20 marks answer layout

Para1: Developed Knowledge

Para2: Point 1 + Cause + Impacts [chain of analysis] + Consequence + Counter argument + Impact + Conclusion
Para3: Point 2 + Cause + Impacts [chain of analysis] + Consequence + Counter argument + Impact + Conclusion
Para4: Factors affecting (internal and external factor) + Impacts
Para5: Alternative strategy + Impacts
Para6: Final judgement + Justification + Counter argument + Connect back to case study

NOVEMBER 2024/41
Q1: Evaluate the extent to which corporate planning could have prevented the ‘Fly-away’ promotion crisis. [20]

Corporate planning involves setting objectives, developing strategies, and allocating resources to achieve business
goals. It helps businesses prepare for potential risks and avoid crises. In DF’s case, corporate planning could have
helped prevent the ‘Fly-away’ promotion crisis by ensuring demand forecasting, contingency planning, and
financial allocation. However, external factors such as consumer behavior, AB’s response, and social media
influence may have limited its effectiveness.

A detailed corporate plan with demand forecasting could have anticipated the overwhelming 150,000
applications instead of the expected 10,000. By setting stricter eligibility criteria or limiting the number of tickets
per purchase, DF could have avoided financial strain and reputational damage. Better coordination with AB could
have ensured shared accountability, reducing the risk of AB shifting the blame onto DF. However, consumer
behavior is unpredictable, and even the best corporate planning might not have fully prevented the crisis. Thus,
while corporate planning could have reduced the severity of the issue, it may not have entirely stopped customer
dissatisfaction.

Over-reliance on planning can sometimes reduce flexibility in decision-making. While a structured approach
ensures resource allocation, DF’s main issue was the inability to adapt once the crisis escalated. The backlash on
social media and negative coverage on consumer TV programs were worsened by DF’s failure to respond
effectively. A customer-friendly crisis management strategy—such as offering vouchers instead of flights—could
have been a better solution than outright refusals. Therefore, corporate planning alone was insufficient; DF also
needed an adaptive response strategy to handle unforeseen consumer reactions effectively.

The impact of external factors must also be considered. DF faced intense competition in the floor cleaner market,
leading it to introduce an aggressive promotion to gain market share. Additionally, DF’s high dividend payout
(90% of profits) left minimal funds for crisis management, making it financially vulnerable. The rise of social
media amplified the crisis, making damage control difficult even with corporate planning. Ultimately, while
corporate planning could have improved risk assessment, the external market pressures and lack of financial
reserves limited DF’s ability to manage the crisis smoothly.

In conclusion, corporate planning could have mitigated but not entirely prevented the crisis. While effective
planning could have ensured better forecasting, budgeting, and risk management, external factors such as market
competition, shareholder pressure, and digital consumer backlash played a significant role. Therefore, a
combination of corporate planning and crisis management would have been the best approach to handle the
situation.

Q2: Advise DF on the likely impact of ratio results on its choice of future growth strategy. [20]

Financial ratios provide key insights into a company’s profitability, liquidity, and efficiency, guiding strategic
decisions. DF must decide between external growth through acquisition (Strategy A) or internal growth via R&D
investment in AI technology (Strategy B). The choice depends on DF’s financial health, market conditions, and
shareholder expectations.

Strategy A (Acquisition of a Competitor) appears financially viable. DF’s gross profit margin (GPM) has improved
from 20% to 25%, showing a partial recovery. The current ratio of 3:1 indicates strong liquidity, meaning DF has
enough funds for expansion. Additionally, the trade receivables turnover improved from 30 to 20 days, ensuring
better cash flow. A successful acquisition could increase DF’s market share and reduce supplier dependency.
However, high competitive rivalry in the battery-powered floor cleaner market and potential integration
difficulties pose risks. If DF fails to efficiently manage costs and operations, profitability may decline. Thus, while
Strategy A offers immediate market expansion, its success depends on effective post-acquisition management
and competitive positioning.

Strategy B (R&D Investment in AI Cleaners) could secure DF’s long-term position. Investing in AI could
differentiate DF from competitors and attract high-end consumers. The declining price/earnings ratio (from 8 to
5) signals lower investor confidence, meaning innovation might be necessary to regain market trust. However,
R&D is capital-intensive, and with gearing rising from 30% to 35%, DF must be cautious about excessive
borrowing. Additionally, hiring specialized engineers is a constraint, and success is not guaranteed. Therefore,
while R&D could offer DF a competitive edge in the long run, it involves higher financial risks and uncertain
returns.

