Strategic Management – Page 4

FM – Nov 2022 – L3 – Q1 – Mergers and Acquisitions

Evaluating the acquisition of Company K3 in Togo for business expansion purposes.

Question

The following case relates to a business expansion decision for Abayomi Plc (AP):

Abayomi Plc (AP) is a major electrical company in Nigeria. The directors have recently identified Togo as a priority location for business expansion. Togo uses currency T$. Assume today is 30 August 2021.

Company K3, located in Togo, has been identified as a potential acquisition target. AP already manages two business units in Togo, named K1 and K2, and these have shown strong performance under AP’s ownership.

K3 is particularly attractive to AP because it has its own warehouse, distribution, and logistics network, all of which could be used by K1 and K2, if the acquisition goes ahead. Currently, K1 and K2 send goods to customers from AP warehouses located in Ghana. This involves considerable cost and delay in delivery.

K3 is a private company, and 100% of its shares are owned by the family that founded it. Many shareholders are keen to realize their investment by selling the company to AP.

Both companies are working towards an effective date for the sale of K3 to AP on 1 January 2022.

Financial Data for K3 for 2020:

The statement of financial position of K3 as at 31 December 2020 showed the following balances:

T$ Million
Long term borrowings	375
Share capital (T$1 ordinary shares)	90
Total liabilities	465
Net assets	180

Additional Data:

AP aims to maintain the same capital structure as AP. That is, gearing (debt/debt+equity) would be 25% based on market values. AP would guarantee K3’s new debt, which can be assumed to have the same risk profile as AP’s debt.

A proxy company has been identified which is also located in Togo and has a similar business model to K3.

Proxy company data:

P/E ratio of 12.
Equity beta of 1.7 and debt beta of 0.4.
Gearing (debt/debt+equity) based on market values of 35%.

Togo has a risk-free rate of 5% and a market risk premium of 4%.

Financial Data for AP:

Latest data available for AP shows:

P/E ratio of 14.
Equity beta of 1.5 and debt beta of 0.3.
Gearing (debt/debt+equity) based on market values of 25%.
AP pays 6.2% interest on its long-term borrowings.
Tax rate in Nigeria is 30%.

The spot rate for T$ against Naira today is T$7/₦ (i.e., ₦1 = T$7.00) and is not expected to change in the foreseeable future.

Assume that Nigeria has the same risk-free rate and market risk premium as Togo.

Required:
Assume you are the Finance Director of AP.

a. Advise on:
i. The types of synergistic benefit that might arise from the acquisition of K3. (8 Marks)
ii. Possible reasons why both one-off and ongoing synergistic benefits might not be achieved to the extent expected. (4 Marks)

b. Calculate:
i. A Weighted Average Cost of Capital (WACC) for use in valuing K3 based on the proxy company’s business and country risk and AP’s capital structure. (6 Marks)
ii. A range of values for the equity of K3 in T$ as at 1 January 2022 using the following methods:

Asset basis. (2 Marks)
P/E (including bootstrapping). (5 Marks)
DCF (with and without synergistic benefits). (5 Marks)

(Total 30 Marks)

Answer

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Tags: Acquisition valuation, Business Expansion, Cost Analysis, Financial strategy, Foreign Operations, Logistics Integration, Strategic Management, Synergy
Level: Level 3

Topic: Mergers and acquisitions
Series: NOV 2022

CSME – May 2017 – L2 – SB – Q4 – Strategic Management in the Public Sector

Explain organizational growth through Greiner's model and discuss board diversity benefits and limitations.

Question

a. With the aid of an appropriate diagram, explain how organisations and management structures might change as a business grows using Greiner’s growth model. (10 Marks)

b. Explain briefly the concept of board diversity giving THREE examples of categories of diversity. (5 Marks)

c. Explain THREE benefits of the diversity of the board of a large company. (3 Marks)

d. Discuss TWO limitations of board diversity. (2 Marks)

Answer

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Tags: Board Diversity, Corporate Governance, Growth Model, Organizational Structure, Strategic Management
Level: Level 2

Topic: Strategic Management in the Public Sector
Series: MAY 2017

CSME – Nov 2015 – L2 – Q4 – Risk Management and Corporate Strategy

Analyzes strengths and weaknesses of Toyin Trust Insurance Plc pre- and post-2000 ownership changes, and suggests strategies for sustaining the company.

