SOLUTION 1

a. The products of Topnotch bottling company can be categorized into

any of the following:
i.
 Star
 Question Mark (Also called Problem child)
 Cash Cow
 Dog

Question Mark: A question mark is a product with a relatively low market share in
a high-growth market. Since the market is growing quickly, there is an opportunity
to increase market share, but initially it will require a substantial investment of cash
to increase or even maintain market share.
A strategic decision that needs to be taken is whether to invest more heavily to
increase market share in a growing market, whether to seek a profitable position in
the market, but not as market leader, or whether to withdraw from the market
because the cash flows from the product are negative. The BCG analysis states that
a firm cannot last long with a small market share, as bigger companies will be able
to apply great cost and price pressure as they enjoy economies of scale.
Star: a star has a high relative market share in a high-growth market. It is the
market leader. However, a considerable investment of cash is still required to
maintain its leading position. Initially, they probably use up more cash than they
earn, and at best are cash-neutral. Over time, stars should gradually become self-
financing. At some stage in the future, they should start to earn high returns.
Cash Cow: a cash cow is a product in a market where market growth is lower, and
possibly even negative. It has a high relative market share, and is the market
leader. It should be earning substantial net cash inflows, because has high
economies of scale and will have become efficient through experience. Other
companies will not mount an attack as they perceive that the market is old and
near decline. Cash cows should be providing the business entity with the cash that
it needs to invest in question marks and stars.
Dog: a dog is a product in a low-growth market that is not the market leader. It is
unlikely that the product will gain a larger market share, because the market leader
will defend the position of its cash cow. A dog might be losing money, and using up
more cash than it earns. If so, it should be evaluated for potential closure. However,
a dog may be providing positive cash flows. Although the entity has a relatively
small market share in a low-growth market (or declining market), the product may
be profitable. A strategic decision for the entity may be to choose
between immediate withdrawal from the market

b. The Concept of Value Chain: a value chain is a series of activities, each of

which adds value. The total value added by the entity is the sum of the value
created by each stage along the chain.
Johnson and Scholes have defined the value chain as: ‘the activities within and
around an organisation which together create a product or service

The Primary Value Chain

Inbound logistics. These are the activities concerned with receiving and handling
purchased materials and components, and storing them until needed.
Operations. These are the activities concerned with converting the purchased
materials into an item that customers will buy.
Outbound logistics. These are activities concerned with the storage of finished
goods before sale, and the distribution and delivery of goods (or services) to the
customers. For services, outbound logistics relate to the delivery of a service at the
customer’s own premises.
Marketing and sales.
These are the activities concerned with advertising the product for consumers to
make purchase decision
Service. These are all the activities that occur after the point of sale, such as
installation, warranties, repairs and maintenance, providing training to
the employees of customers and after-sales service

Secondary Value Chain Activities: Support Activities

Procurement: These are activities concerned with buying the resources forthe
entity – materials, plant, equipment and other assets
Technology development. these are activities related to any development in the
technological systems of the entity, such as product design (research and
development) and IT systems.
Human resources management. These are the activities concerned with
recruiting, training, developing and rewarding people in the organisation.
Corporate infrastructure. This relates to the organisation structure and its
management systems, including planning and finance management, quality
management and information systems management.
Support activities are often seen as necessary ‘overheads’ to support the primary
value chain, but value can also be created by support activities. For instance,
Procurement can add value by identifying a cheaper source of materials or
equipment

C. Elements of strategic clock

No frills strategy: A ‘no frills strategy’ is to offer a product or service at a low price
and with low perceived benefits. It should attract customers who are price-
conscious, and are happy to buy a basic product at the lowest possible price. With a
‘no frills’ strategy, customers understand that they are buying a product or service
that gives them fewer benefits than rival products or services in the market.
Low Price Strategy: With a ‘low price’ strategy, customers perceive that the
product or service gives average or normal benefits. It is not regarded as a low-
quality product. The price, however, is low compared with similar products in the
market. Only the lowest-cost producer in the market can implement this business
strategy successfully. If a company that is not the least-cost producer tries to
implement a ‘low price strategy’ there will be a continual threat that the least-cost
producer will copy the same strategy, and offer prices that are even lower.
Differentiation Strategy: A differentiation strategy is based on making a product
or service appear to offer more benefits than rival products or services. Companies
try to differentiate their own particular products – make them seem different. In the
strategic clock, a strategy of differentiation involves charging average prices for the
product or service, or prices that are perhaps only slightly higher than average. The
strategy does not involve charging prices that are very much higher than average.
Customers therefore believe that they are getting more benefits for every N1 they
spend.
Hybrid Strategy: A hybrid strategy involves selling a product or service that
combines: higher-than average benefits to customers, and a below-average selling
price. To be successful, this business strategy requires low-cost production and also
the ability to provide larger benefits. It tries to achieve a mix between a low price
strategy and a differentiation strategy.
Focused Differentiation: A focused differentiation strategy is to sell a product
that offers above-average benefits for a higher-than-average price. Products in this
category are often strongly branded as premium products so that their high price
can be justified. Ferrari sports cars are examples of products sold using this
business strategy.
Business strategies on the clock that will fail: The diagram of the strategic
clock also indicates some business strategies that will not succeed, because they do
not enable the company to gaining competitive advantage. Products with perceived
benefits that are below-average cannot be sold successfully when there are lower-
priced products offering the same perceived benefits. Customers will not pay more
for products that, in their opinion, give them nothing extra

