POLYTECHNIC OF NAMIBIA

Transcription

1 POLYTECHNIC OF NAMIBIA SCHOOL OF MANAGEMENT SCIENCES DEPARTMENT OF MANAGEMENT STRATEGIC BUSINESS MANAGEMENT: ANALYSIS & DECISION BACHELOR OF BUSINESS ADMINISTRATION 21BBAD SUBJECT CODE: SBM422S DATE: DURATION:.NOVEMBER Hours MARKS: Maximum 100 EXAMINER CHRIS VAN ZYL MODERATOR: RAINER RIDER 1st OPPORTUNITY EXAMINATION QUESTION PAPER (This paper consists of 10 pages including this front page) INSTRUCTIONS 1. Write clearly and be tidy. 2. Answer all the questions. 3. Questions 1 to 25 of Section A should be answered on the attached multiple choice answer sheet. 4. Choose only one option when answering the multiple choice questions. 5. Include the Multiple Choice Answer Sheet in your Examinations Answer Book. 1

2 SECTION A 1. The IE Matrix accommodates the following on its two axes: A IFE 8 BCG C EFE D A+C 2. In the EPS/EBIT analysis the EPS is calculated by: A Dividing EAT by the number of outstanding shares 8 EBIT minus EBT divided by the number of outstanding shares C EBT multiplied by the number of outstanding shares D EBIT minus EAT divided by the number of outstanding shares E None of the above 5. With strengths; opportunities; weaknesses and threats variables available, the following techniques could be applied: A QSP Matrix B SWOT matching strategies C IE Matrix D B +C E All of these 6. In an IE Matrix the number of variables in each category (S; W; 0 & T) has to comply to the following requirements: A S&W has to be more thaf) 50% B O&T has to be more than 50% C S&W and O&T have to be equal D T's are not always necessary 3. If the IE Matrix coordinates are (1.5; 1.5) the following strategy could be suggested: A Diversification 8 Divestiture C Product development D Market penetration 4. What would the IE Matrix coordinates be if a spectrum of integration strategies are recommended?: A (3.25; 3.25) 8 (1.50; 3.50) c (3.50; 1.50) 0 (2.50; 2.50) 2 7. In the SPACE Matrix where FP = +1; CA = -1; ES =-4 and IS = +4, then the vector will be drawn in the: A Conservative quadrant B Competitive quadrant C Aggressive quadrant D Defensive quadrant 8. The SWOT matching strategies tool assists to evaluate a variety of strategies from: A S&W B S&O C O&T D S&S E All of these NMG N セM M M..

3 9. The reason for using the BCG Matrix is to: A Determine where to draw the circles 8 Plot competitor's ISGR versus RMSP C Plot competitor's FP versus ES D A+B 10. The following RMSP/ISGR coordinates (0.05; -15) mean that the suggested strategy could be:.a Market penetration B Product development C Liquidation D Horizontal integration E All of these 11. Cash Cows and Dogs share the following suggested strategy: A Divestiture B Diversification C Liquidation D Product development E All of these 13. In the process to draw the vector on the SPACE Matrix the following are considered as necessary: A The averages of the FP/ES and CAliS ratings are calculated B The averages of the CAlES and FP/IS ratings are calculated C The averages of the FP/CA and ES/IS ratings are calculated D The averages of the FP/MG and CA/GR ratings are calculated 14. When determining the weight of as; W; 0 or T variable the following applies: A Performance B Highest score C Importance D Accuracy E All of the above 12. If the vector is drawn in the Aggressive quadrant of the SPACE Matrix, the following strategy could not be recommended: A Divestiture B Diversification C Market penetration D Market development E A+B 15. When considering the rating of a S; W; 0 or T variable the following applies: A Highest score B Importance C Reliability D Performance 3