Question

Toyin Trust Insurance Company is one of the duly registered insurance companies in Nigeria. Ten years after it started operations in 1990, the company had become a household name in the market. Its strengths included timely payment of claims and introduction of quality products that captured changing customers’ needs.

At inception, the company was 100% foreign-owned, with five of the seven directors being experienced expatriate insurance practitioners. However, by 2000, over 90% of the equity had been transferred to Nigerian investors. In 2009, following reorganization, many experienced senior managers resigned, and inexperienced staff took over key positions, leading to a decline in service quality and a 40% drop in premium collection.

Required:

a. Analyze the strengths of Toyin Trust Insurance Plc before 2000. (5 Marks)
b. Analyze the strengths and weaknesses of Toyin Trust Insurance Plc after 2000. (5 Marks)
c. Suggest essential strategies to sustain Toyin Trust Insurance Plc. (10 Marks)

Answer

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Tags: Business Growth, Organizational Challenges, Risk Mitigation, Strategic Management
Level: Level 2

Topic: Corporate Governance, Risk Management and Corporate Strategy
Series: NOV 2015

CSME – Nov 2020 – L2 – Q1a – Environmental Analysis

Advise Cells Incorporated on the strategic management factors to consider when relocating its manufacturing plant to Dumbura Republic.

Question

Dumbura Republic is reputed for its high population density and the consequent availability of cheap labour. Surprisingly, due to the high premium placed on qualitative education in science and technology-based disciplines, the country has an abundance of highly skilled workforce suited for manufacturing industries. Other features of Dumbura Republic include adequate, accessible and reliable social infrastructure such as electricity, potable water, road and rail network, and an effective security network. Besides, the country also has a variety of tax incentives designed to attract foreign investments. These positive features of the socio-economic environment in Dumbura have attracted a lot of foreign investors, including several computer and mobile phones hardware production companies.

Indeed, the socio-economic environment in Dumbura is very business-friendly. Hence, it is not surprising that a lot of foreign companies have located their industrial plants in the country. Effects of this development include increased employment opportunities, influx of people in search of employment from neighbouring countries, spiralling rent rates for all categories of accommodation, worsening environmental pollution, and a spiking population growth rate, which is beginning to take its toll on available social infrastructure. Besides, the hitherto peaceful country is beginning to experience an increased rate of crimes such as burglary, robbery, cyber theft and kidnap that target expatriates particularly. The local population is becoming increasingly hostile to the expatriates and workers from neighbouring countries, accusing them of denying the local population access to good job opportunities.

You have been employed as a consultant to a computer and mobile phone hardware company, Cells Incorporated, which is considering relocating its major manufacturing plant from an Asian country to Dumbura Republic. This is hoped to bring down the cost of production and provide a ready market for about 20% of its products.

Required:
With the aid of Johnson, Scholes, and Whittington’s position on strategic management, advise Cells Incorporated on the elements of strategic management that must be taken into consideration in deciding whether to relocate its manufacturing plants to Dumbura Republic. Ensure that you make adequate references to the scenario above as might be relevant.

Answer

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Tags: Business Relocation, Risk Assessment, Strategic Management, Strategy implementation
Level: Level 2

Topic: Environment analysis
Series: NOV 2020

PM – Nov 2020 – L2 – Q5 – Balanced Scorecard

Analyze the performance of DAT Air using the Balanced Scorecard approach and propose relevant goals and performance measures for each of the perspectives.

