are confined within their limited geographical areas. (06 marks) Q 19 Give five reasons why the process of Globalization has assumed great importance in the present business environment. Describe at least six core capabilities which are observed in leading global organisations regardless of their special lines of business. This policy requires each subsidiary to retain minimum cash for its own transaction purposes and remit all excess funds to a central cash depository. (06) (b) State the main reasons why leading companies obtain cross-border financing including equity. in your opinion.gcaofficial.Global Chartered Accountants . (09 marks) Q 18 Multinational Corporations (MNCs) which have widely dispersed operations in several countries often prefer to centralise their cash management functions and conduct all their major cash operations from pools located in internationally recognised financial centres. Briefly describe four policies which. The company is planning to establish a joint venture in Centralia. a country which has several untapped sectors. EL may pursue for achieving its long term business objectives. (06) Q 21 (a) Eagle Limited (EL) is a large conglomerate. debt and bank financing in different countries.

State what policy measures should DEL adopt to eliminate the unethical practices of the sales representatives. Explain what do you understand by the term Corporate Social Responsibility. (06 marks) www. The Company strives hard to achieve sustainable growth and meet the requirements of highly demanding dentists who want the “very best and the latest” equipments to serve their patients. DEL has recently observed a trend of unethical practices followed by its sales representatives. The sales representatives who are not able to meet their targets. book fictitious sales at year ends and later record them as sales returns.org .GCA CSR & Business Ethics Q1 Summer 2008 What do you understand by Code of Ethics in the context of a business organization? State four advantages which in your opinion are important for adopting a Code of Ethics? (07) Winter 2008 Q2 (a) Currently. (03) (b) In your opinion what are the major concerns which prevent organizations from adopting and implementing comprehensive policies of Corporate Social Responsibility? (05) Q3 Briefly explain (a) Business Ethics (3) Summer 2009 Q4 Briefly explain the following (a) Business Ethics Winter 2010 Q5 Dental Equipments Limited (DEL) is engaged in the business of manufacture of a wide range of equipments used by private dentists as well as leading hospitals.Global Chartered Accountants .gcaofficial. a large number of progressive companies are in the various stages of adopting policies of Corporate Social Responsibility. They also share a portion of their commissions with the purchase representatives of the major hospitals.

gcaofficial.org .5 marks) Summer 2012 Q8 Explain the term Business Ethics and discuss its increasing significance in the present business environment. FCL’s Institutional Marketing Division (IMD) would sell the www. etc. bed linen. (05 marks) Management of the working environment Q1 Briefly explain (c) Environment Management (3) Summer 2011 Q Environmental Scanning Summer 2012 Q2 Fintex Company Limited (FCL) is in the advanced stage of implementing facilities for manufacture of home textile products such as curtain draperies. sofa cloth.Global Chartered Accountants . FCL intends to market its products to customers through 20 company-owned retail outlets to be established in the major cities.5 marks) Winter 2011 Q7 What is meant by the term Corporate Social Responsibility? (3. table covers. towels.GCA Summer 2011 Q6 Briefly discuss the following: (a) Business Ethics (2.

gcaofficial. (10 marks) Winter 2012 Q3 Successful companies make concerted efforts to retain their competitive advantages vis-à-vis their competitors as an ongoing exercise encompassing all spheres of their business operations. The Mission Statement should be brief. business organizations are under continuous stress to achieve economies in their production and operating costs.GCA company’s products. The pressures for cost reduction emanate from the management as well as the competitors and customers. a non-profit organization has recently received substantial donations from a group of overseas Pakistani philanthropists. FCL’s IMD also wants to aggressively pursue marketing strategies to cater to the requirements of the institutional customers who are a source of repeat business. Identify and explain briefly four Critical Success Factors which in your opinion would create sustainable long-term competitive advantage for FCL. (06) In the current economic scenario. Narrate six measures which these companies usually take to retain and further consolidate their competitive advantages. You are required to prepare a Mission Statement for EWCD stating its purpose and identifying its core values. These customers are keen shoppers who want quality products at affordable prices. hospitals. EWCD has ambitious plans to develop the institution into an absolutely world-class research and teaching university-cum-hospital in the country.Global Chartered Accountants . FCL’s principal corporate objectives are to create a sustainable competitive advantage and obtain a firm foothold in the substantial and fast growing target market of middle class customers. It is envisaged to provide treatment for diabetes which is growing at an alarming rate and adversely affecting the health of a large segment of the population in all age groups. simple and clearly highlight the important purpose.org . The University would also help to produce qualified doctors who would specialize in the treatment of patients suffering from this highly debilitating disease. industrial companies and government organisations. www. to institutional customers such as hotels. The Hospital would provide infrastructure facilities and medical care by a team of highly reputable consultants. intent and aspirations of EWCD. as well as workers uniforms to be procured from external vendors. (06) Strategic Mangament & Planning Q1 Q2 Summer 2008 East-West Centre of Diabetes (EWCD).

The new management team made ambitious plans to increase the rated capacity. (08) Q3 Union Group of Companies has diversified interests in fertilizer.org . (04) Summer 2009 Q5 Pan Pacific Steel Mills Limited was established in 1960 to manufacture steel products such as iron bars. (09) Winter 2008 Q4 (a) What are the distinctive ingredients of Vision and Mission Statements? (03) (b) It has been observed that certain companies adopt. (a) Explain the relationship between Strategy Formulation and Strategy Implementation. with minor modifications and changes in emphasis. Tactical and Strategic levels. The Group Management Team which monitors and controls the performance of the different strategic business units has retained for itself the powers to make all strategic decisions. sugar. Describe the drawbacks of adopting such an approach in formulation of Vision and Mission Statements.gcaofficial.GCA Identify eight operational and strategic areas which must be scanned continuously by an industry leader to achieve cost economies and maintain its competitive advantage. Describe the distinguishing features of decision making process at Operating.Global Chartered Accountants . cement and steel industries. the basic ingredients of Vision and Mission Statements of the more successful rival companies in an attempt to achieve similar results. In 2006. In spite of formulation of Corporate and Business Strategy on sound lines by the multi-disciplinary management team. girders and steel sheets. diversify the product-mix and upgrade the quality of the products to bring the Company’s operations at par with the leading players in the country’s steel industry. wire rods. the Company is experiencing serious problems in achieving its objectives due to lack of cohesion between the formulation of strategic plans and their actual implementation. (b) What essential elements should the management of Pan Pacific Steel Mills Limited consider for creating an environment of good relationship between Strategy Formulation and Strategy Implementation? (10) Winter 2009 Q6 (a) Why mission–oriented business strategists do not view the Short-termism approach favourably? (02) (b) Give two examples of typical business situations to highlight the defects of pursuing a www. Each entity operates as a strategic business unit and executives in the individual companies have powers to take all decisions at the operational level and only limited decisions at the tactical level. a team of professional management assumed charge of the Company’s operations.

implementation and evaluation of cross-functional activities which would enable an organization to achieve its stated objectives. (09 marks) Q 12 Briefly discuss the following: Tactical Planning (2. (03) Q7 Strategic Planning and Management is an exercise undertaken at the highest levels of the management hierarchy and involves decisions concerning formulation. which in your opinion.GCA policy of short-termism.5 marks) Winter 2011 www.org . Identify four Strategic Objectives which in your opinion may be included in the strategic planning process of Unique Textile Mills. (05 marks) Q 10 Unique Textile Mills are leaders in the designing and manufacturing of cotton fabrics for ladies fashion clothing. Identify the distinguishing characteristics of organizations which pursue innovative corporate strategies.gcaofficial.5 marks) Backward Integration Strategy (2. In spite of the cumulative skills and considerable experience of the senior management team. (a) Why do companies accord importance to the pursuance of a formal Strategic Planning Process? (06 marks) (b) Explain the different steps which the management has to undertake in the formulation and implementation of a well-considered business strategy. (09 marks) Summer 2011 Q9 A leading manufacturer of automobiles attaches high degree of importance to the competencies and skills of its front-line operational managers in the manufacturing and assembly lines. Identify and briefly explain the different types of competencies and skills required for effective performance by these managers. (09) Winter 2010 Q8 Management has to expend considerable efforts in devising business strategies to achieve corporate objectives and goals effectively. are responsible for the management’s inability to achieve all of the goals envisaged in the Strategic Plans. Explain the key factors.Global Chartered Accountants . (03 marks) Q 11 Highly Creative Strategic Planners in progressive organizations have innovative mindsets and do not merely project past strategies in the future but are continuously engaged in “out of the box” thinking to explore new opportunities beyond the existing strategy framework. it has been observed that a number of organizations are not able to achieve significant success and the actual performance often falls short of the set goals.

financial institutions. employees and the society as a whole. Although motors account for a nominal proportion of the cost of the laser printers. Cash Cows and Dogs. place excessive emphasis on Cost Reduction and Austerity policies to achieve their profit objectives. HEL is one of the few firms who manufacture these types of small motors.Global Chartered Accountants . (09 marks) Q 15 In the past two decades a number of Mergers and Acquisitions have been witnessed between some of the most prestigious and financially strong international corporations in a wide range of businesses such as pharmaceutical and automobile manufacturing companies.org . business organisations which have multidivisions and compete in different industries pursue separate strategies for their various business divisions. These policies may be in conflict with the interests of customers. Also mention the types of business strategies which should be pursued by each of these types of business divisions. Narrate the principal objectives behind the mergers and acquisitions of companies which are considered to be financially sound and well-established in their own spheres of business.gcaofficial. Important customers of HEL are the original equipment manufacturers of precision laser printers. Hawk Engineering Limited (HEL) is engaged in the business of manufacturing of small motors which are installed in printers. HEL has made substantial investments in manufacturing facilities and R&D and has developed its own in-house technology and manufacturing processes. It is able to achieve high profit margins and returns on its investments because of the superior quality of its products for which its customers are www. their efficient and reliable performance are of crucial importance for HEL’s customers who provide performance guarantees for their products. (04 marks) Winter 2012 Q 17 A sound system of Environment Scanning is of critical importance in the formulation of Strategic Plans of any progressive company operating in a fast-changing and competitive business environment. Explain the distinctive characteristics of each of these types of business divisions in terms of their relative market positions. (05 marks) Q 16 Differentiate between the characteristics of Strategic Decisions and Tactical Decisions. at times.5 marks) Summer 2012 Q 14 According to the Boston Consulting Group Matrix. supermarkets. etc.GCA Q 13 Business firms. This gives HEL competitive advantage over its rivals in terms of meeting the stringent requirements of its quality conscious customers. Identify any three adverse effects of introduction of stringent Cost Reduction and Austerity policies on each of the above stakeholders. The BCG Matrix describes the characteristics of the markets and the relative competitive position of the various business divisions as Stars. (4.

the overall profitability has not shown a corresponding increase. Identify and explain briefly four factors which HEL should monitor closely to anticipate the emerging business environment in which it operates and its impact in the formulation of its Strategic Plans. (10) General Q1 Q2 Summer 2008 All leading global business organizations possess certain distinctive marketing capabilities and competitive advantages which set them apart from those companies whose operations are confined within their limited geographical areas. You are required to identify four advantages and disadvantages each of Business Process Outsourcing in the above situation for SEL. SEL considers that a substantial proportion of the efforts and energies of the management and staff at various levels are expended in handling a very wide range of diversified activities. (06) Summer 2010 Q4 Fine Sugar Mills Limited (FSML) owns and operates a sugar cane crushing plant for manufacture of refined sugar. the company has witnessed phenomenal growth in its product lines and sales revenues have registered significant growth. Describe five core capabilities which are observed in leading global organizations regardless of special lines of business. The affairs of FSML are looked after by a team of professional management and the company ranks third amongst all the sugar mills in the country in terms of its sales and profitability.Global Chartered Accountants . However. (10) Narrate important points that should be considered in the decision making process. www. (03) Winter 2009 Q3 Superb Engineering Limited (SEL) manufactures parts and components for assembly/manufacture of automobiles. During the past few years. The Company has developed an extensive network of growers spread over a wide area who deliver cane at the factory site which is then crushed in the minimum possible time to achieve high rates of sucrose recoveries. therefore.org . examining the feasibility of outsourcing certain activities of its operations to outside parties.gcaofficial.GCA willing to pay premium prices. SEL is.

(i) A method of demand forecasting in which a firm markets its new products in a limited geographical area to ascertain consumer response and from this sample develops projections of the size of market over a larger area is called __________. This strategy is called __________.000 for a 28” TV set to attract new customers. the price was gradually reduced in 1993 to $ 6. After reaping the maximum profits and recovery of the sunk R&D costs.org . (03 marks) Winter 2012 www. (e) If a company engaged in the textile manufacturing business acquires majority holdings in a sugar mill. (f) The chief executive officer who makes alternative plans to deal with emergencies or unexpected situations prior to their occurrence is pursuing a __________ strategy. (09 mark) Winter 2011 Q7 Explain what is meant by Scenario Planning. (09) Q5 Management of Business Organizations are invariably seized with numerous problems and expend a considerable proportion of their energy and time in making decisions to solve these problems. (c) The assessment tool used to compare and identify the variance between a firm's current market coverage and potential market opportunities for its products is called __________. (d) A company which has capabilities to manufacture a complete line of superior quality ball bearings for a wide range of original equipment manufacturers and industrial users is pursuing a strategy of __________. a motor car manufacturing plant and a private airline. Sony launched the first High Definition (HD) TV in the market at a price of $43. (g) A firm uses different brands of essentially the same product to target different market segments is pursuing a __________strategy.000 per set. (b) The management tool that enables a firm to classify its range of products according to their current market share and expected growth is called __________.GCA Identify the key stakeholders of FSML and explain briefly why you consider each of these constituent stakeholders to be of vital importance for the sustainable and long-term profitable operations of the Company. These TV sets were purchased by customers who could afford to pay the high price for the new technology. it is pursuing a __________ strategy. (h) A bank which strives to develop better understanding of the customer’s needs and satisfy them to create customer loyalty is adopting a policy of __________. (09) Winter 2010 Q6 Identify the business strategy/policy/tool which an organisation is pursuing in each of the following situations: (a) In 1990. Explain briefly the various stages involved in the Decision Making Process.Global Chartered Accountants .gcaofficial.

gcaofficial.org . Identify four advantages which. in your opinion.Global Chartered Accountants .GCA Q8 The trend of outsourcing of certain activities by business firms to external entities has gained considerable momentum in the past few years. ( 04) www. these firms expect to derive from outsourcing of selected business activities to external entities.

customers and other stakeholders are in the developing stage.gcaofficial.GCA Suggested Answers BM Past Papers Topic wise Marketing Q1 Summer 2008 In a Franchise Arrangement. § To take advantages of firms with different skills and abilities. (ii) Multiple and conflicting demands for allocation of management.org . (iv) Extremely high workload for key personnel with conflicting and multiple priorities. § To minimize risk for any individual participant. one business entity who is the franchisor grants a license to another business entity called the franchisee to use the name and brand/trademark of the franchisor and conduct the business according to the tested processes. § The Trade Fair may lead to contacts and opportunities for appointment of agents and distributors in Sri Lanka. SRL would be able to gain the following advantages of entering into a franchise arrangement with Oriental Resorts Inc.to utilize complementary manufacturing facilities and skills.to reduce research costs and use complementary skills. administration and marketing techniques developed by the franchisor. Winter 2008 Q4 The dominant characteristics of a company which is in the start-up stage of its business are: (i) High financial costs. (iii) Organization’s systems and procedures are not in place. § Airline Industry ---to share passenger load and utilize available capacity. (ii) The franchisee can use a well-known brand name which is promoted aggressively and has wide customer acceptance. § The Trade Fair can create awareness of the products among the prospective customers. (iv) The franchisee can concentrate wholly on the day-to-day operations of the business as the responsibilities of purchasing stocks. (iii) Rapidly expanding organizational structure. § To co-operate to reduce research costs. marketing and advertising are handled by the franchisor. § To avoid ownership of overseas operations. (v) Resources are not sufficient to meet multiple demands. (v) Shift in power structures as the organization witnesses expansion in business. technical and financial resources. (iii) The franchisee receives guidance and advice on selection of a suitable project design and equipment according to the pre-tested specifications of the franchisor. (vi) Relationships with suppliers. products and technology are being introduced. The dominant characteristics of a company which is witnessing rapid and dynamic growth of its existing business are: (i) New markets. (iv) Unequal growth in various sectors within the organization.Global Chartered Accountants . Examples of industries in which International Alliances are common: § Pharmaceutical Industry --. www. The reasons for entering into international alliances are: § To gain access to foreign markets. : (i) The franchisee is able to make investment in a proven business format and can eliminate the risks and difficulties of establishing a completely a new business. The expected advantages of participation in the Trade Fair are: Q2 Q3 § The Trade Fair can serve as a vehicle for securing orders for the Company’s products. § To effectively utilize complementary technologies. (v) The franchisee can seek managerial advice and guidance to overcome any problems which he may encounter in the business. § Manufacture of computers and electronics --. (ii) Limited cohesiveness in the senior management team. staff training. methods. § The participants in the Trade Fair from other countries may show interest in the products which may lead to sales and joint ventures in these countries.

Percent increase/decrease in number of customer complaints. �Keen to seize opportunities for competitive advantage. �After-sales service. (g) Sales of new products / models lodged in the year as a proportion of the Company’s annual turnover. �Measure customer satisfaction. procurement. �Resources are shared frequently among the various business units. �Senior managers frequently discuss competitors’ strategies and tactics. time to develop. �Understanding of customer needs and objectives. The marketing-mix strategies in different stages of Product Life Cycle should be pursued on the following lines: Q 6: Marketingmix Introduction Product Basic Product Price Unit cost. �Individual organizations respond rapidly to competitors actions. �Creation of customer value. Organic/internal growth is a strategy to achieve growth by expansion in the company’s own line of products and market portfolio. (d) Product development speed time i. �Functions are geared towards creation and satisfaction of individual customer needs. Competitor orientation �Sales force shares competitors’ information among themselves. (e) Number of customer complaints lodged. �Constant struggle to achieve market leader status.gcaofficial. It relates to increasing the market share in the existing www. �Technical. customer and market information is shared closely among different functions/departments. plus Distribution Build selected distribution channels Sales Promotion Heavy sales promotion Growth Product extension. �Close integration among different functions and departments in implementation of strategy.e.Global Chartered Accountants . (c) Percentage increase in sales achieved through customer retention/brand loyal customers. Inter-functional coordination �Inter-functional calls on customers.GCA (vi) Constant dilemma between doing current work and building support systems for the future.org . aftersales service and warranties Price to penetrate market Stages Maturity Decline Diversification of products Phasing out of weak products Price to meet competition Reduce price Build intensive distribution channels Strengthen distribution network Eliminate unprofitable outlets Reduce effort due to increase in consumer demand Increase efforts to promote brand Reduce cost to minimum level Summer 2009 Q7 Q 8 (a) The performance indicators to measure the success of marketing strategy of Euro Motors Limited which is engaged in the business of manufacturing and marketing of automobiles in a dynamic and highly competitive business environment may be as follows: (a) Growth in sales revenue (b) Increase in market share. Q5 The determinants of competitive policies and efforts in the different categories of business are : Customer orientation �Customer commitment. manufacture and market a new product. (f) Number of new distributorships appointed in the year.

rapid expansion is achieved through acquisition of existing assets of another company. In case of acquisition. acquisitions require substantial investment outlays and the acquiring companies resort to heavy borrowings which may extend financial leverage beyond prudent limits. inducing retailers or distributors to acquire stocks of the company’s goods. (c) Differentiate Product from Competitors Sponsorship provides companies a competitive selling advantage because it offers opportunities for category exclusiveness which can be used as product differentiation strategy for creating greater acceptability amongst the customers. on the management’s ability to formulate and implement sound plans. particularly if there are relatively few strong players. whereas in growth by acquisition. for example by changing the channels. business and operational level synergies. dealers and other intermediaries in the distribution channel to promote the company’s products. Q (9) Companies which pursue market-driven business strategies consider sponsorship of attractive and high profile events to achieve the following objectives: (a) Increased Visibility The wide exposure such events receive in both the electronic and print media provides sponsors with vast publicity opportunities. whereas in an acquisition strategy. in the case of organic growth. expansion is achieved in a steady and planned manner extending over a phase-wise schedule. by offering the licensee the right to use the manufacturing process. The key differences between the two strategies are as follows: (i) In internal growth strategy. www. Various types of sponsorships e. it is possible to retain the attention of the captive viewership. to a considerable extent.GCA market or entering new markets by bringing high value products. (e) Cost Effectiveness Sponsorships are usually more cost effective specially when a specific category of audience is to be targeted. (iii) In a strategy of internal growth. In a successful Pull Strategy.org . Q 8 (b) A company may pursue a policy of growth by organic/internal expansion and not through acquisition for the following reasons: (i) Expansion of its physical infrastructure and facilities can be planned more efficiently to fulfill the organizational requirements. paid overseas holidays or complimentary tickets/passes for popular events can be used to attract retailers. but in expansion by acquisition the level of competition may be reduced by acquiring a rival competitor. tyre manufacturers may sponsor car-racing events to demonstrate their products in action. trade mark. (f) Targeted Sponsorship Properly planned sponsorship programs integrated with predetermined objectives and focused on specific audience targets can create lasting impact. Sponsorships help companies to create exclusive attributes for their products in the minds of the customers to fulfill their needs and objectives.g. Licensing is a technique of entering a specific market in which the licensor enters into an agreement with a licensee. a company acquires functions of other companies which may result in duplication of facilities or redundancies which ultimately results in lowering of employees morale. the level of competition can become more intense. the company would have to utilize the existing sites and facilities which may not be the most suitable option for its requirements. patent. (g) Captive Viewership Advertisements on TV are often avoided by the viewers. Q 10 Pull Strategy of Promotion is a promotional strategy based on aggressive advertising of brands to build-up consumer demand. (ii) In expansion by internal growth. the success of the strategy is dependent. (d) Active Display of Product Attributes Sponsorship allows companies to draw special attention of the audience to the advantages and unique attributes of their product by promoting special events e. (v) Human Resources can be utilized more effectively and with a greater degree of cohesion of corporate culture by adopting strategies of organic growth. In case of expansion by acquisition of other businesses. the success of the strategy is also linked with achievement of corporate. the customers ask for the brand by name. the company usually has to acquire and assimilate the staff of those businesses. (b) Business-to-business Promotion: Competition for prominent positioning of products in the shelf-spaces of popular retail outlets is a big challenge for companies.Global Chartered Accountants . Acquisition strategies involve expansion by way of purchase of controlling interest in another existing companies. trade secret or any other item of value for a fee or royalty.g. (iii) Often. (iv) In acquisitions. Also. better career development opportunities are provided to the employees.gcaofficial. In case of popular programs/shows. (ii) The cost of acquisition of an existing company may be much higher than the cost of expansion of assets through internal growth.

