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ZAMBIA INSTITUTE OF CHARTERED ACCOUNTANTS

PROFESSIONAL LEVEL
P5: Strategic Management
June 2010
December 2010
June 2011
QUESTION PAPERS AND SUGGESTED SOLUTIONS

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Table of Contents
JUNE 2010 STRATEGIC MANAGEMENT ................................................................... 3
SUGGESTED SOLUTIONS ....................................................................... 7
DECEMBER 2010 STRATEGIC MANAGEMENT ................................................................. 21
SUGGESTED SOLUTIONS ..................................................................... 24
JUNE 2011 STRATEGIC MANAGEMENT ................................................................. 36
SUGGESTED SOLUTIONS ..................................................................... 39

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ZAMBIA INSTITUTE OF CHARTERED ACCOUNTANTS
CHARTERED ACCOUNTANTS EXAMINATIONS

PROFESSIONAL LEVEL

P5: STRATEGIC MANAGEMENT


SERIES: JUNE 2010


TOTAL MARKS 100 TIME ALLOWED: THREE (3) HOURS

INSTRUCTIONS TO CANDIDATES
1. You have ten (10) minutes reading time. Use it to study the examination paper carefully so that you
understand what to do in each question. You will be told when to start writing.
2. There are FIVE questions in this paper. You are required to attempt any FOUR questions.
ALL questions carry equal marks.
3. Enter your student number and your National Registration Card number on the front of the answer
booklet. Your name must NOT appear anywhere on your answer booklet.
4. Do NOT write in pencil (except for graphs and diagrams).
5. The marks shown against the requirement(s) for each question should be taken as an indication of
the expected length and depth of the answer.
6. All workings must be done in the answer booklet.
7. Present legible and tidy work.
8. Graph paper (if required) is provided at the end of the answer booklet.

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Question 1
Strategic planning is often defined as a process of proactively aligning the organizations resources with
threats and opportunities caused by changes in the external environment in order to achieve prescribed
goals. While it focuses on the future, it also reflects on what happened in the past.
(a) Explain the four (4) aspects that are embedded in the definition of strategic planning. (8 marks)
(b) Point out five (5) reasons why organizations may embark on the concept of strategic planning.
(5 marks)
(c) State seven (7) shortcomings of strategic planning. (7 marks)
(Total: 20 marks)
Question 2
Taifa Bank, a subsidiary of an International Bank has experienced a serious decline in its business
performance. The deposits are down, the loan portfolio has a lot of bad debts and head office is planning
to slash the level of investment in the bank.
Use Porters Five Forces of Competition Model to establish the impact of competition on the overall
performance of the bank.
Explain how Taifa Bank can use Porters Five Forces Model in evaluating why there has been a decline
in performance. (20 marks)
(Total: 20 marks)
Question 3
Chawama Enterprises was established twenty-five years ago. The organization was formed to provide
mining tools to the mines on the Copperbelt and the neighbouring country of Democratic Republic of
Congo. The organization has faced mixed fortunes in its business over the period of its existence. This
is directly attributable to external forces faced over its life cycle both at macro and competitive
environment levels.
There are times when macro environment has been favourable and times when factors relating to
political and economical environment had almost threatened the survival of the organization.
During the world credit crunch, fall in copper prices and ever increasing importation prices of tools due to
weaker kwacha has once again created acute challenges for the organisation.
In wake of the above background:
(a) Evaluate how environmental analysis can help Chawama Enterprises deal with the business
environment? (10 marks)
(b) Explain how Chawama Enterprises can use the Five Forces Model to evaluate how competitive
the firm is. (10 marks)
(Total: 20 marks)

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Question 4
A companys value chain identifies the primary activities that create customer value and the related
support service activity.
Ultimately, it is the customer who derives from the product bought from one company as compared to
that produced by rivals. It is cardinal that a company carries out customer value analysis if it has to
compete favourably in the market place.
Discuss the steps you would take in customer value analysis.
(Total: 20 marks)
Question 5
Introduction
Kitwe City council is one of the councils on the Copperbelt. Its mandate includes maintenance of roads
and walkways, street lighting, council (government) housing provision and maintenance, regulation of
local entertainment clubs and refuse collection among its many roles.
Funding
The council is funded through government allocation and grants. In addition, the council collects various
levies for provision of services to the city residents such as refuse collection and road maintenance.
Management
The council is governed by councilors elected from the various wards within the expanse of the city. In
turn the governing body of councilors has selected a team of professionals who carry out the daily duties
of the council.
Required:
(a) Distinguish how objective setting in Kitwe city council would differ from that of a Private Sector
corporation. (12 marks)
(b) Kitwe city councils objective of regulating social clubs and taverns would encroach on its ability to
collect more levies.
(c) Describe how the council Town clerk can manage the conflict between the two conflicting
objectives. (8 marks)
(Total: 20 marks)

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Question 6
Hassan is one of the Zambias leading detergent manufacturing companies. The firm has more than
twenty-five product types. These have been developed over a period of its ten year existence. Some
products are very successful while others have not performed well. The challenge for the board has
been the formulation of strategy policy in the way the company manages the portfolio of products.
As a newly recruited qualified ZICA Accountant, your advice is being sought to address the following
questions the Product manager has prepared as input into his paper to the Board.
(a) Describe the Boston Consulting Group (BCG) growth vector matrix. (8 marks)
(b) Explain what strategic options are available to Hassan in accordance to the BCG Matrix.
(8 marks)
(c) Outline what limitations the model poses to the Product Manager as he prepares his paper to the
Board.
(4 marks)
(Total: 20 marks
Question 7
Sylva Food Processing company has proposed you as a management consultant. The firm seeks to
implement the balanced scorecard tool in an attempt to monitor performance.
The management of Sylva has no idea about the balanced scorecard model and has approached you for
guidance regarding the approach to implement it and the challenge such a model presents.
(a) Describe the balanced scorecard. (10 marks)
(b) Explain the steps that Sylva can take in designing and implementing the balanced scorecard.
(5 marks)
(c) Evaluate why the cost of implementing the balanced scorecard can outweigh the benefits derived
from the use of the model. (5 marks)
(Total: 20 marks
END OF PAPER

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JUNE 2010
P5 STRATEGIC MANAGEMENT
SUGGESTED SOLUTIONS

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Solution 1
(a) Strategic planning should be defined in four ways which are:-
1. Futurity of Current Decision
It deals with the futurity of current decisions. Strategic planning looks at the chain of cause
and effect consequences overtime of an actual or intended decision that a manager is going
to make.
Strategic planning looks also at the alternative courses of action that are open in the future
and when are made among the alternatives they become the basis for making current
decisions systematic identification of opportunities and threats that to lie in the future and
deciding how best and the bet way to exploit opportunities and avoiding threats.
2. Process
Strategic Planning is a process. It is the process that begins with the setting of
organizational aims, defines objectives and policies to achieve them, and develop detailed
plans to make sure that the strategies are implemented so as to achieve the ends sought.
Strategic Planning for most organisations results in a set of plans produced after a specified
period of time set aside for the development of the plans.
3. Philosophy
Strategic planning is an altitude, a way of life. It is more of a thought process, an intellectual
exercise, than a prescribed set of processes, procedures, structures, or techniques.
To get best results, managers and staff in the organization must believe that strategic
planning is worth doing and must want to do it as well as they can.
4. Structure
A formal strategic planning system links three major types of plans:-
Strategic plans
Medium-range programmes and
Short-range budgets and operating plans
(b) Any five of the following will suffice:
1. Change direction of the company
2. Accelerate growth and improve profitability
3. Weed out poor performers among divisions
4. Flush up strategic issues for top management consideration
5. Concentrate resources on important things. Guide divisions and research personnel in
developing new products. Allocate assets to areas of best potential.