Question

QUESTION 5
Dat Air was founded in January 2010 by Dr. Daniel Taiwo and the airline has been
branded as a low-cost airline in Nigeria. Dat Air‟s strategy is to operate as a low-cost and highly efficient airline, and it does this by:
(i) Operating mostly in cities where other airlines do not fly to reduce landing
cost;
(ii) Using only one aircraft model in order to reduce maintenance and operational
costs. These planes are leased rather than bought outright;
(iii) Having only one category of seat class; there is no pre-allocated seats or in-
flight entertainment; and to
(iv) Focus on e-commerce with customers both booking tickets and checking in
for flights online. Customers who booked well in advance before the flight
date enjoy substantial discount.
The airline was given an „on time arrival‟ ranking of second best by the
Nigerian aviation authority, who rank all 20 airlines operating locally in the
country based on the number of flights which arrive on time at their
destinations. 48 Dat Air flights were cancelled in 2018 compared to 35 in
2017. This increase was due to an increase in the staff absentee rate at Dat
Air from 5 days per staff member per year to 7 days.
The average „ground turnaround time‟ for airlines in Nigeria is 2 hours,
meaning that, on average, planes are on the ground for cleaning, refuelling,
etc for 2 hours before departing again. Customer satisfaction surveys have
shown that 90% of customers are happy with the standard of cleanliness on
Dat Air‟s planes.
The number of passengers carried by the airline has grown from 200,000
passengers on a total of 2,107 flights in 2010 to 650,000 passengers on
5,320 flights in 2018. The overall growth of the airline has been helped by
the limited route licensing policy of the Nigerian government, which has
given DAT Air almost monopoly status on some of its routes. However, the
government is now set to change this policy with almost immediate effect,
and it has become more important than ever to monitor performance
effectively.
This has necessitated the management of Dat Air to examine the airline‟s
performance using the balanced scorecard model. This will enable the
management to discover areas where improvement is needed in its
operations.
Required:
a. Describe each of the FOUR perspectives of the balanced scorecard.
(6 Marks)
b. For each perspective of the balanced scorecard, identify ONE goal
together with a corresponding performance measure which could be
used by DAT Air to measure the company‟s performance. The goals
and performance measures should be specifically relevant to Dat Air.
For each pair of goals and performance measures, explain why you
have chosen them. (9 Marks)
c. Appraise the usefulness of the balanced scorecard as a performance
evaluation technique. (5 Marks)
(Total 20 Marks)

Answer

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Tags: Airline Industry, Balanced Scorecard, Customer Satisfaction, Operational Efficiency, Performance Measurement, Strategic Management
Level: Level 2

Topic: Balanced Scorecard, Performance Measurement Systems
Series: NOV 2020

CSME – Nov 2018 – L2 – Q6 – Corporate Strategy Formulation

Explain the BCG Model with a diagram to analyze a firm's business portfolio, detailing the four product categories.

Question

As part of a training session in strategic management, deploy a diagram to explain how a firm would use the Boston Consulting Group (BCG) model to analyze its business portfolio. Explain each category of products identified in the BCG model.

Answer

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Tags: BCG Model, Business Strategy, Portfolio analysis, Product Categories, Strategic Management
Level: Level 2

Series: NOV 2018

BMF – May 2016 – L1 – SA – Q10 – Basic Management Functions

This question evaluates the student's knowledge of Porter's Strategic Management Model and which element is not a part of it.

Question

Which of the following is NOT part of Porters’ Model of Strategic Management?
A. The Strategic goal for a company should be to achieve a superior long-term return on investment
B. Strategy must offer a unique value proposition for the customer
C. There should also be a distinctive value chain
D. The selected strategy will not involve some trade-offs
E. There should be continuity of strategic direction

Answer

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Tags: Competitive Strategy, Porter's Model, Strategic Management
Level: Level 1

Topic: Basic Management Functions
Series: MAY 2016

MI – Nov 2015 – L1 – SA – Q16 – Information Systems and Management

Identifies which management level handles strategic issues and long-term trends.