The design and color should be in line with the brand and brand name should be displayed prominently www.GCA Benchmarking is the process of comparing the company’s products and processes with those of the competitors or leading firms in other industries or any other accepted standards against which the performance of the company is measured. (ii) Compare the capital expenditure involved in the establishment of retail stores and their recurring operating expenses and inventory carrying costs with the costs incurred under the existing set-up. (x) Examine the extent to which the availability of more reliable information of future market and fashions trends would be an advantage after RBCL establishes its own retail outlets. Q 11 RBCL should consider the following factors while evaluating the decision to establish its own network of retail outlets: (i) Examine the existing network of retailers of RBCL to ascertain the extent to which they have advantages of location of their shops in important shopping centers.g. sunlight. carry out a viability study of the share of market available (xii) Analyze the value addition by gaining ownership of retail outlets.org . (iii) Product Information–The packaging should provide vital information regarding the ingredients of the food item. one month or an economy package for a large family.Global Chartered Accountants . (vi) Ascertain the profit margins currently earned by the independent retailers on the Company’s products and the impact of the self-owned retail outlets on the company’s profitability. (ii) Preserve the Quality of the Product–The packaging should be capable of preserving the quality of the edible product from the elements e. (ii) Strong coordination between research and development. (vi) Strong connection and cooperation from well-established vendor network. (iv) Determine the ability of RBCL to mobilise sufficient financial resources required to establish and operate the business of retail marketing of its products (v) Examine whether sufficiently experienced and trained staff at various levels would be available to manage and operate the retail outlets. (viii) Examine the need to revise the terms and conditions relating to sales to be offered to the independent retail outlets. (v) Strong brand name. that is. (ix) Enquire into the business policies of competitors who have their own retail network and whether RBCL would be able to enjoy a competitive advantage over the independent retailers. (vii) Consider the impact of the decision to establish own retail outlets on the Company’s future relationships with the independent retailers. a sachet for a single use. (viii) Protection of research should be available in order to ensure that resources are not imitated. humidity or moisture. Q 12 (b) A Product/Service Differentiation Strategy is a strategy which promotes and emphasizes that the product/service offered by the firm is different from other available products/services of a similar nature. (iii) Innovative Management allowing better ideas to be cultivated.gcaofficial. able to correctly anticipate and assess the consumer behavior and desire. Q 12 © The capabilities which are most important for the success of a Product/Service Differentiation Strategy are: (i) Strong and functional research and development department. Q 12 (a) Cost Leadership is a strategy that seeks to establish long-term competitive advantages by emphasizing that value chain activities can be achieved at costs which are substantially below what competitors are able to match on a sustained basis. This allows a firm to compete primarily by charging a price lower than the competitors and still earn satisfactory levels of profits. (vii) Capital Allocated for attracting technical and creative human resources enabling ability to create a unique value/attribute that is hard to copy by competitors. (iii) Estimate the envisaged number of RBCL’s own retail stores to be established to cater to the requirements of the target segment of the market. Marketing and Technical departments. evaluate the possibility of brand dilution in independent retail houses. their nutritional value and expiry date (iv) Attractiveness of the Package–The packaging should be attractive in its presentation and colour scheme to draw the attention and interest of the customer at the point of display of the product on the shelves in the retail outlets. The differences are based on certain desirable features and performance attributes and therefore the high prices are justified. or a size which would meet the requirements for a period of say. Q 13 (a) The packaging features which would influence a consumer’s decision to purchase an edible consumer product are: (i) Convenience of the Size of the Package– The consumer should be able to chose from a range of sizes available. (iv) Deep insight of the market and close association with the distribution channels. (xi) Analysis of the industry growth expected and the market share to be captured.

(ii) The external database may not be current for the purpose of arriving at the decision in the present changed circumstances. It would also be necessary to identify and appoint competent new distributors who would aggressively promote DCL’s products. (vi) Convenience of Storage–The package containing the edible product can be stored conveniently and occupy minimum storage space.Global Chartered Accountants . (vii) Disposal of the Package–The package. This strategy would enable DCL to gain a larger share of the market as the consumers would increase the frequency of their purchases. (iv) The information required to reach reliable and rational conclusions may not be available in the external databases. (a) Pricing: DCL should reduce its prices to achieve a larger share of the growing market. Besides.org . can be disposed of safely from the environmental viewpoint Q 13 (b) The limitations of external databases are: (i) The external database may not be accurate and it may not be possible for the user to determine the extent to which the database is inaccurate. educational profiles of the prospective subscribers may be available but information regarding their particular interests would not be available in the external databases. DCL should provide support to the retailers by way of prizes and gifts for distribution among the children and also sponsor special events to increase awareness of its products in the target market. (ii) The firm considers it advantageous to control sources of supplies or marketing channels by backward or forward integration.gcaofficial. Pursuance of this pricing policy would therefore contribute towards increase in sales revenue as well as overall profitability of DCL. DCL might have to explore both the push and pull marketing strategy along with media advertising (c) Product Modifications: DCL should introduce further product improvements and change design features from time to time to make the products more attractive for the children. (v) The data might be unrepresentative as every research has a different criteria for the target segment depending on the in its objectives. Information regarding income. Q 14 The incoming Marketing Director of DCL may pursue the following Marketing Penetration Strategies to increase the Company’s annual sales from Rs 600 million to Rs 1200 million in the next 3 years. www. age. OR Obtaining information of prospective subscribers and circulation of existing magazines for launching a new high fashion magazine. price considerations. (b) Increase in Promotion and Distribution Support: DCL should launch well-conceived advertising and promotion campaigns to attract those segments of the market in which its products are not consumed at present. (e) Market Development: DCL should introduce its products in new geographic areas besides Karachi which offer good opportunities of achieving larger share of the market and increase in sales revenue. (iv) The firm has an opportunity to purchase an unrelated business at a very low cost with prospects of attractive rate of return on investment. DCL’s average cost would decline with increase in production and better utilization of existing capacity. etc are very important information. (iii) The external data may not be impartial and may have been prepared with a bias for a particular purpose. This strategy would be particularly rewarding as the target market for children is assumed to be highly price sensitive and will result in substantial increase in the sales revenue. Examples: Launching of a new food product in which reliable feedback and consumer reactions for taste. type of packaging. The external database may not be able to address to the issues required to evaluate these factors for the particular type of food product. eating habits.GCA (v) Convenience of Handling the Package –The packaging should make it easy to take out the edible product for use and also close the package easily after use. after consumption of the contents. Q 15 It would be advisable for a firm to pursue policies of Unrelated Diversification in the following situations: (i) The firm operates in an extremely competitive market or in a no-growth industry characterized by declining industry-wide profitability and low returns on investments. (iii) The firm’s existing channels of distribution can be gainfully utilized to market the new products and services. (d) Incentives to Marketing Staff: DCL should offer performance related incentives and special benefits to the marketing staff who are able to achieve and exceed the sales targets given to them.

Considers the amount of support that the target might muster from allies A Market Follower (a) imitates and attempts to adopt the policies of the Market Leader (b) adopts a secondary or runner-up position as it lacks the resources to challenge the Market Leader (c) follows its particular strengths and skills to maintain its market share and profitability as it considers that pursuing any other strategy would result in a less favourable outcome.org .Global Chartered Accountants . the rationale is that by developing strategies that are parallel to those of the market leader. and are able to use a premium pricing strategy (e) They tend to keep their operating expenses down by spending less on R&D. (f) The firm typically looks to gain a competitive advantage through effectiveness rather than efficiency. (d) They tend to market high end products or services. It sometimes has some market power in determining either price or output A Market Challenger (a) retains a substantial portion of the market share (b) launches direct and indirect attacks on the Market Leader in areas in which there are apparent signs of weakness of the Market Leader (c) attacks firms other than the Market Leader to increase its own share of the market ] (d) Offers price discounts and reduces own cost. These payments require heavy cash outflows and act as exit barriers. (e) Chooses only one target at a time. advertising. Q 16 A Market Leader (a) develops strategies to expand the total size of the market (b) pursues strategies to expand its own current market share (c) defends its own market share vigorously (d) Is customer driven and innovative (e) Flexible and adaptive (f) It tends to be on the cutting edge of new technologies and new production processes. they will gain much of the market from the leader while being exposed to very little risk. The substantial initial capital costs and low salvation value of the assets would result in heavy losses and create exit barriers. (d) no expensive R&D failures as best practices are already established.gcaofficial. and personal selling. High Redundancy Costs: Organizations having a large workforce with high salaries or contracts that stipulate high redundancy payments have to incur substantial costs by way of severance payments to its employees to exit from the industry. A Niche Marketer (a) is a relatively small or a medium-sized firm (b) specializes in a narrow segment of the market according to customer size or fulfilling specific customer requirements (c) meets the requirements of a particular geographical area.GCA (v) The new products offer counter cyclical sales patterns compared to the firm’s existing product lines. assesses the strength of the target competitor. (e) Employ “play it safe” strategy. Ancillary Costs of Closure of Business: www. Q 17 The factors which create Exit Barriers and prevent existing participants from quitting a loss-incurring industry are: Substantial Investment in Highly Specialized Fixed Assets: This is particularly relevant in capital-intensive industries which require very large investments in specific-purpose building and machinery. These assets do not have alternative uses and their salvation value is usually low.

Global Chartered Accountants . Q 18 (a) Current Market Size: (i) Population Size and Growth (ii) GDP Size and Growth (iii) Domestic Production of Appliances (iv) Volume of Import of Appliances (v) Sources of Import of Appliances Market Accessibility: (vi) Import duties and tariffs (vii) Existing distribution channels (viii) Pricing methods and credit terms (ix) Promotional and advertising practices (x) Resourcefulness of potential distributors Q 18 (b) Q 19 (a) Q 19 (b) Economic Stability: (xi) Balance of Payments Position (xii) Taxation Policy (xiii) Monetary and Trade Policy Regulations Miscellaneous : (xiv) Non-tariff barriers (xv) Attitude towards Chinese products (xvi) Political stability (xvii) Cultural differences within the country (xviii) Level of education Companies enter into Licensing Arrangements with overseas companies instead of direct exporting to obtain the following advantages: (i) Direct Exporting may be unattractive because of tariffs.GCA The organization may have entered into long-term contractual agreements with important suppliers or buyers and tenancy agreements carrying substantial penalties in the event of premature termination of these agreements. (ii) Licensing may allow fairly rapid penetration of overseas markets. The high costs of premature termination of agreements are exit barriers as the closure of business would cause huge losses. It is a measure of the brand’s ability to capture and retain the preference and loyalty of the consumers. (iv) Political risks are reduced since the licensee is likely to be a local company. (iii) Licensing does not require substantial financial resources.org . Brand Equity is the differential effect of awareness and familiarity of the brand name on the customer response to the quality of a product or service. (i) A Pull Strategy is a promotional strategy in which considerable expenses are incurred in advertising and customer promotion to attract the final consumers who seek to purchase the products on the strength of its brand name. High Fixed Operating Costs : An organization which has very high fixed operating costs and is faced with unfavourable business conditions may continue operations if it is able to recover its variable costs fully and a portion of its fixed costs. (ii) www.gcaofficial. This is particularly relevant if the unfavourable conditions are considered to be of a temporary nature and the firm is optimistic about the prospects of an upturn and recovery from its current difficulties. This type of composition of preponderance of fixed costs acts as an exit barrier. A brand has positive brand equity when consumers react more favourably to it than to any generic or other branded versions of the same product. (v) Local production may be the only feasible option in the case of bulky products such as cement and flat glass. quotas or other import restrictions in overseas markets.

§ Differentiate its products from those of the competitors and create value for the customers who would be willing to pay a premium price for the products.gcaofficial.org . www.Global Chartered Accountants .GCA SPL intends to launch an aggressive Pull Strategy to achieve the following advantages: § Further strengthen the brand image for its products and create greater brand awareness among the quality conscious customers. § Create customer loyalty by emphasizing that the long-term advantages of superior quality paints far outweigh the apparent savings offered by competitors by way of lower prices.

price. psychological behavior. Furthermore. The groups can be formed on the basis of their geographic locations.g. Although a new entrant would have to incur huge research and development costs to develop the specialized products. (ii) Sufficient production capacity exists and the firm is prepared to sacrifice short.term profits to capture a major share of the market. income levels. advance payments on placement of orders and recovery of transportation costs from the cement plant. (iv) Manufacturing and distribution costs would show a downward trend with increase in production and the size of the market. (ii) to evaluate and predict consumers behavior which may influence their decisions for purchase of various goods and services. It can sell its coal to many other buyers whereas the cement plant would have to incur high transportation costs . educational qualifications. analysis and reporting of data relevant to distribution and selling of goods and services in a specific marketing environment facing an organization. Price competition. (iii) to analyse the marketing strategies of competitors and their impact on the firm’s business. etc. Q 22 (a) Q 22 (b) Market Penetration Policy aims to charge low prices of the product to capture a large share of the market or achieve large volume of sales. the strategies pursued by any one company can be successful to the extent that it has competitive advantage over the strategies of its rivals. Q 21 (a) (a) Market Research is the systematic designing. Q 21 (b) (b) The basic reasons for undertaking market research are as follows: (i) to identify market opportunities and problems and determine the need for changes in marketing plans. there would be a strong attraction for other resourceful companies to enter this market. (iv) to formulate product development. age groups . pricing. more convenient and attractive packaging features and aggressive promotion would be observed among the competing firms.switching costs .GCA Q 20 (i) Rivalry among Existing Firms Since companies of equal size and strength are involved in competition in a market which is not expected to show any growth.org .gcaofficial. (ii) The market segment must be of a size which is sufficiently large to elicit interest of the seller in term of its sales revenue and profit potential.Global Chartered Accountants . Lucky Coal Mines can therefore dictate its terms e. Marketing Segmentation is a process of dividing the total market into several distinct groups with each group having certain homogeneous characteristics. the quality of coal from other sources may not be as suitable for the cement plant. Market Penetration Policy may be pursued to achieve optimal results under the following conditions: (i) Discourage existing and potential competition in a highly competitive market.if it were to procure coal from other mines which are located at a considerable distance. (iii) Bargaining Power of the Supplier Lucky Coal Mines is in a strong bargaining position. buying habits and cultural backgrounds. (ii) Potential Threat of Entry of New Competitors Since the market has significant growth prospects and present firms are earning lucrative profits. The markets can be divided into segments if the segment fulfill the following criterion: (i) The market segment must be capable of classification as a distinctly identifiable and measurable group having common characteristics. promotion and distribution strategies to achieve optimal results. yet threats from successful and experienced companies would always be present. collection. www. (iii) Market is price sensitive and a low price would result in rapid growth of the market. campaigns for creation of perceptions of quality differentiation.

The firm must have sufficient capital and human resources for pursuing a successful forward integration strategy. It is characterized by integration of firms producing the same kind of goods or operating at the same stage of the supply /value chain.org . The customer considers that the additional cost of purchasing the particular product or service is well below what the product or service is worth as compared to the other available alternatives. Forward Integration strategy is most beneficial when significant competitive advantages can be achieved through ownership or effective control of the distribution channels. (ii) The types of skills and resources which are critical for the pursuance of a successful Differentiation Strategy are: § Strong marketing capabilities. § Strong relations with the suppliers of major inputs and services. each of which is capable of achieving excellent financial performance in its respective line of business. (a) Horizontal Integration Strategy: This strategy seeks to achieve growth by ownership/acquisition or merging of functions of organisations which operate on a similar level. or are unreliable in meeting their commitments or are few in number and dictate unreasonable terms or charge exorbitantly high prices to take advantage of the buyers who are heavily dependent on the inputs from these suppliers. This strategy is pursued to achieve economies of scale by sharing of resources and competencies to gain significant competitive advantages. yet have the potential to offer high returns on the investment. Backward integration strategies are pursued in situations where the suppliers are unable to adhere to the buyers specifications of quality. including support of marketing channels. § Corporate reputation for technical and professional leadership. Example: A prominent textile group establishing or making acquisition of a power generation unit. § Good reputation for high standard of products and consistent quality. Firms which have excellent top management capabilities and can effectively plan. § Tradition of positive and prompt response to customers’ queries. § incentives based on subjective measures www.GCA Q 23 Q 24 Backward Integration Strategy seeks the ownership or increased control of the firm’s sources of important raw materials and other critical inputs and supplies. Example: A leading manufacturer of branded fashion clothing establishing its own network of retail outlets. Q 25 (i) In a Differentiation Strategy. (b) Forward Integration Strategy: It is a strategy which envisages gaining ownership or taking control of distribution channels when the existing external distribution channels insist on unduly high profit margins or are unreliable or are unable of meeting the firm’s distribution objectives. the firm is in a position to provide a product or service which the customer perceives to be of a higher value than those offered by other competitors. Firms which pursue conglomerate growth strategies search across different industries for opportunities for expansion and purchase of companies whose assets are undervalued and therefore can be acquired at low prices.Global Chartered Accountants . manage and control individual units in different industries pursue conglomerate growth industries. Example: A profitable cement company acquiring another cement manufacturing unit.gcaofficial. (c) Conglomerate Growth Strategy: This strategy seeks to create diversified business units/entities. § Sound capabilities for research and product engineering.

Q 27 (a) Q 27 (b) Q 28 Foresight Electronics would be able to adopt its Market Skimming Strategy successfully in the following conditions: (i) when the niche market for its products comprises of customers who can afford and are willing to buy the product at the high prices. g. (ii) The different sources would facilitate in the creation of an effective Marketing Intelligence System are: a. These external firms have access to useful data and sell them to the interested parties. Obtain feedback from customers regularly to improve the quality of the products and services in order to offer more value to the customers. store. d. couriers and transporters. (iv) when there is intense competition in the market and Household Furniture Company wants to retain/expand its share of the market to derive benefits in future.gcaofficial. Participation in trade shows and examination of competitors products and their advertisements etc. retailers and other intermediaries who would obtain important information and pass it on to the company to improve the overall quality of products and consumer services. disseminate. to extract information which can be incorporated usefully in the Marketing Intelligence System. etc. b. suppliers. (iii) when the quality of the furniture sold by Household Furniture Company and its promotional strategies are designed to capture a large share of the expanding market. (iii) when the high price would create and convey an image of superior quality products among the buyers. c. (v) there should be a high entry barrier of the industry. Well trained and motivated sales force to provide inputs on the improvements required in the company’s current marketing mix as well as identify new market opportunities. Published government statistics relating to population. analyse and retrieve large amount of data from internal as well as external sources for use in making marketing decisions. manufacturing data. f. agricultural production.org . Motivated distributors. (ii) when the firm is in a position to achieve significant economies of scale by producing and selling a large volume of output. (ii) when the firm is in a position to obtain the advantage of initial high price of its products for the duration that it intends to pursue its market skimming pricing strategy. organise.Global Chartered Accountants . Horizon Limited may pursue Promotion Strategies in the marketing of its consumer durable products in their different stages of Product Life Cycles as follows: (a) Introduction Stage (i) inform and educate the potential customers of the existence of the product (ii) encourage trial of product and create awareness of the benefits that would accrue to the customers by using the product and how it should be used (iii) secure distribution in leading retail outlets (iv) www. e. It would be advantageous for Household Furniture Company to pursue a Market Penetration Strategy in the following situations: (i) when the demand for household furniture is price elastic. Purchase of information from professional suppliers of data and information. (iv) when the unit cost of manufacturing a small quantity of output is not so high so as to offset the advantage of selling the product at the high price. Collect information from competitors’ published reports.GCA § stress continuous improvement and innovation Q 26 (i) Marketing Intelligence System is an ongoing and organised procedure to generate.

