Paper P3 Business Analysis EXAM KIT - Kaplan Publishingkaplan-publishing.kaplan.co.uk/.../acca-look-inside/exam-kit/p3.pdf · The P3 examination starts with a strategic case study

Professional Examinations Paper P3

Business Analysis

EXAM KIT

PAPER P3 : BUSINE SS ANALYSIS

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British Library Cataloguing-in-Publication Data

A catalogue record for this book is available from the British Library.

Published by:

Kaplan Publishing UK

Unit 2 The Business Centre

Molly Millar’s Lane

Wokingham

Berkshire

RG41 2QZ

ISBN: 978-1-78415-234-5

© Kaplan Financial Limited, 2015

Printed and bound in Great Britain

The text in this material and any others made available by any Kaplan Group company does not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content as the basis for any investment or other decision or in connection with any advice given to third parties. Please consult your appropriate professional adviser as necessary. Kaplan Publishing Limited and all other Kaplan group companies expressly disclaim all liability to any person in respect of any losses or other claims, whether direct, indirect, incidental, consequential or otherwise arising in relation to the use of such materials.

All rights reserved. No part of this examination may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without prior permission from Kaplan Publishing.

Acknowledgements

The past ACCA examination questions are the copyright of the Association of Chartered Certified Accountants. The original answers to the questions from June 1994 onwards were produced by the examiners themselves and have been adapted by Kaplan Publishing.

We are grateful to the Chartered Institute of Management Accountants and the Institute of Chartered Accountants in England and Wales for permission to reproduce past examination questions. The answers have been prepared by Kaplan Publishing.

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CONTENTS Page

Index to questions and answers v

Analysis of past papers xi

Exam technique xiii

Paper specific information xv

Kaplan’s recommended revision approach xix

Kaplan’s detailed revision plan xxiii

Section

1 Practice questions 1

2 Scenario-based questions 99

3 Answers to practice questions 163

4 Answers to scenario-based questions 381

Key features in this edition

In addition to providing a wide ranging bank of real past exam questions, we have also included in this edition:

• An analysis of all of the recent new syllabus examination papers.

• Paper specific information and advice on exam technique.

• Our recommended approach to make your revision for this particular subject as effective as possible.

This includes step by step guidance on how best to use our Kaplan material (Complete text, pocket notes and exam kit) at this stage in your studies.

• Enhanced tutorial answers packed with specific key answer tips, technical tutorial notes and exam technique tips from our experienced tutors.

• Complementary online resources including full tutor debriefs and question assistance to point you in the right direction when you get stuck.

You will find a wealth of other resources to help you with your studies on the following sites:

www.mykaplan.co.uk

www.accaglobal.com/students/

http://www.mykaplan.co.uk/

http://www.accaglobal.com/students/


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Quality and accuracy are of the utmost importance to us so if you spot an error in any of our products, please send an email to [email protected] with full details, or follow the link to the feedback form in MyKaplan.

Our Quality Co-ordinator will work with our technical team to verify the error and take action to ensure it is corrected in future editions.

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INDEX TO QUESTIONS AND ANSWERS

INTRODUCTION The P3 examination starts with a strategic case study (see the scenario based questions) and strategic implementation has formed the majority of the option questions. However there has been a slight change in the way that the syllabus has been examined – strategic implementation has begun to feature as one part of the scenario question, whilst strategic analysis (such as the value chain) has begun to appear in the option questions. The exam kit tries to reflect this by having all three strategic planning areas (analysis, choice and action/implementation) reflected in both the scenario based questions section and the option question section.

Note that the majority of the questions within the kit are past ACCA exam questions – though, since the change of the examiner in 2007 and the change in syllabus this year, some new topics have been introduced to the syllabus and there are fewer past exam questions in these areas.

KEY TO THE INDEX

PAPER ENHANCEMENTS We have added the following enhancements to the answers in this exam kit:

Key answer tips

Most answers include key answer tips to help your understanding of each question.