d Difference between market development strategy and product

development strategy
Market development strategy involves selling of existing product in new
market which can be aided by collaboration with a company in the new
market or by offering a variant of the existing product in the new market
whereas product development strategy involves selling new product in an
existing market. This can be aided by a strong brand name of the producer.
The two strategies are feature of Ansolf growth matrix.

SOLUTION 2
a. Objective and subjective risk perception
Objective perception of risk is when it is possible to assign accurate and
reliable values to the likelihood and impact of a risk with a high degree of
certainty. This degree of certainty of assigning values however, varies with
the nature of risk while subjective risk perception occurs when it is difficult to
 assign accurate and reliable values to either the likelihood or impact of a risk
with a high degree of accuracy.
b. Related and Correlated Risk Factors
Related risks are those risks that are often present together at a time while
correlated risks are those risks that vary together. Risks can be positively
correlated when they both go up and down together or negatively correlated
when one falls as the other increases.
c. Assessing Risk: Impact and Probability
i. High Impact, Low Probability (HL) consider the need for control
measures such as insurance
ii. High Impact, High probability (HH) take immediate action
iii. Low Impact, Low Probability (LL) review periodically
iv. Low Impact, High Probability (LH) consider the need for control action
d. Measuring Risk
This involves quantifying risks to determine how they should be managed.
Risk measurement can be financial or non financial
e. Prioritising Risk

This is done to determine which risks are tolerable and which need more
control measures to reduce them. A risk dashboard can be used to priortise
risk.