The decision depends on market conditions and investor sentiment. Strategy A offers short-term growth but
comes with high competitive pressure. Strategy B offers long-term innovation but carries financial risk. A hybrid
approach—investing moderately in R&D while acquiring a smaller competitor—could balance both strategies.
Ultimately, the best strategy would depend on DF’s ability to secure financing while maintaining shareholder
confidence.

In conclusion, Strategy A is preferable in the short term due to DF’s strong liquidity and cash flow, but Strategy B is
crucial for long-term differentiation. Given DF’s financial position, a gradual investment in AI while securing
market share through selective acquisitions may be the best approach for sustainable growth.

NOVEMBER 2024/42
Q1: Evaluate the success of Idir’s strategy for improving employee performance between 2020 and 2024. [20]
Employee performance is crucial for a business’s success, impacting productivity, efficiency, and profitability. Idir’s
strategy focused on delayering, decentralization, financial incentives, and increasing IT use to improve
performance at PI. While these strategies led to higher sales and cost reductions, their impact on employee
morale and long-term sustainability remains questionable.

One of the key successes of Idir’s strategy was the significant improvement in key performance indicators.
Absenteeism and lateness, which were previously at 12% and 27% respectively, dropped drastically by 2024. By
introducing financial penalties for lateness and incentives for attendance, employees were motivated to maintain
punctuality. Additionally, IT implementation enhanced efficiency in sales processes, leading to lower cost of sales
and the highest gross profit margin in the industry. These improvements suggest that Idir’s hard HRM approach
effectively optimized productivity and reduced operational inefficiencies. However, such strict control measures
may have created a stressful work environment, potentially leading to dissatisfaction and increased long-term
turnover. Thus, while the strategy enhanced short-term performance, it may not be sustainable if employee
engagement continues to decline.

Despite operational efficiency, Idir’s strategy had negative consequences on employee relations and retention.
The labour turnover increased, likely due to the delayering and redundancies of car and home insurance
managers. Decentralization placed greater pressure on remaining managers, possibly leading to job
dissatisfaction. Furthermore, trade union membership surged from 4% in 2020 to 60% in 2022, indicating growing
employee dissatisfaction and the likelihood of industrial action. While redundancies reduced costs, they may have
also led to lower motivation and engagement, which could hinder long-term productivity. Therefore, the success
of Idir’s strategy is debatable—it improved efficiency and profitability but may have damaged employee morale
and trust in leadership.

A more balanced alternative strategy would have been a hybrid HR approach, incorporating both hard and soft
HRM practices. Instead of strict financial penalties and heavy redundancies, PI could have focused on employee
engagement programs, career development plans, and a gradual performance improvement model. For example,
introducing flexible working arrangements and non-financial motivation methods could have reduced turnover
while maintaining productivity. Additionally, implementing target-based performance bonuses rather than strict
penalties might have been more effective in keeping employees engaged. This approach could have sustained
long-term productivity without creating resentment among employees.

In conclusion, Idir’s strategy achieved significant improvements in efficiency, cost reduction, and profitability, but
at the expense of employee well-being. While the drop in absenteeism and lateness suggests increased discipline,
the rise in turnover and unionization indicates dissatisfaction. An alternative approach that combined
performance incentives with employee engagement could have improved both productivity and workforce
morale. Therefore, the success of the strategy is mixed—it was effective in meeting business objectives but may
require adjustments to ensure long-term workforce stability and engagement.

Q2: Advise Idir on what accounting data he should use to help him develop a new business strategy for PI to
sell pet insurance. [20]
Developing a new business strategy requires a detailed financial analysis to assess profitability, risk, and
investment requirements. Since Idir plans to enter the pet insurance market, which is highly competitive and
requires significant investment, he must use key accounting data such as profitability ratios, liquidity ratios, and
investment appraisal techniques to guide decision-making.