Tutorial note

Most answers include more tutorial notes to explain some of the technical points in detail.

Top tutor tips

For selected questions, we “walk through the answer” giving guidance on how to approach the questions with helpful ‘tips from a top tutor’, together with technical tutor notes.

These answers are indicated with the “footsteps” icon in the index.


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ONLINE ENHANCEMENTS

Timed question with Online tutor debrief

For selected questions, we recommend that they are to be completed in full exam conditions (i.e. properly timed in a closed book environment).

In addition to the examiner’s technical answer, enhanced with key answer tips and tutorial notes in this exam kit, online you can find an answer debrief by a top tutor that:

• works through the question in full

• points out how to approach the question

• how to ensure that the easy marks are obtained as quickly as possible, and

• emphasises how to tackle exam questions and exam technique.

These questions are indicated with the “clock” icon in the index.

Online question assistance

Have you ever looked at a question and not known where to start, or got stuck part way through?

For selected questions, we have produced “Online question assistance” offering different levels of guidance, such as:

• ensuring that you understand the question requirements fully, highlighting key terms and the meaning of the verbs used

• how to read the question proactively, with knowledge of the requirements, to identify the topic areas covered

• assessing the detail content of the question body, pointing out key information and explaining why it is important

• help in devising a plan of attack.

With this assistance, you should then be able to attempt your answer confident that you know what is expected of you.

These questions are indicated with the “signpost” icon in the index.

Online question enhancements and answer debriefs will be available on MyKaplan

www.mykaplan.co.uk

http://www.mykaplan.co.uk/

INDE X TO QUESTIONS AND ANSWERS

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PRACTICE QUESTIONS

STRATEGIC ANALYSIS

Page number

Question Answer Past exam

1 CTC Telecommunication 1 163 –

2 3C Pharmaceuticals 2 166 –

3 EEE Flavourings 3 169 –

4 Swift 4 171 Jun 10

5 Bowland 6 174 Dec 95

6 McGeorge Holdings plc 7 176 Jun 03

7 NESTA 8 178 Jun 13

8 ISD 9 182 Dec 11

9 Moor Farm 11 186 Dec 12

10 ATD 13 189 Dec 13

11 One Energy plc 15 193 Jun 09

12 Independent Living 17 197 Dec 09

13 Noble Pets 19 201 Dec 14

STRATEGIC CHOICE 14 Graffoff 21 204 Dec 12

15 Environment Management Society 23 208 Pilot 11

16 MMI 24 211 Dec 08

17 Bluesky 26 216 –

ORGANISATIONAL STRUCTURE 18 ALG Technology 29 219 Dec 01

19 ICC Organisation 30 222 Dec 96

20 Frigate Limited 31 224 Dec 10

BUSINESS PROCESS CHANGE 21 Country Car Club 32 228 Jun 08

22 Stella Electronics 34 232 Dec 14

23 TMP 36 235 Dec 10

24 Institute of Analytical Accountants 38 238 Jun 11

25 Flexipipe 39 242 Jun 12


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INFORMATION TECHNOLOGY Page number


26 Perfect Shopper 41 246 Dec 07

27 Jayne Cox Direct 42 251 Jun 12

28 Protech-Public 44 255 Jun 10

29 Good Sports 45 258 Dec 06

30 Cronin Auto Retail 46 259 Jun 11

31 ARG 48 263 –

32 Bridge Co 49 264 Jun 14

MARKETING 33 AEC 51 268 Jun 08

34 HGT 53 276 Dec 13

35 BA Times 55 281 Dec 13

36 IAA 56 285 Dec 10

37 Chemical Transport 57 288 Jun 13

38 iTTrain 59 292 Jun 14

PROJECT MANAGEMENT 39 HomeDeliver 60 298 Dec 11

40 ASW 61 301 Dec 08

41 LDB 64 305 Dec 09

42 8-Hats Promotions 65 309 Jun 11

43 Institute of Independent Analysts 67 313 Jun 14

44 TKP 69 317 Dec 14

45 A clothing company 70 320 Dec 07

46 PAA 72 324 Jun 12

FINANCING 47 Woods Educational Institution 74 328 –

48 Potato-to-go Inc 75 332 –

49 David Silvester 77 334 Dec 06

50 Satellite Navigation Systems 78 336 –

51 X plc 79 339 –

52 World Engines 80 341 Dec 12

53 CoolFreeze 82 345 Pilot 11

54 PES 84 348 –

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STRATEGY AND PEOPLE Page number