4 16. The main reason for performing a QSPM analysis is to determine the most appropriate: A Position of the vector B Source of finance C Strategic alternative D Amount to borrow E All of the above 20. If the vector of the GSM is in quadrant I, the following could be expected: A Positive RMG and SCP B Negative RMG and positive SCP C Positive RMG and negative SCP D Liquidation 17. The AS in the QSPM tool could be equated to: A Importance B Performance C Reliability D Accuracy E All of the above 18. GSM suggested strategies when x- & y-axis coordinates are (-1; -3): A Liquidation B Divestment C Horizontal integration D Joint venture 19. The RMSP and SGR% coordinates of a company are represented as (0.25; 1 0). What should not be done?: A Divest B Diversify C Penetrate the market D Liquidate Where EBIT=N$35mil.; Share price=n$350; Interest rate=15%; Tax rate=35%; Number outstanding shares=2mil.; Capital required=n$25mil.; the best financing option is: A Debt only financing B Shares only financing C 1 O%Share & 90%Debt financing D 25%Shares & 75% Debt financing E None of the above 22. Where EBIT=N$35mil.; Share price=n$350; Interest rate=15%; Tax rate=35%; Number outstanding shares=2mil.; Capital required=n$25mil.; the EPS for 10% Share & 90% Debt financing option could be: A B c D E ::..;o , _-_,._ --,.-. N[ ッセ M...,._,_,_ _,_,_-... セ M M セ M ,_

5 23. When important decisions regarding sustainability issues are made, the order of importance for each of the following aspects should ideally be (most important first, etc... ): A Economic profits; Natural environmental impact; Social impact B Natural environmental impact; Economic profits; Social impact C Social impact; Economic profits; Natural environmental impact D Social impact; Natural environmental impact; Economic profits E All of the above 25. Competitiveness encompasses the following issue(s): A Quality & Value B Speed C Economies of scale D Price E A ll of these 24. In ethical decision-making, the Absolutist could be described by: A This person assumes that the best possible outcome could always be achieved by following universal ethical rules. B This person's decisions are based on personal values and perspectives rather than on that of universal ethical rules, policies or principles. C Ethical absolutes guide judgments for this person, but the latter are pragmatically open to exceptions. D This person has an individualistic approach where each act in each situation is analyzed and only then a decision is made. Subtotal: 25 Marks (One mark for each correct answer) 5

6 ' \..; 1.1 セ SECTION 8 Question 1 How would you advise a public company that wants to know how their share price would influence their decision-making regarding the choice of financing options given the following information? A. Turnover in millions N$ during Recession; Normal; Boom market conditions are as follows: 20; 60; 11 0 respectively B. Share price in one scenario at N$300, 00 per share; In the second scenario the share price drops to N$10, 00 per share C. Interest rate to borrow money from the bank: 10% D. Tax rate: 40% E. Number of shares outstanding: 30 million F. Amount of capital needed: N$100 million Assume that there are only two options available for financing the N$1 00 million, namely: a) 5% Share and 95% Debt combination financing option, and b) 75% Share and 25% Debt combination financing option. Calculate how the situations would change for each of the two options above if the share price would change (drop) from N$300, 00 per share to N$10, 00 per share. Consider all the market conditions {recession; normal; boom) for each of the two options. Advise the public company management how the different scenarios would change their financing options. Provide all the figures in tabular format and round all amounts off to two decimal points. {Example table provided below). 6