Profitability ratios, such as Gross Profit Margin (GPM) and Return on Capital Employed (ROCE), are crucial in
determining PI’s financial capability to expand. PI currently has the highest GPM in the industry, suggesting strong
financial health. However, to invest in pet insurance, Idir must assess whether PI’s retained earnings are sufficient
or if external financing is needed. If profit margins are declining or ROCE is low, the business may struggle to
generate enough returns on new investments. Therefore, profitability ratios will help Idir decide if PI can self-fund
the expansion or if it needs external financing.

Liquidity ratios, including the Current Ratio and Acid-Test Ratio, will help determine whether PI has sufficient
short-term assets to manage expansion costs. Entering a new market requires substantial upfront investment,
including marketing, regulatory compliance, and staff training. If liquidity is weak, PI may struggle with short-term
financial commitments, leading to cash flow problems. However, if liquidity is strong, Idir can invest aggressively
without endangering existing operations. Thus, assessing liquidity is essential for managing the financial risks of
expansion.

Investment appraisal techniques such as Payback Period, Net Present Value (NPV), and Average Rate of Return
(ARR) will help Idir evaluate the financial viability of entering the pet insurance market. Since the market is
dominated by two large competitors, PI needs a strong return on investment (ROI) strategy to compete
effectively. If the payback period is too long, it may indicate higher financial risk, discouraging investment.
Similarly, if NPV is negative, the expansion may not generate sufficient long-term returns. Therefore, these
methods will provide Idir with a clearer picture of whether investing in pet insurance is financially feasible.

An alternative strategy to full-scale expansion would be a strategic partnership with an existing pet insurance
provider rather than developing a new division from scratch. Instead of committing large upfront investment, PI
could collaborate with an established player in a joint venture or licensing agreement, leveraging its existing
expertise and customer base. This approach would reduce financial risk, require less capital investment, and
provide PI with industry insights before fully entering the market. Additionally, PI could test the pet insurance
segment by offering it as an add-on service for existing customers, which would allow gradual market penetration
without heavy financial commitment.

In conclusion, Idir should focus on profitability ratios to assess financial strength, liquidity ratios to ensure short-
term financial stability, and investment appraisal techniques to determine the feasibility of expansion. If these
indicators suggest PI has strong financial reserves and high expected returns, expanding into pet insurance could
be a viable growth strategy. However, a strategic partnership could serve as a lower-risk alternative, allowing PI to
enter the market with minimal investment while assessing its long-term potential. Ultimately, the decision should
balance financial feasibility with market risk to ensure sustainable growth.

NOVEMBER 2024/43
Q1: Evaluate the impact of FB’s finance and accounting strategy on its performance between 2016 and 2022.
[20]

A company’s finance and accounting strategy directly influences its profitability, liquidity, and long-term
sustainability. FB’s approach, characterized by avoiding long-term borrowing and consistently paying high
dividends, has had both positive and negative impacts on its financial performance. While this strategy has
ensured financial independence, it has also contributed to liquidity issues and vulnerability to external market
conditions.

One significant advantage of FB’s strategy was the avoidance of long-term debt, which reduced financial risk and
interest costs. FB funded its 2018 workshop expansion with cash, aligning with its strategy of maintaining
financial independence. This helped preserve ownership control and prevented high gearing ratios, ensuring the
company was not burdened by long-term liabilities. Additionally, FB maintained premium pricing and exclusivity,
reflected in its high gross profit margin of 34% in 2019. However, this approach restricted cash reserves, evident
in the sharp decline from $6.6m in 2019 to just $0.8m in 2022, leading to cash flow problems that limited
operational flexibility. Thus, while the strategy ensured financial autonomy, it also weakened the company’s
liquidity position, making it difficult to sustain during economic downturns.

The commitment to high annual dividend payments ($5m every year) also had mixed consequences. While
dividends can attract investors, in FB’s case, the sole shareholder is Stefan Fletcher, meaning the policy was likely
driven by personal financial gain rather than reinvestment into the business. Despite making a $3.06m loss in
2016, dividends continued, further reducing cash availability. This became particularly problematic during the
economic downturn of 2020-2021, when sales fell sharply, and FB struggled to maintain profitability. By 2022,
profit for the year had fallen to just $0.1m, and the return on capital employed (ROCE) dropped from 32% in 2019
to a mere 0.3%. This suggests that prioritizing dividend payouts over reinvestment constrained FB’s ability to
adapt to market changes and build financial resilience.

