E3 - Enterprise Strategy

Post Exam Guide

March 2012

General Comments

This examination paper was designed to test candidates’ ability to demonstrate their understanding
and application of the following learning outcomes from the E3 syllabus:

• evaluate strategic options

• evaluate the process of strategy formulation
• discuss the drivers of external demands for corporate social responsibility and the
organisation's response’
• evaluate approaches to managing change
• recommend techniques to manage resistance to change
• recommend how to interact with suppliers and customers
• evaluate tools, techniques and strategies for managing the change process
• evaluate ethical issues and their resolution in the context of organisational change
• recommend appropriate control measures
• recommend solutions to problems in performance measurement

This examination aimed to test a wide range of syllabus areas. Candidates are once again reminded
that they must familiarise themselves with the pre-seen material prior to the examination, as the
unseen material presented to candidates on the day of the examination builds upon the pre-seen
information. An understanding of the context of the scenario organisation and the main issues it is
facing clearly helps candidates to gain a better understanding of the overall themes within the unseen
material prior to the day of the examination.

The Question 1 unseen scenario was designed to test a number of key skills including both
quantitative and qualitative analysis. The pre-seen and unseen scenarios were based upon M plc, a
publisher of newspapers and provider of web media based in the UK. M has three divisions: the
Newspaper Division, the Web Division and the Advertising Division. The pre-seen material identified a
number of relevant areas relating to the E3 syllabus, including references to the organisation’s
mission statement, strategic objectives and its planning process. In the unseen material these themes
were further developed by the introduction of information relating to the potential future strategic
development within the Newspaper Division of offering a free newspaper to its readers and
information relating to the competitive environment in order to assess the possible application of the
competitive generic strategies model.

In general, candidates performed reasonably well on Question 1. Part (a)(i) was answered well, with
most candidates undertaking a competent and well-presented calculation of the number of pages of
advertising required to be sold in the year in order for FREE to break even. However, many answers
to part (a)(ii) presented a limited discussion of only the adverse factors affecting FREE's ability to
achieve the sale of this number of pages of advertising.

Answers to part (a)(iii) of the question were reasonably good although many candidates provided
rather thin answers to this question. Most candidates attempted to discuss all of the strategic and
financial objectives in their analysis although there was some misinterpretation and incorrect
assumptions made in regard to Strategic Objectives 1 and 2. Most candidates did not answer part
(a)(iv) well as many answers were superficial and only focused upon the negative CSR impacts of the
FREE newspaper.

Part (b) of the question was not well answered by most candidates. Many answers presented only a
description of Porter’s competitive generic strategies with very little attempt at applying this directly to
the FREE newspaper or, more importantly, assessing the sustainability of each strategy. One point
that must be noted is that it is most disappointing to see how many candidates still get this model
wrong, with large numbers of candidates failing to define the strategies correctly. In particular, many
candidates wrongly assumed that the strategy of Cost Leadership necessarily implies undercutting
competitors’ prices which is a fundamental misunderstanding

Part (c) was well answered by most candidates and it is clear that the syllabus area of ‘managing
change’ is well understood by most candidates.

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 2 was a popular choice of candidates but was generally not well answered. Part (a) was well
answered, with most candidates recognising the potential concerns of the shareholders with the
current ethical business policy. However, many candidates’ answers to part (b) were very
disappointing. Very few recognised that for each interest group there was a conflict with the ethical
business policy and that this required a number of positive actions on the part of JJJ to ensure
continued relationships with each. Very few candidates discussed these relationships effectively.

Question 3 was not well answered by candidates. Answers to part (a) were disappointing with most
candidates demonstrating only a general theoretical knowledge of the SMART criteria. Few
demonstrated the ability to apply these directly to the scenario. Part (b)(i) was very badly answered,
with most candidates merely using a mechanistic change management approach, with little
consideration given to the inappropriateness of this to a cultural change. Part (c) was well answered
generally, with most candidates demonstrating a sound understanding of the role of a change agent.

