SCS – Dec 2022 – L3 – Corporate Strategy and Competitive Dynamics in Cable Manufacturing

Level: Level 3
Series: DEC 2022
Case Study Tags: Competitive Advantage, Corporate Governance, Ethics, Money Market Hedge, Organisational Structure, Risk Management

Summarized Case Study

TEKNIK Cable & Wire Limited (TCWL), a Ghanaian cable manufacturer, has grown to compete in both local and international markets. The case study centers on the strategic issues facing the company as it looks to expand into Kenya and South Africa, driven by the African Continental Free Trade Agreement (AfCFTA). The company’s CEO is proposing significant organizational changes to align with its growth ambitions, including a shift to a matrix organizational structure, which aims to improve flexibility and accountability across regions.

Corporate governance plays a key role in TCWL’s strategic operations, especially with the involvement of the founding CEO, now Board Chairman, in decision-making processes. This leads to discussions around the potential agency conflicts that could arise due to the overlap between ownership and management roles. The company also contemplates going public, a move that could influence governance structures and financial decision-making, especially in relation to funding for international expansion.

Key strategic factors influencing TCWL’s competitive advantage are analyzed using Porter’s Diamond model. These include factor conditions such as access to local resources (e.g., aluminum) versus the need to import copper and skilled labor. Additionally, the local market’s demand for quality products and the challenges posed by competitors, including those importing cheaper, inferior cables, are considered.

The case also explores the ethical dilemma of child labor, as some of TCWL’s distributors are accused of engaging in such practices. The case applies deontological and teleological ethical theories to assess the company’s responsibilities in this regard.

Lastly, TCWL faces financial risks due to currency fluctuations and considers a money market hedge to mitigate the impact of the Ghanaian cedi’s potential appreciation on expected foreign currency receipts from exports. The company’s operational risks related to its highly automated production processes are also examined, with emphasis on embedding risk awareness to ensure business continuity.

Full Case Study

Past Questions for SCS – Dec 2022 – L3 – Corporate Strategy and Competitive Dynamics in Cable Manufacturing

SCS – Dec 2022 – L3 – Q8b – Controlling risk

Explanation of ways to embed risk awareness within an organisation.

Question

The risks that TCWL automated systems could be exposed to can be controlled and managed through embedding risk awareness in the culture of the organisation. Creating a culture of risk awareness is the responsibility of the board of directors and senior management of TCWL.

Required:
Explain FOUR (4) ways by which the Board can create and embed risk awareness in the culture of TCWL to ensure that systems risks are controlled effectively. (5 marks)

Answer

Tags: Corporate Governance, risk awareness
Level: Level 3

Topic: Controlling Risk
Series: DEC 2022

SCS – Dec 2022 – L3 – Q8a – Controlling risk

Explanation of risks faced by automated systems and ways to embed risk awareness within an organisation.

Question

TCWL production processes and operations are highly automated, and this may expose the company to major risks with high potential of negative consequences for the business.

Required:
Explain FOUR (4) major risks that TCWL automated systems could suffer. (5 marks)

Answer

Tags: Automated systems, Corporate Governance, risk awareness, Risk Management, System Vulnerabilities
Level: Level 3

Topic: Controlling Risk
Series: DEC 2022

SCS – Dec 2022 – L3 – Q7 – Strategy, stakeholders, and mission

Explanation of required corporate disclosures and measures to maximise shareholder engagement in a listed company.

Question

The Ghana Code of Best Practices for Corporate Governance specifies a number of disclosures that should be included in an annual report of a listed company, in addition to those required by law or other regulations. The new CEO has presented a paper to the Board recommending that the company should go public to raise some equity capital to partially finance its expansion plans. The listing of the company would result in an increased number of shareholders.