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6. Develop better information for top managers to make better decisions
7. Develop a frame of reference for budgets and short range operating plans.
8. Develop situation analyses of opportunities and threats to provide better awareness of
companys potential in light of its strengths and weaknesses.
9. Provide a road map to show where the company is going and how to get there
10. Setting more realistic, demanding yet attainable objectives.
11. Review and audit present activities so as to make proper adjustments and
(c) Some critical shortcomings are reviewed as follows:
1. Environment may prove different from that expected
Forecasting is not an exact science and plans that are based upon predictions that prove
incorrect may fail. Unexpected events in government action such as a contract cancellation,
a change in labour union activities, a decline in economic activity, or a sudden price discount
by a major competitor all are uncertainties that make planning difficult.
2. Internal resistance
In many organisations the introduction of a formal planning system raises antiplanning biases
that can prevent effective planning. In larger organisations, old ways of doing things, old
rules, and old methods may be so entrenched that it is difficult to change them. The larger
the companies become, the greater the amount of such debris one finds.
3. Planning is expensive
In a typical corporate planning effort of even a medium-sized company a significant effort is
required to do effective planning. The time of many people is occupied and costs are
incurred for special studies and information. Planning is expensive and managers
throughout the planning process must continuously apply a cost-benefit gauge. It is not
possible to apply this equation quantitatively to corporate planning, but the idea should be
kept in mind for it is not difficult to incur costs that exceed potential benefits.

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Solution 2
Part (a)
The Five Forces model can provide useful information in regard to the decline in performance of the
bank. It is worth assuming that forces in the market such as competition has resulted in declining profits,
in ability to attract quality clients and general poor reaction to competitive moves in the market.
Useful information that the Bank can derive is as follows:
Statistical Analysis
1. The Five Forces Analysis allows determining the attractiveness of an industry. The decline in
profitability may be due to the industry becoming less attractive.
2. It provides insights on profitability. The model can assist determine how the forces have driven the
costs up or reduced turnover that the bank can make.
3. Thus, it supports decisions about entry to or exit from an industry or a market segment. This is
helpful for the bank in the context of whether it has been easy for new firms to enter or difficult for
other banks to leave. The combination intensifies competition that may impact on the performance
of the bank.
4. Moreover, the model can be used to compare the impact of competitive forces on their own
organization with their impact on competitors. Taifa bank must evaluate the extent to which the
forces have impacted on their operations in relation to competitors.
5. Competitors may have different options to react to changes in competitive forces from their
different resources and competences. A comparison of how the bank has developed strategic
options in response to the forces can be helpful.
Dynamical analysis
In combination with a PEST Analysis, which reveals drivers for change in an industry, Five Forces
analysis can reveal insights about the potential future attractiveness of the industry. Expected Political,
Economical, Socio-demographical and Technological change can influence the five competitive forces
and thus have impact on industry structures.
Analysis of Options
With the knowledge about intensity and power of competitive forces, organizations can develop options
to influence them in a way that improves their own competitive position. The result could be a new
strategic direction, e.g. a new positioning, differentiation for competitive products of strategic
partnerships.
This, Porters model of five competitive Forces allows a systematic and structured analysis of market
structure and competitive situation. The model can be applied to particular companies, market
segments, industries or regions. Therefore, it is necessary to determine the scope of the market to be

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analysed in a first step. Following all relevant forces for this market are identified and analysed. Hence,
it is not necessary to analyse all elements of all competitive forces with the same depth.
The five forces Model is based on microeconomics. It takes into account supply and demand,
complementary products and substitutes, the relationship between volume of production and cost of
production, and market structures like monopoly, oligopoly or perfect competition.

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Solution 3
(a) Chawama must actively and consistently conduct environmental analysis by analyzing the political,
legal, economical, social, environmental and technological environments.
This analysis will be invaluable as follows:
(i) Chawama will be become knowledgeable about the macro environmental forces that are
affecting the organization.
(ii) Chawama will be able to establish a trend analysis of these forces in terms of how the
forces have affected the firm over its life cycle. Are we faced with opportunities or threats, is
the question to answer?
(iii) Chawama will know at any given point which force has high, medium or low impact.
Currently most firms must deal with the economic environment. During 1991, the firm had to
deal with the political environment.
(iv) Chawama can then construct scenarios representing possible future occurrences. This is
applicable in times of acute uncertainty.
(v) Chawama will then develop strategies of dealing with each scenario should it occur in
future.
(vi) The above will result in Chawama overcoming the negative implications of not taking the
environment seriously.
(vii) Eventually environment analysis ensures long term survival as the organization is able to
gain strategic foresight.
Strategic management must address the environment in knowing what opportunities and
threats are being posed by the environment.
(b) The five forces model helps organizations to analyze and evaluate their competitive position by
looking at the impact of these forces.
These forces include:
Threat of rivalry amongst current competitors- Chawama will have to look at the number of
competing firms, are these firms supplying a homogenous product, are firms competing on price or
quality and what are the exit barriers.
For example, too many competitors increase competition. High exit barriers can also increase
competition, while differentiation can reduce competition.
Threat of new entrants-the extent to which new entrants can establish similar business will result
in Chawama finding its position undermined. Factors relating to entry barriers will have to be
analyzed. Ease with which new entrants can get business from mines, ease of raising capital and

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ease of having access to sources of these tools can make it easy for new firms to set up the
business in which Chawama is.
Threat of substitute products-this relates to whether mines can find alternative tools or methods
of extracting minerals. In times where Chawama tools are getting expensive, the mines may be
forced to get innovative or look at alternative tools.
Threat of bargaining power of suppliers- Chawama will have to ask themselves the extent to
which the firm can force suppliers to reduce prices. This will depend on the quantities bought, the
number of customers buying from the same supplier and the extent to which Chawama can easily
switch to other sources of tools.
Threat of bargaining power of customers-this relates to mines. Can they drive the prices
down? Under current economic problems, mines are finding strength in the crisis by citing
economic wows as reducing their ability to pay and in the process forcing suppliers to reduce
prices or be threatened with loss of business.
The extent to which Chawama can deal with these forces will affect the level of profits, value and
long term survival of the firm.

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Solution 4
The aim of a customer value analysis is to determine the benefits that customers in a target market
segment want and how they perceive the relative value of competing suppliers offers. The premise upon
which customer value is held, is that customers will buy from the firm that they perceive offers the highest
customer delivered value.
The major steps in customer value analysis are as follows: -
1. Identify the major attributes that customers value. Customers are asked what functions and
performance levels they look for in choosing a product and vendors. Different customers will
mention different features/benefits. If the list gets overly long, the researcher can remove
redundant attributes.
2. Assess the Quantitative Importance of the different attributes. Customers are asked to supply their
ratings or rankings of the importance of the different attributes. If the customers diverge much in
their ratings, they should be clustered into different customer segments.
3. Assess the companys and competitors performances on the different customer values against
their rated importance. The customers are asked where they see the companys and each
competitors performance on each attribute. Ideally, the companys performance should be rated
high on the attributes that customers value most and low on the attributes customers value least.
4. Examine how customers in a specific segment rate the companys performance against a specific
major competitor on an attribute-by-attribute basis. The key to gaining competitive advantage is to
take each customer segment and examine how the companys offer compares to that of its major
competitor. If the companys offer exceeds the competitors offer on all important attributes, the
company can charge a higher price, thereby earning higher profits, or it can charge the same price
and gain more market share.
5. Monitor customer values overtime: although customer values are fairly stable in the short run, they
will most probably charge as technologies and features charge and as customers face different
economic climates. The company must periodically re-do its studies of customer values and
competitors standings if it wants to be strategically effective.