A resourceful market challenger may launch a full frontal attack to match the market leader’s main strengths. A market challenger must have substantial resources and sustaining capability to challenge the market leader. i.GCA place heavy emphasis on personal selling and promotion in trade shows and exhibitions. A market challenger may also pursue a strategy of acquisition of smaller companies to eliminate competition and steadily increase its share of the market to achieve top position. firms which are placed in second and third positions launch aggressive marketing campaigns to capture a larger share of the market to dislodge the market leader from its number one position. (iii) enter new markets and expand coverage (iv) identify new distribution channels (v) shift emphasis from product awareness to the individual firm’s brand preference through aggressive advertising. Q 29: Identification of appropriate characteristics of each category of the Marketing Mix for the different categories of Consumer Products are as follows: Q 30 (i) Price Convenience Products Low price Shopping Products High price Specialty Products Expensive (ii) Consumer Buying Behaviour Frequent purchase/ less planning Less frequent purchase/keen comparison of price.org . (d) Declining Stage (i) reduce promotion expenses as the size of the market is shrinking (ii) focus of promotion towards reminding remaining customers. Alternatively a market challenger may pursue a strategy of indirect attack on the competitor’s weaknesses and gradually make inroads in the market to achieve the top position. (b) Growth Stage (i) stimulate demand in selected market segments and promote the particular brand as competition increases (ii) increase emphasis on advertising to capture a large share of the growing market. pricing.e. (vi) Promote differentiation (c) Maturity Stage (i) focus on promotion and advertising to persuade the customers to purchase the particular brand rather than to provide information about the product (ii) selective promotion only as intense competition and increase in promotion expenditures would result in lower profits (iii) increase R&D budgets to improve product quality vis-a-vis competitors (iv) extend product lines to meet niche customer demand. The outcome of the challenge would depend on the relative strengths of each of the firms. (iii) Rejuvenate old products to make them look new. advertising and distribution efforts. product.Global Chartered Accountants . quality and style Special purchase effort/brand loyalty (iii) Distribution Channels Widespread distribution at convenient locations Outlets in Distribution in few specialised outlets markets/shopping malls (iv) Promotion / Advertising Mass promotion by producer Advertising and Carefully targeted personal selling by promotion by producer/resellers producer/resellers Market Challenger Strategy . www.In this strategy.gcaofficial.

(iii) Provide vital information of high-value customers – Information from the customer database can enable the bank to create a profile of privileged customers and cater to the special needs of these customers. A market follower retains the current customers and plans to achieve a fair share of the market expansion and also avoids retaliation from the market leader. (v) Adopt proactive competitive strategies – The bank can use the information from the customer database to upgrade the cards and enhance the credit limits of customers who have shown good performance in terms of customer profitability and timely payments of their dues to compete effectively with the products offered by the competitors. (ii) Formulation of marketing policies – Credit Cards have different features e. (iv) Negotiate Terms with suppliers to benefit high-value customers – Information from the customer database can be used by the bank to seek concessional special terms for its customers from relevant institutions such as hotels.Global Chartered Accountants . it decides to maintain its existing status. payment or waiver of initial and annual fees. income. etc. gold cards. When the market follower realizes that the market leader would put up strong resistance and not yield easily from its well-entrenched position or the market follower lacks the resources to meet the capabilities of the market leader. etc.GCA Market Follower Strategy . purchases and other useful information. Q (i) Market skimming (ii) Global (iii) Conglomerate or Diversification (iv) Work-to-rule (v) www. a firm prefers to retain its runner-up position in the industry rather than to attack and dislodge the market leader. telephone numbers. platinum cards. number of family members. A market follower may be satisfied with its existing runner-up position as it would not have to incur the high expenditure on developing new products and educating the consumers of the new product in the market. Information obtained from the customer database can help the bank to formulate policies for the different needs of customers and offerings of types of credit cards which best serve their needs.gcaofficial. (i) Identify prospective customers – The customer database would help the bank to identify prospective customers and contact them by telephone calls.In a market follower strategy. Q 31 (a) Q 31 (b) A Customer Database is an organized and updated collection of comprehensive information of existing and prospective customers names and addresses. A market follower strives to keep its manufacturing costs and prices low and maintain the quality of its products to meet its targets of market share. travels agents.g. bonus points. selected retail outlets. sales revenue and profitability without inviting retaliation from the market leader. A market follower learns from the market leader’s products and programs usually with less investment. etc. business activities. demographic information of age. interests. personal visits and promotion letters to convince them of the advantages of acquiring the bank’s credit card facilities. with varying credit limits.org .

Dunkin Doughnut. Billboards(Hoardings) high repeated exposure to the passing traffic. Widely circulated newspapers extensive coverage of different categories of the prospective audience. Burger King. qualities of the product can be highlighted more effectively. (iii) They pursue marketing strategies to overcome competitive pressures by special price offers and more aggressive promotion and advertising campaigns and modifications in product specifications to create differentiation advantages. (vi) The franchisee undertakes to purchase selected material inputs from the franchisor or a specified supplier. (ii) They plan their strategies to achieve market leadership status or to hold on to their second or third tier positions in the market depending upon their own resourcefulness and objectives and the relative strengths and competitive advantages of the market leader. (v) They pursue marketing strategies to maintain market visibility. (vi) They also pursue marketing strategies to explore new markets to diversify into those markets which offer higher profitability prospects and to identify and seize new opportunities which would create synergy effects with the existing product mix. Q 33 Progressive organizations aim to achieve the following objectives by pursuing various marketing strategies: (i) They pursue marketing strategies to achieve maximum market penetration and increase their share of the existing and expanding market. Q 34 The advantages and disadvantages/limitations of placement of advertisements by Zest Diary Company for introducing their frozen fruit yoghurt products on the various types of media are: Advantages Television offers combined effects of highly attractive sights. reaches a large segment of the prospective market. (iii) The franchisee undertakes to achieve predetermined sales targets. sound and motion to appeal to the audience. (iv) The franchisee is entitled to benefit from the promotion and advertising campaigns of the franchisor to facilitate the franchisee to achieve the sales targets in the defined territory. captures attention of the audience for a relatively longer duration. etc. create goodwill and strengthen relations with their stakeholders to improve their business reputation in order to counter threats from competitors.GCA First mover advantage (vi) Strategic Business Units Q 32 The terms which are incorporated in a typical Franchise Agreement are: (i) The franchisor authorizes the franchisee to use the franchisor’s complete brand concept. a large part of the audience may read the newspaper in their free time or when required when it is more easier to respond. customers can refer back to the newspaper whenever there is a need for the product.gcaofficial. can be installed at most strategic locations. Examples: McDonald. goodwill and business operating systems and methods to conduct business as defined in the franchise agreement. (ii) The franchisee undertakes to make investment of a specified amount in the business and operate within a defined territory. captures high attention of the audience.org . Disadvantages/Limitations TV:entails high cost. more efficient distribution and creating stronger linkages with the distribution channels. (iv) They create market acceptability for their products and pursue marketing strategies to consolidate their position through aggressive promotion. Marriot Hotel. www. (v) The franchisee makes an initial payment of the stated amount and further commission or royalties on the amount of sales. colourful digital graphic billboards attract attention of large audience.Global Chartered Accountants .

Structure the enquiry and make noting of the important points to be covered in the enquiry.Global Chartered Accountants . Bill Borad:audience often find the similar colours on billboard boring and therefore avoid looking at them. (iii) Investigate into the Assistant Manager’s personal record to ascertain if there is any evidence of indiscipline. written and verbal replies of the Assistant Manager and my findings along with the course of proposed line of action and rationale for my recommendations. Newspaper:busy readers glance through the newspapers to read the headlines and ignore the advertisements. fair and consistent manner. (vi) A meeting would be held with the Assistant Manager in which he would be provided an opportunity to explain his viewpoint and circumstances leading to the Branch Manager’s complaint. HRM Summer 2008 In order to conduct the Disciplinary Enquiry in a fair and impartial manner. (iv) Study the Bank’s disciplinary rules bearing in mind the Assistant Manager’s past record and the nature and intensity of the offence. Newspaper: have a very short life and advertisements are effective only if they are repeated frequently Newspaper:quality of the advertisements are generally not ‘audience attention captivating type’. Bill Borad:limited audience selectivity. (ix) Prepare a comprehensive report on the allegations leveled by the Branch Manager. (vii) Examine similar cases in the past and the nature of punishment meted to the defaulters. TV:audience can move away from the TV sets during advertisement breaks. I would adopt the following steps: Q1 (i) Obtain complete written evidence from the Branch Manager stating the specific nature of the Assistant Manager’s misconduct. aggressive behaviour or misconduct in the past. Bill Borad:ignored by the fast moving traffic on busy roads. Bill Borad:high costs are involved in the maintenance and upkeep of the billboards. time and place of the enquiry and the reason why he has to appear for the enquiry. their dates and timings and the names of colleagues with whom the Assistant Manager was involved in the offensive conduct. Newspaper:newspapers have a very restricted ‘pass-on’ or secondary audience.gcaofficial. I would draw my conclusions regarding the nature of the allegations and the intensity of the misconduct. (ii) Make efforts to obtain specific information from the complaints as well as other colleagues regarding any special circumstances inside the office or outside which may help to explain the source of the problem. Bill Borad:billboards placed too closely are eyesore for the audience and are ignored. The Assistant Manager would be informed of the date. (v) Direct the Assistant Manager to give a written reply to the various allegations of aggressive conduct and misbehaviour offering his explanations to the charges made by the Branch Manager.org . www. TV:has minimum audience selectivity.GCA TV:has very short exposure. (viii) After hearing of the Assistant Manager’s explanation in an objective.

injuries. safety and security programs. (iii) To create an effective framework for enforcement of the regulations. safety and security of the workers are: Q2 (i) To encourage employers and employees to reduce hazards in the work place and to strengthen the health. Personal Development Planning is a continuous process to improve and utilize one’s full potential at each stage of the chosen career path. (v) To prevent employment of child workers. illnesses and deaths. (ii) acquisition and accumulation of new skills thus minimizing the chances of www. (iv) Ability to attract and retain competent and more committed work force. (ii) Increase in efficiency and productivity of the workers. image and reputation of the Company.org . Q5 (a) Personal Development Plan is a plan which outlines the process of improving and upgrading one’s work skills. (iii) More congenial working relationship and better harmony with the workers union. knowledge and capabilities in order to enhance its effectiveness and adaptability.Global Chartered Accountants . (b) The principal advantages of adopting and pursuing a well-formulated Personal Development Plan are: (i) continuous appraisal of the individual’s career path and upgrading of skills. particularly in hazardous industries such as steel.GCA The objectives of promulgating comprehensive laws for the health. (ii) To establish minimum safety and health standards.gcaofficial. Responsible Management can reduce the risks of industrial accidents by adopting the following measures: Human Factors: § Strict compliance with safety rules § Proper operation of equipment § Avoid excessive overtime Q3 Environmental Factors: § Good housekeeping § Proper ventilation § Adequate lighting Mechanical/Technical Factors: § Safe storage and handling of inflammable materials § Proper tools and equipment § Adequate protective equipment or mechanical guards Winter 2008 Q4 The introduction of welfare-oriented labour policies would offer significant benefits to OCL by way of: (i) Improvement in goodwill. (iv) To frame procedures for reporting of job related accidents. mining and construction. (vi) To provide special facilities for female workers.

justice and fair play in its dealings with the workers.org . access to superior quality raw materials.Transfer from internal sources prevents introduction of fresh blood and new ideas which are essential for innovations. gives it competitive advantage and contributes to its long term success.Since the existing employees know the middle and senior level managers. The disadvantages of transfer and promotion from the automobile division are: (i) Absence of Fresh Ideas . (ii) Unsatisfactory enforcement of Mining Rules and Regulations by the concerned regulatory authority.gcaofficial. (ii) Safety Equipment: Management should install proper safety equipment in the mines and protective personal gear for ensuring safe working conditions in the mines. employees may become complacent because of their assured promotion and seniority. Q 8 (b) The management of Apollo Mining Company Limited should take the following measures to satisfy the demands of the striking workers: (i) Compensation for the Affected Workers: Management should pay compensation to the dependents of the workers who have lost their lives in the accident. (iv) creating a sense of achievement and commitment to reach the set targets within specified time-limits. acumen of management. job site. (iv) Cost-effective . Proper arrangements should be made for treatment. (iv) Rather than being motivated to work hard.The managers may not necessarily promote deserving employees strictly on merit because of their personal likes and dislikes for certain individuals. skills and competence of workers and marketing insight . (iii) The Management does not believe in ethics. Core competence is valuable.Global Chartered Accountants . unique capabilities of equipment. department.GCA the existing skills becoming obsolete or redundant. competency levels and commitment as compared to interviews with outsiders. The past performance of existing employees is a better guide to their skills. (ii) Biases and Personal Preferences of Managers. and reporting channels.Internal transfer from within the organization is less costly than recruitment from external sources.The management is in a better position to evaluate the performance of existing employees before considering them for higher positions. (iii) More effective team work . including hospitalization for the workers and their families. Q7 (b) Core Competence Core Competence is the key ability or strength that an organization has acquired which differentiates it from others. rare and difficult for competitors to imitate. (ii) Proper Evaluation of Employees . (iii) Limitations on the number of employees to be transferred –Since the transfer has to be made from within the organization. the number of individuals who are eligible to apply would be restricted. for the tractor division are: (i) Improvement of Morale – The internal transfers and promotions would provide an impetus to the morale of the workers. if considered necessary. (iv) The Workers and their Union is not fully aware of the rights of the workers and their bargaining strength. Core competence accrues due to its favourable location. (iv) Provide Medical Facilities to the Workers: Management should provide adequate medical facilities. The individuals outside the organization who are more talented would not be given an opportunity to serve the organization. It defines the boundaries of the job-holder’s authority and responsibility and includes the job title. Q6 The advantages of promotion from internal sources. www. (iii) continuous monitoring of progress in one’s career to ensure that it is on the right path and taking timely corrective measures. (iii) Formal Safety Training of the Workers: Management should introduce Safety Training Programs and educate the workers of the positive results achieved through the introduction and implementation of these programs. They would feel assured that the company has a policy to provide opportunities to the existing employees rather than to outsiders. Q 8 (a) The indifferent attitude of management of Apollo Mining Company Limited towards the workers may be attributed to: (i) Abundance of workers seeking jobs and comparatively few opportunities for employment in the area. including hospitalization. (d) Job Description Job Description is a structured and factual statement of a job’s functions and objectives. they would be motivated to put in their maximum efforts leading to more effective team work. of workers who have been injured in the accident.

(ii) Supervisors involved in Performance Appraisal often consider them in the context of reward-punishment exercises and not on the overall skills and potential of the employee. Q 11 The products / services would satisfy the following types of Human Needs: Product/Service (i) health insurance (ii) cosmetics (iii) flowers for a sick friend (iv) tandoori nan (v) burglar alarm system in a bungalow (vi) rare and expensive work of art (vii) membership of an exclusive golf club (viii) wages of a daily worker (ix) sponsoring of a charitable hospital (x) a luxury car Type of Need security social//friendship/love social/friendship/love physiological security www. (vi) Self-management Competency: The General Manager should have a sense of integrity and good ethics and be willing to accept responsibilities. (ii) Planning and Administrative Competency: The ability to plan and organize activities and make decisions especially related to resource allocation. Q 10 (a) The Human Resource Management and Planning policies can play an important role in the achievement of business objectives by: (i) Determining Requirements of Human Resources: an essential element of HR Management and Planning function is to ascertain accurately HR requirements to avoid problems of manpower shortages. (v) Industrial Relations: Properly conceived industrial relations strategies are essential for maintaining a skilled and motivated work force and ensure continuity of smooth operations. (v) Global Awareness Competency: Ability to explore and seize business opportunities. mismatch of work skills with the job requirements and redundancies due to over staffing. etc. (iv) Strategic Action Competency: The ability to understand the overall mission and strategies of the organization and be able to achieve the objectives of the company. (iii) Performance Appraisal is often considered as a routine paperwork exercise rather than conducting an objective critique of the individual’s performance. (iii) Teamwork Competency: The ability to complete the tasks through individuals who have to work collectively in a team environment. (iv) Fair Compensation: Fair compensation plans. costs. I will examine and seek the following managerial competencies: (i) Communication Competency: The ability to effectively transfer and exchange information with senior management and subordinates as well as other stakeholders. Marketing. (iii) Career Path Planning for Managers: Career path planning of trained and experienced officers/managers is essential in order to retain them and keep them motivated to meet the present and future requirements of personnel in all management positions. (ii) Ascertaining Training Needs: an important HR planning function pertains to preparation and conduct of training programs to ensure that a cadre of skilled workforce is available to meet the requirements of the organization. (iv) Individuals being appraised consider the exercise as being biased or unfair.Global Chartered Accountants . wastages. Q9 In order to recruit a suitable candidate for the position of General Manager.org . (v) Subordinates react negatively when evaluators offer unfavorable comments. (vi) Personal biases and inconsistencies of the individual conducting the Performance Appraisal may undermine the efficacy of the entire exercise. including fringe benefits are essential for inducting and retaining a motivated and performance–oriented team and work force at all levels.gcaofficial. (vi) Social Needs of the Workers: Management should sponsor recreational and social activities for the workers and their families. Q 10 (b) The limitations of Performance Appraisal are: (i) Performance Appraisals often focus on employee’s efforts for short-term rewards rather than on issues that are important to the long-term success of the organization.GCA (v) Group Life Insurance: Management should provide Group Life Insurance coverage for the workers. The Marketing Manager should have knowledge of different cultures and a receptive and open mind.

(ii) Capable of handling increased workloads and pressures. posters and installation of safety equipment at all sensitive areas in the premises. Functions of Counseling: (i) Provide Reassurance: Offering reassurance to employees by inspiring them and giving confidence to handle problems and inculcating in them a sense of direction and purpose in the discharge of their responsibilities and duties. (iv) Education and training of the workers on a continuous basis and dissemination of information by posting of safety charts. The scope of Employee Counseling could be to: 1. (ii) Creation of a Safety Committee to review the safety measures and monitor the implementation of the safety rules and procedures periodically to create a safe and secure working environment.gcaofficial. (ii) Help to release of Emotional Tensions: Employee Counselor can help to create a conductive non-critical and objective attitude by providing suitable opportunities to employees to communicate and explain their problems to counselors who are receptive and sympathetic to the problems faced by the employees so that the tensions are released. (ii) Capable of quick thinking and be able to make timely decisions regarding changes in the external environment. (iii) Being proactive in anticipating the changing environment. Q 14 The different types of external business environment and internal business management competencies requirements of managers to perform in the prevailing corporate environment are: External Business Environment Competencies: (i) Capable of evaluating external environment and be able to see the “whole picture”. (v) Ability to take and manage external business threats. (iii) Responsible for building effective work groups and developing teams.GCA self-actualization esteem physiological self-actualization esteem Q 12 Employee-Counseling includes working with individuals to promote and nurture relationships which are supportive. joint ventures are prevalent. Q 13 The management of ECL should take the following Safety Policy measures to minimize the risks of accidents in the plant for the manufacture of industrial chemicals: (i) Involvement and active supervision by the top management and participation of the employees in introducing effective safety policies in the entire premises. explore the impact of the problems and exploring all possible solutions.org . Bring in focus the nature of problem 4. (iv) Being sensitive to the interests and concerns of the different stakeholders in the organization in which new complex business relationships such as partnerships. It revives the employee’s level of aspirations and motivates them to high levels of actual achievement. www. help the employee identify areas that need improvement. psychotherapeutic. alliances. Create a constructive environment mutually beneficial to employees and organization. rather than being limited to the day-to-day operations of the organization. 2. (vi) Installation of proper warning/alarm systems and conduct of regular safety drills and exercises.Global Chartered Accountants . providing guidance for dispelling fears and apprehensions and resolving of work-related problems. (v) Creation of an environment where the equipment and machines which are properly maintained and the workers are provided protective uniforms. 5. (vii) Adoption of a policy which ensures that the workers are not required to work for very long hours which may adversely affect their concentration and result in performance lapses. Internal Business Management Competencies: (i) Awareness of the overall organizational objectives. (iii) Preparation of Safety Rules and Instruction Manuals for strict compliance by employees at all levels. (iii) Clarification of Thought Process: Enable employees to clarify their thought process and motivate them to accept responsibilities and adopt a realistic approach in dealing with work-stress. support the psychological equilibrium of employee 3.