RED AMBER GREEN

High Risk Low Risk
SOLUTION 3
a. Elements of risk management
i. There should be a culture of risk awareness within the company
ii. Managers and employees should understand the risk appetite of the
company and no that excessive risk are not justified by the quest for
higher profit
iii. There should be a system of identifying, assessing and measuring risk
iv. When risk have been measured, they can be priotised for control or
containment
v. There should be an efficient system of communicating information
about risk and risk management to managers and the board of
directors
vi. Strategies and risk should be monitored to ensure that strategic
objectives are achieved within acceptable levels of risk
b. The functions expected of a Board Committee in Enterprise Risk
Management
i. Risk Identification – Identifying and assessing risk and reporting to the
board
ii. Formulating possible business risk management strategies
iii. Design and implement internal control systems
 iv. Risk monitoring
v. Reviewing Risk management structure
vi. Risk assessment
vii. Control activities
viii. Information and communication
c. Categories of risk common to many types of business identified in
Turnbull Report
i. Market risk – risk arising from changes in market price of key items
ii. Credit risk – risk of losses from bad debt
iii. Liquidity risk – risk that the entity will not meet up with its liabilities when
payment is due
iv. Reputational risk – risk that the image of the company or its product will
suffer damage
v. Legal Risk – risk of losses arising from fsilure to comply with laws and
regulation or legal action and law suits
vi. Technological risk – risk that could arise from changes in Technology or
inadequacies of technological systems in use
vii. Health, safety and environmental risk – risk affecting safety and health of
employees, customers and general public
viii. Business probity risk - risk from failure to act honestly
ix. Hedging risk – risk from fluctuations in exchange rate and interest rate
SOLUTION 4
a. Importance of effective corporate governance codes to corporation
i. Protection of investors from unethical or dishonest behaviour by
company’s management
ii. Prevention of the collapse of the stock market
iii. Securing the investment of shareholders
iv. It responds positively to the pressure from institutional investors
v. It contributes to efficiency and effectiveness of a company leadership
vi. It builds trust in potential investors
b. The two basic approaches to Corporate Governance
i. Rule Based Approach – with this approach, companies are required by
law to comply with established rules of good governance. This may
however, apply only to some types of companies e.g stock market
companies
ii. Principle Based Approach – this approach is based on the premised that
a single set of rules may not be appropriate to deal with peculiarities of
every company
There is no concluding evidence on the most appropriate between the two
approaches as such it si suggested that the peculiarity of the situation should
determine which approach to bw adopted.
c. Five aspects of Sarbanes/Oxley Act
i. CEO/CFO certification – applicable in the US and foreign companies
 ii. Assessment of internal control – the act requires the security and
exchange commission to establish rules that require companies to
include an internal control report in annual statement.
iii. Loans to Executives – the act prohibits companies from lending money
to ant director or senior executive
iv. Forfeiture of Bonus – any bonus paid to the CEO and CFO in the last
twelve months will have to be paid back to the company if financial
statements had to be restated due to non compliance with accounting
standard and rules
v. Insider dealing – directors and senior executives are not allowed to
trade in the shares of their company during any black out period
vi. Audit Committee
vii. Non audit work by auditors
viii. Protection of Whistleblowers
ix. Audit standard
SOLUTION 5
a. Business Ethics
Business ethics describes the moral principle and values that guide how
people and institution behave in the world of commerce. It considers how the
pursuit of self interest (Profits) impact others through actions of individuals
and firms within business
b. Ethical dilemma
Ethical dilemma or moral dilemma involves a conflict between two moral
principles whereby it can be argued that both perspectives are fair and
reasonable.
c. Environmental and Social Footprints of organisations
i. An environmental footprint also called ecological footprint is a term
that describes the impact of an entity’s operation on its environment.
The amount of raw materials that it uses to make its product where
the raw materials is subject to depletion, non renewable resources that
it uses to make its products and the quantity of waste and emission
that it creates in the process.
With the recognition today that the world cannot go on increasing its
environmental footprints, maby leading companies are looking for
ways to reduce the size of their footprint.
Environmental footprint can be reduced by developing and
implementing policies for better resource management and using
different resources, green procurement policies and waste
management.
ii. Social footprint is the effect of an entity’s economic activities on
society and people. Despite the fact that economic activities provide
benefits to the society, some companies are more people friendly.
Some companies for instance use child labour while some pay
subsistence wage to their workers.
SOLUTION 6
 a. American Accounting Association Model
American Accounting Association Model is one of the ethical decision making
models with the following features
i. What are the facts?
ii. What are the ethical issues?
iii. What are the ethical principles and values relevant to the moral dilemma?
iv. What are the alternative courses of action?
v. Which course of action seems best that is consistent with the moral
principle and values in iii above?
vi. What are the consequences of each possible courses of action?
vii. What is the decision?

b. Tucker’s Five Question Model

i. Is it profitable?
ii. Is it legal?
iii. Is it fair?
iv. Is it right?
v. Is it sustainable or environmentally friendly

SOLUTION 7
The component and contents of a business plan are as follows:
a. TITLE PAGE
The title and any sub-title should define the plan/report and ensure it is easily
distinguishable from others
i. Author
ii. Organisation‟s name
iii. Reference numbers (if any)
iv. Date
b. TABLE OF CONTENTS INTRODUCTION
This prepares the readers on why the report is being written. It addresses the
following: i. Subject of the report;
ii. Purpose of the report; and
iii. Methods used in gathering inforamtion.
c. EXECUTIVE SUMMARY
The executive summary should include:
i. What the report is about;
ii. The relevant problems; and
iii. Recommendation/Conclusion.
d. BODY OF REPORT
The body of report should be split into sections with logical headings and sub-
headings e.g.
i. Business descriptions: Overall mission and objectives. History & ownership.
Products and services.
ii. Business Envrionment analysis: PEST Analysis report. SWOT Analaysis
report (Strenghts, Weaknesses, Opportunities & Threats). Competitor
analysis.
iii. Operating Plans Marketing plan. Opertions plan.
e. MANAGEMENT SUMMARY
i. Management personnel and their background.
ii. Oganisation chart.
e. FINANCIAL PLAN - Financial information e.g. cashflow statements,
income statements, statement of financial postion & risk factors .

g. CONCLUSIONS & RECOMMENDATIONS

i. To follow logically from the rest of the plan.
ii. Draw conclusions that are justified by evidence.
iii. Make recommendations based on discussions. & conclusions
h. APPENDICES
i. Appendices should include detailed information that will throw more light to
the report. ii. CVs of key management of board members.