7 I Mark allocation for Question 1 in Section B would be as follows: One mark for each of the correctly calculated EPS values in each of the four situations (4x3 = 12); One mark for each of the correctly calculated Interest amounts for the four situations (4x1 = 4); One mark for each of the correctly calculated Number of shares for the four situations (4x1 = 4); Five marks for the correct interpretations and advice to the public company (5x1 =5). Marks: 25 Question 2 In 1997 the Kyoto protocol was signed by a number of highly industrialized countries with the main aim of minimizing greenhouse gases like carbon dioxide (C0 2 ) and methane in the atmosphere. The industrialization processes contribute to high levels of C0 2 emissions into the atmosphere. These gases contribute towards global warming which effects drastic changes in weather patterns worldwide. Some of the detrimental changes to the weather patterns include severe and extensive droughts in some places, but also on the contrary may cause intensive storms with high rainfall and floods in other places on earth. These weather changes therefore influence the food production cycles worldwide and also impacts negatively in terms of human safety and wellbeing. Recent studies found that cows produce between 200 and 500 liters of methane per day as a result of their digestion processes as ruminants. Through belching and flatulence cows therefore contribute enormously towards the increasing global warming phenomenon, because the methane gasses that are released by them into the atmosphere on a daily basis adds to this dilemma. Namibia is a country with large numbers of cows on the farms and therefore also contributes to this global warming scenario. A very creative and innovative entrepreneur from Windhoek found a solution to this problem with the cows. The entrepreneur developed a prototype device which could be attached to the high-end of the tail of cows where gases from flatulent cows could be adsorbed onto a filter system. The filter system is in the form of an easily replaceable pill which is made from a special formula of Acacia mellifera tree bark and compressed sand dune extract. Both of these latter ingredients are found in abundance in Namibia. Once the pill is saturated with methane gas it changes in colour from yellow to red. It was furthermore scientifically determined that once these red pills with high concentrations of methane gas adsorbed into its surfaces are added to motor car fuel tanks, it could improve the fuel utilization efficiencies more than tenfold. The intellectual property rights of the prototype device with the unique chemical formula of the pill (filter) are now protected worldwide. The entrepreneur has approached his family and some of his friends for capital investments in order to set up a manufacturing plant of these pills/filters in Windhoek. The entrepreneur 7

8 obtained sufficient capital from own savings as well as from family and friends to start producing the methane-- absorbing pills. The pill could be sold to farmers with cows in Namibia as well as to farmers in all the other f. countries globally where cows contribute to the global warming phenomenon. The materials for manufacturing the filter pill are in abundance in Namibia. Exporting this pill to international destinations would contribute hugely to the Namibian foreign exchange earnings. Fuel stations worldwide have already indicated that they are willing to buy the saturated pills from the farmers in order to sell it to motorists at their fueling stations who would then additionally benefit from its fuel savings benefits. Contracts in this regard have already been signed with 78 countries. i There are challenges in terms of skilled workers on the production line who have to be trained firstly. The management of this production line could be outsourced during the first six months until the necessary knowledge and experience are obtained through learning while producing. The profits on the pill are high since the raw products are relatively cheap and will always be available. A possible negative consequence of using Acacia mellifera tree bark is that it could interfere with the dynamics of some interdependent ecosystems. The benefits however outnumber the negative effects by far. You are a business consultant and were approached by the entrepreneur for guidance on the strategic management of his manufacturing enterprise. Consider the above mentioned scenarios as described in the case and use your own understanding and insight into this manufacturing and exporting business to advise the entrepreneur. You may predict certain additional scenarios to add to the contents of this case, but you have to justify any additional scenarios which could complement your analyses and advice. Apply the following tools in your analyses of this case: a) SWOT Matching strategies (at least three per category: SO; WO; ST & WT). Marks 20 b) IE Matrix Marks 15 c) SPACE Matrix Marks 10 d) Specify the activities of ONE main suggested strategy according to the findings of the tools above. Marks 5 Mark allocation for Question 2 in Section B would be as follows: a) Maximum 5 marks per category awarded for at least 3 relevantly fonmulated matching strategies per category (4x5 = 20); b) 5 Marks for the relevantly identified and formulated IFE variables and 5 marks for the relevantly identified and formulated EFE variables plus 5 marks for the calculations & plotting of coordinates onto the matrix and identification of associated strategies (3x5 = 15); 8

9 c) 4 Marks for drawing the matrix with correctly positioned vector plus 4 marks for calculating the coordinates and 2 marks for identifying the associated quadrant strategies correctly (4+4+2 = 10); d) Only one common strategy should be identified from the analyses and suggestions in (a); (b) & (c) above. Specific actions or activities which could be reasonably associated with this identified common strategy should be provided (maximum 5 marks). Total Marks: 100 9

10 SECTION A Subject code: Student number: Surname: Initials: Date: Lecturer Name: FT/PT/Distance I Multiple Choice Answers I A 8 c D E '