Global Chartered Accountants . The objectives should be in line with the organization's overall corporate strategy and lead to the creation of a work force that is capable of implementing its plans. (vi) Administration of the Compensation Program Administration of a comprehensive compensation program to be applied uniformly for all employees. facilities and perquisites.GCA (iv) Flexible in handling human relations and in managing internal challenges of group work performance. The standards must be well-defined and applied specifically to the positions rather to the individuals in these positions. (v) Comparison of the Compensation Packages with the packages offered by the competitors. administrators and management who must have a thorough knowledge of the program to avoid any misunderstandings. (xv) Ensuring equality amongst all the branches. bonuses. Development of a rational compensation program in accordance with the competitive environment by collecting relevant data of compensation packages offered by the competitors. (vii) Communication of the Compensation Package Communication of all aspects of the compensation package to the concerned parties including the employees. By adopting formal procedures and standards. (ii) Review of Compensation Plan Examination of the strengths and weaknesses of the existing compensation policies should have been carried on a regular basis to enable the management to formulate new or improved compensation package. Job descriptions should be reviewed periodically to ensure that they are in conformity with the employee skill requirements. (b) The steps which should have been followed in the formulation and implementation of a well-conceived Employee Compensation Strategy are: (i) Identification of the Objectives of the Employee Compensation Strategy Compensation objectives should have been identified and articulated as part of the Bank’s overall planning process. (xiv) Maintenance of centralised records of all the branches. learning and acquiring financial and information management and IT skills. www. health and safety (xiii) Compliance with employment legislation and other legal requirements. including reward systems (vi) Planning for posting and transfers of suitable staff in the various branches (vii) Training and development of staff (viii) Measuring and monitoring of staff performance (ix) Instituting measures for improving motivation and morale of employees (x) Succession planning of competent staff (xi) Handling of employee grievances and complaints (xii) Employee welfare.gcaofficial. arbitrary or unfair personnel decisions can be avoided. including cash. assignments and responsibilities. Q 14 A (a) Employee Compensation Package refers to all forms of pay and rewards received by the employees for the performance of their jobs. (iii) Identification of the Positions and Prepare their Job Descriptions Identification of the positions at various levels and precisely defined job descriptions are essential for the development of a meaningful compensation program. Q 15 (a) The important functions which have to be performed by the Human Resources Department of the commercial bank are: (i) Human Resource Planning (ii) Recruitment. (v) Initiative for self-development. supervisors. (iv) Evaluation of the relative importance of the Positions and their significance for achieving the objectives of the Bank Evaluation and comparison of the positions is necessary to establish their relative importance and the relationship between the compensation for different positions.org . selection and induction of employees (iii) Organisation of departments and design of work flows (iv) Preparation of job specifications and job descriptions of employees (v) Salary and wage administration. The Bank should identify the competitors and offer competitive compensation packages to attract and retain skilled and motivated employees. policies should be made at central level with equal remuneration and training opportunities for all the 17500 employees. benefits.

role ambiguities and competition for resources must be contained and resolved by management in a fair and equitable manner to promote team effort for the achieving the organizational objectives. accuracy and bias Q 17 (b) The advantages of Group/Panel Interview are: (i) Reduces the biases of an interview conducted by a single interviewer. (viii)Employee Service: Make sure that the staff is provided with healthcare incentives. (iv) Less time consuming and can provide the candidate insight of how the staff works together and interacts The advantages of Structured Interview are: www. The questions are based on job analysis of the position and the responses from the candidates are reviewed for their relevance. (ii) Enable the recruiter to evaluate whether the applicant has relevant work experience to meet the requirement of the job.org . proper maintenance of records and information system Q 16 Q 17 (a) A properly designed Job Application Form is expected to provide the following information to the recruiter in the process of preliminary screening of a prospective candidate: (i) Enable the recruiter to assess whether the applicant has the basic educational qualifications. (iv) Enable the recruiter to predict whether the applicant would fit in the cultural and social structure of the organization. (vi) Conflict Management: Conflicts due to differences in perceptions. Group/Panel Interview consists of multiple interviewers who independently record and rate the applicant’s responses during the interview session.gcaofficial. (ii) Workforce Planning : The strength of workers in various categories are determined in anticipation of the expected workload and measures are taken for ensuring their availability at the required point of time (iii) Work Processes: Work processes are well-defined and training is provided to the employees to enable them to perform their tasks in an efficient manner. (v) Enable the recruiter to reach a decision whether it would be worthwhile to process the application further and call the applicant for test or interview. (iii) Enable the recruiter to draw tentative conclusions about the applicant’s suitability for the position under consideration on the basis of previous work record. and technical skills to meet the requirements of the job. (v) Performance Management Systems: Well-designed employee performance systems are instituted in the organizations which are communicated and accepted by all the concerned employees. (iv) Working Conditions: The internal working conditions are conducive for maximum achievement and the management supports high levels of performance. Also reduce Staff turnover rate by providing adequate compensation and support. (ii) Increases the reliability and validity of the interview.GCA Q 15 (b) The important Human Resource Management practices which contribute towards workforce optimization in a manufacturing plant with several integrated workshops and departments are: (i) Hiring of Workers: Workers are selected carefully on the basis of their skills to undertake the specialized jobs they are required to perform. (iii) The candidate is simultaneously evaluated by all those individuals who are relevant to the appointment. (vii) Reward System: High level of performance is expected from the workers and they are adequately rewarded in a transparent manner for their good performance.Global Chartered Accountants . Structured Interview is a procedure in which interviewers ask the same set of questions in the same order to all the candidates. The panel normally includes the immediate supervisor. a representative of the HR Department and a Job Expert.

Q 18 Q 19 (a) The Health and Safety hazards which are faced by workers in typical manufacturing environment are: (a) Contact with chemicals and other harmful materials. (ii) Outline of the hospital’s network and its reputation. (c) Extreme temperatures. (f) Absence of safety guards on moving parts of equipment.g. (g) Poor illumination e. identify the potential candidates and adopt appropriate methods of recruitment. (i) Lack of safety rules and regulations (j) Faulty /Outdated safety equipment (K) Improper machine maintenance (l) Excessive humidity A skilled recruiter should: (i) Possess knowledge about the job to be filled – The recruiter should have a clear understanding of the job and be able to ascertain whether it is necessary to induct a new employee or the work can be handled adequately by reorganizing or reallocating other jobs. (iii) Ensures that answers can be reliably aggregated and that comparisons can be made with confidence between subgroups or between different survey periods.Global Chartered Accountants . experience and skills necessary to perform the job.gcaofficial. working conditions. (ii) Possess insight in the attributes and qualities of the individuals to perform the job – The recruiter should be aware of the qualifications. (iii) Location(s) at which the technicians would be posted. insufficient light. (ii) It is easy to ensure that all relevant information has been collected. www. (e) Slippery floors and passage ways. Q 19 (b) The advertisement should contain the following information: (i) Requirements of the job specifications stating main tasks to be performed and the responsibilities associated with the position. light glare. (b) Excessive noise and vibrations of heavy machines. the facilities available in the hospital and professional capabilities of the staff. (iv) Compensation package including fringe benefits.org . If the job is necessary then the duties and responsibilities attached to the job should be clearly spelt out. (h) Improper ventilation. (iv) Possess skills to evaluate the candidates who are most suitable for the job – The recruiter should have insight in the methods of obtaining information about the candidates and be able to apply the appropriate methods for selection of the right candidate. (d) Poorly designed equipment which affect postures of workers.GCA (i) The interview is highly focused and all the candidates are assessed according to their responses to the specific job related questions. the recruiter should be aware of the sources where suitable applicants are available. (iii) Have knowledge of the sources and the means of attracting a range of suitable candidates – In case it is necessary to recruit from external sources.

(iii) Properly trained and competent employees are able to avoid and handle accidents and mishaps and contribute towards the safety and security of customers. (iv) The managers at all hierarchical levels should make effective plans to achieve the business and operational goals and targets entrusted to their respective departments.000 employees should have responsibilities to achieve the following objectives : (i) The organizational structure should be appropriately designed to achieve the overall corporate objectives. (v) The job descriptions and job specifications should be precisely defined and clearly understood by the employees at all levels. A separate SBU pursues its own marketing strategy and is established on the premise that a single strategic approach is not always appropriate in a large diversified organisation which markets different products to serve the needs of a wide range of customers. job rotations.gcaofficial. (vi) The organization’s reward system. (viii) The employees should be kept fully motivated and their morale and commitment should be high at all times. Q 20 (b) Q 21 A Strategic Business Unit (SBU) is an independent unit within a large organization and has its own staff. The employees should take pride in their association with the company. These companies can operate efficiently with relatively flat organization structures and lower operating costs. Q 20 (a) A Senior Human Resource Manager involved in the Formulation and Implementation of Strategy at the corporate level of a textile mill having 15. The well-managed service–oriented companies give high importance to staff training and development and create a cadre of competent and committed employees to derive the following advantages: (i) The cadre of properly trained and competent staff who are fully knowledgeable of their duties and responsibilities can handle customers in a highly professional and courteous manner The competent staff inspires confidence in the customers and helps to retain their loyalty which brings repeat business. including benefits and policies of promotion should be fair and equitable and designed to achieve optimum employee performance at all levels. career path and succession planning should be accorded the necessary degree of importance and be implemented in an objective and fair manner. Areas of friction and conflict which may undermine performance should be identified and rectified at appropriate levels.org .Global Chartered Accountants . professional training. (ii) Success of even the well-conceived corporate and business strategies of service-oriented companies depend to a considerable extent on the competence of their staff at various levels to deal with a variety of situations where proper handling is of vital importance towards the achievement of the corporate goals. (iv) A well-trained and competent work force at all levels requires less directions and supervision and is able to handle the various day-to-day issues promptly in a responsible manner to the satisfaction of the management. (v) www.GCA (v) Specifications of job requirements such as education. The organizational structure should capitalize on internal strengths and strive to remove internal weaknesses which may be impediments to the achievement of the objectives. (iii) The various divisions and departments should work in close coordination to achieve the main goals and objectives of the company. other members of the staff as well as the valuable physical assets. (vi) Name /designation of the individual to whom the application should be sent and last date for receipt of applications. (vii) The policy issues of training. financial resources and products. particular skills and experience. (ii) The company’s objectives and goals should be communicated and well understood by the employees at all levels.

The main advantages which would accrue to FECL by introducing a Formal Succession Planning Scheme are as follows: (i) www. (ii) Employee Participation would make the workers more willing to implement the decisions in which they have also been involved. (vi) The bank should not have negative image in the financial circles nor should the customers have any apprehensions about the goodwill and long-term financial standing of the bank and its ability to continue to render good service to the customers. transfers. (ii) The laying off of employees should not demoralize the surviving employees or pose a threat to their job security concerns which would affect their morale and performance. (iv) Employee Participation would tend to reduce the extent of supervision as the workers would be more conversant with the actual work because of their close involvement. Q 22 Q 23 (a) Q 23 (b) The advantages of Employee Participation in the affairs of the organization are: (i) Employee Participation would improve decision making as the employees would acquire the necessary knowledge and insight to contribute effectively in this process. committed and motivated workforce is able to create a high degree of cohesion and team effort among the staff at various levels. (iii) Employee Participation would help to improve internal communication and coordination and contribute towards better working relationships at all levels. (vi) Create an attitude change and ownership of the organization and tasks improving the productivity. It results in more flat organizational structures. (vii) The new inductees who undergo formal training programs are better absorbed in the culture of the organization.GCA A competent. Downsizing is the process of reducing the number of employees with the purpose of making the organization more efficient and responsive to the changes in its business environment.gcaofficial. (vii) Before downsizing there should be a fresh appraisal / performance competence done and results taken in consideration Q 24 (a) Q 24 (b) Formal Succession Planning is an important HR function as it ensures availability of sufficient number of appropriately qualified and competent employees from internal sources to meet the future HR needs of the organization. to assume more responsible positions in the organization arising due to promotions.Global Chartered Accountants . retirement or death of key employees. (iv) The remaining staff should not be excessively overburdened as they would have to carry the additional workload which was handled by the employees who have been laid off. close to the points of interaction with the customers.org . (v) Employee Participation would enable the employees at all levels to acquire new skills and develop leadership qualities. (vi) A well-trained and competent workforce with multi-skilled capabilities is able to handle varied and different assignments. greater delegation of authority and responsibilities. HR Manager of the bank should keep the following considerations in perspective while pursuing a policy of downsizing and laying off of employees: (i) The downsizing process should be transparent and objective and not convey any impression of favouritism or create a feeling of victimization. (iii) The layoffs should not result in loss of all employees who are performing important functions and are conversant with the internal procedures of the bank. (v) The downsizing should not lead towards excessive consolidation of duties and responsibilities which may result in compromising the important controls and security aspects of the bank’s operations. improved communication within the bank and more functions being performed at the lower echelons in the organization. Suitable employees are identified in the early stages of their careers and are groomed through a process of job rotation and training.

(viii) Defined career paths. (ix) Fire Alarms and fire fighting facilities should be provided and checked and refilled at regular intervals. (ii) The employees must be provided training for compliance with the safety procedures. (iii) It would align the HR function of career path planning of employees with the overall corporate and strategic planning objectives. goals and objectives and the ability to communicate them to all the stakeholders (b) deep understanding and insight of the role of the various media channels in projecting a positive image of the reputation and standing of SHPL (c) demonstrable track record and experience in media relations and media contacts to handle unforeseen situations which may affect SHPL’s reputation and image (d) excellent interpersonal and communication skills with ability to deliver messages by adopting appropriate styles. Q 25 (i) The plant and equipment must be maintained according to the specified standards. (vii) All slippery floors areas should display adequate warning signs. (vii) Positive goals for key personnel. (vi) It would reduce the risk of inducting employees from external sources at higher levels who may not be able to assimilate in the corporate culture of FECL and work in a cohesive team environment. (ii) It would enable the company to identify high-potential employees at an early stage whose career paths can be planned for promotion to higher levels in the organization hierarchy. (v) It would provide internal promotion opportunities for the employees to increase their level of motivation and commitment towards the company.org . which will help the company recruit and retain better people.GCA It would enable FECL to anticipate HR requirements in advance and avoid awkward problems arising due to delays in identifying and recruiting suitable employees from external sources to fill in key vacancies. tools and techniques depending on the type of information and the intended recipients (e) good management and organisational skills and be able to prioritize and plan activities taking into account factors such as deadlines and resources (f) work closely with senior level executives as an effective member of the top management. (iv) It would increase the managerial depth within the organization which can readily fill in the positions when necessary. (iii) The Safety Policy should be communicated to all the employees (iv) Instructions for proper handling of equipment should be displayed prominently in the work areas.Global Chartered Accountants . which will help keep them with the company and will help assure the continuing supply of capable successors for each of the important positions included in the succession plan. (vi) All moving parts which may cause injuries to the workers should have protective fencing. (g) assimilate complex information and take independent action where necessary and handle multiple projects and work demands at a time (h) excellent writing skills with a high level of capability to attend to details (i) qualities of leadership and a positive frame of mind www. (xi) Employees should immediately report all accidents on the prescribed Accident Reporting Forms. (v) Employees who are exposed to risks should be provided proper safety gear. (viii) First aid boxes with necessary supplies should be provided at various points. (x) Health and Safety Advisors should conduct Workshops and Seminars at regular intervals. Q 26 The critical Skills and Competencies required for the position of Director Public Relations and Media Affairs of SHPL are: (a) good understanding of SHPL’s mission.gcaofficial.

medical examination and conducting interviews would have to be incurred in the hiring of new workers.gcaofficial. www. (vi) Additional costs of placement of advertisements. (iii) Periodic training of employees for compliance with the safety rules and procedures so that they are fully aware of the accident hazards while performing their duties. background verification.maintenance and supporting the in-house broadcasting department Q 27 The following important factors should be included in developing an effective Accident Prevention and Reporting System for a company involved in heavy mechanical and engineering operations: (i) All accidents should be reported on Accident Reporting Forms and proper records should be maintained of accidents resulting in death and major injuries. (iii) Deterioration and inconsistency in the quality of the products as the new workers would require time and hands-on experience to acquire the levels of proficiency and skills necessary to manufacture precision earth drilling tools. (v) The new workers would require time to assimilate in the Company’s organisation culture. expertise and competence to perform the particular task for which the individual is being considered for recruitment.GCA (j) proficient in developing web-site content . handle work-related stress and cope with the various demands of the job. (v) Periodical review of the safety conditions should be carried out by an independent person.org . Q 29 (a) The purpose of different types of tests administered to the prospective candidates are: (i) Intelligence Tests: Intelligence Tests are administered to measure the candidate’s ability to think logically. (vi) Statistical trends of recurring accidents must be monitored closely to identify and examine the need for introduction of special measures. analyse the pros and cons of problems and make rational decisions. Q 28 Accurate Engineering Limited would experience the following disadvantages due to the exceptionally High Rate of Employee Turnover: (i) Loss of important confidential and proprietary information and knowledge of work processes to competitors. if necessary to encourage timely corrective actions and openness in reporting of such incidents. (ii) Identification of particularly more risky activities and adopting special precautionary measures such as installation of safety grills to prevent accidents. (vii) Staff morale and motivation would be adversely affected which would create a sense of insecurity among the remaining workers and result in low employee productivity. (iv) Regular maintenance of plant and machinery to ensure that all the parts and components are repaired/ replaced promptly so that they do not cause injuries to the workers due to malfunction or breakdown of the equipment. Additional effort and costs would be involved in the training of new workers who would replace the outgoing workers. (vii) Procedures for reporting ‘near-misses’ should be laid down: anonymously.Global Chartered Accountants . Intelligence Tests may also be used to determine the candidate’s understanding of social values and customs (ii) Proficiency Tests: Proficiency Tests are designed to evaluate the candidate’s level of skills. (ii) Disruptions and delays in manufacturing operations as new workers would have to be recruited and would require training to learn the work processes. (iv) Effort and cost incurred in training of employees who leave the organisation are irrecoverable losses. (iii) Aptitude Tests: Aptitude Tests are conducted to ascertain the candidate’s ability to work with others in a team environment.

(ii) The employee has indulged in serious misbehaviour/indiscipline with the supervisor or peers and this conduct is not conducive to the good working environment of the organisation. Such measures will increase their level of motivation and deter them from seeking job opportunities elsewhere. Appropriate training programs for these employees would upgrade their work skills and retain their motivation levels. (iii) The employee cannot continue to work as it would be in contravention of the legal requirements/ laws of the country.GCA Q 29 (b) A well-conceived Selection Test should have the following qualities: (i) a high degree of validity . (iii) Not yet competent to perform in the present position: The specific areas of weaknesses of these employees should be identified and on the job training should be provided to enable them to overcome their weaknesses and perform efficiently. providing proper training through lecture sessions. (vii) www. Q 30 (a) Training Needs of employees of Apollo Engineering Limited in the different categories are: (i) Competent to perform in the present position: These employees should be provided training by way of lecture sessions and skills enhancement programs to enable them to be able to handle assignments in the next stage of competence.that is it should be capable of measuring attributes which it seeks to evaluate in the candidate (ii) a high degree of reliability – that is should provide results which have a high degree of consistency among the various candidates. Q 30 (b) The Employee Compensation and Reward system for a service-oriented company operating in a competitive business environment should be designed to achieve the following objectives: (i) Obtaining support of employees for the main strategic objectives of the service-oriented company for innovation. workshops and on the job training would improve their skills and help them to achieve competency in their present positions. Q 29 © It may be necessary for an organisation to dismiss an employee in the following situations: (i) The abilities of the employee have been impaired and it is not possible for the individual to continue to perform the assigned duties satisfactorily. In case it is not possible to promote such employees. (iv) Inducting and retaining a pool of suitably skilled and motivated work force.gcaofficial. (iii) Deriving significant value-addition at all the stages of customer service chain because human resources are strategic assets of a service-oriented company and personnel costs account for a substantial portion of the total administration costs. (iv) The employee is involved in corruption/misappropriation of the employer’s properties. (ii) More than competent to perform in their present positions: These employees should be provided training opportunities through participation in seminars. efficiency. job enrichment and job rotation to assume greater challenges and to facilitate them to move to higher positions. (v) The employee has divulged company’s confidential/proprietary information to competitors.org .Global Chartered Accountants . teamwork and high standards of customer service. Since employees in this category are not incompetent. their job satisfaction level can be increased by delegation of authority and responsibilities and redesigning their jobs. (vi) Articulating in precise terms the organization’s expectations of employee performance and service standards to create a competitive business advantage. (ii) Building of a durable and mutually beneficial long-term relationship between the employer and the employees. (vi) The employee has attempted or made unauthorized access in the company’s confidential information network with malicious intent. (v) Inculcating a sense of financial transparency and fairness of the compensation and reward system among the employees.

A proper HR Skills Information Database would help to match these individuals with the HR requirements at various levels and fill in the vacant position promptly without causing any disruptions or delays. alterations in work processes and transfers would threaten their present work routines. (v) The failure of management to communicate to the employees in a convincing manner the reasons and need for change which gives rise to suspicions and apprehensions and results in resistance to change. power and authority. This is necessary to ensure recruitment of only such skilled employees who can contribute to the company’s requirements for expansion of its manufacturing capabilities. technology or expectations. (iv) The employees may fear uncertainties in the new organizational design. (ii) The employees fear that they may lose their present position/status. patterns of social-on-the-job interactions and friendships. (ii) Training and Development – HR Skills Information Database would help to identify the deficiencies and weaknesses among the existing workers and adopt appropriate training and skills development programs to enable them to perform their work more effectively and strengthen the HR capabilities of Sitara Limited. Q 32 (b) The advantages of a policy of Quarterly Performance Appraisal of skilled workers by such firms are: (i) Employees efforts and capabilities are recognised promptly and they are suitably rewarded for their performance resulting in enhanced performance level of the individual employees in terms of productivity and low material losses due to defects in workmanship. systems.org . training and development and succession planning in Sitara Limited in the following areas: (i) Recruitment – Compilation of HR Skills Information Database in a systematic manner would help Sitara Limited to identify the pool of skills and experiences of the employees currently available within the organization and fill in the skill gaps by induction of new employees for the expansion of the facilities and efficient functioning of the organization to meet its corporate objectives. attitudes and working styles of new supervisors and their own status in the organisation in the revised set-up.gcaofficial. (vi) The fear of dissonance because employees may have to confront with new and different process.Global Chartered Accountants . (iii) The employer is able to identify and retain the highly skilled workers and promptly replace those workers who are unable to meet the quality standards (iv) www. The dissonance or discomfort created by what is new or different is a psychological process which causes resistance to change. (iii) The employees may anticipate that changes in work assignments. Q 31 Employees offer strong resistance to major organisational changes and prefer to continue with the existing status because of the following reasons: (i) The employees may have concerns of financial insecurity due to loss of their jobs or decline in their existing level of compensation.GCA Aligning the compensation and reward packages with the comparative packages offered by the competitors. Q 32 (a) The compilation of Human Resource Skills Information Database has relevance and usefulness in the recruitment. (ii) The employer can ensure that the quality specifications of its products are strictly adhered to. (iii) Succession Planning – HR Skills Information Database would help to identify employees who are most suitable for promotion to higher levels in the organization hierarchy due to the creation of new openings in the firm and also in the event of retirement or death of an employee.

creating awareness of rules and knowledge of disciplinary actions may prevent violations by the employees. (iii) Written documentation – If change in behavior is not achieved. salaries of interviewers.Global Chartered Accountants . (iv) Separation Costs – such as HR staff and time of supervisors and salaries to process separation formalities and exit interview time and costs. then the services of the employee are terminated after giving notice and keeping all the legal implications of the action in perspective. (v) Disclosure of Confidential Information – former employees may pass on expert knowledge or disclose important confidential information to competitors. then a second session of meeting with the concerned employee would become necessary. (ii) Training Costs – including cost of orientation time of new workers. Q 32 © Q 33 The costs associated with a high rate of turnover of employees include: (i) Hiring Costs – comprising of recruiting and advertising expenses. the proceedings of this meeting are documented in written form in which the employee and the supervisor prepare written solutions to prevent further continuation of the problem. (ii) A more co-operative work environment would encourage better team work among the various cadres of employees leading to safety of the passengers. Whereas. the first phase took place as a conversation between the supervisor and employee. verification and reference checking time and expenses. cost of training materials. In this session. (iii) Productivity Costs – including lost productivity due to “break-in time” of new employees and lack of awareness of the company’s products and services. (v) Discharge – If the employee fails to follow the action plan that was developed and the problem continues to persist. Counseling by the immediate supervisor can have positive effects. rather than strive to achieve high levels of performance close to the year end to earn good appraisal rating. Often. (ii) Counseling – The objective in this phase is to create awareness among the employees of organizational policies and rules. The demotion/suspension period is used to demonstrate the seriousness of the problem and the organisation’s determination to bring a change in the behavior of the employee. Q 34 (a) BTC expects to derive the following benefits by pursing a well-conceived policy of good human relations management between the employer and the employees: (i) The employees at all levels would be committed to achieve high levels of performance in providing good service resulting in customer satisfaction. Employers may also demote employees or temporarily suspend their services for a limited period with pay. vehicles and staff.org . (iv) The staff would be satisfied with the management’s good relations policy which would result in low absenteeism and minimum employee turnover rate. (v) www.GCA Employees make sustained efforts throughout the year.gcaofficial. the HR official emphasizes to the employee the importance of rectifying the inappropriate behavior/actions. a final warning meeting is held. employee testing costs. (iii) The reduced lost time due to good maintenance of the vehicles and more efficient handling of customers would result in low operating costs and higher profitability. A competent HR Manager should pursue the following stages in handling employees who have been involved in behavior/actions which are contrary to the rules of company discipline : (i) Investigation – A thorough investigation should be undertaken of the nature of the delinquent behavior of the employee and the factors which have led the employee to behave and conduct himself in a manner which is contrary to the accepted norms of the firm’s rules and discipline. supervisors’ and co-workers “coaching” time and salaries. staff time and salaries of trainers. (iv) Final warning – When the employee does not follow the written solutions noted in the second step.