Required:

a) Explain to the Board SIX (6) statements that must be disclosed in the annual report of TCWL after listing on the Ghana Stock Exchange. (6 marks)
b) The Code of Best Practices recommends measures that aim at maximising attendance and involvement by shareholders in the company. Briefly discuss FOUR (4) of those measures. (4 marks)

Answer

Tags: Annual Reports, Corporate Governance, Disclosures, Ghana Code of Best Practices, shareholder engagement
Level: Level 3

Series: DEC 2022

SCS – Dec 2022 – L3 – Q6b – Ethics and social responsibility

Analysis of child labour using deontological and teleological ethical theories.

Question

The Board chairman and the CEO have disagreed on whether the use of child labour by the distributors and continuous supply of the company’s products to the affected distributors is ethically wrong. The two have approached you as an expert in ethics to determine which of the positions is correct.

Required:

Using the two main theories of ethics, deontological theory and teleological theory, determine whether child labour is ethically wrong. (10 marks)

Answer

Tags: child labour, Corporate Social Responsibility, deontological theory, Ethics, teleological theory
Level: Level 3

Topic: Ethics and social responsibility
Series: DEC 2022

SCS – Dec 2022 – L3 – Q6a – Internal analysis

Draw Shell Directional Policy Matrix and recommend strategies for TCWL products based on their performance.

Question

The Consultant undertook analysis of the performance of TCWL products using Shell Directional Policy Matrix. The management of the company is interested in receiving a report that contains the matrix and the strategies to be adopted for each product.

Required:

i) Draw Shell Directional Policy Matrix and clearly locate each product in an appropriate quadrant/cell in the matrix based on the product’s performance. (2 marks)
ii) Recommend and explain the appropriate strategy or strategies that TCWL should adopt for each product as suggested by Shell Directional Policy Matrix. (8 marks)

Answer

Tags: Competitive Advantage, product performance, Shell Directional Policy Matrix, Strategic Recommendations
Level: Level 3

Topic: Internal analysis
Series: DEC 2022

SCS – Dec 2022 – L3 – Q5 – Financial management

Calculate the required loan, interest earned, and the Cedi gain or loss from a money market hedge.

Question

The Board has directed the CEO to take the necessary steps to arrange with its bankers, a money market hedge for the expected receipts from DMP, to protect the company against the downside risk of expected Cedi appreciation.

Required:
As the Financial Controller of the company, the CEO has asked you to calculate the following relating to money market hedge:

a) The initial dollar amount of loan that TCWL could take from the bank in Cameroon on 1 December 2022 and the cedi equivalent of the initial loan if converted on the same date. (3 marks)
b) The total Cedi amount and interest the company will earn by 31 May 2023, if the converted amount is invested in Ghana for the duration of the money market hedge. (3 marks)
c) The Cedi gain or loss that TCWL would make by hedging. (2 marks)
d) The effective forward rate of the Cedi to U.S. dollar on 31 May 2023. (2 marks)

Answer

Tags: Currency risk, Financial management, Foreign Exchange, Money market hedge
Level: Level 3

Topic: Financial management
Series: DEC 2022

SCS – Dec 2022 – L3 – Q4b – Strategy implementation

Explain the levers of change and discuss the benefits of an external change agent for leading change in TCWL.

Question

The Board Chairman wants the new CEO to keep to the original vision and mission upon which the company was founded, but the new CEO has his own idea of the direction he wants to take the company. He, therefore, desires to implement some changes, including the introduction of a new organisational structure.

Required:

i) Explain FOUR (4) levers of change that the CEO must adopt to successfully implement the changes he desires in TCWL. (6 marks)
ii) Briefly discuss FOUR (4) benefits of an external change agent if the CEO decides to engage one to lead the proposed changes. (4 marks)

Answer

Tags: external change agents, Leadership, levers of change, Organisational Change, resistance to change
Level: Level 3

Topic: Strategy implementation
Series: DEC 2022

SCS – Dec 2022 – L3 – Q4a – Strategy implementation

Evaluate non-financial factors affecting TCWL’s strategic expansion using Johnson and Scholes’ model.