55 Rock Bottom 86 350 Jun 09

56 ARC 87 355 Jun 13

57 Grumit 88 359 Jun 95

58 National College 89 361 Jun 10

59 Global Imaging 91 363 Jun 06

MANAGING STRATEGIC CHANGE 60 PSI 92 365 Jun 08

61 iCompute 93 371 Dec 11

62 Zoomba 95 375 –

63 Strategies 97 378 –

SCENARIO-BASED QUESTIONS 64 Oceania National Airline (ONA) 99 381 Dec 07

65 The National Museum 103 392 Dec 08

66 Shoal plc 107 402 Dec 10

67 AutoFone 110 410 Jun 08

68 WET 114 418 Jun 10

69 ReInk Co 119 427 Jun 14

70 Roam Group Co 123 434 Dec 14

71 Hammond Shoes 127 441 Jun 12

72 Hair Care Ltd 130 448 Jun 03

73 ABC Learning 133 455 Dec 09

74 GreenTech 137 463 Jun 09

75 GET 141 471 Dec 11

76 MidShire Health 145 479 Jun 13

77 MachineShop 149 487 Dec 13

78 EcoCar 153 495 Jun 11

79 Network Management Systems 156 503 Pilot 11

80 POTS 159 509 Dec 12


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ANALYSIS OF PAST PAPERS

The table below summarises the key topics that have been tested in the new syllabus examinations to date.

Note that the references are to the number of the question in this edition of the exam kit, but the Pilot Paper is produced in its original form at the end of the kit and therefore these questions have retained their original numbering in the paper itself.

Pilot 11

Dec 10

Jun 11

Dec 11

Jun 12

Dec 12

Jun 13

Dec 13

Jun 14

Dec 14

Strategic planning C PESTEL C C 5 FORCES C O Forecasting O O O Strengths/weaknesses C C Value chain O O SWOT C C O C Stakeholders/mission C Strategy evaluation C C C Strategic choice C C C Methods of strategic development C C C C

Organisational structure O Business process change O O O O O Project management C O O O O C O O Information technology O O O O O Marketing O O O O O Financing/cost accounting O O O O Strategy and people O O Change management C C C C

Key:

C Appeared in the compulsory question (section A) in the exam

O Appeared as an option question in the exam

APPROACH TO EXAMINING THE SYLLABUS

The syllabus is assessed by a three-hour paper-based examination.

Section A

Section A contains one multi-part question based on a case study scenario. This question is worth 50 marks.

Section B

Section B will consist of three discrete questions each worth 25 marks. Candidates must answer two questions from this section.


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EXAM TECHNIQUE

• Use the allocated 15 minutes reading and planning time at the beginning of the exam:

– read the questions and examination requirements carefully, and

– begin planning your answers.

See the Paper Specific Information for advice on how to use this time for this paper.

• Divide the time you spend on questions in proportion to the marks on offer:

– there are 1.8 minutes available per mark in the examination

– within that, try to allow time for reading the long scenarios, and at the end of each question to review your answer and address any obvious issues

Whatever happens, always keep your eye on the clock and do not over run on any part of any question!

• Spend the last five minutes of the examination:

– reading through your answers, and

– making any additions or corrections.

• If you get completely stuck with a question:

– leave space in your answer book, and

– return to it later.

• Stick to the question and tailor your answer to what you are asked.

– pay particular attention to the verbs in the question.

• If you do not understand what a question is asking, state your assumptions.