Question 4 was the least popular question on the examination paper and was not answered well by
those who did so. Most candidates made a reasonable attempt at part (a), but far too many
candidates spent far too much of their answer discussing irrelevant information or making a
recommendation for improved information. Candidates are reminded once again to make sure they
read each question requirement carefully. Had they done so in this question, they would have seen
that recommendations for improvement were asked for in part (b) of the requirement. Part (b) was not
well answered as many focused upon general improvements to the organisation rather than
specifically focusing upon improvements to the planning and decision making information. Part (c)
was reasonably well answered.

Overall, candidates did not perform well in this examination. There was evidence of some good
analysis and evaluation skills but in many cases there was a lack of knowledge and understanding of
the syllabus and an inability to apply knowledge to the scenarios. It is recommended that candidates
ensure that they have a wide knowledge and understanding of the E3 syllabus, and must ensure that
they apply their knowledge to the scenario information.

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

SECTION A – 50 MARKS
ANSWER THIS QUESTION

Question 1(a)(i)
Calculate the number of pages of advertising required to be sold in the year ending 31 March 2013 in
order for FREE to break even.
Base your calculation on 312 published days.
(8 marks)

Rationale
This question examines learning outcome C1(b) 'evaluate strategic options' and is designed to test
candidates' ability to quantitatively evaluate a strategic option.

Suggested Approach
Candidates were expected to calculate the revised costs of the proposal from the information provided
and, from this, to work out the number of required pages of advertising to breakeven. This should have
been a straightforward calculation, using the information provided in the unseen material.

Marking Guide Marks

Journalists: 3,150,000 (8,400,000 - (125 x £42,000) 1

Other staff: 2,210,000 (4,810,000 - 2,600,000) 1

Production costs: Fixed: 3,180,000 Variable: 9,360,000 Total: 12,540,000 (8,360,000 +

50%) 1

Advertising: 1,500,000 (1,000,000 + 500,000) 1

Distrib'n costs: 2,574,000 (4,680,000 - 45%) 1

IT costs: 2,000,000 (4,000,000 - 50%) 1

Pictures: 2,250,000 (3,000,000 - 25%) 1

Total cost = £26,224,000

No. pages to be sold = £26,224,000/£7,000 = 3,746 pages per year 1

Maximum marks awarded 8

Lead Marker’s Comments

This question was well answered by many candidates. Most were able to calculate the revised costs
correctly, although very few calculated the production costs correctly.
The most common mistake was where candidates calculated only a cost variance or occasionally mixed
cost variances with revised costs to come to an incorrect revised cost total. However, in general this
question was well answered by most candidates.
Common Errors
• Only calculating variances
• No calculation of the breakeven pages undertaken

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 1(a)(ii)
Discuss the factors that affect FREE's ability to achieve the sales of the number of pages of advertising
you have calculated in (i).
(6 marks)

Rationale
This question examines learning outcome C1(a) 'evaluate the process of strategy formulation' and is
designed to test candidates' ability to evaluate the qualitative issues to consider when making a strategic
decision.

Suggested Approach
Candidates were expected to discuss the factors which could either adversely or favourably affect the
ability to sell the revised number of advertising pages calculated in the previous answer. Candidates should
have deduced from their previous calculations that the revised number of advertising pages was
significantly higher than the present level and this should have provided a number of discussion points to
answer this question.

Marking Guide Marks

Unfavourable factors discussed (e.g. less broad focus/competitors) - 2 marks per factor 4

Favourable factors discussed (e.g. circulation inc./cheaper advertising) - 2 marks per factor 4

Maximum marks awarded 6

Lead Marker’s Comments

This question was generally not well answered. Most candidates only discussed the adverse factors which
would affect the number of pages sold. This obviously then limited the marks awarded. Although these
adverse factors were generally well discussed, candidates must remember that a discussion requires a
review of both positive and negative or adverse and favourable aspects of the point under discussion.
Common Errors
• Only reviewing adverse factors
• Focus upon the readers and not the advertisers

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 1(a)(iii)
Advise S of the extent to which the publication of a free newspaper fits M's strategic and financial
objectives.
(7 marks)

Rationale
This question examines learning outcome C1(a) 'evaluate the process of strategy formulation' and is
designed to test candidates' understanding of the impact of strategy formulation upon the organisation's
objectives.