The effectiveness of FB’s financial strategy was also influenced by external market conditions and internal
business decisions. The global recession (2008–12) had already slowed demand, and economic uncertainty in
2020-21 further impacted revenue. Additionally, FB’s reliance on Swiss currency stability posed a challenge, as the
currency depreciation affected cash balances. Internally, the decision to expand production capacity in 2018
without external financing created a financial strain when demand unexpectedly declined in 2020. Furthermore,
inventory levels increased from $12.86m in 2016 to $16.2m in 2022, tying up capital in unsold stock. These
factors indicate that while FB’s financial strategy worked during stable periods, it was not flexible enough to
withstand economic downturns.

An alternative financial strategy could have been a balanced approach, where FB reduced dividend payouts and
reinvested profits into liquidity reserves or new market opportunities. Instead of entirely avoiding long-term
borrowing, FB could have used selective financing to support expansion without exhausting cash reserves. For
instance, using external funding for the workshop expansion in 2018 could have preserved liquidity, allowing FB
to navigate the 2020-21 downturn more effectively. Additionally, a more flexible dividend policy, adjusting
payments based on financial performance, could have prevented excessive cash depletion.
In conclusion, FB’s finance and accounting strategy provided financial independence and maintained premium
brand value but also created liquidity risks and limited long-term sustainability. While avoiding long-term
borrowing prevented financial strain from debt, the continuous high dividend payments restricted reinvestment,
leading to cash shortages and operational difficulties. A more balanced approach with controlled borrowing and
reinvestment in liquidity reserves could have ensured greater financial stability while maintaining independence.

Q2: Advise the Board of Directors on whether scenario planning is the most useful approach to develop a new
business strategy for FB. [20]

Scenario planning involves forecasting different future scenarios to prepare for uncertainties in business strategy.
Given FB’s uncertain leadership transition, market volatility, and technological advancements in the sports watch
industry, scenario planning could be a useful tool for risk management and strategic decision-making. However,
alternative strategic approaches such as SWOT analysis, Ansoff’s Matrix, and Porter’s Five Forces might offer more
direct and structured insights into FB’s future.

One key advantage of scenario planning is that it allows FB to prepare for multiple potential leadership
transitions. With no successor confirmed after Stefan Fletcher’s 2025 retirement, FB faces three potential paths:
appointing a new CEO, selling the business, or closing down. Scenario planning enables FB to assess the risks and
benefits of each option, helping stakeholders make a well-informed leadership decision. Additionally, economic
volatility and exchange rate fluctuations pose major risks for FB, given its reliance on global luxury markets. By
modeling different economic conditions, scenario planning can help FB develop flexible pricing and operational
strategies. However, scenario planning is time-consuming and does not provide a clear-cut decision, meaning it
may only be useful when combined with other analytical tools.

The usefulness of scenario planning depends on several external and internal factors. The luxury watch industry is
facing increased competition from digital alternatives, meaning FB must assess how consumer preferences are
shifting. Furthermore, global economic conditions, particularly currency fluctuations and luxury market demand,
will significantly impact FB’s future. Internally, FB’s financial constraints (low cash reserves and weak liquidity
ratios) limit its ability to adapt quickly to changing conditions. Additionally, the uncertainty surrounding
leadership succession affects long-term strategic planning. These factors suggest that while scenario planning
provides an overview of potential risks, it does not directly address FB’s immediate competitive challenges.

An alternative strategic approach could be to use Ansoff’s Matrix to evaluate FB’s growth options. Instead of
passively planning for different leadership or market scenarios, FB could actively pursue market development by
expanding into emerging luxury markets or product diversification by introducing digital components in sports
watches. This approach focuses on proactive decision-making rather than hypothetical planning, ensuring that FB
adapts to market changes rather than just preparing for possible futures.

In conclusion, while scenario planning helps FB prepare for leadership and market uncertainties, it may not be the
most effective tool for developing an actionable business strategy. Given the competitive pressures and need for
market adaptation, alternative approaches such as SWOT analysis, Porter’s Five Forces, or Ansoff’s Matrix could
provide more concrete and strategic insights. A combination of scenario planning for leadership decisions and
analytical tools for market strategy would be the most effective approach for FB’s long-term success.