Question

Strategic issues and long-term trends are handled by:
A. Software system developers
B. Hardware system developers
C. Senior management
D. Middle management
E. System analysts

Answer

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Tags: Long-Term Planning, Management Levels, Strategic Management
Level: Level 1

Topic: Information Systems Development and Security
Series: NOV 2015

SCS – May 2020 – L3 – Q1 – Strategy, Stakeholders and Mission

Perform a SWOT analysis of Customer Focused Ltd, highlighting key strengths, weaknesses, opportunities, and threats.

Question

Customer Focused Ltd has updated its management accounts (Exhibit 1) to produce a
forecast for the year 2020 and these have indicated some significant problems. The business
owners are unsure what to do next.
Required:
You are acting as an advisor to the company and they ask you to:

Prepare a SWOT analysis of Customer Focused Ltd. You should list the strengths, weaknesses, opportunities, and threats in the SWOT analysis of Customer Focused Ltd. You should then select from your list the key strengths, weaknesses, opportunities, and threats and explain why they are important.

Answer

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Tags: Business Assessment, Competitive analysis, Opportunities, Strategic Management, Strengths, SWOT Analysis, Threats, Weaknesses
Level: Level 3

Topic: Strategy, stakeholders, and mission
Series: MAY 2020

BMF – Nov 2021 – L1 – SA – Q20 – The Business Environment

Question about identifying an element not part of the Cultural Web model within an organization.

Question

The cultural web consists of the following inter-related elements of culture within an organisation, EXCEPT:

A. Symbols
B. Interactions
C. Control systems
D. Stories and myths
E. Routine and rituals

Answer

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Tags: Corporate Culture, Organizational Behavior, Strategic Management
Level: Level 1

Topic: The Business Environment
Series: NOV 2021

BMIS – March 2024 – L1 – Q5b – Competitive forces and markets

Explain the components of Porter's Five Force Model used to analyze competitive environment and its impact on a company's profitability and strategy.

Question

The Porter’s Five Force Model is regarded as a tool for driving industry competition. The model is used to analyse the competitive environment in terms of five key forces that impact a company’s profitability and influence its strategy.

Required: Explain the components of the Model. (10 marks)

Answer

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Tags: Competitive analysis, Industry competition, Market dynamics, Porter’s Five Forces, Strategic Management
Level: Level 1

Topic: Competitive forces and markets
Series: MAR 2024

BMIS – Nov 2023 – L1 – Q5b – The external environment

Describe how each element of the PEST Analysis (Political, Economic, Socio-cultural, Technological) influences an organization's operations.

Question

The PEST Analysis is a strategic tool used for generating information about how the business environment operates and influences the operations of an organisation.

Required:

Describe how each element in the analysis influences an organisation’s operations.

Answer

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Tags: Business Environment, External factors, Organizational operations, PEST Analysis, Strategic Management
Level: Level 1

Topic: The external environment
Series: NOV 2023

BMIS – Nov 2017 – L1 – Q1b – The external environment

Distinguish between the internal and external environment of a business organization.

Question

b) In an organization, every action of management body is influenced by the environment. In this context, “environment” means understanding the surroundings or conditions in which a particular activity is carried out.

Required:
Distinguish between internal and external environment of a business organization.
(5 marks)

Answer

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Tags: Business Environment, External Environment, Internal Environment, Organizational Environment, Strategic Management
Level: Level 1

Topic: The external environment
Series: NOV 2017

Question Tag: Strategic Management

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FM – Nov 2022 – L3 – Q1 – Mergers and Acquisitions

Evaluating the acquisition of Company K3 in Togo for business expansion purposes.

CSME – May 2017 – L2 – SB – Q4 – Strategic Management in the Public Sector

Explain organizational growth through Greiner's model and discuss board diversity benefits and limitations.

CSME – Nov 2015 – L2 – Q4 – Risk Management and Corporate Strategy

Analyzes strengths and weaknesses of Toyin Trust Insurance Plc pre- and post-2000 ownership changes, and suggests strategies for sustaining the company.