Suggested Approach
This question required candidates to review each of the strategic and financial objectives highlighted in the
pre-seen material, in order to evaluate whether the publication of the FREE newspaper still allowed these
objectives to be met. Candidates were expected to discuss each of the strategic and financial objectives
separately.

Marking Guide Marks

Meet the need of readers for reliable and well informed news. Increased circulation
does not preclude reliable and well informed news. Change to FREE could fit well 1
with this objective

Expand the geographical spread of M plc's output to reach as many potential

newspaper and website readers as possible. Increase in circulation implies FREE fits 1
well with this objective

Publish some newspapers which help meet the needs of native English speakers
who live in countries which do not have English as a first language. Change to FREE 1
does not address this

Increase advertising income so that the group moves towards offering as many news
titles as possible, free of charge to the public. Increasing advertising income to 1
£26,250,000 fits well with this objective.

Financial objectives:
(i) To ensure that revenue and operating profit grow by an average of 4% per year. 1
Change to FREE fits well with this

(ii) To achieve steady growth in dividend per share. Change does not directly 1
address this objective

(iii) To maintain gearing below 40%, where gearing is calculated as debt/(debt plus
equity) based on the market value of equity and the book value of debt. Change to 1
FREE does not directly address this objective

Maximum marks awarded 7

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Lead Marker’s Comments

This question was reasonably well answered by most candidates. Most attempted to evaluate all of the
objectives which was a marked improvement from the last examination.
However, there was some misinterpretation of the information, particularly in the evaluation of strategic
objectives 1 and 2, as nearly all of the candidates stated that strategic objective 1 and 2 were not met. Most
of these made an incorrect assumption that because the focus of the newspaper’s readership has changed
this meant that the quality of the articles and news had decreased. Clearly the newspaper is now targeting a
new audience of readers who would be interested in this form of news and there was no information in the
scenario to suggest that it would be less well informed or of a lower quality. Similarly for strategic objective
2, many candidates suggested that because the distribution points had reduced that this reduced the
geographical spread. However, this does not take into account the fact that circulation has increased
dramatically and that the objective also considers the issues of ‘reaching as many newspaper and website
readers as possible’, which many candidates ignored.
Common Errors
• Assumptions made regarding the quality of the newspaper
• Misinterpretation of geographical spread
• Omitting to discuss the financial objectives

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 1(a)(iv)
Advise S whether the effects of the proposed change to FREE are consistent with Corporate Social
Responsibility principles relating to employment, the environment, and FREE readership.
(8 marks)

Rationale
This question examines learning outcome A1(c) 'discuss the drivers of external demands for corporate
social responsibility and the firm's response' and is designed to test candidates' understanding of the
external demands placed on organisations for responsible business practices.

Suggested Approach
Candidates were expected to review the effects of the change to FREE on the CSR principles specifically
relating to effects on employment, the environment and the FREE readership. Importantly, candidates
should have considered both the positive and negative consequences of the decision upon the three areas
highlighted.

Marking Guide Marks

Corporate Social Responsibility defined 1

Employment
125 journalists (-ve)
Other staff (-ve)
Newsagents (-ve) 1 to 2 each
FREE distribution staff (+ve)
Advertising (+ve)
Summary - overall adverse effect but redundancies likely anyway 1
(max 5)
Environmental
Litter (-ve) 1 to 2 each
Recycled newsprint (+ve) (max 3)

Readership
Existing readers may feel loss/but other similar newspapers 1 to 2 each
Enhanced circulation leading to more readers (max 2)

(1 mark for recognition of effect and 1 mark for consistency with CSR)