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Solution 5
(a) Objectives are intentions behind actions. All organizations will set-up objectives for themselves.
These would be the targets which they hop to meet in the future, both short term and long term
ones. They will serve as key performance measures or yard sticks towards which the businesses
would be working towards.
Usually senior management would e charged with the duty of setting these objectives. In the case
of Kitwe city council, the governing body of councilors will have the duty of setting out the Kitwe
City council objectives.
Kitwe City Council is an arm of the Ministry of Local government, hence it is not a private sector
organization, therefore, its objective setting process is going to be different from that of a typical
private sector corporation.
Multiple Stakeholders
Kitwe City council has got multiple stakeholders whose interest is to be satisfied by the council. In
the situation of a private sector company, the most key stakeholder is the shareholder who has
committed funds in the business and waits for a return from the business in form of capital growth
on share price or dividend payouts when the business posts profits.
In the light of this when setting out its objectives, it would need to carry out several consultations
with its key stakeholder representatives to ensure that the objectives/targets incorporate the
interests of the stakeholders, whereas in a private sector corporation, the private focus of
objectives would be the stakeholders.
During objective setting Kitwe City Council would hold length consultative meetings with
stakeholder groupings, whereas the private sector company would only need to ensure that the
primary goal of generating profits and giving returns to shareholders is incorporated in the
objectives.
Political Influence and Limits on Resources
Kitwe City council Is part of the Ministry of Local Government, hence the council would have a lot
of political influence on its operations. Usually the top team council personnel would be appointed
by the minister of local government. Further, Kitwe City Council depends to a large extent on the
government grants or its funding. This introduces a constraint in form of financial resources.
The objective setting will be done with limited resources in view. As opposed to Kitwe City Council,
a private sector company ideally would not have financial resources constraints as it can borrow
more funds if needed from financial institutions like banks and other financiers, in addition, if the
business needs more capitalization, it can issue some more share capital as long as all legal
requirements for a right issue are met.

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Multiple Objectives
As pointed to earlier, private sector companies will have a profit motive as the primary objective of
its existence and this will permit all its investment decision making activities. Kitwe City council on
the other hand would have several objectives which would be of equal importance.
For instance, the scenario has pointed out objectives for Kitwe City Council such as maintenance
of roads and walkways, street lighting, provision of council housing and maintenance of these
housing units, regulation of entertainment clubs and refuse collection.
It therefore, means that as opposed to a private sector corporation, Kitwe City Council will need to
set-p multiple objectives which it would be pursuing simultaneously. Kitwe city council would need
to develop various key performance indicators (KPIs) to be used in tracking its performance.
Service Oriented objectives
Most Municipal councils provide services such as road maintenance, housing provisions, and
lighting. Therefore, the objectives that Kitwe City Council will set-up would be service oriented.
Service objectives are usually going to be very difficult to quantify and hence difficult to track. On
the other hand a private sector corporation will be able to easily quantify its profitability objective by
selling out a profit figure it would want to achieve in a given financial year.
(b) All organizations at one time or the other will have conflicting objectives that is objectives which pull
in different direction.
For Kitwe city council, much as it would want to regulate farmers and social clubs, the successful
pursuit of this objective would result in loss of revenue by club owners, and in turn this would
collect from the tavern and social club owners.
There are a number of approaches to managing such conflict which the council Secretary would
employ.
Satisfying
Satisfying would involve partly meeting each objective with the given available resources. In the
case of Kitwe City Council, it would need to regulate the taverns and clubs quiet in a reasonably
stringent manner which would still leave them making money out of which they will meet the levies
obligation to the local authority (council)

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Prioritizing
The council secretary can also consult the top council team to decide which of the objectives the
council would prioritize between the maximization of revenue collection and regulation of
bars/taverns to create sanity in the community. If the council senior management team decides
that regulation is more noble, then the council should take regulation as the more superior
objective and pursue it.
Shifting Duties to law Enforcement Wings
Alternatively the Council Secretary and the deputies would lobby the government to give some of
the law enforcing duties to the necessary law enforcement wings such as state police, the anti-drug
enforcement agencies to help in regulating of taverns and bars and ensure that all the laws as
regards social club patronage are strictly adhered to. This will likely lift the burden of attending to
too many objectives by Kitwe City Council and free up human capital for employment on other
activities.

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Solution 6
(a) The BCG Matrix is a model used to analyze the portfolio of strategic business units, investments
and products according to their cash generating capabilities whose function is relative market
share and market growth rate. This results into 4 categories being: question marks (future
potential earners), stars ( increasing good positive cash flow), cash cows (cash rich) and dogs
(declining cash flows)
(b) Hassan has four strategic choices when we look at the BCG Matrix. They include:
Build-this is where Hassan uses funds from other products to invest in question marks or stars.
These funds are usually harvested from cash cows. This is about moving excess cash around
various product lines especially those with potential for growth but lacking own funds for
reinvestments.
Hold-this is where funds are ploughed back or profits reinvested. This is applicable to question
marks and stars.
Harvest-this is where funds are milked out of cash cows and used to build question marks and
stars.
Divest-this is applicable in cases where Omar discontinues operations of product lines that are no
longer profitable.
(c) The limitations include:-
(i) Market information regarding aggregate demand and market shares held by competing
firms may not be readily available or too expensive to obtain.
(ii) Too simplistic by assuming that cash flow is affected by only market growth rate and
relative market share.
(iii) Assumes that only longer staying firms in the market can build competitive edge. In modern
business environments, this is not possible. We have seen new entrants easily overtaking
long established firms.

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Solution 7
Part (a)
The Balanced Scorecard is a performance planning and measurement framework, with similar principles
as management by objectives, which was publicized by Kaplan and Norton in the early 1990s, as a
means to overcome the traditional approach to performance evaluation that relies solely on financial
objectives.
Balanced scorecard is a tool to execute and monitor the organizational strategy by using a combination
of financial and non financial measures. It is designed to translate vision and strategy into objectives and
measures across four balanced perspectives: financial, customers, internal business process and
learning and growth. It gives a framework ensuring that the strategy is translated into a coherent set of
performance measures.
The Balanced Scorecard helps provide a more comprehensive view of a business, which in turn helps
organizations act in their best long-term interests. The strategic management system helps managers
focus on performance metrics while balancing financial objectives with customer, process and employee
perspectives. Measures are often indicators of future performance
Part (b)
Implementing Balanced Scorecards typically includes four processes:
1. Translating the vision into operational goals;
2. Communicating the vision and link it to individual performance;
3. Business planning;
4. Feedback and learning, and adjusting the strategy accordingly.
Managers have to identify five or six goals within each of the perspectives (financial, customers, internal
business process and learning and growth), and then demonstrate some inter-linking between these
goals by plotting causal links to the perspectives. Having reached some consensus about the objectives
and how they inter-relate, the Balanced Scorecard is devised by choosing suitable measures for each
objective. This type of approach provides greater contextual justification for the measures chosen, and is
generally easier for managers to work through.
Part (c)
The balanced scorecard can be very costly. The firm must pay for the software, the consultant and
allocate time for staff to go through the training. All this can accumulate to levels the firm finds too high in
comparison to value derived.
In as much as the costs are easy to quantify, the benefits are difficult to quantify. In political
organisations or depending on perceptions, it is easy to believe that the cost is less than the benefit and
in some cases rightly so.

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Some organisations may be too smaller lack the organisational as well as information systems especially
integrated to successfully implement the balanced scorecard. In such cases, it would be wise not to
attempt to introduce the system until such a time that such gaps are closed up.
Challenges
A challenge of the Balanced Scorecards is that the scores are not based on any proven economic or
financial theory, and therefore have no basis in the decision sciences. The process is entirely subjective
and makes no provision to assess quantities (e.g., risk and economic value) in a way that is actuarially or
economically well-founded.
Another challenge is that the Balanced Scorecard does not provide a bottom line score or a unified view
with clear recommendations: it is simply a list of metrics.
Some people also claim that positive feedback from users of Balanced Scorecards may be due to a
placebo effect, as there are no empirical studies linking the use of Balanced Scorecards to better
decision making or improved financial performance of companies.