Question

TCWL plans to expand to Kenya and South Africa to produce for Eastern and Southern Africa markets respectively. This move is largely influenced by the Africa Continental Free Trade Agreement (AfCFTA) which was launched in July 2020. This strategic direction would require substantial investments to upgrade production facilities to meet the new market demand.

Required:

Using Johnson and Scholes suitability/feasibility/acceptability model, evaluate the non-financial factors that could influence the success of this strategic decision. (10 marks)

Answer

Tags: AfCFTA, expansion, Johnson and Scholes, Non-Financial Factors, Strategic Decision-Making
Level: Level 3

Topic: Strategy implementation
Series: DEC 2022

SCS – Dec 2022 – L3 – Q3 – Strategy, stakeholders, and mission

Explanation of potential agency conflicts minimised by the involvement of a shareholder in management.

Question

Mr. Asare Blankson, the sole shareholder, has been actively involved in the management of the company by serving as the CEO for many years and currently as the Board Chairman. This could minimise potential agency conflicts associated with the separation of the shareholder(s) from management as suggested by the Agency Theory of Corporate Governance.

Required:

Explain FIVE (5) potential agency conflicts that could be minimised or avoided by Mr. Asare Blankson’s involvement in the management of the company as a former CEO and the current Board Chairman. (10 marks)

Answer

Tags: Agency Conflicts, Agency theory, Corporate Governance, shareholder-management relations
Level: Level 3

Topic: Strategy, stakeholders, and mission
Series: DEC 2022

SCS – Dec 2022 – L3 – Q2 – Competitive forces

Using Porter’s Diamond model to evaluate the factors influencing the competitiveness of TCWL in Ghana.

Question

The competitiveness of a business operating in a country is determined by the presence of a combination of some factors and conditions. The management of TCWL wants to understand the factors in Ghana that have influenced its success or otherwise over the years and which should be considered as it expands to Kenya and South Africa.

Required:

Using Porter’s model for determining national competitive advantage (Porter’s Diamond), evaluate FOUR (4) factors that have influenced the competitiveness of TCWL in Ghana for which the management must consider as it expands its operations internationally. (10 marks)

Answer

Tags: Competitive Advantage, International Expansion, national competitiveness, Porter’s Diamond
Level: Level 3

Topic: Competitive forces
Series: DEC 2022

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SCS – Dec 2022 – L3 – Corporate Strategy and Competitive Dynamics in Cable Manufacturing

Past Questions for SCS – Dec 2022 – L3 – Corporate Strategy and Competitive Dynamics in Cable Manufacturing

SCS – Dec 2022 – L3 – Q8b – Controlling risk

Explanation of ways to embed risk awareness within an organisation.

SCS – Dec 2022 – L3 – Q8a – Controlling risk

Explanation of risks faced by automated systems and ways to embed risk awareness within an organisation.

SCS – Dec 2022 – L3 – Q7 – Strategy, stakeholders, and mission

Explanation of required corporate disclosures and measures to maximise shareholder engagement in a listed company.

SCS – Dec 2022 – L3 – Q6b – Ethics and social responsibility

Analysis of child labour using deontological and teleological ethical theories.

SCS – Dec 2022 – L3 – Q6a – Internal analysis

Draw Shell Directional Policy Matrix and recommend strategies for TCWL products based on their performance.

SCS – Dec 2022 – L3 – Q5 – Financial management

Calculate the required loan, interest earned, and the Cedi gain or loss from a money market hedge.

SCS – Dec 2022 – L3 – Q4b – Strategy implementation

Explain the levers of change and discuss the benefits of an external change agent for leading change in TCWL.

SCS – Dec 2022 – L3 – Q4a – Strategy implementation

Evaluate non-financial factors affecting TCWL’s strategic expansion using Johnson and Scholes’ model.

SCS – Dec 2022 – L3 – Q3 – Strategy, stakeholders, and mission

Explanation of potential agency conflicts minimised by the involvement of a shareholder in management.

SCS – Dec 2022 – L3 – Q2 – Competitive forces

Using Porter’s Diamond model to evaluate the factors influencing the competitiveness of TCWL in Ghana.

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