Even if you do not answer in precisely the way the examiner hoped, you should be given some credit, if your assumptions are reasonable.

• You should do everything you can to make things easy for the marker.

The marker will find it easier to identify the points you have made if your answers are legible.

• Written questions:

Your answer should have:

– a clear structure

– a brief introduction, a main section and a conclusion.

Be concise.

It is better to write a little about a lot of different points than a great deal about one or two points.

• Reports, memos and other documents:

Some questions ask you to present your answer in the form of a report, a memo, a letter or other document.

Make sure that you use the correct format – there could be easy marks to gain here.


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PAPER SPECIFIC INFORMATION

THE EXAM

FORMAT OF THE EXAM

Number of marks

1 compulsory questions 50

A choice of 2 from 3 option questions worth 25 marks each 50

Total time allowed: 3 hours plus 15 minutes reading and planning time.

Note that:

• All syllabus areas will be examined.

• The exam may contain one question from each syllabus area. However, some exam questions have examined more than one syllabus area in the same question.

• Questions will be based around a long scenario. It is important to refer back to this scenario when answering the question.

PASS MARK

The pass mark for all ACCA Qualification examination papers is 50%.

READING AND PLANNING TIME Remember that all three hour paper based examinations have an additional 15 minutes reading and planning time.

ACCA GUIDANCE

ACCA guidance on the use of this time is as follows:

This additional time is allowed at the beginning of the examination to allow candidates to read the questions and to begin planning their answers before they start to write in their answer books. This time should be used to ensure that all the information and, in particular, the exam requirements are properly read and understood. During this time, candidates may only annotate their question paper. They may not write anything in their answer booklets until told to do so by the invigilator.


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KAPLAN GUIDANCE

As all questions are compulsory, there are no decisions to be made about choice of questions, other than in which order you would like to tackle them.

Therefore, in relation to P3, we recommend that you take the following approach with your reading and planning time:

• Skim through the whole paper, assessing the level of difficulty of each question.

• Write down on the question paper next to the mark allocation the amount of time you should spend on each part. Do this for each part of every question.

• Decide the order in which you think you will attempt each question:

This is a personal choice and you have time on the revision phase to try out different approaches, for example, if you sit mock exams.

A common approach is to tackle the question you think is the easiest and you are most comfortable with first.

Psychologists believe that you usually perform at your best on the second and third question you attempt, once you have settled into the exam, so not tackling the most difficult question first may be advisable.

It is usual however that students tackle their least favourite topic and/or the most difficult question in their opinion last.

Whatever you approach, you must make sure that you leave enough time to attempt all questions fully and be very strict with yourself in timing each question.

• For each question in turn, read the requirements and then the detail of the question carefully.

Always read the requirement first as this enables you to focus on the detail of the question with the specific task in mind.

Models:

Most questions will require you to use a model from the syllabus as the structure for your answer. You therefore need to be clear as to which model(s) are required in each question. If you cannot determine which model to use it may be better for you to choose an alternative question.

For written questions:

Take notice of the format required (e.g. letter, memo, notes) and identify the recipient of the answer. You need to do this to judge the level of financial sophistication required in your answer and whether the use of a formal reply or informal bullet points would be satisfactory.

Plan your beginning, middle and end and the key areas to be addressed and your use of titles and sub-titles to enhance your answer.

For all questions:

Spot the easy marks to be gained in a question and parts which can be performed independently of the rest of the question. For example, discussing the problems with a numerical technique might be easier than actually performing the calculations.

Make sure that you do these parts first when you tackle the question.

PAPE R SPE CIFIC INFOR MATION

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Don’t go overboard in terms of planning time on any one question – you need a good measure of the whole paper and a plan for all of the questions at the end of the 15 minutes.

By covering all questions you can often help yourself as you may find that facts in one question may remind you of things you should put into your answer relating to a different question.

• With your plan of attack in mind, start answering your chosen question with your plan to hand, as soon as you are allowed to start.