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ZAMBIA INSTITUTE OF CHARTERED ACCOUNTANTS
CHARTERED ACCOUNTANTS EXAMINATIONS

PROFESSIONAL LEVEL

P5: STRATEGIC MANAGEMENT


SERIES: DECEMBER 2010


TOTAL MARKS 100 TIME ALLOWED: THREE (3) HOURS

INSTRUCTIONS TO CANDIDATES
1. You have ten (10) minutes reading time. Use it to study the examination paper carefully so that you
understand what to do in each question. You will be told when to start writing.
2. There are FIVE questions in this paper. You are required to attempt any FOUR questions.
ALL questions carry equal marks.
3. Enter your student number and your National Registration Card number on the front of the answer
booklet. Your name must NOT appear anywhere on your answer booklet.
4. Do NOT write in pencil (except for graphs and diagrams).
5. The marks shown against the requirement(s) for each question should be taken as an indication of
the expected length and depth of the answer.
6. All workings must be done in the answer booklet.
7. Present legible and tidy work.
8. Graph paper (if required) is provided at the end of the answer booklet.

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Question 1
You are the Chief Accountant for a new mine that is about to commence operations in Mufumbwe.
Your boss has just returned from a workshop on mission statements and requires your input to clarify
some questions he has regarding mission statements.
Provide detailed notes on the following issues which he wants clarified regarding mission statements by:
(a) Evaluating the concept of the Mission Statement. (8 marks)
(b) Explaining the motivation behind the firms developing mission statement. (7 marks)
(c) Stating the contents of a mission statement (5 marks)
(Total: 20 marks)
Question 2
(a) Explain with examples the functions of corporate strategy in an organization. (12 marks)
(b) Discuss the functions of business strategy in a strategic business unit. (8 marks)
(Total: 20 marks)
Question 3
(a) Explain the term Stakeholder. (4 marks)
(b) Discuss how stakeholders exercise power (6 marks)
(c) Describe how an organization can neutralize stakeholder power. (10 marks)
(Total: 20 marks)
Question 4
Sepiso detergents has faced serious challenges managing the portfolio of its products ranging from
washing powders/paste, bathing soaps and tooth pastes.
Currently the firm is using the BCG matrix to manage the portfolio of products. At a senior management
meeting, it was resolved that to gain better insight into understanding the performance of products, the
product life cycle model and product life cycle management be used as compliment to the BCG matrix.
As a newly recruited Management accountant, you have been asked to make presentation to senior
management at the next management briefing regarding a product life cycle management and product
life cycle.
The presentation must cover the following issues:
(a) The stages that the product goes through according to product life cycle. (12 marks)
(b) Contrast between the concept of Product Life Cycle Management and that of Product life cycle.
(8 marks)
(Total: 20 marks)

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Question 5
Strategy making is a key function of any successful manager. Many strategists agree that strategy is a fit
between what is obtaining in the internal environment of the organization and the dictates of the external
environment. However, the manager must consider a number of factors that shape any strategy.
Describe any five (5) factors that shape strategy. (20 marks)
(Total: 20 marks)
Question 6
Buyantanshi Ltd. is a Zambian bank that has been conceived by transforming a mutual cooperative
foundation into a full fledged bank to offer traditional banking products of account for deposits and loans
to the general public. Buyantanshi ltd. is in direct competition with both local (other Zambian banks) and
international banks currently operating in Zambia. As a cooperative fund, (before change of status),
Buyantanshi Ltd, operated to satisfy the deposit taking and financing functions for its co-operative
members. However, as a private sector bank, offering traditional banking products in a profitable
(economical) manner, there is increased focus on business profitability, balance sheet liquidity and
compliance to central bank regulatory requirements.
Buyantanshi (the mutual co-operative fund) employed large numbers of employees, many of whom were
relatives of the members of the fund. This sometimes brought laissez-faire attitude towards work. As a
result, the chief executive officer of Buyananshi Ltd., has made repeated calls for cultural change and
streamlining of bank operations in order to achieve increased profitability.
(a) Describe the factors that have dictated the culture of Buyantanshi Ltd. (12 marks)
(b) As an Accountant of Buyantanshi Ltd, write a report to the Chief Executive Officer of Buyantanshi
Ltd on ways in which he can improve the profitability of the bank. (8 marks)
(Total: 20 marks)
Question 7
Karibu is a Kenyan company that is setting up a Salt processing plant in Chavuma. Karibu has just been
given an operating license to process edible salt in Zambia. The senior managers of Karibu have made
a detailed study of the production logistics, political, socio-economical and technological realities
surrounding the potential production site and the general environment opportunities, both local and
international.
(a) Discuss benefits that will occur to Karibu by internationalizing its business by expanding its
operations outside Kenya. (8 marks)
(b) Elaborate on challenges likely to be faced by Karibu under the Zambian environment.
(12 marks)
(Total: 20 marks)
END OF PAPER

24




DECEMBER 2010
P5 STRATEGIC MANAGEMENT
SUGGESTED SOLUTIONS


25



Solution 1
(a) Evaluation of Mission Statement
One need not look beyond basic business policy textbooks to find the assertion that mission
statements, as a strategic planning and management tool, provide the basis for organizational
performance and indeed, organizational survival.
A frequently repeated definition of a mission statement is that it is, a broadly defined but enduring
statement of purpose that distinguishes the organization from others of its type and identifies the
scope of its operations in product (service) and market terms.
Recognised as the starting point for a corporate identity program, mission statements are
described as wielding significant influence over organisational performance.
The conclusion of most commentaries on mission statements is that they are an essential factor
contributing to an organisations enduring success.
For the mining company, the mission statement will help the firm define what its purpose is,
responsibilities to stakeholders and what impact in terms of its business it intends to make on the
market and environment.
(b) Motivations for Development of Mission Statements
They include:
(a) To inspire and motivate organisational members to higher levels of performance
(ii) To provide a sense of purpose to members of the organization.
(iii) To guide resource allocation in a consistent manner.
(iv) To create a balance among the competing and often conflicting interests of various
organizational stakeholders.
(v) Providing a sense of direction.
(vi) Promoting shared values amongst employees.
(viii) And refocusing on organization during crises.
(c) Contents of a mission Statement
(i) Purpose the reason why the business exists defining its products and services.
(ii) Strategy also called commercial logic, looking at what markets, customers and key
stakeholders to focus on.
(iii) Values look at what the business believes in, for example customer is king
(iv) Behavioural standards brings in the aspect of culture, dos and donts, ethics and social
responsibility.
(v) Responsibility to stakeholders.

26



Solution 2
(a) The following are the functions of a corporate strategy:
(i) Building and managing a high performing portfolio of business units (making acquisitions,
strengthening existing business positions, diverting business that no longer fit into
managements plans.
(ii) Capturing the synergy among related business units and turning it into competitive
advantage.
(iii) Establishing investments priorities and steering corporate resources into business
(iv) Reviewing/revising/unifying the major strategic approaches and moves proposed by SBU
managers.
(b) The functions of business strategy are:
(i) Devising moves and approaches to compete successfully and to secure a competitive
advantage based on low-cost, differentiation and narrow focused/niche strategy
(ii) Forming responses to changing external conditions.
(iii) Uniting the strategic initiatives of key functional department for efficiency and productivity as
well as removal of unfitting situation and red tape.
(iv) Coordination across functional area strategies is best accomplished during the deliberation
stage (meetings and consultations). It avoids conflicts.

27



Solution 3
(a) A stakeholder relates to an individual or organization with a stake, affected or affects an
organization. They include internal (employees and management), connected (shareholders,
suppliers and customers) and external (government and general public)
(b) This is done via three ways:
(i) Voice by expressing displeasure or being vocal, some stakeholders can prevail over the
organizations, e.g. trade unions, government and the general public.
(iii) Exit those stakeholders with cash or material investment in the firm can threaten to
withdraw their investment if their objectives are not being met.
(iv) Loyalty some stakeholders can use length of association with the firm to demand that the
firm honors the same loyalty by meeting their objectives.
(v) Stakeholder power is about twisting firms hand to bend to meet the stakeholders interests.
(c) Organisations deploy various methods to neutralize stakeholder power as follows:
(i) Involvement stakeholders with a lot of power and interest must be given active involvement
in the decision making.
(ii) Stakeholders with high interest but low power must be kept informed..
(iii) Stakeholders with high power yet low interest must be made satisfied to avoid awakening a
giant.
(iv) Those with both low interest and power must be educated.
(v) Other methods include side payments, dialogue and information flow management.