(ii) The operations of the subsidiary may suffer due to delays in the decisions by the parent company resulting in higher costs and inefficiencies. Competency–based job descriptions are primarily worker performancefocused rather than work description-focused and place high degree of emphasis on achievements. International transfer pricing is the price at which products or services are transacted between units of the same company which are located in different countries.Global Chartered Accountants . (iii) The performance of the individual units can be evaluated more objectively. The advantages of market-based transfer pricing are: Q2 (i) The individual units would achieve high level of efficiency as they can negotiate most favourable market-based prices as if they were independent units. (v) The overall costs would increase considerably due to duplication of work and additional traveling and incidental costs.GCA There would be open communication between the management and the staff and sharing of information to achieve positive results. Winter 2008 Q3 (a) The Governments in developing countries may take the following policy decisions to protect their interests in the face of threats from global companies: (i) Impose quotas which would prescribe limits on the quantities and values of raw materials that the global company may import from its affiliated/parent companies. (ii) The selling unit would make efforts to improve the quality of the products in accordance with the requirements of the purchasing unit. (vi) The good human relations policy would encourage training and development of the staff at all levels. utilities. (ii) An import tariff structure may be imposed which may make the imported goods expensive and enable the domestic manufacturers to compete in the local market.org . especially those which are engaged in business of a sensitive nature such as defense. www. Competency–based job descriptions specify that the employees must be capable of achieving high levels of performance and commitment in demanding and highly challenging work environments. (iii) The government may place restrictions on the ability of global companies to acquire domestic companies.gcaofficial. International Business Summer 2008 The major difficulties expected to be faced by the parent and subsidiary companies in pursuing a highly centralized financial policy are: Q1 (i) The staff at the parent company would not be fully conversant with the local rules and regulations in Pakistan. Q 34 (b) Competency–based job descriptions define observable and measurable behaviour traits of skills and performance that individuals must exhibit to do the job efficiently. (iv) The morale and initiative of the local staff may be affected as they would have to obtain approvals for decisions which can be taken here readily by responsible officers. etc. (iii) The executives at the parent company would be overburdened as they would have to take numerous decisions pertaining to the subsidiary.

revolution. (iv) The overseas manufacturing operations of the Korean company would be fully integrated and aligned with its overall international operations. (vii) Stipulate that a certain proportion of the local personnel should be hired by the global company. (iii) The Korean company would not have communication problems which are frequently experienced in joint venture operations.Global Chartered Accountants . Polycentric oriented companies follow the philosophy that the organization located in the host country should be staffed by local individuals to the maximum extent as they are expected to understand more closely their culture. The best people. (iii) To gain access to wide global markets without incurring substantial expenditures on product development in different markets. growth of free trade zones and relaxation of regulations regarding direct foreign investments. (b) Ethnocentric oriented companies follow policies that are primarily home-grown and the management assumes that the practices which work in the headquarters or in the home country are most suitable and should be adopted and pursued in all their international operations. building of plants. (ii) To recover extremely high Research and Development expenditures required in the manufacturing of knowledge-based products from widely dispersed target markets located in different countries.gcaofficial. work ethics and markets. regardless of their home or host country origin. offers optimal advantages. such as dismantling of trade restrictions. Q4 The advantages and disadvantages of undertaking overseas manufacturing operations through a wholly-owned subsidiary company are: Advantages (i) The Korean company would not have to share its profits with any other entity. (v) Legal standards of safety and quality of imported goods may be imposed to prevent global companies from importing goods which are considered to be of a substandard or inferior quality. Major issues of headquarters and subsidiaries. Q5 The significant objectives of multinational companies in pursuing strategies of globalization are: (i) To achieve significant economies of scale in management and other functional operations of the global companies. Q 6 (b) The different types of Political Risks which would adversely affect the security and long-term profitability of direct foreign investment in a third world country are: (i) Domestic Instability – Domestic instability relates to the risks of subversion. (vi) Impose stringent conditions of deletion programs. (iv) The wholly-owned subsidiary may not be able to avail the benefits of the overseas partner’s valuable knowledge and expertise of the domestic conditions. research and development are viewed in the entire global perspective. Consequently. (ii) The risks of nationalization and losses are much greater in the event the host government introduces major changes in its policies towards foreign investments. (vi) To derive maximum advantages of access to cheap sources of labour.GCA (iv) The government may impose restrictions on the maximum per cent of shares that a global company can hold in a domestic business entity. Geocentric orientation is an approach in which the management considers that a worldwide focus. (ii) Foreign Conflict – Foreign conflict pertains to the extent of hostility and disputes that a www. (iv) To seize the advantages offered by growing economies. Disadvantages (i) The substantial amount of investment may prevent or discourage the Korean company from undertaking wholly-owned overseas manufacturing operations. raw materials and energy. (v) To enter into widely diversified markets and achieve maximum profits through transfer pricing and tax concessions. local markets and distribution channels etc. such as raising of funds. should be used to solve company problems. subsidiaries in various countries operate under the directions of locals and are controlled by the parent company through well-conceived financial reporting systems. Q 6 (a) Political risk is the probability that political decisions or events would negatively affect the long-term security and profitability of an investment in a foreign country. (ii) The Korean company would not have to share its technology and know-how with any foreign entity. both at the headquarters and also in the host countries.org . internal conflict and government crisis. (iii) It may be difficult to recruit suitable high-level technical and management personnel in the host country in the absence of benefits of equity ownership.

(ii) Phenomenal improvement in communication and transportation technologies have resulted in rapid movement of goods and consequent reduction in transportation costs. inflation. (iii) Political Climate – Political climate can be affected by radical shifts in government policies and can be influenced by the number of political parties.GCA country has with other country(ies). Corrective action may not produce positive results because many foreign subsidiaries operate in conditions which are very different from those of the parent company. their level of maturity. Q 9 (a) The factors which have contributed to the increase in importance of International Trade in the preceding 3-4 decades are: (i) Reduction in tariffs. Diverse Economic Conditions The parent company has to adjust operations to the situations prevailing in the countries in which the subsidiary companies are located. repatriation of capital and dividends. nature of competition. (v) The importer’s bank pays the proceeds to the exporter’s bank. labor costs and currency implications render the tasks of setting standards and evaluating performance of foreign subsidiaries extremely complicated. political and economic agenda and approaches towards free or restrictive foreign investment policies. (iii) The exporter ships the goods and obtains the Bill of Lading / Airway Bill. including the government.org . Uncontrollable Factors Planning and control is effective only in situations when timely corrective actions can be taken in the event of deviations in performances. (iv) Global standardization and worldwide brand building with local adaption have created significant market opportunities in different countries. (v) www. (ii) To achieve economies of large-large production opportunities available in certain countries. type of the products. (ii) The importer’s banker promises the exporter to pay the specified amount on behalf of the importer. Q7 The types of complexities generally encountered by parent companies in the planning and control of operations of their foreign subsidiaries are: Physical and Cultural Distances The geographical and cultural distances separating the parent company increases the duration. (iii) To eliminate or achieve economies in costs of transportation of raw materials and finished goods. Differences in size of the market.Global Chartered Accountants . (vi) To achieve advantages of lower financial costs in certain countries. (iv) To overcome high tariff rates and various non-tariff barriers. (v) Level of Corruption – Level of corruption refers to the degree to which the various institutions. (iv) The exporter delivers the documents to his banker. Q 8 (b) The major advantages of establishing manufacturing facilities in foreign countries are: (i) To utilize cheap raw materials.gcaofficial. (v) To obtain available tax concessions and tax holidays. exchange controls and liberalization of trade and investments have resulted in making the imported products competitive in local markets. including currency fluctuations. (iv) Economic Culture – Economic culture refers to the risks of significant shifts in policies concerning government involvement and control of economic activities as well as financial markets. open to bribes and involved in various types of fraudulent and unethical practices. regulation of prices of essential inputs and development and maintenance of infrastructure. expenses and barriers in communications between the headquarters and their foreign subsidiary companies and creates difficulties in the planning and control process. energy and human resources. quotas. are perceived to be untrustworthy. Q 8 (a) The steps involved in the operation of a letter of credit in their logical sequence are: (i) The importer obtains the bank’s promise to pay the specified amount on behalf of the importer. (vi) The exporter’s bank endorses the documents (bill of lading/airway bill) and delivers them to the importer’s bank. (iii) Development of free-trade zones such as European Union and North American Free Trade Agreement have resulted in increase in international trade owing to preferential movement of goods and dismantling of high tariff regimes.

(iv) The country may be involved in conflict. fast food. edible products and luxury goods. Q 9 (b) The Competitive Forces stated by Michael Porter are: (i) Potential threat of entry of new competitors (ii) Potential threat of substitutes (iii) Bargaining power of buyers (iv) Bargaining power of suppliers (v) Rivalry among existing competitors Q 10 (a) The different types of Political Risks which should be evaluated by Accurate Engineering Limited are: (i) The assets may be nationalized or expropriated by the government of the host country. (ii) The risks of losses on account of devaluation in the currency of the host countries are minimized. relaxation in any way could impact the demand. it would prefer to establish branch operations. Q 10 (b) The MNC seeks to obtain the following advantages by pursuing a centralized financial decision making policy: (i) The parent Company has superior fund management skills which are not available in the subsidiaries.GCA Substantial expenditures have been incurred on R&D and standardization of manufacturing and marketing techniques by global companies in industries such as manufacturing of pharmaceutical products. (vii) Risk of sovereign default by the host country. (iii) If the MNC does not intend to have a long term presence in the foreign country. (ii) If the legal and accounting formalities of the branch operations are more simple vis-à-vis those involved in a subsidiary company. (iv) If the amount of investment involved in the foreign country is of a nominal amount and it may be advisable to set up branch operations instead of a subsidiary company. (vi) Frequent changes in the government with far reaching shifts in its policies. Q 11 Q 12 (a) It would be advantageous to establish branch operations in a foreign country instead of an overseas subsidiary company in the following situations: (i) If the foreign business is not expected to be profitable in the initial years and therefore the losses of the subsidiary company can have a negative effect on the image of the MNC. telecommunications. social and political unrest and terrorist activities which would be detrimental to the interests of Accurate Engineering Limited. (iii) The funds can be promptly invested in avenues which offer optimal returns. energy development.gcaofficial. (vi) Important raw material exporting countries now have a growing class of affluent citizens and foreign residents which have resulted in the creation of substantial markets for import of vehicles. (iii) The country may face domestic instability such as revolution. The methods of payment in the order of preference for the importers are: (i) Consignment (ii) www. (vi) The parent company can obtain facilities on more favourable terms from the bankers due to the substantial size of the pooling of funds. disputes and war with other countries which would cause disruptions in business. (v) The pooling of funds can help to implement a more coordinated and effective overall fund management strategy. etc and such companies seek opportunities to apportion these costs to markets in different countries. (iv) The risks of expropriation of funds by the governments of the host countries are reduced considerably. (v) Deterioration of relationships between the investor country and the country in which the investment is proposed would pose difficulties in the business operations of Accurate Engineering Limited. (ii) The Asian country may impose stringent exchange control restrictions which would make it difficult to repatriate the profits and investments. construction materials. equipment. (v) If it is advisable to have a low operating profile to achieve the business objectives.org .Global Chartered Accountants . (viii) Maintenance of the tolerance standards.

(iv) The tax authorities would accept more favourably a market-based transfer pricing policy. cosmetics.photocopiers.GCA Open Account (iii) Usance Letter of Credit (iv) Sight Letter of Credit Q 12 (b) The constraints which act as impediments towards attracting foreign investment in an underdeveloped country are: (i) Poor infrastructure facilities of roads and communications. A multi-domestic or adaptive business strategy is one in which the firm treats each market in a different manner and develops products and marketing strategies which appeal to the varying customs. copyrights and intellectual properties. packaging. etc are not sensitive to differences in cultures and are sold in different markets highlighting similar features and attributes such as quality and convenience. specifications. tastes and buying habits in the different national markets. (vi) Widespread corruption in the government and other social sectors.gcaofficial.Food products such as fast foods. (v) High Risk of political instability in the country. (vii) Lack of education and non-availability of a skilled and competent work force. apparel and clothing. (ix) Uncertain long-term economic and financial policies. (iv) Absence of laws relating to patents. then should the subsidiary raise equity through a resourceful local investor in the host country or should it make a public offering of its shares? (iii) Should the subsidiary be financed substantially through equity investment or should it raise debt financing to meet a large proportion of its capital costs? (iv) www. etc. Real Life Example of a Global Business Strategy . medical equipments. etc. Q 13 (b) The key financial decisions which should be made by the management while contemplating investment in a foreign subsidiary company are: (i) Should the parent company invest in the subsidiary as a wholly owned company or should the parent company retain only a majority interest in the subsidiary? (ii) If the parent company decides to retain only a majority interest. steel.Global Chartered Accountants . chemicals. Q 13(a) A global business strategy specifies a standardized worldwide product and marketing strategy by which a firm sells the same product in essentially the same manner throughout the world by highlighting its main features such as quality. (viii) Absence of generally accepted accounting principles. (ii) Currency depreciation of the underdeveloped country. (iii) High costs of energy inputs and their unreliable availability.org . which are adapted to meet the consumption habits. Real Life Example of Multi-domestic or Adaptive Products strategy . warranty. Q 12 © The advantages of market-based transfer pricing policies are: (i) The individual units would achieve high level of efficiency as they can negotiate most favourable market-based prices as if they were independent units. cement. (ii) The selling unit would make efforts to improve the quality of the products in accordance with the requirements of the purchasing unit. tastes and cultural sensitivities and unique requirements of the different markets. etc. (iii) The performance of the individual units can be evaluated more objectively.

the company also considers designing its products and services to cater to the local differences in tastes and cultures to add maximum customer value and achieve optimal results. including the MNC itself. Major issues such as raising of funds.Global Chartered Accountants . their performance can have far-reaching implications on the financial standing and profitability of the MNC.GCA Should the subsidiary make the borrowings in the local currency of the host country or in any other currency to avail benefits of exchange fluctuations? (v) Should the subsidiary distribute a large portion of its profits as high dividends or should it retain a substantial portion of its earnings to meet the cost of its expansion strategy? (vi) Should the subsidiary raise the bulk of its working capital requirements through borrowings from banks or should it place heavy reliance on trade credit? Q 14 The factors responsible for the MNC’s policy of close control and centralized decision making for the subsidiary companies are: (i) Large size of the subsidiary companies and Substantial Capital Investment .If the products manufactured by the subsidiaries have to conform to stringent quality control requirements stipulated by the parent company or if the operations are of a highly environmentally sensitive nature.Due to the large size of the individual entities and substantial investment of the MNC in the subsidiary companies. (iv) Stringent Targets . (iii) Operations of the subsidiary companies are closely integrated and inter-dependent . At the same time.gcaofficial. There is therefore the need for more centralized control and supervision of the subsidiaries . (iii) The Single Distributor would be able to coordinate promotional efforts and exchange vital information with Alpha Equipments on a continuous basis and in a purposeful manner. Any lapse or mishap by the subsidiary can have far-reaching adverse impact on the standing and reputation of the parent company. The technology is closelyguarded and the parent company wants to ensure maximum security and confidentiality of this technology. Q 15(a) Q 15 (b) A Geocentric orientation is an approach followed by companies having global scale of operations.org .The manufacturing process in the subsidiary companies involves sophisticated technology which has been developed by the MNC at a very high R&D cost. The management of such companies considers a worldwide focus both at the headquarters and also in the host countries to obtain optimal advantages. culture and marketing channels would ensure smooth handling of all marketing operations in a more professional and purposeful manner. research and development are centralised in the entire global perspective. then the parent company would want to exercise more close control of the subsidiary companies. (v) The Single Distributor would be able to maintain sufficient level of inventories as he would have a better perception of the market demand and as a result make prompt dispatches of supplies to the retailers as and when required. The advantages of appointment of a Single Distributer in Pakistan by Alpha Equipments are: (i) The large volume of business would attract a competent and resourceful distributor who would wield considerable influence in the local business community in Pakistan.The operations of the subsidiaries are closely integrated and interdependent and unsatisfactory performance of any one company can have adverse impact on the performance of other group companies. building of plants. (iv) Training and marketing efforts of the retailers located in the various cities in Pakistan would be coordinated in a much more effective manner. (ii) The appointment of a knowledgeable Single Distributor who is conversant with the local business practices. (ii) Access to technology and manufacturing process . (vi) www.

Q 16 (a) The leading Japanese companies have established automobile assembling or manufacturing plants in selected developing countries due to the following reasons: (i) The developing countries are witnessing significant economic growth and increase in population which have created very large markets for various types of vehicles. (iv) Creation and retention of a pool of talented and motivated management team and work force aligned with the strategic objectives of the organisation. access to international communication facilities and well defined legal procedures. www. would be considered favourably as against policies which pursue government ownership of business enterprises.a government having the support of its citizens and enjoying political stability would provide continuity to its economic and financial policies which would be beneficial for MNC. (vi) Assessment of the strengths and weaknesses of the competitors in the different territories in terms of their market share.Global Chartered Accountants . (vii) The logistics of exports including transportation costs would be less cumbersome and more economical.org . competitive advantages and anticipated business strategies. Establishment of automobile assembly/manufacturing plants locally would fulfil the demand/supply gaps in these countries. (iii) Capacity for continuous innovation and research which is a prerequisite for maintaining and consolidating of their global leadership status in a highly competitive business environment. Multinational Corporations seek to achieve the following advantages through policies of centralised cash management and establishment of cash pools at prominent financial centers: (i) Security and Convenience: Centralised cash pools are maintained at major financial centers which offer advantages of political and economic stability. (iii) Relations with other countries .a government which pursues policies of encouragement towards private investment. including foreign investment. (v) Financial resourcefulness with the capability to utilize the funds effectively with sound planning and control structures. (ii) Labour and other manufacturing costs are on the high side in Japan and the high prices of imported vehicles from Japan would be beyond the reach of a large segment of the market.GCA The Single Distributor would have high stakes in the business which would lead to greater effort and a better principal – distributor relationship. convertibility of currencies. Q 16 (b) The following Political Factors should be taken into consideration by a multinational company while evaluating a decision to make substantial direct investment in a foreign country: (i) Form of the Government and its Stability . market segments.gcaofficial. The pooling of cash funds at such locations provides security and convenience of prompt transfer of funds from and to the subsidiaries. their strengths and special customer service skills. (ii) Highly developed marketing skills by way of insight of consumer behavior. (iii) The strong Japanese Yen makes the price of imported vehicles very expensive in the developing countries and would restrict the size of the market (iv) Transfer of technology and creation of job opportunities are viewed favourably by the governments in the developing countries and they offer liberal tax concessions to the Japanese companies to establish assembling/manufacturing facilities in their countries (v) The domestically assembled/manufactured vehicles of various types and models are adapted to meet the local requirements in terms of prices and their suitability for the particular developing countries. share of the market and distributions channels.a country which has good relations with other countries would be considered favourably as it would provide stability and sustained long-term operations for MNC’s business Q 17 Q 18 The core capabilities which are commonly observed in leading global business organizations are: (i) In-depth knowledge of the organisation’s products/services. (ii) Attitude towards Private and Foreign investment .