CSME – Nov 2020 – L2 – Q1a – Environmental Analysis

Advise Cells Incorporated on the strategic management factors to consider when relocating its manufacturing plant to Dumbura Republic.

PM – Nov 2020 – L2 – Q5 – Balanced Scorecard

Analyze the performance of DAT Air using the Balanced Scorecard approach and propose relevant goals and performance measures for each of the perspectives.

CSME – Nov 2018 – L2 – Q6 – Corporate Strategy Formulation

Explain the BCG Model with a diagram to analyze a firm's business portfolio, detailing the four product categories.

BMF – May 2016 – L1 – SA – Q10 – Basic Management Functions

This question evaluates the student's knowledge of Porter's Strategic Management Model and which element is not a part of it.

MI – Nov 2015 – L1 – SA – Q16 – Information Systems and Management

Identifies which management level handles strategic issues and long-term trends.

SCS – May 2020 – L3 – Q1 – Strategy, Stakeholders and Mission

Perform a SWOT analysis of Customer Focused Ltd, highlighting key strengths, weaknesses, opportunities, and threats.

BMF – Nov 2021 – L1 – SA – Q20 – The Business Environment

Question about identifying an element not part of the Cultural Web model within an organization.

BMIS – March 2024 – L1 – Q5b – Competitive forces and markets

Explain the components of Porter's Five Force Model used to analyze competitive environment and its impact on a company's profitability and strategy.

BMIS – Nov 2023 – L1 – Q5b – The external environment

Describe how each element of the PEST Analysis (Political, Economic, Socio-cultural, Technological) influences an organization's operations.

BMIS – Nov 2017 – L1 – Q1b – The external environment

Distinguish between the internal and external environment of a business organization.

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FM – Nov 2022 – L3 – Q1 – Mergers and Acquisitions

Evaluating the acquisition of Company K3 in Togo for business expansion purposes.

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CSME – May 2017 – L2 – SB – Q4 – Strategic Management in the Public Sector

Explain organizational growth through Greiner's model and discuss board diversity benefits and limitations.

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CSME – Nov 2015 – L2 – Q4 – Risk Management and Corporate Strategy

Analyzes strengths and weaknesses of Toyin Trust Insurance Plc pre- and post-2000 ownership changes, and suggests strategies for sustaining the company.

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CSME – Nov 2020 – L2 – Q1a – Environmental Analysis

Advise Cells Incorporated on the strategic management factors to consider when relocating its manufacturing plant to Dumbura Republic.

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PM – Nov 2020 – L2 – Q5 – Balanced Scorecard

Analyze the performance of DAT Air using the Balanced Scorecard approach and propose relevant goals and performance measures for each of the perspectives.

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CSME – Nov 2018 – L2 – Q6 – Corporate Strategy Formulation

Explain the BCG Model with a diagram to analyze a firm's business portfolio, detailing the four product categories.

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BMF – May 2016 – L1 – SA – Q10 – Basic Management Functions

This question evaluates the student's knowledge of Porter's Strategic Management Model and which element is not a part of it.

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MI – Nov 2015 – L1 – SA – Q16 – Information Systems and Management

Identifies which management level handles strategic issues and long-term trends.

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SCS – May 2020 – L3 – Q1 – Strategy, Stakeholders and Mission

Perform a SWOT analysis of Customer Focused Ltd, highlighting key strengths, weaknesses, opportunities, and threats.

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BMF – Nov 2021 – L1 – SA – Q20 – The Business Environment

Question about identifying an element not part of the Cultural Web model within an organization.

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BMIS – March 2024 – L1 – Q5b – Competitive forces and markets

Explain the components of Porter's Five Force Model used to analyze competitive environment and its impact on a company's profitability and strategy.

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BMIS – Nov 2023 – L1 – Q5b – The external environment

Describe how each element of the PEST Analysis (Political, Economic, Socio-cultural, Technological) influences an organization's operations.

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BMIS – Nov 2017 – L1 – Q1b – The external environment

Distinguish between the internal and external environment of a business organization.

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