28



Solution 4
(a) The different stages in a product life cycle are:
1. Market introduction stage
Cost high
Sales volume low
No/little competition competitive manufacturers watch for acceptance/segment
growth losses
Demand has to be created
Customers have to be prompted to try the product
2. Growth stage
Costs reduced due to economies scale.
Sales volume increases significantly
Profitability
Public awareness
Competition begins to increase with a few new players in establishing market
Prices to maximise market share
3. Mature stage
Costs are very low as you are well established in market & no need for publicity.
Sales volume peaks
Increase in competitive offerings
Prices tend to drop due to the proliferation of competing products
Brand differentiation, feature diversification, as each player seeks to differentiate from
competition with how much product is offered
Industrial profits go down
4. Saturation and decline stage
Costs become counter-optimal
Sales volume decline or stabilize
Prices, profitability diminish
Profit becomes more a challenge of production/distribution efficiency than increased
sales
(b) Product Life Cycle Management is the succession of strategies used by management as a product
goes through its product life cycle. The conditions in which a product is sold changes over time
and must be managed as it moves through its succession of stages.
The product life cycle goes through many phases, involves many professional disciplines, and
requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a

29



product in the market with respect to business/commercial costs and sales measures; whereas
product life cycle management (PLM) has more to do with managing descriptions and properties of
a product through its development and useful life, mainly from a business/engineering point of
view. To ay that a product has a life cycle is to assert four things:
1. that products have a limited life,
2. product sales pass through distinct stages, each posing different challenges, opportunities,
and problems to the seller,
3. profits rise and fall at different stages of product life cycle, and
4. products require different marketing, financial, manufacturing, purchasing, and human
resource strategies in each life cycle stage.

30



Solution 5
(a) Societal, political, regulatory and citizen considerations
What an enterprise can and cannot do concerning strategies is always constrained by what is
legal, by what is in compliance with government regulations and policies, by what is considered
socially acceptable and by what constitutes community citizenship. Outside pressures may also
come from other sources special interest groups, the glare of investigative reporting. A fear of
unwanted political action, and the stigma of negative opinion also have an impact on the
organization.
More and more companies now consider societal values and priorities, community concerns and
for the potential for onerous legislation and regulatory requirements. The concept of corporate,
social responsibility is now showing in companys mission statements.
(ii) Industry attractiveness and competitive conditions
Industry attractiveness and competitive conditions are bit strategy determining factors. When a
firm concludes its industry and the environment has grown unattractive, it is better off investing
company resources elsewhere, it may craft a strategy of disinvestments and abandonment. When
competitive conditions intensify significantly, a company must respond with strategic actions to
protect its position. A strategist therefore, has to e a student of industry and competitive
conditions.
(iii) Specific company opportunities and threats
A well-conceived strategy aims at capturing a companys best growth opportunities and defending
against external threats to its well being and future performance. The particular business
opportunities a company has and the threats to its position that it faces are key influences on
strategy.
(iv) Organisational strengths, weaknesses, and competitive capabilities
Experience shows that in matching strategy to a firms internal situation, management should build
strategy around what the company does well and avoid strategies whose success depends heavily
on something the company does poorly or has never done at all. A companys strategy ought to be
grounded in what it is good at doing (i.e. its organisational strength and competitive weaknesses.)
(v) The personal ambitions, business philosophies and ethical beliefs of managers
Managers decisions are often influenced by their own vision of how to compete and how to
position he enterprise and by what image and standing they want the company to have. Managers
personal ambition, business philosophies, and ethical beliefs are usually woven into the strategies
they craft. Sometimes the influence of the managers personal values and experiences is
conscious and deliberate, at other times it is unconscious.

31



Attitudes toward risk also have a big influence on strategy. Risk avoids favour conservative
strategies that minimize downside risk, have a quick payback and produce sure short term profits.
Risk takers lean more toward opportunistic strategies where bold moves can produce a big pay-off
over the long term. Risk takers prefer innovation to imitation and strategic offensives to defensive
conservation. Managerial values also shape the ethical quality of a firms strategy.
(vi) The influence of shared values and company culture on strategy
An organisations policies, practices, traditions, philosophical beliefs and ways of doing things
combine to give it a distinctive culture. A companys values and culture sometimes dominate the
kind of strategic moves it will consider or reject. This is because culture related values and beliefs
become so embedded in managements thinking and actions that they condition how the enterprise
responds to external events.

32



Solution 6
(a) Culture is the sum total of beliefs, values, behavioural standards accepted by a group of people.
In the case of Buyantanshi, culture of this bank would be the sum total of beliefs, values and
behavioural standards acceptable to the Buyantanshi personnel. It would be important to note
that culture of the business can grow from out rightly written policies and mission statements of
the business and to a large extent by the behaviours that over time become norms (the bare
minimum expected behaviour among the employees of the business.
Culture of a business is determined by so many factors such as:
Size of Company
One of the determinants of a business culture is the size of the company. Small size businesses
would have a power culture enshrined in them where power, direction and general policy and
strategy setting comes from a central source, the leadership established in the business, in the
case of Buyantanshi Ltd, the CEOs and his deputies since it was concerned by transforming a
formal mutual co-operative fund, it is perceived from the scenario that this Buyantanshi Ltd, is still
a small operation and the culture is likely to exhibit power in its policy and strategy settling
activities.
Culture of Founding Founders (members)
Culture of a corporation will closely imitate the culture of he founding founders of the business,
depending on whether the founders serve as employees in their companies or not.
The founders of business, who work in their corporations as employees usually, set the cultural
pace of their companies. For instance Bill Gates worked as a CEO of his company Microsoft, after
which he stepped down to the position of Chief software architect within Microsoft Corporation, and
now serves as Board Chairperson. In all these roles, Bill Gates has fostered a spirit of aggression
in Microsofts approach to business and a strong monopoly in software development and sales.
In the case of Buyantanshi Ltd, the original state of the Buyantanshi Ltd was that of a mutual
cooperative fund with the objective of providing deposit taking and funding needs of its paid-up co-
operative fund members. Therefore, the co-operative was set up with the sole objective of serving
the interests of its members, promoting the existing culture, where an organization aims to support
and secure the interest of its members, hence forth the culture likely to be found in Buyantanshi
Ltd.
Age of the company
The companys culture will also to a large extent depend on the age of the organization. The age
of the company is basically how old the business is. Companies that are reasonably old will have
well established systems and business cooperating models by which they are managed. Usually
they will be stable businesses with well spelt out business procedures. In case of Buyantanshi Ltd,

33



a relatively new player in the Banking industry, it could have some areas in the business which
might still need to be well established. For instance the Laize-fare attitude among its employees,
many of them being relatives to members in the old cooperative fund (before transformation).
Business Strategy
The business strategy is the approach a business will take in ensuring competitiveness in the
markets it operates in with regards to its product offering pricing and customer handling.
This entails that culture will be dictated by the strategy in place just like Buyantanshi Ltd, most
commercial banks would want to offer high quality customer service.
The strategy of offering a high quality service calls for culture of excellence in all avenues of
managing Buyantanshi Ltd, no wonder the CEO of Buyantanshi is calling for total change in culture
and skills to ensure that employees of Buyantanshi Ltd reflect the culture that will foster excellent
service quality to customers.
(b) TO: THE CEO
FROM: ACCOUNTANT
DATE: XX/XX/XXXX
SUBJECT: IMPROVING PROFITABILITY
Given the current situation of business and your desire to enhance the profitability of the
Buyantanshi Ltd, please see the notes below which highlight ways in which the profitability of
Buyantanshi Ltd. can be improved.
Cost Management
Profit is a function of income and expenses of any business. Therefore, increasing income while
keeping tight control over expenditure will enhance profits of Buyantanshi Ltd, all department
heads should be sent cost reports for the units which they head for their review so that they
monitor the cost hitting the cost centres with a view to controlling them.
A cost management committee could be established to regularly meet and discuss all cost related
issues and brainstorm on how to manage costs and implement the cost reduction and control
initiatives.
Customer Centricity
Buyantanshi Ltd should differentiate its banking services by being a customer centred bank,
meaning that Buyantanshi Ltd must begin to have increased focus on its customers with the
objective of satisfying the customer needs and desires to the least detail. For example, if an
individual applies for a debit card, bank should ensure that the card should be activated as quickly
as it is given to the customer so that they can transact on it.