Q 20 The factors which have contributed to the creation and significant expansion of the Global Markets are: (i) Specialisation of Products – Certain countries have achieved high degrees of specialisation in the manufacturing of specific types of goods which have worldwide demand.gcaofficial.GCA (ii) Availability of Information: Location of cash pools at major financial centers provide advantages of immediate access to latest information of the relative strengths and weaknesses of various currencies. traditions and values of the host country. (iii) Technological advances have made it possible to manage and control business operations in different countries through electronic mail. (v) Global companies seek competitive advantages by locating production facilities of components and parts in those countries where the costs are the lowest. Q 19 Globalization has assumed great importance in the present business environment due to the following reasons: (i) Adoption of free market economic policies by increasing number of countries has created opportunities for capital investment and significant economic growth. (iii) Holding of Minimum Surplus Funds for Precautionary Purposes: The pooling of funds at centralised locations in excess of the transaction requirements of the subsidiaries enables the MNCs to reduce the overall size of the cash pool without any loss of level of protection to any individual subsidiary.Global Chartered Accountants . (v) Acquisition of Services of Competent Personnel: The funds can be managed by highly competent financial managers whereas individual subsidiaries may not be in a position to acquire the services of such executives. (iv) The development of the emerging markets has expanded the demand for products and services worldwide.org . (iii) Economies of Scale – Access to global markets allow MNCs to obtain benefits of economies of scale which are achieved by manufacturing large quantities that can be sold in several markets in different countries. These products are promoted on a worldwide scale through aggressive advertising campaigns to create and expand their global markets. (iv) High R&D expenditures on Products – A number of knowledge-based products involve exceptionally large R&D costs which can be incurred only in countries with substantial financial resources and technical human resource base. services and financial resources. internet and frequent travel by key management and other professional staff. (ii) Rapid improvement in communications have reduced costs of transportation and facilitated quick movement of goods. (ii) Reduction in tariff barriers and relaxation of direct foreign investment regulations – MNCs have been able to increase their exports significantly and expand global markets as policies of liberalisation of trade restrictions and relaxation of foreign investment regulations have received worldwide acceptance. (ii) www. fluctuations in rates of return on financial instruments in various currencies and ease of execution of financial transactions. Worldwide demand for such R&D-intensive products is responsible for creation of global markets for these types of products. customs. (iv) Reduction in Interest Costs: The large size of the pooled funds enables financial managers to negotiate borrowings most effectively and thus reduce borrowing costs. (v) Reduction in Communication and Transportation Costs – Efficient and fast means of communications and reduction in transportation costs have provided considerable impetus to the growth of global markets for a large number of products Q 21 (a) Pursuance of the following policies by Eagle Limited would be perceived favourably by the joint venture partner and other stakeholders and also contribute towards the industrial development objectives of Centralia: (i) Eagle Limited should act as a good corporate citizen and respect the culture.

org . § Enhances the organisation’s reputation and inspires public confidence. (iv) fund raising in certain countries is easier because the debt and equity markets there are broad-based and have greater market depth. (v) The joint venture should be encouraged to develop local R&D which would help to reduce dependence on imported inputs. (iii) Eagle Limited should allow the local partners to set their own rules and regulations and adjust the manufacturing processes to match the skills of the local workers. (iii) because financing can be obtained conveniently in different countries in which MNCs conduct significant business operations. Q1 The advantages of adopting a formal code of ethics are: § Provides an explicit guidance to employees so that they know what is expected from them in terms of ethical behavior.gcaofficial.GCA Eagle Limited should offer its best manufacturing technologies and practices to the joint venture in the host country. www. along with pursuance of the organization’s own business interests. Q 21 (b) Leading MNCs engage in international or cross-border financing and raising funds. (b) The major concerns which prevent organizations from adopting and implementing comprehensive policies of CSR are: (i) Concerns that they may adopt a comprehensive CSR policy while their competitors may not do so with the result that they may incur costs which may place them at a competitive disadvantage. including the management.Global Chartered Accountants . (v) to seize strategic advantages of their presence and relationships in important financial centers in many countries. (ii) because of liberalization of foreign exchange regulations which allows easy and free movement of capital in the important financial centers. The Code of Ethics applies both to the organization as well as its employees in all their business dealings. Winter 2008 Q2 (a) Corporate Social Responsibility involves an organization’s obligation to provide benefits to society in ways that protect and improve the welfare of the society. § Creates an awareness of the organisation’s expectations of proper conduct among all the stakeholders. debt and bank financing in different countries: (i) to obtain financing at overall lower costs. (iv) Eagle Limited should keep the expatriate employees to the minimum strength and provide training to the local managers to enable them to acquire skills and assume responsibilities at all levels. comprising of interest costs and impact of any adverse fluctuations in exchange rates. § Promotes a culture of excellence by demonstrating the organisation’s commitment to ethical behavior. (ii) Organizations may not feel a sense of commitment and urgency to address to the various issues which are of a societal nature. CSR & Business Ethics Summer 2008 Code of Ethics provides a guideline to the moral principles or values by which an organization conducts its business with respect to what is right or wrong. including equity.

(iv) Sales Representatives who are unable to achieve their allocated targets fully should also be rewarded on an appropriate basis. (vi) Reporting on the entire scope of a company’s impact upon the society and the environment is a complex exercise which is beyond an individual organization’s capabilities and scope of activities. the organizational culture and internal policies of individual organizations play a very important role in determining the ethical policies that are followed in the company. www.Global Chartered Accountants . (ii) Issue clear and specific instructions. (iii) The consequences of indulging in unethical behavior should be stated clearly in the Code of Ethics. Business ethics provide guidelines for acceptable behaviour by organizations in their strategy formulation and day-to-day operations. Q4 Business Ethics is a code of moral principles that the employees follow with respect to what is right or wrong from the viewpoint of the organization’s dealings and interactions with its stakeholders.GCA (iii) There are no accepted standards on CSR issues. requiring adherence to the norms of ethical behaviour. The organizational culture and internal policies and systems have far-reaching ethical implications and reinforce the set of values to be upheld by the employees in all their business dealings. (iv) At times it may be difficult to identify the stakeholders and the audience for the CSR reports which may be ambiguous and could undermine the quality of the reports. (v) Belief that efforts of the traditional philanthropists are sufficient to take care of the social needs of the society. Besides generally acceptable values and norms. Q8 Business Ethics are the moral principles of conduct applied in the commercial world. The guidelines for proper ethical conduct are embodied in the company’s Formal Code of Ethics. Q3 Business Ethics (a) Business Ethics refers to the code of moral principles and values which are applied by individuals and organizations in their dealings in the commercial world. Q6 Business Ethics is a code of moral principles that management and employees follow with respect to what is right and what is wrong from the standpoint of the organization’s dealings and interactions with its stakeholders.gcaofficial.org . This would eliminate the ambiguities and help the employees to differentiate between what is considered to be acceptable behaviour and what is unethical behavior. These instructions would be deterrent for the sales representatives and dissuade them from engaging in unethical practices. (v) DEL should sponsor and organize seminars and workshops on Ethics to emphasize the importance of ethical behaviour. ethical and environmental measures. Q5 DEL should adopt the following policy measures to eliminate the unethical practices followed by the sales representatives: (i) Create a written Company Code of Ethics and circulate it to each member of the sales department. Good business ethics are essential for good strategic management as issues of ethics permeate in all areas of strategy formulation. The goal of CSR is to make a positive impact through its activities on the environment as well as all its stakeholders. The standards of ethical conduct may be embodied in the Company’s Formal Code of Ethics. Q7 Corporate Social Responsibility is a form of voluntary business approach that a business firm pursues to meet or exceed the expectations of its stakeholders by adopting social. Business ethics provide guidelines to individuals and organizations to determine whether a particular action is right or wrong. implementation and evaluation.

Management of the working environment Q1 Q2 Q2 Environment Management Environment Management is a systematic approach to minimize the damage caused by an organization to the environment in which it operates.The management of FCL would have to develop necessary competence for identifying opportunities. An increasing number of organizations now adopt concepts of personal and corporate accountability in all aspects of their business conduct. www. Environmental scanning includes assessment of political developments. The Critical Success Factors which would create sustainable long term competitive advantage for FCL and enable the company to obtain a firm foothold in the target market are: (i) Management and Organizational Competence: The knowledge. Company-owned retail outlets would enable FCL to achieve high rates of sales turnover through finely tuned marketing policies and also retain high profit margins which otherwise would be demanded by prominent retailers. development. implementing and monitoring sound corporate strategies. The rapid expansion of information technology has created awareness and enhanced the importance of ethical behaviour in business all over the world. Environment management has assumed considerable importance because all the stakeholders expect organizations to be responsible for the preservation of the environment and management are increasingly being held responsible and liable for their organization’s environmental performance. It needs to manufacture products which would satisfy the needs of its customers who want new and better products at affordable prices. consumers and other stakeholders for adherence to ethical and responsible business practices have led many organizations to make public commitment of their ethical business standards. (ii) Manufacturing Capability and Production Process: FCL should acquire and develop the best manufacturing capabilities and introduce sound technical processes. Marketing programs would have to be developed to meet the needs of the customer groups. (iii) Skilled and Motivated Employees: FCL must adopt sound policies relating to hiring. insider trading and discrimination in dealing with employees are considered to be violation of acceptable ethical behavior.GCA An ethical approach has become increasingly necessary both for corporate success and a positive corporate image. poor employee health and safety procedures. including insight in FCL’s strengths and weakness and pursuance of appropriate corporate and business strategies to achieve the objectives would be critical success factors . the objectives and role of FCL. Ability of the Institutional Marketing Division to develop a supply chain of reliable vendors who can manufacture products of the required specifications to be sold to the institutional customers would also be a critical success factor for FCL. (iv) Marketing Know-how and Promotion Strategies: Market research and knowledge of the target market is essential for sustained growth in sales. economic trends and social and cultural influences which would affect the organization. Environmental Scanning is the process of collecting information about the external marketing environment in order to identify and interpret potential trends. formulating. It includes analysis of collected information to anticipate whether the trends represent opportunities or threats. performance evaluation. creating a supporting organizational structure and mobilizing resources.Global Chartered Accountants . causing harm to the natural environment.Misleading advertisements. skills and attitude of the management relating to understanding of the home textile industry.gcaofficial. These policies would promote motivation and commitment of the employees at all levels towards the achievement of the objectives of the company. working environment and compensation of its employees. poor product or service safety standards. Pressures from employees. Environment management involves reducing pollution/waste and consumption of natural resources in judicious manner.org . training.

www.GCA Q3 Successful companies must take the following measures to retain and consolidate their competitive advantages vis-à-vis their competitors by: (i) Developing. (ix) outsourcing processes/ manufacturing of components to low cost suppliers if quality control measures can be implemented.org . (vi) improving machine and worker efficiencies. (iii) relocating facilities to areas which have lower costs. Strategic Mangament & Planning Summer 2008 Mission Statement Q1 Q2 EWCD is committed to the development of human capabilities through the sharing of knowledge and application through service. It seeks to prepare individuals who would be exemplary doctors and nurses. (v) Protecting their intellectual property rights and ensuring that they are not infringed by any unscrupulous competitors. all dedicated to provide meaningful contribution to society in the treatment of diabetes. (iii) Making continuous efforts to improve their performance capabilities in all spheres of their business activities and achieve competitive advantage. (iv) Providing superior and value-added products/services to their customers as compared to the competitors.Global Chartered Accountants . retaining and motivating a cadre of corporate leadership which has a strong value-driven vision of the company’s mission. (vii) re-engineering processes to eliminate activities and bring cost reductions. (vii) Stating clear performance standards and fair and equitable reward systems to the employees to obtain high levels of motivation. (viii) hiring contract workers with the objective to reduce labour costs. (vi) Training and development of employees and empowering them to achieve the company’s objectives and share the company’s values. through excellence in research and education. (iv) improving capacity utilization to achieve economies in costs. (v) introducing modifications in production designs to reduce costs.gcaofficial. (ii) negotiating with existing suppliers of raw materials and components for more favourable terms. (ii) Creating an efficient and flexible organizational structure to achieve the objectives of the company in changing business environments. The economies in production and operating costs can be achieved by focusing in the following areas: (i) exploring alternate sources of cheaper raw materials and components. (x) adopting efficient inventory management practices such as just-in-time inventory management techniques.

gcaofficial. Strategic Level Decisions § decisions are concerned with long-term goals and future direction of business. supervisors and workers to link the tasks and efforts of the individuals and groups to implement and achieve the strategic plans. They are enduring statements containing: �business philosophy �unique purpose �goals of business The above are inter-twined with the competitive advantages which distinguishes it and sets it apart from others. § decisions are more conceptual and have elements of uncertainty. schedules and resources. (ii) Human Resources: Human resources with necessary skills should be deployed in appropriate positions. Strategic plans and strategy implementation have to be synchronized to perform in close interaction to achieve optimum results. equipment and work techniques necessary to deliver the products or services. Q 5 (b) The essential elements which should be considered by the management of PPSML for creating good relationship between formulation of strategic plans and strategy implementation are: (i) Organizational Structure: Organizational structure creates the formal pattern of interactions and coordination amongst the management. Q 5 (a) Strategy formulation policies can be successful only if the strategic plans are implemented effectively by converting the plans into well-conceived actions designed to achieve the objectives of the organization. are as follows: (i) Vision and Mission Statement of a firm is inextricably inter-linked with its management philosophy. Q3 Tactical Level Decisions § decisions are concerned with short to medium term objectives. (b) The drawbacks of adopting Vision and Mission Statements of more successful rival companies. (ii) The imitated version of a Vision and Mission Statement cannot be an enduring or permanent feature and frequent lapses or deviations in actual performance are bound to create resentment and suspicion among the internal and external stakeholders.GCA Operational Level Decisions § decisions are concerned with day-to-day systems and procedures. Q4 (a) Vision and Mission Statements are manifestations of the unique identities of an organization. The management should ensure that the Organization Structure is suitably integrated for achieving harmony among the various functions and greater co-ordination at all levels. § risks of failure of decisions are moderate. personnel. § decisions are taken at the highest management and board levels. with certain changes and modifications. for effective strategy implementation.org . § decisions have far-reaching consequences and are therefore of considerable importance. purpose of business and distinctive capabilities which cannot be replicated in their entirety by other firms. § decisions are more structured and are of a routine nature.Global Chartered Accountants . § decisions involve fewer risks. § decisions are often related with implementation and success of strategic decisions. (iii) Technology: Technology comprises the knowledge. § decisions are concerned with overseeing and handling of budgets. § outcomes of decisions are immediate and of short term nature. Technology is an important factor in www.

gcaofficial. Lack of support from the management in providing adequate resources for the achievement of the goals set in the strategic plans.org . Examples: A pharmaceutical company may not incur expensive R&D costs and be satisfied with its existing line of products which are popular. (viii) Absence of a proper system to measure actual performance from time-to-time and compare the results with the targets to take timely corrective measures in the event of any new development or unfavorable variances. Q7 The key factors which contribute towards the achievement of only a limited number of goals envisaged in the Strategic Plans are: (i) Inadequate understanding of the strategic plans and failure at the business and functional levels to realize that sustained and coordinated efforts are required to achieve the goals. middle and operational level of management leading to poor goal definitions and unawareness of the departments role in achieving the goal. leading to lack of involvement of the management at the business and operational levels who feel that they are not on board in the strategic planning exercise and therefore there is lack of “ownership” of the plans and goals from their side. organizational as well as human.GCA strategy implementation. A beverage company may prefer to defer advertising expenditures to reduce the costs and report high profits. (vii) Inability to integrate and coordinate the various functions of research and development. (iii) Weak organizational culture. production. the company may lose the efficacy of its brands and competitive advantage to other more aggressive competitors. (vi) Pre-occupation of the operational level managers with the achievement of their short-term targets and lack of awareness of the contribution of their own efforts towards achievement of the overall objectives. (v) Poor Communication and lack of coordination between the top. The management should ensure that appropriate and adequate technological inputs are available to support the performance necessary to achieve the objectives of the strategic plans. the long-term performance would suffer as new and more effective medicines are introduced in the market by the competitors. (ii) Poor allocation of resources. However. (v) Monitoring and Control Systems: Appropriate system should be established to ensure that progress is monitored against the established standards on a continuous basis and deviations if any. (iv) Consideration of the strategic planning as a ritual exercise and not as a day-to-day sustained effort for achievement of the objectives of the plan. (iv) Decision Process: Decision processes are required for the resolution of problems encountered in the operations of the business and achievement of the objectives of the strategic plan. Q 6 (a) Q 6 (b) Mission-oriented business strategists do not view the strategy of short-termism outlook favourably because it ignores the principle that long-term economic maximization of wealth and pursuit of objectives on a sustainable basis cannot be achieved by maximizing economic wealth in each of the individual short-term periods. (vi) Reward System: A well-conceived reward system comprising salaries. benefits. promotions and recognition should be developed to provide necessary motivation to the workforce for successful implementation of the strategic plans. in the long-run. are identified for taking timely corrective actions. Although this would result in high profits in the short-term.Global Chartered Accountants . HR management. procurement. Sound policies and processes should be developed to ensure that all significant decisions are taken on a timely basis and in a co-ordinated manner. Q 8 (a) Companies accord importance to the pursuance of a formal Strategic Planning Process to achieve the following www. indifferent attitude and lack of commitment and motivation on the part of the line managers towards the achievement of the goals. marketing and finance with the result that these activities are working independently and at cross purposes. Decisions relating to allocation of resources are particularly important for strategy implementation because timely availability of resources are crucial for the success of strategic plans.

(v) A formal Strategic Planning Process is essential for optimum coordination of the corporate. (ii) A formal Strategic Planning Process enables the company’s top management to be involved in proactive thinking of the business objectives and taking coordinated actions relating to deployment of resources to achieve its strategic goals. business and functional strategies for achievement of the Company’s objectives. Human Competencies and Skills: These are interpersonal competencies and skills which enable managers to work effectively with other employees as team players. (iii) Availability of Financial Resources: Adequate financial resources should be made available in time for implementation of the strategy. The steps in the implementation of a well-considered Business Strategy are: (i) Organizational Structure: Organization Structure is suitably integrated for achieving harmony among the various departments and functions and co-ordination at all levels. the management conducts an Appraisal of the company’s internal and external environment. performance and management of day-to-day activities and for understanding the manufacturing operations. Q 8(b) In the formulation of a well-considered Business Strategy. (iv) Technology: Appropriate technological inputs are made available to support the performance necessary to achieve the objectives of the strategic plans. medium-term and longterm targets for achievement of the company’s objectives. (ii) Human Resources: Human resources with necessary skills and proper motivation are deployed in appropriate positions for effective implementation of strategy. (iv) A formal Strategic Planning Process is essential to create alignment of the company’s short-term. (iii) A formal Strategic Planning Process ensures the participation of management and the staff who are seized with the task of achievement of the business objectives. Human Skills are important for front-line managers because they have to liaise with the workers as well as with other managers. Q9 The different types of competencies and skills required by front-line operational managers of an automobile manufacturing and assembly unit are: Technical Competencies and Skills: Technical competencies and skills are necessary for knowledge of procedures and rules. The staff at all levels develop understanding of the productivity-reward relationship in the strategic plans which increases their motivation and reduces the adverse impact of resistance to change. Technical skills are essential for applying the procedures for routine work.Global Chartered Accountants . (vi) Monitoring and Control Systems: Appropriate systems are established to ensure that progress is monitored against the established standards on a continuous basis and deviations if any are identified for taking timely corrective actions for implementation of the strategic plans. quality control. www.gcaofficial. The company can make well-considered strategies and adopt measures to seize the opportunities accruing from its internal and external strengths and also reduce the various business risks. such as setting work priorities.GCA objectives: (i) A formal Strategic Planning Process helps to indentify the opportunities and risks involved in the company’s business. These skills are important for the front-line managers because they have to guide and supervise the production workers. meeting schedules and conserving resources at the floor level.org . (v) Decision Process: Sound policies and processes are developed to ensure that all significant decisions are taken on time and in a coordinated manner. Human competencies and skills also include communication skills and the ability to motivate and lead subordinates and ensure discipline. For this purpose SWOT Analysis may be carried out in order to find ways for (a) exploiting the company’s strengths to help achieve short-term and long-term objectives and (b) reviewing the weakness and threats faced by the company from the following standpoints.

(iv) Play a pioneering role in introducing the latest technologies and textile machinery in the country. (e) they are forward looking visionaries and are continuously searching for means to change their strategic direction. (iii) Minimize the time involved in the stages of Designing. (d) they are always making efforts to develop new and innovative products to provide greater customer value. Tactical Plans pertain to the current and short-term activities performed by low-level managers which are nevertheless of vital importance for implementation and achievement of the objectives of the overall strategic plans. (c) they are able to anticipate threats from competitors and seek to respond with new or better products/services to sustain their competitive advantage.GCA Q 10 Unique Textile Mills should include the following objectives in its strategic planning process: (i) Maintain and consolidate its leadership status as designers and manufacturers of high fashion fabrics.Global Chartered Accountants . (v) New distribution channels: Create a network of company-owned retail outlets for distribution of exclusive high-value fabrics. (vi) Reduce the cost of manufacturing and venture into vertical integration Q 11 The distinguishing characteristics of organizations which pursue innovative corporate strategies are: (a) they compete in the market on the basis of their differentiated superior products/services as compared to the offerings of other companies. Q 12 (c) Tactical Planning refers to the day-to-day plans regarding implementation of the different work activities required to achieve the objectives of the strategic plans. (b) they are continuously searching for new growth platforms for their business and are several steps ahead of their competitors. Bring new designs in the market well in advance of the competitors.gcaofficial. (ii) Innovate. Manufacturing and Marketing of the products.org . or are unreliable in meeting their commitments or are few in number and dictate unreasonable terms or charge exorbitantly high prices to take advantage of the buyers who are heavily dependent on the inputs from these suppliers. (f) they value management cohesiveness at all levels and both the strategy planners and those involved in implementation of the strategy work in close collaboration. Q 13 Stringent Cost Reduction and Austerity policies may be in conflict with the interests of the stakeholders in the following situations: (i) Customers § the products may be of an inferior quality and perform unsatisfactorily § the products may have a very limited useful life § sub-standard quality of raw material inputs and packaging may be harmful for the health of the customers (ii) Employees § working conditions may not be conducive for the health of the workers § poor maintenance of machinery and equipment may cause injuries and accidents § www. (d) Backward Integration Strategy seeks the ownership or increased control of the firm’s sources of important raw materials and other critical inputs and supplies. Backward integration strategies are pursued in situations where the suppliers are unable to adhere to the buyers specifications of quality.