Always keep your eye on the clock and do not over run on any part of any question!

DETAILED SYLLABUS The detailed syllabus and study guide written by the ACCA can be found at:

www.accaglobal.com/students/

http://www.accaglobal.com/students/


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KAPLAN’S RECOMMENDED REVISION APPROACH

QUESTION PRACTICE IS THE KEY TO SUCCESS Success in professional examinations relies upon you acquiring a firm grasp of the required knowledge at the tuition phase. In order to be able to do the questions, knowledge is essential.

However, the difference between success and failure often hinges on your exam technique on the day and making the most of the revision phase of your studies.

The Kaplan complete text is the starting point, designed to provide the underpinning knowledge to tackle all questions. However, in the revision phase, pouring over text books is not the answer.

Kaplan Online fixed tests help you consolidate your knowledge and understanding and are a useful tool to check whether you can remember key topic areas.

Kaplan pocket notes are designed to help you quickly revise a topic area, however you then need to practice questions. There is a need to progress to full exam standard questions as soon as possible, and to tie your exam technique and technical knowledge together.

The importance of question practice cannot be over-emphasised.

The recommended approach below is designed by expert tutors in the field, in conjunction with their knowledge of the examiner and their recent real exams.

The approach taken for the fundamental papers is to revise by topic area. However, with the professional stage papers, a multi topic approach is required to answer the scenario based questions.

You need to practice as many questions as possible in the time you have left.

OUR AIM Our aim is to get you to the stage where you can attempt exam standard questions confidently, to time, in a closed book environment, with no supplementary help (i.e. to simulate the real examination experience).

Practising your exam technique on real past examination questions, in timed conditions, is also vitally important for you to assess your progress and identify areas of weakness that may need more attention in the final run up to the examination.

In order to achieve this we recognise that initially you may feel the need to practice some questions with open book help and exceed the required time.

The approach below shows you which questions you should use to build up to coping with exam standard question practice, and references to the sources of information available should you need to revisit a topic area in more detail.


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Remember that in the real examination, all you have to do is:

• attempt all questions required by the exam

• only spend the allotted time on each question, and

• get them at least 50% right!

Try and practice this approach on every question you attempt from now to the real exam.

EXAMINER COMMENTS We have included the examiners comments to the specific new syllabus examination questions in this kit for you to see the main pitfalls that students fall into with regard to technical content.

However, too many times in the general section of the report, the examiner comments that students had failed due to:

• “not answering the question”

• “a poor understanding of why something is done, not just how it is done”

• “simply writing out numbers from the question. Candidates must understand what the numbers tell them about business performance”

• “a lack of common business sense” and

• “ignoring clues in the question”.

Good exam technique is vital.

KAPLAN’S RE COMMENDE D RE VISION APPROACH

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THE KAPLAN PAPER P3 REVISION PLAN

Stage 1: Assess areas of strengths and weaknesses

Stage 2: Practice questions Follow the order of revision of topics as recommended in the revision table plan below and attempt the questions in the order suggested.

Try to avoid referring to text books and notes and the model answer until you have completed your attempt.

Try to answer the question in the allotted time.

Review your attempt with the model answer and assess how much of the answer you achieved in the allocated exam time.

Comfortable with the technical content

Not comfortable with the technical content

Read the relevant chapter(s) in Kaplan’s Complete Text

Attempt the Test your understanding

examples if unsure of an area

Attempt appropriate Online Fixed Tests

Review the pocket notes on this area

Determine whether or not the area is one with which you are comfortable

Review the topic listings in the revision table plan below


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Fill in the self-assessment box below and decide on your best course of action. Note that:

The “footsteps questions” give guidance on exam techniques and how you should have approached the question.

The “clock questions” have an online debrief where a tutor talks you through the exam technique and approach to that question and works the question in full.

Stage 3: Final pre-exam revision

We recommend that you attempt at least one three hour mock examination containing a set of previously unseen exam standard questions.