JUNE 2024/41
Q1: Evaluate LC’s business performance between 2014 and 2023. [20]

Business performance is measured through financial stability, operational efficiency, and employee satisfaction.
LC’s cost-cutting strategy under CEO Juan Pedro focused on centralized financial control, factory closures, product
reduction, and workforce restructuring. While this improved profitability in some areas, it also led to operational
inefficiencies and employee dissatisfaction, impacting long-term sustainability.

One key success was the initial increase in profitability. Gross profit margin (GPM) rose from 40% in 2014 to 60%
in 2020, indicating effective cost control and improved production efficiency. Additionally, inventory turnover
improved from 12 times in 2014 to 24 times by 2020, suggesting better inventory management and reduced
holding costs. These improvements helped stabilize liquidity, with the current ratio consistently at 1:1, indicating
controlled short-term financial management. However, by 2023, GPM fell back to 40%, suggesting that cost-
cutting alone was not sustainable. Furthermore, gearing increased from 40% in 2014 to 65% in 2020, meaning
higher reliance on debt financing, which could increase financial risk if revenues decline. Thus, while LC improved
short-term profitability, the strategy was not resilient enough to maintain long-term financial growth.

Despite cost reductions, employee productivity declined significantly. Labour turnover increased, and productivity
was 30% lower than projected, partly due to factory closures and unfavorable contract changes in 2021.
Employees lost bonuses, pension contributions, and salary-based contracts, leading to demotivation and
dissatisfaction, as seen in Appendix 5. Additionally, the shift from geographical profit centers to centralized
financial control reduced regional market responsiveness, possibly affecting customer satisfaction and sales in key
markets. Thus, while financial metrics initially improved, LC’s cost-cutting measures negatively impacted
employee morale and operational efficiency, which could undermine future performance.

LC’s performance was influenced by external market conditions and internal strategic decisions. The global
financial crisis (2009–13) reduced disposable incomes, forcing LC to restructure its pricing and cost base.
Additionally, the move toward capital-intensive production in 2020 required a bank loan, increasing gearing
levels. Internally, the reduction in product range and factory closures aimed to improve efficiency but may have
weakened LC’s competitive edge. Furthermore, rising dividend yield (from 2% in 2014 to 5% in 2023) indicates
that more profits were being returned to shareholders rather than reinvested in business growth, limiting
innovation and expansion. These factors suggest that while LC’s financial decisions were effective in maintaining
profitability, they lacked adaptability to external changes.

An alternative strategy could have focused on a balanced cost-cutting approach combined with employee
engagement initiatives. Instead of removing bonuses and reducing job security, LC could have introduced
performance-based incentives to maintain motivation. Additionally, adopting a hybrid approach—maintaining
some geographical decision-making alongside centralized control—could have preserved market responsiveness.
Moreover, investing in product innovation rather than purely cost-cutting could have sustained LC’s competitive
edge.

In conclusion, LC’s business performance showed financial improvement in the short term but suffered from long-
term sustainability issues. While cost reductions increased profit margins and inventory turnover, the negative
impact on employee productivity, rising debt reliance, and declining market flexibility raise concerns about LC’s
future growth. A more balanced strategy—combining cost control with reinvestment in employees and product
development—would have improved overall business performance.

Q2: Advise LC on a new HR strategy to improve employee performance. [20]

A human resource (HR) strategy is essential for ensuring employee motivation, retention, and efficiency. LC’s
current HR practices, including reducing working hours, removing bonuses, and enforcing centralized decision-
making, have led to low morale, higher turnover, and decreased productivity. A new HR strategy should prioritize
employee engagement, job security, and skills development to enhance overall business performance.

One key improvement would be introducing performance-based incentives. The removal of bonuses and pension
contributions in 2021 demotivated employees, leading to negative feedback and declining productivity. By
reinstating performance-related bonuses and offering higher pay for overtime work, LC could boost motivation
and encourage higher efficiency. Additionally, offering career progression opportunities, such as promotion
pathways for experienced workers, could increase retention rates. This strategy would ensure employees feel
valued and incentivized to improve their performance. However, LC must balance these incentives with cost
control measures to maintain financial stability.