Q 16 The distinguishing characteristics of Strategic Decisions and Tactical Decisions are: (i) Strategic Decisions determine the course and define the contours of the company’s main objectives. (iii) To achieve synergies in domestic and global operations across different industries which offer complementary advantages. (v) To diversify operations and spread risks over a more wide area. Substantial investment should be made in Star business divisions to maintain and strengthen their dominant positions. The Cash Cows are ‘milked’ as a source of corporate resources for utilization of funds in other business divisions which offer long-term growth prospects and in which competitive advantages can be achieved. customers and financial institutions from a position of greater strength.Star business divisions have a relatively large share of the market in high-growth industries and offer lucrative opportunities for growth and profitability in the long-run. Q 15 The principal objectives of mergers and acquisitions of financially strong and well-established international corporations are as follows: (i) To gain access to strategic proprietary assets/technical know-how and exploit these strengths with greater effectiveness. whereas the Tactical Decisions are concerned with the achievement of targets within the framework of the main strategic objectives of the company. It may not always be advisable to liquidate or divest the Dog divisions as their assets can be disposed of only at throw–away prices because of the company’s weak bargaining position. Quite often the Star divisions with the passage of time are relegated to the position of Cash Cows. (ii) Strategic Decisions are made at the board of directors/senior management level. www.GCA inadequate compensation may result in financial difficulties for the workers (iii) Society as a whole § cause pollution and create environmental hazard § lack of interest in charities. The Cash Cows are in a position to generate substantial funds because of their strong competitive position. their requirements of funds for expansion are minimal and they are therefore in a position to generate funds which are in excess of their requirements.Dogs are those business divisions which have a relatively small share of the market and compete in a slow or nogrowth industry. sports and community activities § impose social cost on the society by making improper use of public assets Q 14 The distinctive characteristics of the different types of business divisions in terms of their relative market positions and pursuit of business strategies are as follows: (i) Stars -. Therefore such divisions are often liquidated or divested or subjected to policies of retrenchment to curtail expenditures on salaries and other associated costs. (iv) Strategic Decisions have far-reaching financial repercussions.Global Chartered Accountants . (ii) To gain market power and dominance. Strategies of vertical and horizontal integration. This strategy may pay off if there is a business turnaround at a later stage. Dog business divisions are not able to earn fair profits and generally incur losses. whereas Tactical Decisions have relatively less financial bearing on the company’s results.org . (ii) Cash Cows -. whereas Tactical Decisions have consequences which are of medium-term nature. (iv) To expand the size of operations to obtain advantages of economies of scale and achieve competitive advantages in negotiations with suppliers. (iii) Strategic Decisions have long-term implications.Cash Cows are business divisions which have a relatively large market share but compete in a low-growth industry. (iii) Dogs -. including access to strong distribution channels in expanding and lucrative markets. market penetration and product development may be considered to further consolidate the well-entrenched position of the Star business divisions and to compete aggressively in the market. whereas Tactical Decisions are taken by middle-level managers.gcaofficial. However.

www. (v) financial resourcefulness with the capability to utilize the funds effectively with sound planning and control structures. and also introduce related products (other than small motors). HEL should be prepared to meet the threat of new entrants and adopt appropriate measures to maintain its competitive advantages and face threats posed by potential competitors by interacting closely with its important customers and creating barriers of high switching costs. (iii) capacity for continuous innovation and research which is a prerequisite for maintaining and consolidating of their global leadership status in a highly competitive business environment. the threat of new entrants who may pose competitive challenges to HEL is always present. (iii) Threat of entry of new competitors – HEL is presently earning high profit margins and realizing attractive returns on investments. designs and tooling. (ii) Technological changes – Changes in models and designs of laser printers due to variations in customers requirements can have considerable impact on HEL’s business prospects. (iv) creation and retention of a pool of talented and motivated management team and work force aligned with the strategic objectives of the organization. their strengths and special customer service skills. (iv) Competitive rivalry and prices of Competing Products – Although HEL has significant competitive advantages in terms of quality of its products over its competitors. (ii) highly developed marketing skills by way of insight of consumer behaviour. HEL should adopt appropriate strategies to monitor these threats and counter them effectively.GCA Q 17 HEL should closely monitor the following factors in the emerging business environment in which it operates and its impact in the formulation of its strategic plans: (i) Projection of future demand for laser printers in the international market – The demand for motors by the original equipment manufacturers of laser printers is a derived demand and changes in the demand for these printers can have considerable impact on the business prospects of HEL. (v) Diversification – HEL’s present customer base and product range is considered to be quite narrow. computers. (vi) assessment of the strengths and weaknesses of the competitors in the different territories in terms of their market share. etc. General Summer 2008 The core capabilities which are commonly observed in leading global business organizations are: Q1 (i) in-depth knowledge of the organisation’s products. market segments. competitive advantages and anticipated business strategies. It may like to explore the prospects of marketing its products to other original equipement manufacturers such as manufacturers of photocopiers. continuously enhance its R&D capabilities and introduce necessary modifications in its manufacturing processes. share of the market and distributions channels.org . it should take cognizance of the strategies of its rivals who would want to improve the quality of their products and may offer competitive prices to attract HEL’s customers. This would involve continuous upgrading of technology and improvement of manufacturing process to retain its competitive advantage. This would involve substantial R&D expenditures and investments in additional equipment which would have to be incorporated in its strategic planning process. HEL would have to expand its manufacturing capacity if it anticipates increase in the demand for laser printers or alternatively explore new markets for its products if it foresees decline in demand for these printers in its existing markets.Global Chartered Accountants .gcaofficial. Therefore. HEL would have to keep abreast of these changes.

(ii) Outsourcing may help to reduce the operating costs of SEL. Also enable SEL to improve core activities performance. The disadvantages of Business Process Outsourcing are: (i) Outsourcing involves loss of some control and places excessive reliance on outsiders.Global Chartered Accountants . thus improving their core competencies and the overall productivity. etc The creditors are important stakeholders as they have to provide funds to meet FSML’s requirements.GCA Q2 Q3 The following important points should be considered when one is involved in the decision making process: (i) have a clear perspective of the goals to be achieved. (v) If the level of the performance is not the same then it might result in brand dilution and shift in brand loyalty.gcaofficial. (iii) Outsourcing would enable SEL to reduce the amount of capital investment that it would otherwise have to incur in the facilities which would be provided by the outsourced agency. (iv) Outsourcing may result in disclosure of critical confidential information to outsiders. including the banks. (v) weigh the possible consequences of selecting any one or combination of actions. (iii) analyse the nature of the problem in sufficient detail according to the importance of the final outcome of the decision. (b) Distributors and Customers: The distributors and customers are important as the Company can operate profitably only if it is able to build long-term relationship with the distributors and the ultimate customers by offering quality products and value for money. financing of stocks of sugar manufactured during the crushing season. (d) Employees: The employees are important as the staff have to be trained and motivated to enable the Company to maintain and strengthen its reputation as a progressive company and be able to continue to operate as a profitable entity. are important stakeholders as substantial amounts of finances are required by FSML for making payments to the cane growers. (ii) Outsourcing can result in loss of valuable in-house skills. The advantages of Business Process Outsourcing are: (i) Outsourcing would enable the managers and the staff to concentrate in activities which are of critical importance for the achievement of the corporate mission. purchase of components. www. (iv) examine the various available options. (ii) develop the timeframe for reaching the final decision. (e) Creditors: The creditors. parts and spares. (iii) Outsourcing may result in creation of competition in future. Q4 Key stakeholders of FSML and their importance for the sustainable and long-term profitable operations of the Company are : (a) Shareholders: The shareholders are the ultimate owners of the Company and it is important to maximize their wealth through sustained growth in real earnings and profitable expansion of the business. (c) Cane Growers: The sugar cane farmers are critical stakeholders as the Company has to build ongoing relationship with them for supply of good quality cane according to the pre-determined delivery schedules. (iv) Careful selection of outsourcing companies would help to acquire new know-how and expertise from the outsource agencies as they would be providing similar services to their several customers.org .

(c) Analyses of information and ideas: The information and ideas collected have to be analyzed to assess the alternative courses of action.org . (d) Making of the Decision: This is the most important stage of the decision making process as the decision maker has to select a particular course of action. Reaching the right decision is important because this process involves selection of a particular course of action to the exclusion of the various other alternatives. its role for fair pricing of sugar and ensuring its availability for the consumers throughout the country. It enables them to modify the course of action or revise the objectives etc. Q5 The various stages of the Decision Making Process are: (a) Identification of the objectives: The first stage in the decision making process involves identification of the objectives which may vary considerably. (f) Evaluation of the results of the decision: Decision makers have to evaluate the outcome of the decision. Decisions which cannot be reversed readily and have serious long-term consequences require more indepth and accurate analysis of the data and evaluation of the ideas obtained from the different sources. Q6 The business strategy/policy in each of these situations is: (a) Market Skimming Pricing Strategy (b) BCG Matrix (c) Gap Analysis (d) Product Specialization (e) Conglomerate Diversification or Conglomerate Expansion Strategy (f) Contingency Planning Strategy (g) Multi-brand Strategy (h) Relationship Marketing (i) Test Marketing www. At times the decision maker may require additional information to reach a well-considered decision. (e) Communication of the Decision: Quite often the persons making the decision are different from those who have to implement the decision. (g) Community: The neighbouring community has to accept the Company as a socially responsible and conscientious corporate citizen mindful of its obligations to the community and its overall welfare. It is important at this stage to specify the criteria for measuring the extent to which the objective has been achieved. maintaining law and order particularly during the crushing season.gcaofficial.Global Chartered Accountants . Consequently it is necessary to issue instructions to all individuals who would be affected by the decision or who would be required to implement the decisions.GCA (f) Government: The government officials at various levels play an effective role for the smooth operations of FSML for movement of heavy traffic. (b) Collection of information and ideas: The importance of outcome of the decision would determine the extent of the efforts that should be made to collect the information and ideas and the degree of accuracy of the input data required to reach a well-considered decision.

The process of scenario planning on the basis of different assumptions enables the company to realign its corporate strategy quickly in the changing business conditions. formulate corporate strategy.GCA Q7 Q8 Scenario Planning is a technique which involves the process of identifying alternative scenarios in the future. (ii) Place greater focus on core value-added activities of the business as the ancillary activities are outsourced to external suppliers. Business firms expect to derive the following advantages by outsourcing of selected business activities to external entities: (i) Reduce requirements of capital investment and human resources as the facilities and services are provided by the external entities to whom these activities have been outsourced. and on the basis of different assumptions that the strategists may anticipate in the future.Global Chartered Accountants . (iv) Derive benefits of the particular expertise and innovations of the external entities who provide these services. the objective is to re-evaluate the relevance of the strategic objectives which would be valid for different outcomes/events as they unfold from time to time. (iii) Achieve cost economies as the suppliers of the outsourced activities are able to obtain the advantages of economies of scale.Rather. www.gcaofficial.org . The purpose of scenario planning is to avoid formulating corporate strategy on the basis of a single future outcome which may not materialise.

org .gcaofficial.Global Chartered Accountants .GCA www.

org .Global Chartered Accountants .GCA www.gcaofficial.

Q. lawlessness etc. These had to be arranged in order of preference for the importer in descending order. Very few touched on the important point of circulating a written Code of ethics.Winter 2010 General: the paper was well designed and comprehensive.5 (b) Students had to list the obstacles in attracting foreign investment in underdeveloped countries. etc. Students were required to give measures that DEL should adopt. • Sales targets should not be superficially high as that may demoralize the employees. are understood and mentioned. which was completely irrelevant as an organization would not degrade its employees by secretly seeking feedback from customers. Q. The tax implications and long term benefits were not touched upon. It was felt that students were not sure about the meaning of descending. Q.5 (c) The advantages of market based transfer pricing. There are so many factors that make up this answer. at this level it is expected that terms like severance payments. has a separate legal and corporate existence and is not a part of a larger entity with at least 50% shareholding of the parent company. division or section of an entity that is set apart to undertake certain tasks or responsibilities in order to carry on business and derive revenues in a foreign country..1 (b) Establishment of branch operations instead of an overseas subsidiary: Students need to understand the difference between incorporating a branch in a foreign country and an overseas subsidiary.org . • Consequences of indulging in unethical practices should be made clear. All important topics were included and the questions were simply worded so as to help the students in understanding what exactly is being asked.4 (a & b) Both the parts of this question were generally attempted nicely and show that recruitment is a topic that is commonly liked and understood. in order to eliminate unethical practices by sales representatives. Q. Almost all students secured atleast passing marks in www. resulting in improved efficiency. should be sought.6 (a) The easiest question of this paper and a golden opportunity to score quick marks. • Training workshops should be held. Q. Some of the students seemed to be in a hurry and missed to mention some very mandatory points like required qualification or job description.1 (a) This common ethical dilemma was given to test the candidates’ personal ethical and moral judgment. Some candidates were unable to understand the question and in haste mentioned reasons that would lead a corporation to wind up and leave. competition between depts. asked in this question are: fair pricing. Q. easy performance evaluation etc.Global Chartered accountants – GCA BM Examiner Comments Final Examination . so many answers were given in reverse order which resulted in loss of easy marks.gcaofficial. However. Few students scored well. There are numerous factors which a Chinese company would reflect on before going ahead with the decision of whether or not to export. Answers were mostly good however. This shows that concepts are just skimmed through and students do not make any effort to practically understand the strategies. Some candidates mentioned that surveys of hospitals and feedback from doctors. inflation. Q. redundancy costs and ancillary costs associated with closure of business etc. This style of testing the knowledge should be encouraged. A branch is simply a part. The question was mostly attempted well. it is suggested that extensive reading should be done and reference books should be consulted to improve the quality of responses. Students were unable to score high marks in this part as they mostly mentioned benefits like cost savings and lesser legal formalities in case of establishing a branch. An overseas subsidiary however.5 (a) Four methods of payment against imports were given. Most candidates mentioned measures like: • Sales reps should be given written instructions about acceptable behaviour and norms. It is suggested that students consult reference books and improve their understanding of the concepts so that they are able to tackle questions in a better way. Q. Q.3 Students’ knowledge of various business strategies was tested through this question. some are: corruption. others just did guess work. It is reiterated that marks allotted next to each part of each question are checked so that the time to be spent on answering each may be gauged.2 In this question ‘exit barriers’ that prevent going concerns from quitting the business were to be explained. Most students could mention one or two points only. instability of government & its policies. tax benefits.

gcaofficial. Very few actually knew the difference between skill and function. Competitive advantage in service-oriented companies was touched upon by some. Q.7 (a) “Brand Equity” is a well-known concept in management studies but most students gave wrong answers. it was below average. Most answers left a lot to be desired. There are several more of them but most candidates could mention not more than four. Mostly. Most students emphasized on achieving objectives and crafting strategies. updating the skills of Employees through training & development.10 This question again did not require any text book learning just some logical. knowledge & wit. students not being able to do well shows a lack of commitment on their part. It was observed that students talked only about the benefits to the employees like higher prospects for promotion etc. conflict resolution. Benefits to the organization. Q.8 (b) The basic definition of SBU is “an independent unit which has its own resources and products and strategy” and because SBUs have independent objectives they allow the owning conglomerate to respond quickly to changing economic or market situations. Some of the students discussed strategic level decision-making. recruiting the most suitable workforce. Q. Q. Many students incorrectly mentioned that SBU is a department of the organization which plays an important role in achieving its strategy. selective study. It is advisable to take at least the initial five minutes to just read the paper CAREFULLY before attempting to answer it. This usually happens when students hurry to answer after reading two three words of the question.Global Chartered accountants – GCA BM Examiner Comments this part of the question. maintaining a peaceful environment by conflict management etc. students thought that it meant having equal value or same name of many products launched under one brand. Q.org . As for the students’ performance. It seemed like students had difficulty in organizing their responses and hastily tried to get over this part.9 (b) Steps in the implementation of a well considered business strategy were required in this part.7 (b) The Pull Strategy is not an alien concept for anyone having some knowledge of product management.Summer 2011 General: Question Paper was interesting and covered almost all the major topics. systems and resource allocation. although most students attempted all questions but the usual problem of hazy answers led to failing grades. Equity was mistaken for equality. which is not the responsibility of frontline managers.6 (b) This question asked the benefits availed by the licensor by entering into a Licensing Arrangement. communicating effectively etc. failure to read and understand the requirements of the questions and weak expression power were the major reasons for below standard performance. The same points were repeated in many different ways. These can not be categorized as skills. Despite the fact that this question pertained to basics of Business Management. the true essence of distinguishing oneself on the basis of good quality service did not come out. This manifested in the form of a lengthy answer but not the one which was desired. Students ignored important areas like policies. vague and general answers were given. As observed in the past.8 (a) The objectives to be achieved by Human Resource Managers are several including fair compensation management. Those who had a fair idea could not express themselves due to lack of reading. Q. The response was generally satisfactory. motivating employees. Q. Most common error here was that students gave the benefits availed by the Licensee instead of the Licensor.1 (a) The question pertained to skills essential for frontline operational managers. Some had no grip on the concept of strategic planning. Q. 3-4 points were created out of one. Many students did not understand that HR manager’s duties of strategy formulation and implementation are being discussed and included points such as maintenance of personal records etc. clients and overall business were often ignored. However. inadequate preparation. www.9 (a) Students were lost whilst attempting this question. Q. Skills essential for frontline operational managers include resource allocation. Final Examination . It just required students to give a pointwise enumeration of advantages of conducting training. It is a strategy in which promotional expenses are incurred with the aim of attracting potential consumers and reduce reliance on sales persons. although both of these are basic topics of business management.

objectives like cost cutting. Many students knew the basic concept and the bases on which the markets are divided.gcaofficial.6 (a) Market Penetration proved to be a difficult topic as very few students were able to define this simple term which means increasing market share/sales volume by lowering prices. Most candidates were able to identify the model that would be apt in each scenario. Advantages like better working relationship. What benefits do organizations reap by “Employee Participation”? Most candidates mentioned Employee motivation and commitment as the main benefits. distinguishing characteristics of organizations which pursue innovative corporate strategies were required to be identified. Q. like formulating plans for making the employees successful. transparency. incomplete and weak. Majority of the students referred to generic objectives irrespective of whether they were strategic. Q. price reduction. Very few students could specify that this policy is adopted when a firm has excess capacity and is in a position to achieve economies of scale or when cost reduction is possible by using new technology. Q. Q.7 In this question. tactics and goals. those who were not aware of the basic concept. They focus their strategies on the future and are able to anticipate the threats and opportunities to better handle market www. objectivity and image of the bank etc.2 (a) Porter’s Five Forces Model of Competition: in this question. Q. were not of much relevance. Some students mentioned 2 or 3 models under each scenario which were contradictory and defeated the purpose of the question.5 (a) Unfortunately. better services and technological advancements. Q. Innovative and forward looking companies are continuously coming up with new products. These points were rephrased and broken down into 3-4 points with the same matter being repeated in different words. effect on workload. were less frequently mentioned. its effects on the organization and then explain what considerations should a HR manager keep in perspective while pursuing a policy of downsizing. Some of the better replies simply discussed fulfillment of future requirements but missed out key points such as identification. etc.5 (b) This part of the question required mentioning advantages of formal succession planning. Most students emphasized on payment of due compensations and the legal and social consequences. However.4 (b) Most of the students mentioned the basic reasons for undertaking market research and scored good marks. the reasons to support their choice were brief. Performance in this part was good as most of the students could frame answers based on their general knowledge and such answers did fit in. Q. Many students wrote that it is the taking over and handing over of duties by a new employee when the old employee resigns or retires. Q.2 (b) Four strategic objectives of a leading cotton fabric manufacturer were required. As discussed in part (a). ended up stating wholly irrelevant points. majority of the examinees were not clear about the concept of Succession Planning.4 (a) Students did have a fair idea about ‘market research’ but definitions lacked substance and it was apparent that many students had difficulty expressing themselves.6 (b) The concept of Market Segmentation was better understood as the students were able to produce average. hardly anyone did justice to the question. training etc.Global Chartered accountants – GCA BM Examiner Comments Q.org .3 This question required the students to define downsizing. Important considerations like employee morale. However. students were given three different scenarios and they had to identify and highlight the salient features of the model of competition that would be appropriate in each scenario. However. greater willingness to implement the decisions. Q. grooming. discounts etc. Wholly irrelevant answers were given. this part was better handled. Hence. Some students confused Market Penetration Policy with Market Skimming Policy. Most candidates were not aware of the difference between strategies. Most students could write that downsizing means reducing the number of employees and it results in a flatter hierarchical structure. although it is felt that students have to thoroughly read and understand these topics to be able to produce good answers in a specific scenario and to express themselves better. operational or tactical. were missed out. Students didn’t realize that leading firms/companies capitalize on their established reputation and premium quality of their products/services. while discussing matters requiring consideration of the HR manager. Many students confused “Threat of New Entrant” with “Threat of Substitute Product”. Q. reducing the need for supervision etc.1 (b) A very basic yet interesting question. if not good answers.

monitored and reviewed as four different points. Backward Integration Strategy: Most of the students gave appropriate definition of the concept with relevant examples. interpersonal and communication skills. many irrelevant points were mentioned. the students were required to list the key financial decisions that need to be made by MNCs contemplating direct investment in a foreign country through a subsidiary company. Other important points like safeguarding access to specialized technology and highly interdependent nature of operations were mentioned by very few candidates. Some of the students were well prepared and produced really good answers. where a single point would have been sufficient. whereas relevant points were missed. However.Global Chartered accountants – GCA BM Examiner Comments requirements. Some students offered long winded explanations. and good management skills were mentioned by most of the students but appropriate explanations were often missing. Skills like problem solving.10 Students were fairly able to list the responsibilities which employers must fulfill in order to ensure that issues of Health and Safety are addressed adequately in a manufacturing environment. Many students wrote 4 to 5 points. The students must understand that such techniques cannot impress the examiner and simply result in wastage of time. Q. Q. without understanding the precise demand of the questions. experience and knowledge of the business. This question required the candidates to specify the critical skills required for the position of Director Public Relations.1 The Public Relations job means moving people to action by creating credible and meaningful relationships between an organization and the people and groups important to its success. Environmental Scanning: Most of the students were not clear about this concept and described it as an exercise to control environmental pollution and keeping the world clean! Tactical Planning: Many candidates defined it as strategic level decision making and planning and implementation at management level. multi-tasking. Most of them emphasized on R & D and new products. A reference to values and culture would have been more appropriate. www. The comments are as under: Business Ethics: Some students confused this concept with that of corporate social responsibility. which were not relevant for this question. For example. although it is quite the contrary. a student wrote that health policy should be crafted. Majority of the candidates emphasized on rules and regulations. Final Examination .8 (a) Majority of the students appeared to be confused while distinguishing between a global business strategy and a multi-domestic/adaptive business strategy.gcaofficial. All such students were apparently placing reliance on guesswork and need to consult good books. However. Moreover. although the requirement was only to identify the characteristics of organizations which pursue innovative corporate strategies. Q.org . writing skills. Q. since the question required eight critical skills and competencies many candidates repeated similar skills using different words. Question-wise comments are given below: Q. implemented. Most of them wrote that companies pursuing global business strategies ‘think globally and act locally’! Multi-domestic strategy was defined as a firm that serves the local market only and does not do business globally. Consequently. combat competition and avoid being obsolete. A number of students incorrectly described it as a medium term plan.Winter 2011 General: The question paper was quite easy and interesting but unfortunately many students had resorted to selective study and were therefore inadequately prepared. leadership. Some students advised about buying health and life insurance policies and bearing medical expenses. Q. Most students mentioned that an MNC adopts a policy of centralized decisionmaking only when it wishes to exercise close control over the subsidiary companies. coordination with senior level executives. the majority seemed to rely on their general knowledge and could produce only two or three valid points.8 (b) In this question.11 Short notes were to be written on four different topics.9 This was one of the most poorly attempted question. Most of the students did not appreciate that their answers should be limited to financial considerations only. very few students explained the situations in which this strategy is pursued. The students lacked conceptual understanding of the terms and gave vague answers.