Maximum marks awarded 8

Lead marker’s Comments

This question was not well answered. Most answers were very limited in scope and only recognised the
negative impact of redundancies and the littering problem. Very few answers considered the possible
benefits of the proposal. Many candidates failed to recognise that the environmental impact was reduced
by the use of recycled newsprint and many answers incorrectly focused upon extra trees being cut down to
accommodate the extra pages. Many answers did not discuss the issue of readership at all.
Common Errors
• Limited answers not covering all of the areas in the requirement

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 1(b)
Evaluate, using Porter's generic competitive strategy model, the likelihood of the proposed change to
FREE giving the Newspaper Division a sustainable competitive advantage.
(12 marks)

Rationale
This question examines learning outcome C1(b) 'evaluate strategic options' and is designed to test
candidates' ability to apply Porter's generic competitive strategy model to undertake strategic option
generation.

Suggested Approach
This question should have been a straightforward application of Porter’s Generic competitive strategies
model. It was important that candidates review each of the strategies in order to evaluate the likelihood of
each providing FREE with a sustainable competitive advantage. Candidates were required to apply the
generic strategies model directly to FREE and evaluate the sustainability of each strategy.

Marking Guide Marks

Cost leadership 4
Differentiation 4
Focus (Niching) 4
(1 mark for description of strategy, 2 marks for discussion of strategy, 1 mark for
conclusion)
Maximum marks awarded 12

Lead marker’s Comments

This question was not well answered. This was most disappointing as this has been examined on a
number of occasions before and it was expected that candidates would be able to apply it well to FREE.
Even more disappointing was the number of candidates who failed to correctly define the generic
strategies, with many confusing differentiation with focus and some poorly defining cost leadership as
relating to low price.
As stated in the scenario, FREE would be operating in a very competitive industry, where production
technology is mature and most competitors are operating with modernised facilities. So it is unlikely that
this area will yield a cost advantage. Although savings would be made in the loss of journalists and other
staff, most of the innovations implied in the move to FREE can be imitated by its competitors which
suggests that achieving a sustainable competitive advantage through cost leadership is doubtful. Most
candidates failed to recognise that a cost advantage is unlikely to be sustainable.
FREE has the potential to differentiate itself from its competitors. However, the Opinion has first mover
advantage and any or all of the other 9 competitors could follow Opinion and FREE and become free
newspapers, meaning a differentiation strategy could yield a sustainable advantage but its competitors
could replicate many of the aspects of this strategy. Again, few candidates discussed the sustainability of
this strategy. The Focus aspect relied on FREE addressing the needs of a particular segment of the
newspaper market. S’s insistence that FREE should imitate Opinion has limited its scope in following this
strategy, which very few candidates recognised. There are no significant barriers to entry to stop any of the
other nine daily newspapers following Opinion and FREE into this segment.
Overall, many candidates' answers were descriptive and very few addressed the question requirement
directly as most missed the issue of sustainability.
Common Errors
• Lack of knowledge of the model and inability to apply
• Application of Porter's Five Forces model

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 1(c)
Advise E how he could use Lewin's three-step model of change to assist the staff to make the transition to
the new working environment of FREE.
(9 marks)

Rationale
This question examines learning outcome B2(c) 'evaluate tools, techniques and strategies for managing
the change process' and tests candidates' understanding of the importance of managing change.

Suggested Approach
This question should have been a straightforward application of Lewin’s three step change model. Once
again, it is important that answers are well applied, and not merely descriptive.

Marking Guide Marks

Unfreezing 3
Change 3
Refreezing 3
(1 mark for naming the action/mechanism, 2 marks for application)

Maximum marks awarded 9

Lead marker’s Comments

This question was well answered by most candidates. Many displayed a sound knowledge of the model
and most were able to apply it directly to the change in working in the new Free environment.