Another crucial change would be reintroducing partial employee involvement in decision-making. Currently, LC’s
centralized HR policies exclude workers from strategic discussions, creating a disconnect between management
and employees. Implementing Management by Objectives (MBO) or regular consultation meetings would allow
employees to contribute feedback on workplace policies, leading to higher engagement and lower resistance to
change. Additionally, flexible working arrangements, such as guaranteed minimum weekly hours, could improve
job security without increasing costs significantly. This would result in a more committed and engaged workforce,
reducing turnover rates and operational disruptions.

The success of this HR strategy depends on external and internal factors. The current economic conditions in the
US and Europe influence labor costs and employee expectations. If inflation rises, LC may need to increase wages
to retain skilled workers. Internally, LC’s capital-intensive production shift in 2020 means that automation is
replacing traditional jobs, making retraining and reskilling employees critical to avoid further dissatisfaction.
Additionally, LC’s financial position and dividend commitments limit how much investment can be allocated to HR
improvements. Thus, the new HR strategy must be cost-effective while addressing key workforce concerns.

An alternative HR approach could be a phased implementation of benefits and workforce restructuring. Instead of
immediate full-scale salary adjustments, LC could gradually reintroduce bonuses and career incentives based on
financial performance. Additionally, a targeted reskilling program for employees in automated factory
environments could ensure workers remain relevant in the evolving industry. By adopting a step-by-step
approach, LC can balance cost efficiency with long-term workforce stability.

In conclusion, LC’s new HR strategy should focus on employee incentives, decision-making involvement, and skills
development to restore workforce morale and improve productivity. While financial constraints limit drastic
changes, gradual improvements in pay structures, career opportunities, and consultation processes would create
a more motivated and committed workforce, leading to higher long-term business efficiency and profitability.

JUNE 2024/42
Q1: Evaluate the extent to which CA’s operations strategy between 2019 and 2024 led to the failure of the city Z
branch. [20]

Operations strategy plays a critical role in determining a company’s efficiency and profitability. CA’s operations
strategy for the city Z branch (2019–2024) included lean production, just-in-time (JIT) inventory management, AI-
driven customer service, and network-based planning. While these strategies aimed to reduce costs and improve
efficiency, they contributed to customer dissatisfaction, operational inefficiencies, and ultimately, financial losses.

One major factor leading to the failure of city Z branch was the implementation of lean production and JIT
inventory management in 2021. The introduction of Kaizen and quality circles may have initially improved
employee engagement, but the requirement for cleaners to participate in quality meetings may have reduced
actual cleaning efficiency. Furthermore, JIT ordering of cleaning materials may have led to delays in service when
materials were not available, reducing customer satisfaction. This is evident in the city Z branch’s increased direct
costs ($0.32m in 2023 from $0.3m in 2021) despite implementing cost-cutting measures. Thus, while lean
production aimed to improve efficiency, it failed to deliver cost savings and instead contributed to operational
delays and inefficiencies.

Another critical failure was the introduction of AI-driven customer service in 2022, which replaced human
customer service operatives with a chatbot system. While AI implementation was intended to reduce indirect
costs, it resulted in negative customer experiences, as shown in local media reports where customers complained
that the chatbot was ineffective. The lack of human customer service may have driven potential clients to
competitors, reducing revenue. Additionally, profitability of city Z fell from a $0.05m profit in 2021 to a $0.1m loss
in 2023, showing a decline in financial performance despite AI cost reductions. This indicates that AI-driven
automation was not suitable for customer interactions in the cleaning service industry, where personal assistance
is valued.

The failure of the city Z branch was also influenced by external factors and internal decisions. The recession in
country P reduced business demand for office cleaning services, making market entry more difficult. Additionally,
Nala’s lack of management experience may have led to ineffective decision-making, especially in planning and
execution. The network diagram used to open the branch assumed a 10-week timeline, which may have been too
ambitious, resulting in rushed hiring and poor location selection. Furthermore, unlike city A, which increased
cleaners from 24 to 26 between 2021 and 2023, city Z maintained only 18 cleaners, possibly limiting capacity to
scale operations effectively. These factors suggest that while operations strategy played a role, external economic
conditions and managerial execution also contributed to the branch’s failure.

An alternative approach could have been a phased AI integration with human support rather than a full transition
to chatbots. Additionally, a hybrid inventory system combining JIT with buffer stock could have reduced the risk of
material shortages while maintaining efficiency. Furthermore, offering flexible service packages based on
customer preferences could have improved client retention. This approach would have allowed CA to optimize
operations without sacrificing service quality.