Q. However. many students also stated the responsibility to pay the salaries and taxes on time as a CSR. This time they were www.7 The major issue with answering this question was that a number of students were unable to understand the precise requirements of the question and defined what skimming and penetration is. Many candidates included all sort of responsibilities in CSR. most of the students wrote “think globally and act locally” but the explanations that followed this sentence were mostly incorrect. irrelevant or vague. For example. However.6 (a) In this question on Geocentric Orientation. While identifying the skills and resources required to pursue a differentiation strategy. the explanations were mostly incomplete or inappropriate. Most of the students had vague ideas of Marketing Intelligence System and believed it to be an informal system of collecting information about competitors. the fact that the company was involved in heavy engineering operations was ignored. many candidates also indulged in repetition to complete the five factors. Q. Q.e. the performance was comparatively better probably because most students were able to respond on the basis of their general understanding and experience. A large number of students confused differentiation with segmentation. The answers to this question strengthened the viewpoint that the vast majority of students resort to selective studies. “Differentiation” was to be explained here. Q.5 (a) Only few students produced appropriate answers and lack of clarity in the understanding of this topic was visible. many students confused it with Backward Integration which is the acquisition of source of raw material.3 (b) This part required definition of Corporate Social Responsibility. Approximately fifty percent of the candidates were able to identify most of the points correctly. instead of listing the situations in which the respective strategy can be beneficially adopted. there were a number of students who had no idea about the concepts of skimming and penetration. the students generally gave a long list of relevant as well as irrelevant points. Q. Q. employees and society. Q.. Q. but many candidates performed poorly. Some students tried to repeat the same points which was a sheer waste of time. In some cases.5 Both parts of this question were challenging as these topics had not been tested in the past many examinations. The candidates are familiar with the basic features of Product Life Cycle. Students were able to correctly point out the disadvantages that Accurate Engineering Limited would experience due to High Employee Turnover. (ii) Some students talked about concepts such as decision support system etc.4 (b) A very basic marketing term.3 (a) The performance in this easy question was good as most of the candidates were able to identify the harmful effects of an Austerity Policy on various stakeholders i.org . Q. Many students picked up the word differentiation and elaborated its dictionary meaning in different contexts without addressing the concept in its marketing parlance.Global Chartered accountants – GCA BM Examiner Comments Q.8 The result of this question was very poor. In identification of sources which help in creating an effective Market Intelligence System. a common mistake observed in many answer scripts was that candidates compared appointment of distributor against opening a subsidiary in Pakistan. Some students got totally confused and discussed the concept of ethnocentric orientation. Q.gcaofficial.5 (b) (i) The performance in this part was average. However. by a Taiwanese company manufacturing photocopier machines. CSR is a well-known concept in business management.4 (a) Overall performance in this question was good. Most of the students were able to define them and were able to give relevant examples.3 (c) This part of the question required five factors which should be included in developing an Effective Accident Prevention and Reporting System for a company. which were not relevant. While explaining Forward Integration. Such basic mistakes are not expected at this level of examinations. Q.6 (b) This part required identification of advantages of appointment of a single distributor in Pakistan. Some of the students just mentioned advantages of having distributors and missed the actual question. Q.2 In this question the candidates were required to explain three types of Growth Strategies. Students attempted this question fairly well. Further.

2 This question required the students to explain the characteristics of the markets and the relative competitive positions of Stars. Unfortunately almost all the examinees had no idea about the exact purpose of these tests and just played around the words. This should be a very familiar topic for anyone studying or related to management/business studies. Again. was the question.Global Chartered accountants – GCA BM Examiner Comments asked to suggest the types of promotional strategies required in different stages of the Product Life Cycle.Summer 2012 General: Overall performance of the students in this paper was not satisfactory. most students were able to discuss the relevant points. Some of the candidates were so confused that they suggested Price Skimming Strategy for the Declining Stage of the product life cycle. and avoid giving irrelevant material. Final Examination . 1 on Critical Success Factors and Q. 2 on characteristics and business strategies of Stars.gcaofficial. growth and maturity stages. Many students just provided the points and gave no or inadequate explanation. clear examples were Q.10 (b) Two qualities of a well conceived selection test were required. Most candidates had no clue. Q. It is quite apparent that intrinsic motivation is lacking in students and appropriate measures should be taken to create interest in this subject. Most students limited themselves to good quality of products and low prices but could not identify other important points. Q. One wonders whether it was lack of thorough reading of the question or flaunting of their knowledge. This exhibit of their knowledge. www.org . Proficiency and Aptitude tests was required to be explained. however.10 (c) In which situation does it become necessary for an organization to dismiss an employee. Many students repeated the same points with variations in emphasis and usage of words. a lot of duplication of points was also witnessed in both parts of this question.3 (a) The Training Needs of employees in three categories namely competent. many students ignored the fact that each factor consisted of one mark only and offered very detailed explanations. Cash Cows and Dogs. Majority of them mentioned more or less the same promotional strategies in the introduction. many students wrote incorrect points and then tried to repeat them in different words. However.9 (a) This was a very easy question and most students were able to secure high marks. The overall performance was reasonable because on the basis of the practical experiences. more than competent and not yet competent to perform in their present positions were to be discussed in this question. For instance “not obeying instructions” and “not following orders of seniors” were listed as two separate points. Many students emphasized quality as a descriptive characteristic of these business units whereas there was no mention of quality in the entire matrix analysis. Q.10 (a) Purpose of Intelligence. In this part also. Q. Also how this training would enhance motivation at all levels was required. Many students gave explanation of Problem Child which was not required. This was a balanced paper with enough margin for students to grab good marks. Cash Cows and Dogs.1 This question required identification of four critical success factors which would create sustainable long-term competitive advantage for a company that is in advanced stage of implementing its facilities for manufacture of home textile products. Another most common observation is that students answer the questions by repeating the text written in questions or by reiterating the same point in different ways. the students lacked specific knowledge and mostly tried to mention generic points. The performance was reasonable although many students also included financial/commercial factors. Q. Q. Students not only displayed lack of proper knowledge of the subject but also poor comprehension.9 (b) This part required description of political factors to be taken into consideration by a multinational. did not gain them any extra marks! Students are advised to use the allotted time wisely. However. Q. ignoring the fact that it was a 10 mark question and only four points were required. Most of the students mentioned market growth and market share but did not mention the appropriate business strategies to be pursued in each case. especially in the case of Intelligence and Aptitude tests. while making direct investment in a foreign country. which should be avoided. Students have a cursory understanding of the major topics but lack in-depth knowledge. Q. But majority of students do not appear to cover the Syllabus comprehensively.

some of the students gave entirely irrelevant answers like types of rewards and basis or criteria on which rewards should be based. Other observations are as follows: • Most of the students gave the difference between local companies and global companies which was not asked in the question. However. Quite regrettably. However. taking advantage of the strengths of the other company. profit maximization. Most of them were able to narrate the objectives such as synergies. Students were required to identify the most appropriate characteristic of each ingredient of the marketing mix for the given category of Consumer Products. the answers did not meet the examiners’ expectations. whereas practically every organization has its strengths and weaknesses. Being students of accountancy.6 This question pertaining to core capabilities of leading global organizations was not as well answered as it should have been. Most students were able to correctly explain the term and also quoted the four situations in which an employee would be guilty of wilful misconduct. However. many students gave incorrect examples also. many students wasted time and left a bad impression by quoting whatever benefit they could think of.7 (a) Most of the students had a clear idea of the reasons why Employees offer strong resistance to major organizational changes and prefer to continue with the existing status.4 (a) Wilful Misconduct was to be explained and situations where an individual was guilty of the same were to be identified. trust and integrity. most candidates had a clear idea of the concept of mergers and acquisition. only those with good conceptual understanding were able to do well and score high marks.7 (b) Quite a number of students confused the concept of Business Ethics with Corporate Social Responsibility. It must be noted that late coming and absenteeism would not be considered as wilful misconduct unless it is done with the malicious intent of foul play and to hamper/paralyze the working of the organization.Global Chartered accountants – GCA BM Examiner Comments Training and learning and development are common and usual organizational activities aimed at improving the performance of individuals. Q. A number of students stated that training is not required for competent employees and extensive training is required for not so competent ones. Therefore. Most of the students could not differentiate between the training needs of the different categories of employees. Distribution and Promotion. Q. Q. Q. presumably because these have been asked several times in the previous examinations.org . it was expected that students would give apt answers from their cognitive awareness and observations if not from text book learning. • Many students listed a large number of “Capabilities” supposed to be possessed by good organizations. The performance in this part was good as the students were able to mention at least some of the points.8 (a) The principal objectives behind merger and acquisition were required to be narrated. whereas they were required to mention the “Core Capabilities”. achieving economies of scale and diversification of risks. majority of the students confused the concept of www. etc. deserted and isolated region.3 (b) A very important issue in Human Resource Management is Reward and Compensation System. Students incorrectly perceive global organizations as trouble-free and limitless entities. Q. mentioned in the question. There was no mention of how specifically to train them or which skills should be provided. such as the need to combat corruption. Q. These decisions are taken by the top management and have far reaching financial repercussions. The four categories were: Price. whereas Business Ethics relates to matters such as honesty. combating competition. Most students had a clear idea of the concept of ‘Strategic Decisions’ which determine the course and define the contours of the company’s main objectives.4 (b) Five security measures were to be identified which the Chief Security Officer should adopt for the security of the employees of a Sugar Mill which is located at the outskirts of a small rural town.5 This was a very interestingly designed question. Consumer Buying Behavior. Corporate Social Responsibility refers to the responsibilities of an organization on social and environmental issues. The aims and objectives of rewards were the issues to be analyzed here. Q. An important point which many students ignored is that any explanation of Wilful Misconduct would be incomplete unless it is mentioned that the misconduct was done on purpose. The most prevalent and common error here was that security was confused with health and safety. Implicitly it is a remote. cost saving. etc. However. Q.8 (b) This part required the candidates to differentiate between strategic and tactical decisions. Just stating that an employee committed a misconduct or an act which harmed the organization is not adequate. Since the question was framed differently from the questions which are normally asked.gcaofficial. Corporate Social Responsibility is not the same as Business Ethics although there are some common grounds between the two. Q.

Many of them described the two concepts by repeating the words as were given in the question and offered very little discussion about when and why does a firm decide to pursue a particular strategy. Q 2 (c) This part required the students to describe the different types of costs that are associated with high rate of employee turnover. The most important reason for such a lackluster performance seemed to be selective study.gcaofficial. political and environmental factors and overlooked important points like projection of future demand. In fact. However. Porter & Ansoff analysis which were entirely irrelevant. It would not yield any additional marks and would result in wastage of precious time. The students generally performed well and identified and described the relevant costs such as training and recruitment costs.Winter 2012 General: The overall performance in this paper was quite below expectations as has been the case in the past many sessions. most answers revolved round earning interest and saving financial costs.10 (a) Highly centralized treasury function allows automation of basic processes and information flows. General understanding of the business environment was required to answer the question. Majority of the answers were quite satisfactory. which were not required. specially when they lack the resources to challenge the market leader or when they do not want to provoke retaliation from the market leader. Generally.9 Performance in this question was below average. some of them confused it with normal HR database rather than HR Skills database. Training and Succession Planning especially with reference to an organization which is about to recruit new workers. some students did not read the question carefully and mentioned advantages of performance appraisal without discussing the main issue. i. Most of the students did not have a clear idea of the difference between a Market Challenger and a Market Follower. imprecise articulation and reliance on rote learning and bookishness were also responsible for the below average result. Some students also included internal factors like skilled human resources which was not required. However. quite often firms are satisfied as market followers. Q 2 (b) This part required identification of advantages of quarterly performance appraisal of skilled workers rather than as an annual exercise.Global Chartered accountants – GCA BM Examiner Comments Tactical decisions with Operational decisions. These costs may be enormous but are quite often ignored. Many students were of the erroneous view-point that a firm would always like to challenge the Market Leader to acquire that position. Final Examination .org . to expand production. Unfortunately. most of the candidates did not read the question carefully. the students performed well. Q 2 (a) This question pertained to HR Skills Information Database and its usefulness in the areas of Recruiting. how often should appraisal be carried out. Most of the students seemed to possess only basic understanding of the issue. Some of them discussed SWOT. The students are advised to adhere to the following guidelines if they really desire to improve their performances: • Cover the whole syllabus. Q 3 (a) This 2 mark question was rather easy and almost all the students met the requirement i. Q.e. Insufficient proficiency of the subject.e. Tactical or Business strategy is concerned with achieving overall success in particular business markets and allocation of resources whereas operational or functional strategy is concerned with the contribution of the particular function or operation towards achievement of the business and corporate strategies. This will enhance their knowledge base and allow them to quickly recall the relevant points rather than wasting time in thinking them over. sophisticated risk management techniques and highly specialized functional competencies. etc. Instead of mentioning the key strategic factors. PESTEL. Q1 A short scenario was given which pertained to a company which is a leading supplier of a small motor which is installed in printers.10 (b) Performance in this question was extremely poor. Some students discussed the advantages from the point of view of employees instead of discussing from the employers point of view. Instead of providing reasons why globalization has assumed importance in the present environment a great number of students mentioned the advantages of globalization. • Develop reading habit and try to read books and magazines other than the prescribed books on relevant topics. Most of them gave very brief answers. It was quite a normal paper as most of the concepts that were tested were the same and remote areas of study were avoided. The candidates were required to identify and explain the factors which the company should strictly monitor to anticipate the emerging business environment (challenges) and which can have a profound impact on its Strategic Plans. Q. competitive rivalry and diversification. They were more focused on social. Q. cost of lost productivity/sales and the loss of competitive advantage. www. to portray the correct meaning of the term Customer Database. • Do not try to deceive the markers by repeating the same points again and again or by producing irrelevant stuff.

In response to part (ii) the appropriate answer was Global.org . Some students broke down the initial stage of investigation into multiple points. many of them jotted down a long list of general clauses instead of those pertaining specifically to franchising agreements. the employee should be discharged. growing competition. So much detail was not required. otherwise it may have serious implications for the employer. such answers are not acceptable. Specialized terms capture the complexity and specificity of business concepts. Q 5 (b) Outsourcing is the buzz word in business these days and hence very relevant. during their training.gcaofficial. Majority of the students had no idea of the concepts of ‘Work to rule’ and ‘First mover advantage’. The question specifically required identification and brief explanation of the various stages. Q 8 (b) Very few students could appropriately explain as to what is meant by a Competency Based Job Description. policies or objectives which the organization was pursuing. They generalized their answers stating that after oral and written warning if the behavior does not show signs of improvement. Usually they mentioned the correct points. enter new markets. In many cases. absolute and comparative advantage. six brief situations were given and the students were required to identify the types of strategies. These were generally missed. increase sales and profitability. Q4 In this question. repeating the same things again and again. While discussing the last stage of Discharge or Termination. Q 6 (a) Most of the students had fair idea of the factors which have contributed to the creation and significant expansion of Global Markets. Many students mentioned the relevant points such as greater specialization but were unable to clearly spell out as to how it results in greater globalization. An average response was seen as most students were able to give 3 or 4 correct answers. etc. overcoming competitive pressure. which is about to launch its credit card. in each of the given situations. However. Quite often the answers were equivocal and mostly mentioned that through marketing. Some of them only listed down possible actions against such employees with few even concluding that HR should try to be polite. There were some students who generated multiple answers. However. some of them also included points which were not relevant such as cheap labour and raw material. launching of credit card. promote brand extension etc. a strategy or an objective. Q 7 (b) This part required the measures which companies take to retain and further consolidate their competitive advantage. Its advantages were asked and most students seemed to have a good idea and answered fairly well. However.e. efficient organizational structure and capable leadership was touched upon by very few students.e. Many students probably tried to use “write what you know” approach and just identified whether the given situation reflected a policy. many students ignored a very important point i. many students wrote ethnocentric. Since the students do come across various agreements. www. the firms introduce new products. Q 5 (a) Students displayed lack of knowledge of the issue namely the stages of dealing with employees involved in serious offences or gross misconduct. Q 7 (a) A below average performance was seen in this part of the question in which the requirement was to provide the objectives that progressive organizations aim to achieve through their marketing strategies. equitable and confidential which was not really required as it was mentioned in the question itself. each describing the different ways the matter should be investigated. Most students were not familiar with the technical business terminology or jargons.e. usefulness of a customer database for a bank. creating goodwill and strengthening relationship with customers were covered by few candidates. Instead. the stages identified by the students were unorganized and indistinguishable. Q 6 (b) This part required the salient features of the terms of a franchising agreement with brief explanation and an example of a franchise relationship. Most students wrote any and every thing about marketing that they knew. that Competency Based Job Descriptions are primarily worker-performance focused rather than work-description focused. that the legal formalities should be complied with while terminating an employee. Some of the important clauses that form part of such agreements are those relating to achievement of desired sales in the defined territory and the undertaking to purchase input materials from the franchisor or a specified supplier. No other words can encapsulate their meaning and if they are replaced by normal “transliterated” words. Many students gave explanatory footnotes in support of their answers which were not required and resulted in wastage of precious time. Objectives such as market penetration. most students gave general answers where usefulness of the database for a bank was discussed with little or no reference to the specific situation i.Global Chartered accountants – GCA BM Examiner Comments Q 3 (b) This question required a very focused answer i. However. Q 8 (a) Students performed well in this question as almost all the students could mention the benefits which BTC (name of company) expects to derive by pursuing a well-conceived policy of good human relations management between the employers and the employees. many students patched all the stages together in one long point. Most students could not mention the most important distinguishing factor i.e. The performance was quite reasonable as majority of the students were able to cover the main points specially those relating to marketing and HR. but Geocentric was also acceptable. After describing the various stages many students stated that the process should be fair. increase in demand and increase in number of wealthy people in the developing countries. then that meaning is lost.

Q 10 (b) The candidates were supposed to identify the main reasons why leading companies obtain cross-border financing. Q 10 (a) This question enquired about the policies which a large conglomerate should pursue while entering the market in a country for the first time.gcaofficial. Some of them wrote that the company should pursue a policy of CSR but did not explain any further. They mostly discussed costs. Newspapers and Billboards. The students didn’t seem to appreciate the essence of this question. Surprisingly. the government and other stakeholders in that country.org . some students also mentioned reasons on account of which crossborder financing is discouraged such as risk of exchange fluctuations and exchange controls.Global Chartered accountants – GCA BM Examiner Comments Q9 This question required Advantages and Disadvantages of advertising in TV. Most of the students could identify low interest cost as the only reason. The performance was quite poor. were rarely covered. etc. They struggled with explaining marketing and production policies rather than getting to the gist of this question and identifying policies which would be looked upon favourably in that country or in other words which would enable the company to gain popularity. Other areas were rarely covered. It was quite easy but majority of the students could only mention one or two advantages and disadvantages in each case. broad based debt and equity markets. by way of a joint venture and which would be perceived favorably by the joint venture partner. Other reasons such as exchange liberalization. reach to the audience/customers and attractiveness of the advertisement. www.