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

SECTION B – 50 MARKS
ANSWER TWO QUESTIONS FROM THREE

Question 2(a)
Advise JJJ whether the four aspects of its 'ethical business policy' could cause concerns for its
shareholders.
Assume that the components are not sourced from suppliers in K when answering this question.
(9 marks)

Rationale
This question examines learning outcome B3(b) 'evaluate ethical issues and their resolution in the context
of organisational change' and examines candidates' understanding of the effect of ethical policies upon the
organisation's shareholders.

Suggested Approach
This question required candidates to review the four aspects of JJJ’s ethical business policy from the
scenario in order to evaluate the extent to which they may cause concern for shareholders. Candidates
were expected to recognise that there could be a potential conflict between the ethical policies of a
business and the shareholders’ expectations.

Marking Guide Marks

All of its products are sourced and made exclusively within Q

JJJ sells all its products in Q Up to 2 each
Legislative requirements and working conditions
Fair trade

Summary Up to 2

Maximum marks awarded 9

Lead marker's Comments

This question was well answered by most candidates. Most recognised the potential conflicts within JJJ’s
ethical policies with the needs of the shareholders in terms of restricting the company’s profit and growth
opportunities. Most candidates correctly recognised the conflicts within the first two aspects of the ethical
policy and most also recognised the need for compliance with the law and high standards of working
conditions. A number of candidates also correctly recognised that even if the policy makes JJJ’s products
more expensive, this may not necessarily reduce shareholder wealth as it attracts customers it would
otherwise not have done because they share the values of JJJ’s ethical business policy.

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 2(b)
Assume that JJJ has decided to source components from suppliers in K.
Advise whether, and how, JJJ could continue with its ethical business policy in its relationship with the
following interest groups:
(i) its suppliers in K (4 marks)
(ii) its suppliers in Q (4 marks)
(iii) its customers in Q (4 marks)
(iv) its shareholders (4 marks)
(16 marks)

Rationale
This question examines learning outcome A1(e) 'recommend how to interact with suppliers and customers'
and tests candidates' understanding of managing key stakeholder relationships.

Suggested Approach
Candidates were expected to undertake two separate activities to answer this question. Firstly, candidates
should have considered whether JJJ could continue with its ethical business policy in relation to each
stakeholder, should it source products from suppliers in K and secondly, the actions it would therefore
need to undertake to continue with its relationships with each interest group.

Marking Guide Marks

Suppliers in K:
Recognition that conflict occurs with EBP 1
Managing relationship issues: Up to 2 each
Child labour
Health and safety
Fair trade

Suppliers in Q:
Recognition that conflict occurs with EBP 1
Lose business Up to 2 each
Managing remaining suppliers in Q

Customers in Q:
Recognition that conflict occurs with EBP 1
Managing relationship issues: Up to 2 each
Price
Necessity
Employment
Child labour
Health and safety

Shareholders:
Recognition that conflict occurs with EBP 1
Managing relationship issues: Up to 2 each
Competing aspirations
Balancing act (max 4 per
CIMA code section)

Maximum marks awarded 16

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Lead marker's Comments

This question was not well answered. Many candidates recognised that sourcing components from
suppliers in K was a conflict with the current ethical business policy but few considered the nature of the
conflict in relation to each of the interest groups. Many answers went little further than recognising that a
conflict existed, with either little or no discussion of how JJJ could manage its future relationships with each
interest group. Some answers merely stated that the ethical business policy should be re-written, but this
was not asked for and therefore awarded no credit.
Common Errors
• Limited answers stating only that the ethical policy had been breached
• Limited focus upon managing future stakeholder relationships

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 3(a)
Advise MMM's executive board:
How it could use the 'SMART' model to achieve the new control system's objectives
(10 marks)

Rationale
This question examines learning outcome D1(a) 'recommend appropriate control measures' and tests
candidates' knowledge and understanding of how to enhance organisational control systems.

Suggested Approach
Candidates were expected to demonstrate a sound understanding of the SMART criteria and to apply
these directly to the objectives identified in the scenario.