It is important that you get a feel for the breadth of coverage of a real exam without advanced knowledge of the topic areas covered – just as you will expect to see on the real exam day.

Ideally this mock should be sat in timed, closed book, real exam conditions and could be:

• a mock examination offered by your tuition provider, and/or

• the pilot paper in the back of this exam kit, and/or

• the last real examination paper (available shortly afterwards on MyKaplan with “enhanced walk through answers” and a full “tutor debrief”).

Comfortable with question attempt Not comfortable with question attempts

Only revisit when comfortable with questions on all topic areas

Focus on these areas by: • Reworking test your understanding

examples in Kaplan’s Complete Text • Revisiting the technical content from

Kaplan’s pocket notes • Working any remaining questions on

that area in the exam kit • Reattempting an exam standard

question in that area, on a timed, closed book basis

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KAPLAN’S DETAILED REVISION PLAN

Topic

Complete Text

Chapter

Pocket note

Chapter

Questions to

attempt

Tutor guidance Date attempted

Self assessment

Strategic position − strategic planning 1 1 This chapter pulls all the other chapters

together. It means that strategic planning could be combined with a question on almost any other topic. It is important that you understand the two key models: J,S & W, and the strategy lenses.

− external analysis 2 2 7, 10,78 Key models are the PESTEL and 5 Forces. Q67 will test the 5 Forces model, whilst Q78 will test the PESTEL. You may want to leave parts (b) and (c) of Q78for now and return to them when you have revised these elements. Forecasting also forms part of this chapter and Q10 should illustrate the nature of the question that you could face on this topic.

− internal analysis 3 3 11, 64 A key skill in this chapter will be the ability to perform good quantitative analysis. These questions will ensure you can do this well.

− objectives 4 4 73 The key model in this chapter is Mendelow’s matrix. In any question on stakeholders you should aim to apply this model to the scenario.


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Topic

Complete Text

Chapter

Pocket note

Chapter

Questions to

attempt


Self assessment

Strategic choice − competitive

strategies and strategy evaluation

5 – 6 5 – 6 64, 74 Competitive strategies will have already been tested in Q63. Strategy evaluation appears in almost every compulsory question and it is vital that you can apply the J,S &W technique.

− strategic development

7 7 15, 66, 77 It is important in these types of question that you do not just regurgitate the lists that are presented in the pocket notes. You need to apply the lists to the scenario and ensure you focus on the actual requirement in the scenario.Q66 provides a good question on portfolio management.

Strategy in action − Organisational

structure 8 8 18 There are few recent exam questions on

this area. But Q18 should test your application of the pocket note material to a question scenario. The key in this question is to spot the most appropriate type of structure.

− Business process change

9 9 21, 22 Harmon’s models are the key models in this chapter. The first model helps decide which processes should be redesigned, the second model helps explain how the redesign should happen. Q21 is a good test of the first model, whilst the second model (already been covered in Q74 and Q78) is covered again in Q22.

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Topic

Complete Text

Chapter

Pocket note

Chapter

Questions to

attempt


Self assessment

− Information technology

10 10 27, 30, 31 The examiner is likely to focus on supply chain management – an area covered well in Q27 (whilst Q30 goes into more details on e-procurement). Q31 covers the POPIT model and IT controls – recent additions to the syllabus.

− Marketing 11 11 33, 38 This area is deceptively tough. The knowledge seems straightforward and common sense, and a lot of it is carried forward from paper F1. But you will only score in this area of the syllabus if you use the appropriate models and make your answers as relevant and specific to the scenario as possible.

− Project management

12 & 13 12 & 13 39, 40, 46 Covering two chapters, this is a very important and significant part of the syllabus. Q46 will test the numerical aspects, whilst the other questions will test different elements of the project management process. It is strongly advised that you attempt all three questions.


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Topic

Complete Text

Chapter

Pocket note

Chapter

Questions to

attempt


Self assessment

− Financing 14 14 14, 52, 53 This chapter focuses primarily on cost accounting techniques. You should focus on areas of weakness rather than doing questions on topics that you are comfortable with. Questions 52 and 53 are the most exam focused questions in this section. Q14 will test your knowledge on raising finance (the other element within this topic).