In conclusion, CA’s operations strategy significantly contributed to the failure of the city Z branch by prioritizing
cost-cutting over customer experience and service efficiency. While lean production, AI, and JIT had theoretical
benefits, their execution led to operational inefficiencies, reduced customer satisfaction, and financial losses.
However, external economic conditions and managerial inexperience also played a role, meaning that a more
customer-focused and flexible operations strategy could have prevented failure.

Q2: Advise Nala on the most important elements to be included in a corporate plan for the future of the city Z
branch. [20]

A corporate plan is essential for defining business objectives, strategies, and financial planning. To secure
financing for purchasing the city Z branch, Nala must develop a corporate plan that addresses previous
operational failures, improves service efficiency, and ensures long-term profitability.

One critical element in the corporate plan should be a clear mission and strategic objectives. The failure of the
city Z branch was partly due to poor customer service and ineffective cost-cutting measures. Nala should outline a
mission that emphasizes quality service and customer satisfaction, aligning with strategies that focus on
personalized customer interaction, improved employee engagement, and sustainable business growth. Setting
SMART objectives, such as increasing revenue by 15% within two years or reducing customer complaints by 50%
through a revised service model, would provide clear performance targets for business success.

Another key aspect is a detailed operational strategy that corrects past inefficiencies. Instead of relying solely on
AI-driven customer service, Nala should reintroduce human customer support while using AI for appointment
scheduling. Additionally, adopting a hybrid inventory model—where core cleaning supplies are kept in stock while
specialty materials follow a JIT system—could improve service reliability while maintaining cost efficiency.
Moreover, Nala could introduce employee training programs focused on service quality and customer handling,
which would help differentiate the business from competitors.

The effectiveness of Nala’s corporate plan will be influenced by external and internal factors. The economic
conditions in country P will impact demand for cleaning services, meaning that pricing strategies must remain
competitive. Additionally, securing financing from the bank depends on demonstrating profitability and risk
mitigation measures. Internally, Nala’s leadership skills and ability to execute the plan effectively will determine
the business's success. These factors highlight the need for a well-structured financial and operational strategy
that aligns with market realities.
An alternative approach could be a gradual expansion strategy rather than an immediate full-scale reopening.
Instead of committing to a large upfront investment, Nala could start with key existing customers and gradually
scale operations as financial stability improves. This approach would reduce financial risk while allowing flexibility
in operations.

In conclusion, Nala’s corporate plan must focus on strategic objectives, an improved operational model, and
financial sustainability. Balancing AI and human services, optimizing inventory, and implementing structured
training programs will improve customer satisfaction and business performance. However, external market
conditions and financial viability will influence the plan’s success, making a phased expansion approach a lower-
risk alternative.

JUNE 2024/43
Q1: Evaluate KF’s approach to human resource management (HRM) between 2018–2023. [20]

Human resource management (HRM) plays a critical role in ensuring workforce productivity, motivation, and
operational efficiency. KF’s HR strategy focused on flexible employment contracts, performance tracking, and cost
minimization to support its rapid expansion. While this approach helped control costs and scale operations, it also
led to employee dissatisfaction and potential legal and operational risks.

One key strength of KF’s HR approach was its use of flexible employment contracts, which allowed for rapid
expansion during the pandemic-driven food delivery boom (2019–2020). By employing zero-hours contracts for
delivery riders, KF avoided long-term wage commitments, keeping costs low while responding to demand
fluctuations. Additionally, flexi-time contracts for kitchen support workers ensured labor flexibility without
overcommitting resources. However, as food delivery demand declined post-2022, KF’s reliance on gig workers
became problematic, leading to workforce uncertainty and potential supply chain disruptions. Thus, while zero-
hours contracts provided cost advantages, they also contributed to long-term instability.

Another critical aspect of KF’s HR strategy was the implementation of performance-tracking technology in 2021.
The delivery app monitored riders’ efficiency, speed, and customer interaction, allowing management to evaluate
and optimize delivery performance. However, employee feedback indicated serious issues with the system,
including unrealistic time targets and unfair bonus evaluations. This led to demotivation and dissatisfaction
among riders, which may have resulted in poor service quality and increased turnover. Moreover, customer
complaints about delivery times suggest that the tracking algorithm may have created more issues than solutions,
potentially damaging KF’s reputation. While performance tracking can improve efficiency, its flawed execution
created employee grievances that harmed workforce morale and operational effectiveness.