Marking Guide Marks

Specific
Measurable
Attainable Up to 2 each
Relevant
Time-bound
(1 mark for each aspect described, 1 mark for exemplification)

Maximum marks awarded 10

Lead marker’s Comments

This question was not well answered. This was most disappointing as this should have been a very
straightforward question. Many candidates scored well on the description of the SMART criteria, although it
was surprising to see how few candidates actually described all five aspects accurately. However, few
answers went further than this.
Most candidates were let down by their application of the SMART criteria to the objectives of MMM. For
example, for the ‘Specific’ criteria, candidates could have suggested that for the first objective of
‘motivation’ this could be made more specific by stating this objective in a way such as ‘increasing the pass
rates on all courses to the national average’. Similarly for the ‘Measurable’ criterion, the third objective
could be enhanced to state ‘new activities should be introduced to raise an extra £1 million profit a year’.
Most candidates failed to make an attempt at application of the criteria to the scenario objectives.
Therefore marks awarded were limited.

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 3(b)
Advise MMM's executive board of the activities it must undertake to manage the process of:
(i) changing the university's culture (5 marks)
(II) introducing the new departmental structure (5 marks)
You must NOT use Lewin's three-step model of change as the basis of your answer to requirement (b)
(10 marks)

Rationale
This question examines learning outcome B2(c) 'evaluate tools, techniques and strategies for managing
the change process' and tests candidates' understanding and application of the possible approaches and
strategies to be applied during a change management process.

Suggested Approach
Candidates were expected to apply their knowledge of managing change to the organisation’s culture and
a new departmental structure. However, it was important that candidates should consider the differences in
approach to managing a change in culture and a change to organisational structure.

Marking Guide Marks

Culture
Limitations Up to 2 each
Communication
Reward system
Symbols

New faculty structure

Reduction of Heads - needs HR strategy Up to 2 each
Planning/budget
Training
Resistance to change
Project management activities

Maximum marks awarded 10

Lead marker’s Comments

This question was answered very badly. Candidates clearly had a poor understanding of changing culture
and treated the process as a purely mechanistic one rather than an abstract one. Many answers focused
upon a structured approach such as ‘Plan, Organise, Monitor, Implement’ and some answers merely re-
wrote the Kotter and Schlesinger approach, but with little consideration of the specific difficulties of cultural
change.
Part (ii) was also not answered well. Although this was more amenable to a mechanistic approach, very
few answers recognised the details of the scenario. Again, the Kotter and Schlesinger framework was often
used but once again, application was poor.
Common Errors
• Poor appreciation of the difficulties of cultural change
• Knowledge dumping of change management frameworks with little/no application

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 3(c)
Discuss the role that a change agent could play in the change process in MMM.
(5 marks)

Rationale
This question examines learning outcome B2(c) 'evaluate tools, techniques and strategies for managing
the change process' and tests candidates' understanding and application of the possible approaches and
strategies to be applied during a change management process.

Suggested Approach
Candidates were expected to consider the specific role and activities of a change agent within MMM, NOT
upon a change agent's skills generally.

Marking Guide Marks

Facilitating not implementing

Defining
Examining 1 mark
Diagnosing each
Offering
Devising
Disseminating
Maximum marks awarded 5

Lead Marker’s Comments

This question was reasonably well answered. Most candidates focused upon the role of the change agent
although most answers were generic rather than specific to the role within MMM. Some answers incorrectly
focused upon the skills of a change agent and this approach was awarded no marks.
Common Errors
• Listing of change agent skills
• Generic list of activities with limited application to MMM

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 4(a)
Advise BBB's management board what additional information it needs to support its planning and decision
making.
(10 marks)

Rationale
This question examines learning outcome D1(a) 'recommend appropriate control measures'. The question
is designed to test candidates' understanding of the informational requirements of an organisation in order
to support business unit performance and appraisal.

Suggested Approach
This question required the candidate to demonstrate a sound understanding of the current weaknesses
and information needs of organisation. Answers should focus specifically upon the information needed to
support planning and decision making in BBB, taking into account the information weaknesses that
currently exist.