34



In case of account opening, it would be better if we reduce the time it takes to open an account on
our core banking system. This would have a lot of referral sales leads. Eventually our customer
base, hence revenue base would increase.
It should be noted here that there would be need to train employees of the bank in basic customer
service, and reward personnel that would be exhibiting new desired enhanced customer service
antiques.
Management of the Bad Book (Loan impairments)
In recent times, a lot of banks have found themselves in financial woos due to imprudent lending
and poor management of the bad loans.
It would be better to review our credit policies and the day-to-day credit operations. The credit
team in conjunction with the sales team must screen customers and ensure that credit dossiers on
credit worthiness are stringently adhered to. This will ensure that potentially toxic (bad) loans are
not booked by Buyantanshi Ltd. And finally the impact of any forth coming bad loans will be highly
reduced.

35



Solution 7
(a) Corporate Image Enhancement
Corporations which are international players are usually perceived to have more expertise on
international business and markets, hence they are usually perceived to be superior in their
operations and they are looked at as exposed businesses. This usually attracts customers due to
the perceived credibility and high confidence levels placed in them. Karibu going international, with
its gesture of establishing and operating the salt processing business in Zambia, it will enhance its
standing both in the light of the Zambian government together with the Zambian population.
Increased access to markets
One benefit which internationalization brings is the immediate access to an increased customer
pool. Since Karibu has been granted the payment (license) to operate the Salt plant in Zambia, it
has full access to the Zambian market, implying that it has about 13 million people (the Zambian) to
its customer base. If fully-exploited this immediate customer growth would increase Karibus
revenue and long-term profitability situation.
Tax Haven
As alluded to earlier, Karibu must have been attracted to make up its investment in Zambia by the
tax exemptions and holidays that was offered by the Zambian government.
By putting up the Salt plant in Zambia, Karibu is going to be given a number of tax credits which
will ease the pressures on the profits of the business in the early years of the businesss inception.
The tax credits (holiday) may be enjoyed on all machinery importation and on corporations profits.
Cost of Production
Yet another benefit of Karibus going international is the benefit obtained from the use of cheap
labour. With current high levels of unemployment prevalent in the country, Zambia has a huge
supply of cheap labour that can be tapped into.
In the final analysis, since Karibu will be tapping into very cheap labour, the total cost of production
at its salt plant will be relatively low. These cost savings will significantly contribute to health profits
for the business, therefore Karibu would have reasonably big profits to expand its operations and
give out as a dividend return to its shareholders (owners) back in Karibu.
(b) Challenges likely to be faced by Karibu under the Zambian Environment are:
(i) For Karibu to be successful, there must be a stable political environment.
(ii) Differences in currencies between Kenya and Zambia. Currencies differ in stability and real
value.
(iii) Differences in culture and lifestyles between Zambia and Kenya.
(vi) Consumers in Kenya do not have the same tastes as consumers in Zambia.
THE END

36




ZAMBIA INSTITUTE OF CHARTERED ACCOUNTANTS
CHARTERED ACCOUNTANTS EXAMINATIONS

PROFESSIONAL LEVEL

P5: STRATEGIC MANAGEMENT


SERIES: JUNE 2010


TOTAL MARKS 100 TIME ALLOWED: THREE (3) HOURS

INSTRUCTIONS TO CANDIDATES
1. You have ten (10) minutes reading time. Use it to study the examination paper carefully so that you
understand what to do in each question. You will be told when to start writing.
2. There are seven (7) questions in this paper. You are required to attempt any five (5) questions.
ALL questions carry equal marks.
3. Enter your student number and your National Registration Card number on the front of the answer
booklet. Your name must NOT appear anywhere on your answer booklet.
4. Do NOT write in pencil (except for graphs and diagrams).
5. The marks shown against the requirement(s) for each question should be taken as an indication of
the expected length and depth of the answer.
6. All workings must be done in the answer booklet.
7. Present legible and tidy work.
8. Graph paper (if required) is provided at the end of the answer booklet.


37



Question 1
You are the Chief Accountant for a new mine that is about to commence operations in Mufumbwe.
Your boss has just returned from a workshop on mission statements and requires your input to clarify
some questions he has regarding mission statements.
Provide detailed notes on the following issues which he wants clarified regarding mission statements by:
(a) Evaluating the concept of the Mission Statement. (8 marks)
(b) Explaining the motivation behind the firms developing mission statement. (7 marks)
(c) Stating the contents of a mission statement (5 marks)
(Total: 20 marks)
Question 2
(a) Explain with examples the functions of corporate strategy in an organization. (12 marks)
(b) Discuss the functions of business strategy in a strategic business unit. (8 marks)
(Total: 20 marks)
Question 3
(a) Explain the term Stakeholder. (4 marks)
(b) Discuss how stakeholders exercise power (6 marks)
(c) Describe how an organization can neutralize stakeholder power. (10 marks)
(Total: 20 marks)
Question 4
Sepiso detergents has faced serious challenges managing the portfolio of its products ranging from
washing powders/paste, bathing soaps and tooth pastes.
Currently the firm is using the BCG matrix to manage the portfolio of products. At a senior management
meting, it was resolved that to gain better insight into understanding the performance of products, the
product life cycle model and product life cycle management be used as compliment to the BCG matrix.
As a newly recruited Management accountant, you have been asked to make presentation to senior
management at the next management briefing regarding a product life cycle management and product
life cycle.
The presentation must cover the following issues:
(a) The stages that the product goes through according to product life cycle. (12 marks)
(b) Contrast between the concept of Product Life Cycle Management and that of Product life cycle.
(8 marks)
(Total: 20 marks)

38



Question 5
Strategy making is a key function of any successful manager. Many strategists agree that strategy is a fit
between what is obtaining in the internal environment of the organization and the dictates of the external
environment. However, the manager must consider a number of factors that shape any strategy.
Describe any five (5) factors that shape strategy. (20 marks)
(Total: 20 marks)
Question 6
Buyantanshi Ltd. is a Zambian bank that has been conceived by transforming a mutual cooperative
foundation into a full fledged bank to offer traditional banking products of account for deposits and loans
to the general public. Buyantanshi Ltd. is in direct competition with both local (other Zambian banks)
and international banks currently operating in Zambia. As a cooperative fund, (before change of status),
Buyantanshi Ltd, operated to satisfy the deposit taking and financing functions for its co-operative
members. However, as a private sector bank, offering traditional banking products in a profitable
(economical) manner, there is increased focus on business profitability, balance sheet liquidity and
compliance to central bank regulatory requirements.
Buyantanshi (the mutual co-operative fund) employed large numbers of employees, many of whom were
relatives of the members of the fund. This sometimes brought laissez-faire attitude towards work. As a
result, the chief executive officer of Buyananshi Ltd., has made repeated calls for cultural change and
streamlining of bank operations in order to achieve increased profitability.
(a) Describe the factors that have dictated the culture of Buyantanshi Ltd. (12 marks)
(b) As an Accountant of Buyantanshi Ltd, write a report to the Chief Executive Officer of Buyantanshi
Ltd on ways in which he can improve the profitability of the bank. (8 marks)
(Total: 20 marks)
Question 7
Karibu is a Kenyan company that is setting up a Salt processing plant in Chavuma. Karibu has just been
given an operating license to process edible salt in Zambia. The senior managers of Karibu have made
a detailed study of the production logistics, political, socio-economical and technological realities
surrounding the potential production site and the general environment opportunities, both local and
international.
(a) Discuss benefits that will occur to Karibu by internationalizing its business by expanding its
operations outside Kenya. (8 marks)
(b) Elaborate on challenges likely to be faced by Karibu under the Zambian environment.
(12 marks)
(Total: 20 marks)
END OF PAPER