− Strategy and people 15 15 55 You may benefit in this area if you can remember some of your brought forward knowledge from paper F1 on leadership and motivation (though you will not lose out in any way if you cannot remember this material). This question will show you how to apply the chapter to a real world scenario.

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Topic

Complete Text

Chapter

Pocket note

Chapter

Questions to

attempt


Self assessment

− Managing strategic change

16 16 60, 76 This is another chapter that can be linked to almost any other chapter. For example, launching new strategies, changing organisational structure, redesigning processes etc. will all require good change management. There are a lot of models in the chapter but the examiner is keen for you to have quite a broad syllabus knowledge so it is important that you are familiar with them all. The suggested questions focus on key models such as the cultural web, types of change, and the contextual features of change.

Note that not all of the questions are referred to in the programme above. We have recommended a large number of exam standard questions and successful completion of these should reassure you that you have a good grounding of all of the key topics and are well prepared for the exam.

The remaining questions are available in the kit for extra practice for those who require more question on some areas.


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Section 1

PRACTICE QUESTIONS

STRATEGIC ANALYSIS

1 CTC TELECOMMUNICATION

CTC, a telecommunications company, has recently been privatised by the government of C after legislation was passed which removed the state monopoly and opened up the communications market to competition from both national and overseas companies – a process known as deregulation.

Prior to the deregulation, CTC was the sole, protected, supplier of telecommunications and was required to provide ‘the best telecommunications service the nation can afford’. At that time the government dictated the performance levels required for CTC, and the level of resources it would be able to bring to bear to meet its objectives.

The shares were floated on the C Stock Exchange with 80% being made available to the population of C and up to 20% being made available to foreign nationals. The government of C retained a ‘golden share’ to prevent the acquisition of CTC by any foreign company. However, the privatisation meant that many of the traditional ways in which the industry had operated would need to change under the new regulations. Apart from the money received from the flotation, the government privatised CTC in recognition of both the changing global environment for telecommunications companies, and the overseas expansion opportunities that might exist for a privatised company. The government recognises that foreign companies will enter the home market but feels that this increased competition is likely to make CTC more effective in the global market.

You have recently been appointed as the management accountant for CTC and have a background in the commercial sector. The Board of Directors is unchanged from CTC’s pre-flotation days.

Required:

(a) Explain to the Board of Directors why the objectives of CTC will need to change as a result of the privatisation of CTC and the deregulation of the market. (10 marks)

(b) Produce two examples of suitable strategic objectives for CTC, following its privatisation and the deregulation of the market, and explain why each would be an appropriate long term objective. (4 marks)

(c) Advise the Board of Directors on the stages of an appropriate strategic planning process for CTC in the light of the privatisation and deregulation. (11 marks)

(Total: 25 marks)


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2 3C PHARMACEUTICALS

3C is a medium-sized pharmaceutical company. It is based in Asia, but distributes and sells its products world-wide.

In common with other pharmaceutical companies, 3C has a large number of products in its portfolio, though most of these are still being developed. The success rate of new drugs is very low, as most fail to complete clinical trials or are believed to be uneconomic to launch. However, the rewards to be gained from a successful new drug are so great that it is only necessary to have a few successful drugs on the market to be very profitable. At present 3C has 240 drugs at various stages of development, being tested or undergoing clinical trials prior to a decision being made whether to launch the drug. 3C has only three products that are actually ‘on the market’: • Epsilon is a drug used in the treatment of heart disease. It has been available for

eight months and has achieved significant success. Sales of this drug are not expected to increase from their current level.

• Alpha is a painkiller. It was launched more than ten years ago, and has become one of the leading drugs in its class. In a few months the patent on this drug will expire, and other manufacturers will be allowed to produce generic copies of it. Alpha is expected to survive a further twelve months after it loses its patent, and will then be withdrawn.