Marking Guide Marks

Internal and externally focused information

Market/customer information 3 marks
Competitor information each
Costing/pricing information

(1 mark each aspect identified, 2 marks for discussion)

Maximum marks awarded 10

Lead Marker’s Comments

This question was not well answered. Candidates seemed to have a basic lack of understanding of
planning and decision making information and many answers merely listed a range of possible information
and information sources. For example, a number of candidates suggested SWOT analysis, PEST analysis
and mission statements but failed to explain their role in planning and decision making for BBB. Many
candidates merely listed all of the aspects of the scenario where it had stated that there was a lack of
information currently, but again, made no attempt to explain its relevance to assisting in planning and
decision making. Overall, candidates demonstrated a lack of understanding of the basic information needs
of organisational decision makers.
Common Errors
• Generic list of organisational information requirements
• Focus upon activities rather than information

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 4(b)
Recommend, with reasons, THREE improvements to the planning and decision-making information
provided to BBB's management board.
(9 marks)

Rationale
This question examines the learning outcome D1(a) 'recommend appropriate control measures' and is
designed to test candidates' ability to evaluate a given performance measurement system.

Suggested Approach
Candidates were required to present three sound recommendations for improvements to BBB’s planning
and decision making information, linked clearly to weaknesses identified in part (a).

Marking Guide Marks

Internal focus
External approach/Strategic Management Accounting
Critically review its current management accounting
BBB's variance analysis: abandoning it?
Five Forces and PEST
Markets, clients and competitors
Commission market research/buy research reports 1 mark for
Market size and relative market share monthly reporting recommend-
Carry out competitor analysis ation and 2
Competitor's costs could be reported marks for
Research and report attributes customers' value reasons
Reported: periodically/occasionally/combination of both
Costing and pricing
Absorption costing may not be the best method for decision-making
Alternatives: Activity Based Costing/Target Costing/Marginal Costing
Pricing not necessarily be subordinated to costing
Different costs (and prices) for different purposes
Report on qualitative factors
Quality/innovation/customer satisfaction

Maximum marks awarded 9

Lead Marker’s Comments

This question was not well answered, largely as a result of the weaknesses of answers to part (a).
Candidates were expected to focus their answers upon information which would address the drawbacks
identified in part (a) of the answer, including the internal focus, the lack of market, client and competitor
information and BBB’s costing and pricing strategies. A number of candidates incorrectly focused upon the
methods of collecting and using information and sources of information, rather than improvements to the
information. For example, a number of candidates discussed the need to undertake rational planning and
others discussed the need for a mission statement. Neither of these is specifically related to the information
needs of planning and decision making. A number of candidates merely re-wrote their answers to part (a)
in answer to this question.
Common Errors
• Repeat of information from part (a) of the answer
• Poor focus upon planning and decision making information needs

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E3 - Enterprise Strategy
Post Exam Guide
March 2012

Question 4(c)
Advise the management board how BBB could benefit from the use of Benchmarking.
(6 marks)

Rationale
This question examines learning outcome D1(b) 'recommend alternative models of performance
measurement' and is designed to examine candidates' understanding of benchmarking as a tool for
performance measurement.

Suggested Approach
Candidates were expected to demonstrate a sound understanding of benchmarking and to apply this
directly to BBB.

Marking Guide Marks

Benchmarking defined: 1 mark for comparative, 1 mark for types 2

External dimension: reduce costs/increase in client satisfaction 2
Increase awareness/imitate successful strategies/avoid harmful strategies 2
Overcome complacency about its performance 2
Better understand business model and how BBB creates value 2

Maximum marks awarded 6

Lead Marker's Comments

This question was reasonably well answered, although it was disappointing that more candidates did not
score highly on this requirement. Most were able to define benchmarking and most also made an attempt
to highlight a number of benefits of benchmarking. However, most answers were generic and descriptive,
with limited reference to the benefits which could be obtained by BBB specifically.

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