39



JUNE 2011
P5 STRATEGIC MANAGEMENT
SUGGESTED SOLUTIONS


40



Solution 1
(a) Evaluation of Mission Statement
One need not look beyond basic business policy textbooks to find the assertion that mission
statements, as a strategic planning and management tool, provide the basis for organizational
performance and indeed, organizational survival.
A frequently repeated definition of a mission statement is that it is, a broadly defined but enduring
statement of purpose that distinguishes the organization from others of its type and identifies the
scope of its operations in product (service) and market terms.
Recognised as the starting point for a corporate identity program, mission statements are
described as wielding significant influence over organisatinal performance.
The conclusion of most commentaries on mission statements is that they are an essential factor
contributing to an organisations enduring success.
For the mining company, the mission statement will help the firm define what its purpose is,
responsibilities to stakeholders and what impact in terms of its business it intends to make on the
market and environment.
(b) Motivations for Development of Mission Statements
They include:
(i) To inspire and motivate organisational members to higher levels of performance
(ii) To provide a sense of purpose to members of the organization.
(iii) To guide resource allocation in a consistent manner.
(iv) To create a balance among the competing and often conflicting interests of various
organizational stakeholders.
(v) Providing a sense of direction.
(vi) Promoting shared values amongst employees.
(vii) And refocusing on organization during crises.
(c) Contents of a mission Statement
(i) Purpose the reason why the business exists defining its products and services.
(ii) Strategy also called commercial logic, looking at what markets, customers and key
stakeholders to focus on.
(iii) Values look at what the business believes in, for example customer is king
(iv) Behavioural standards brings in the aspect of culture, dos and donts, ethics and social
responsibility.
(v) Responsibility to stakeholders.

41



Solution 2
(a) The following are the functions of a corporate strategy:
(i) Building and managing a high performing portfolio of business units (making acquisitions,
strengthening existing business positions, diverting business that no longer fit into
managements plans.
(ii) Capturing the synergy among related business units and turning it into competitive
advantage.
(iii) Establishing investments priorities and steering corporate resources into business
(iv) Reviewing/revising/unifying the major strategic approaches and moves proposed by SBU
managers.
(b) The functions of business strategy are:
(i) Devising moves and approaches to compete successfully and to secure a competitive
advantage based on low-cost, differentiation and narrow focused/niche strategy
(ii) Forming responses to changing external conditions.
(iii) Uniting the strategic initiatives of key functional department for efficiency and productivity as
well as removal of unfitting situation and red tape.
(Iv) Coordination across functional area strategies is best accomplished during the deliberation
stage (meetings and consultations). It avoids conflicts.

42



Solution 3
(a) A stakeholder relates to an individual or organization with a stake, affected or affects an
organization. They include internal (employees and management), connected (shareholders,
suppliers and customers) and external (government and general public)
(b) This is done via three ways:
(i) Voice by expressing displeasure or being vocal, some stakeholders can prevail over the
organizations, e.g. trade unions, government and the general public.
(ii) Exit those stakeholders with cash or material investment in the firm can threaten to
withdraw their investment if their objectives are not being met.
(iii) Loyalty some stakeholders can use length of association with the firm to demand that the
firm honors the same loyalty by meeting their objectives.
(iv) Stakeholder power is about twisting firms hand to bend to meet the stakeholders interests.
(c) Organisations deploy various methods to neutralize stakeholder power as follows:
(i) Involvement stakeholders with a lot of power and interest must be given active involvement
in the decision making.
(ii) Stakeholders with high interest but low power must be kept informed..
(iii) Stakeholders with high power yet low interest must be made satisfied to avoid awakening a
giant.
(iv) Those with both low interest and power must be educated.
(v) Other methods include side payments, dialogue and information flow management.


43



Solution 4
(a) The different stages in a product life cycle are:
(i) Market introduction stage
Cost high
Sales volume low
No/little competition competitive manufacturers watch for acceptance/segment growth
losses
Demand has to be created
Customers have to be prompted to try the product
(ii) Growth stage
Costs reduced due to economies scale.
Sales volume increases significantly
Profitability
Public awareness
Competition begins to increase with a few new players in establishing market
Prices to maximise market share
(iii) Mature stage
Costs are very low as you are well established in market & no need for publicity.
Sales volume peaks
Increase in competitive offerings
Prices tend to drop due to the proliferation of competing products
Brand differentiation, feature diversification, as each player seeks to differentiate from
competition with how much product is offered
Industrial profits go down
(iv) Saturation and decline stage
Costs become counter-optimal
Sales volume decline or stabilize
Prices, profitability diminish
Profit becomes more a challenge of production/distribution efficiency than increased
sales

44



(b) Product Life Cycle Management is the succession of strategies used by management as a product
goes through its product life cycle. The conditions in which a product is sold changes over time
and must be managed as it moves through its succession of stages.
The product life cycle goes through many phases, involves many professional disciplines, and
requires many skills, tools and processes. Product life cycle (PLC) has to do with the life of a
product in the market with respect to business/commercial costs and sales measures; whereas
product life cycle management (PLM) has more to do with managing descriptions and properties of
a product through its development and useful life, mainly from a business/engineering point of
view. To ay that a product has a life cycle is to assert four things:
(i) that products have a limited life,
(ii) product sales pass through distinct stages, each posing different challenges, opportunities,
and problems to the seller,
(iii) profits rise and fall at different stages of product life cycle, and
(iv) products require different marketing, financial, manufacturing, purchasing, and human
resource strategies in each life cycle stage.
Solution 5
(i) Societal, political, regulatory and citizen considerations
What an enterprise can and cannot do concerning strategies is always constrained by what is
legal, by what is in compliance with government regulations and policies, by what is considered
socially acceptable and by what constitutes community citizenship. Outside pressures may also
come from other sources special interest groups, the glare of investigative reporting. A fear of
unwanted political action, and the stigma of negative opinion also have an impact on the
organization.
More and more companies now consider societal values and priorities, community concerns and
for the potential for onerous legislation and regulatory requirements. The concept of corporate,
social responsibility is now showing in companys mission statements.
(ii) Industry attractiveness and competitive conditions
Industry attractiveness and competitive conditions are bit strategy determining factors. When a
firm concludes its industry and the environment has grown unattractive, it is better off investing
company resources elsewhere, it may craft a strategy of disinvestments and abandonment. When
competitive conditions intensify significantly, a company must respond with strategic actions to

45



protect its position. A strategist therefore, has to e a student of industry and competitive
conditions.
(iii) Specific company opportunities and threats
A well-conceived strategy aims at capturing a companys best growth opportunities and defending
against external threats to its well being and future performance. The particular business
opportunities a company has and the threats to its position that it faces are key influences on
strategy.
(iv) Organisational strengths, weaknesses, and competitive capabilities
Experience shows that in matching strategy to a firms internal situation, management should build
strategy around what the company does well and avoid strategies whose success depends heavily
on something the company does poorly or has never done at all. A companys strategy ought to be
grounded in what it is good at doing (i.e. its organisational strength and competitive weaknesses.)
(v) The personal ambitions, business philosophies and ethical beliefs of managers
Managers decisions are often influenced by their own vision of how to compete and how to
position he enterprise and by what image and standing they want the company to have. Managers
personal ambition, business philosophies, and ethical beliefs are usually woven into the strategies
they craft. Sometimes the influence of the managers personal values and experiences is
conscious and deliberate, at other times it is unconscious.
Attitudes toward risk also have a big influence on strategy. Risk avoids favour conservative
strategies that minimize downside risk, have a quick payback and produce sure short term profits.
Risk takers lean more toward opportunistic strategies where bold moves can produce a big pay-off
over the long term. Risk takers prefer innovation to imitation and strategic offensives to defensive
conservation. Managerial values also shape the ethical quality of a firms strategy.
(vi) The influence of shared values and company culture on strategy
An organisations policies, practices, traditions, philosophical beliefs and ways of doing things
combine to give it a distinctive culture. a companys values and culture sometimes dominate the
kind of strategic moves it will consider or reject. This is because culture related values and beliefs
become so embedded in managements thinking and actions that they condition how the enterprise
responds to external events.