• Beta is used in the hospital treatment of serious infections. It is a very specialised drug, and cannot be obtained from a doctor or pharmacist for use outside the hospital environment. It was launched only three months ago, and has yet to generate a significant sales volume.

The directors of 3C meet every month to review the product portfolio and to discuss possible investment opportunities. At their next meeting, they are to be asked to consider three investments. Due to a limited investment budget, the three investments are mutually exclusive. The options are as follows: • The directors can invest in a new version of Alpha, Alpha2, which offers improved

performance. This will allow 3C to apply for a new patent for Alpha2, and maintain the level of sales achieved by Alpha for an additional five years. Alpha2 has successfully completed all its clinical trials, and can be launched immediately.

• The directors can invest in a major marketing campaign to promote the use of Beta to specialist hospital staff. While this investment should lead to a significant growth in the sales of Beta, 3C is aware that one of its competitors is actively promoting a rival product with similar performance to that of Beta.

• The directors can invest in the final stage of clinical trials for Gamma. This is a ‘breakthrough’ drug, as it has no near rivals on the market. Gamma is used in the treatment of HIV, and offers significantly better success rates than any treatment currently available. The team of 3C specialists managing the development of Gamma is confident it can successfully complete clinical trials within six months. The team also believes that Gamma should be sold at the lowest price possible, to maximise the benefits of Gamma to society. However, the marketing department of 3C believes that it would be possible to earn very large profits from Gamma, due to its success rate and breakthrough status.

PRACTICE QUESTIONS : SECTION 1

KAPLAN PUBLISHING 3

Required:

(a) Briefly explain how the product life cycle model can be used to analyse the current product portfolio of 3C (that is, BEFORE the planned investment). (8 marks)

(b) Evaluate the potential impact of each of the three investment options on the product portfolio of 3C, referring to your answer to part (a) above. (9 marks)

(c) Discuss the social responsibility implications of each of the three investment options, for the directors of 3C. (8 marks)

(Total: 25 marks)

3 EEE FLAVOURINGS

EEE is an established chemical company extracting flavours and oils from plant materials and supplying them to the flavours and fragrances industries. The shareholders include institutional investors (20%), employees and pensioners of the company (20%) and the descendants of the family (30%) who founded the business approximately 100 years ago. The remainder of the shares are in public ownership. The company is reasonably successful but, recently, there has been pressure on margins and its future is not guaranteed.

The majority of the Board of Directors are members of the founding family who have always taken an active part in the management of the business.

When the company was originally started, the surrounding area was mainly used as agricultural land but, over time, a residential area has developed around the factory. Although many of the workers in the factory live locally, some of the housing is quite expensive and has attracted affluent residents from the local city.

The chemical engineers at EEE have recently developed, and patented, a new process which would allow EEE to extract onion oil and garlic oil at far better yields than those obtained by existing processes. The market for these oils is very profitable and presents a significant opportunity for EEE to gain a real competitive advantage in its industry.

Unfortunately, as with all extraction processes, there will be some leakage and, although perfectly safe and compliant with all safety legislation, the smell of the oils offends some of the more affluent residents who have complained to local government officers.

There is very little other industry in the area and EEE is a large contributor to the local economy. One of the trade union representatives working in EEE is also an elected council member serving in the local government.

Required:

As management accountant you have been asked to:

(a) Advise the Board of Directors of the advantages to EEE of conducting a stakeholder analysis in the context of the proposed investment decision (5 marks)

(b) Analyse the principal stakeholders in EEE in the context of the proposed investment in the new process (15 marks)

(c) Recommend an acceptable course of action to the Board of Directors in the light of the stakeholder analysis conducted in (b). (5 marks)

(Total: 25 marks)

Documents

Paper P3 Business Analysis EXAM KIT - Kaplan Publishingkaplan-publishing.kaplan.co.uk/.../acca-look-inside/exam-kit/p3.pdf · The P3 examination starts with a strategic case study