46



Solution 6
(a) Culture is the sum total of beliefs, values, behavioural standards accepted by a group of people. In
the case of Buyantanshi, culture of this bank would be the sum total of beliefs, values and
behavioural standards acceptable to the Buyantanshi personnel. It would be important to note that
culture of the business can grow from out rightly written policies and mission statements of the
business and to a large extent by the behaviours that over time become norms (the bare minimum
expected behaviour among the employees of the business.
Culture of a business is determined by so many factors such as:
Size of Company
One of the determinants of a business culture is the size of the company. Small size businesses
would have a power culture enshrined in them where power, direction and general policy and
strategy setting comes from a central source, the leadership established in the business, in the
case of Buyantanshi Ltd, the CEOs and his deputies since it was concerned by transforming a
formal mutual co-operative fund, it is perceived from the scenario that this Buyantanshi Ltd, is still
a small operation and the culture is likely to exhibit power in its policy and strategy settling
activities.
Culture of Founding Founders (members)
Culture of a corporation will closely imitate the culture of he founding founders of the business,
depending on whether the founders serve as employees in their companies or not.
The founders of business, who work in their corporations as employees usually, set the cultural
pace of their companies. For instance Bill Gates worked as a CEO of his company Microsoft, after
which he stepped down to the position of Chief software architect within Microsoft Corporation, and
now serves as Board Chairperson. In all these roles, Bill Gates has fostered a spirit of aggression
in Microsofts approach to business and a strong monopoly in software development and sales.
In the case of Buyantanshi Ltd, the original state of the Buyantanshi Ltd was that of a mutual
cooperative fund with the objective of providing deposit taking and funding needs of its paid-up co-
operative fund members. Therefore, the co-operative was set up with the sole objective of serving
the interests of its members, promoting the existing culture, where an organization aims to support
and secure the interest of its members, hence forth the culture likely to be found in Buyantanshi
Ltd.

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Age of the company
The companys culture will also to a large extent depend on the age of the organization. The age
of the company is basically how old the business is. Companies that are reasonably old will have
well established systems and business cooperating models by which they are managed. Usually
they will be stable businesses with well spelt out business procedures. In case of Buyantanshi Ltd,
a relatively new player in the Banking industry, it could have some areas in the business which
might still need to be well established. For instance the Laize-fare attitude among its employees,
many of them being relatives to members in the old cooperative fund (before transformation).
Business Strategy
The business strategy is the approach a business will take in ensuring competitiveness in the
markets it operates in with regards to its product offering pricing and customer handling.
This entails that culture will be dictated by the strategy in place just like Buyantanshi Ltd, most
commercial banks would want to offer high quality customer service.
The strategy of offering a high quality service calls for culture of excellence in all avenues of
managing Buyantanshi Ltd, no wonder the CEO of Buyantanshi is calling for total change in culture
and skills to ensure that employees of Buyantanshi Ltd reflect the culture that will foster excellent
service quality to customers.
(b) TO: THE CEO
FROM: ACCOUNTANT
DATE: XX/XX/XXXX
SUBJECT: IMPROVING PROFITABILITY
Given the current situation of business and your desire to enhance the profitability of the
Buyantanshi Ltd, please see the notes below which highlight ways in which the profitability of
Buyantanshi Ltd. can be improved.
Cost Management
Profit is a function of income and expenses of any business. Therefore, increasing income while
keeping tight control over expenditure will enhance profits of Buyantanshi Ltd, all department
heads should be sent cost reports for the units which they head for their review so that they
monitor the cost hitting the cost centres with a view to controlling them.

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A cost management committee could be established to regularly meet and discuss all cost related
issues and brainstorm on how to manage costs and implement the cost reduction and control
initiatives.
Customer Centricity
Buyantanshi Ltd should differentiate its banking services by being a customer centre bank,
meaning that Buyantanshi Ltd must begin to have increased focus on its customers with the
objective of satisfying the customer needs and desires to the least detail. For example, if an
individual applies for a debit card, bank should ensure that the card should be activated as quickly
as it is given to the customer so that they can transact on it.
In case of account opening, it would be better if we reduce the time it takes to open an account on
our core banking system. This would have a lot of referral sales leads. Eventually our customer
base, hence revenue base would increase.
It should be noted here that there would be need to train employees of the bank in basic customer
service, and reward personnel that would be exhibiting new desired enhanced customer service
antiques.
Management of the Bad Book (Loan impairments)
In recent times, a lot of banks have found themselves in financial woos due to imprudent lending
and poor management of the bad loans.
It would be better to review our credit policies and the day-to-day credit operations. The credit
team in conjunction with the sales team must screen customers and ensure that credit dossiers on
credit worthiness are stringently adhered to. This will ensure that potentially toxic (bad) loans are
not booked by Buyantanshi Ltd. and finally the impact of any forth coming bad loans will be highly
reduced.

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Solution 7
(a) Corporate Image Enhancement
Corporations which are international players are usually perceived to have more expertise on
international business and markets, hence they are usually perceived to be superior in their
operations and they are looked at as exposed businesses. This usually attracts customers due to
the perceived credibility and high confidence levels placed in them. Karibu going international, with
its gesture of establishing and operating the salt processing business in Zambia, it will enhance its
standing both in the light of the Zambian government together with the Zambian population.
Increased access to markets
One benefit which internationalization brings is the immediate access to an increased customer
pool. Since Karibu has been granted the payment (license) to operate the Salt plant in Zambia, it
has full access to the Zambian market, implying that it has about 13 million people (the Zambian) to
its customer base. If fully-exploited this immediate customer growth would increase Karibus
revenue and long-term profitability situation.
Tax Haven
As alluded to earlier, Karibu must have been attracted to make up its investment in Zambia by the
tax exemptions and holidays that was offered by the Zambian government.
By putting up the Salt plant in Zambia, Karibu is going to be given a number of tax credits which
will ease the pressures on the profits of the business in the early years of the businesss inception.
The tax credits (holiday) may be enjoyed on all machinery importation and on corporations profits.
Cost of Production
Yet another benefit of Karibus going international is the benefit obtained from the use of cheap
labour. With current high levels of unemployment prevalent in the country, Zambia has a huge
supply of cheap labour that can be tapped into.
In the final analysis, since Karibu will be tapping into very cheap labour, the total cost of production
at its salt plant will be relatively low. These cost savings will significantly contribute to health profits
for the business, therefore Karibu would have reasonably big profits to expand its operations and
give out as a dividend return to its shareholders (owners) back in Karibu.

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(b) Challenges likely to be faced by Karibu under the Zambian Environment are:
(i) For Karibu to be successful, there must be a stable political environment.
(ii) Differences in currencies between Kenya and Zambia. Currencies differ in stability and real
value.
(iii) Differences in culture and lifestyles between Zambia and Kenya.
(vi) Consumers in Kenya do not have the same tastes as consumers in Zambia.
THE END