The effectiveness of KF’s HR strategy was influenced by both internal decisions and external factors. The
government ban on zero-hours contracts in 2023 forced KF to reconsider its employment structure, but instead of
integrating full-time employees, KF shifted all riders to self-employment under the gig economy model. This
reduced legal risks and administrative costs but also removed employer responsibilities, such as job security,
benefits, and structured training programs. Additionally, the post-pandemic decline in food delivery orders (2022)
meant that relying on gig workers exposed KF to unpredictable workforce availability. These factors indicate that
while KF’s HR model was cost-efficient, it was reactive rather than strategic, leading to long-term workforce
uncertainty.

An alternative HR approach could have balanced cost control with structured workforce development. Instead of
fully transitioning to a gig economy model, KF could have retained a core team of full-time riders while
supplementing demand with gig workers. Additionally, revising the tracking system to incorporate rider feedback
could have improved employee relations while maintaining efficiency. By adopting a hybrid workforce model with
better performance evaluation methods, KF could have ensured higher service quality while keeping operational
costs manageable.

In conclusion, KF’s HR strategy was effective in scaling operations and reducing costs but created long-term
workforce instability and employee dissatisfaction. While flexible contracts and tracking systems optimized
efficiency, poor implementation and reliance on gig workers post-2023 created operational risks. A more balanced
approach—blending structured employment with controlled flexibility—could have enhanced workforce stability
and service quality, securing long-term business success.

Q2: Advise KF whether using Ansoff’s matrix is sufficient to develop a successful growth strategy. [20]

Ansoff’s matrix is a strategic tool that helps businesses identify growth opportunities through market penetration,
product development, market development, and diversification. Given KF’s declining food delivery market,
Ansoff’s matrix provides a structured approach to assess expansion options. However, it may not be sufficient
alone, as external factors, competitive pressures, and financial constraints must also be considered.

One key benefit of Ansoff’s matrix is that it provides a clear framework for KF’s expansion strategy. Market
penetration, for example, could involve offering discounts, improving app efficiency, or expanding delivery
services to retain customers. Alternatively, market development could focus on targeting corporate clients or
expanding to new geographic areas. However, with the food delivery market shrinking back to pre-pandemic
levels (2022), relying solely on penetration or expansion strategies may be risky. Thus, while Ansoff’s matrix
identifies structured growth pathways, it does not address market constraints or competitive threats.

Another limitation of using Ansoff’s matrix alone is that it does not evaluate external risks or operational
challenges. KF’s decision to transition all riders to gig work (2023) introduced workforce availability uncertainties,
which could impact service consistency in any new expansion strategy. Additionally, customer dissatisfaction with
app tracking and delivery issues suggests that KF may need to improve service quality before pursuing aggressive
growth. These factors highlight that Ansoff’s matrix does not consider operational weaknesses that could hinder
growth success.

The effectiveness of Ansoff’s matrix depends on several external and internal factors. The post-pandemic decline
in food delivery orders means that expanding within the same industry may not be viable. Additionally, increasing
competition from established food delivery platforms (Uber Eats, Deliveroo, etc.) could limit KF’s ability to capture
market share through market penetration. Internally, KF’s reliance on gig workers instead of full-time employees
may lead to operational challenges if demand fluctuates unpredictably. These factors suggest that while Ansoff’s
matrix provides growth options, it does not fully account for business model sustainability and external
challenges.

An alternative strategic approach could involve combining Ansoff’s matrix with other tools such as PEST analysis
and SWOT analysis. A PEST analysis would help KF assess macro-environmental factors, such as regulatory
changes, economic conditions, and technological trends. Meanwhile, SWOT analysis could identify internal
strengths and weaknesses to ensure KF pursues realistic growth strategies. For example, instead of market
penetration in food delivery, KF could explore diversification into meal prep services or cloud kitchen co-working
spaces, reducing reliance on delivery demand.

In conclusion, Ansoff’s matrix is a useful tool for structuring growth strategies, but it is insufficient on its own.
Given KF’s market uncertainties, workforce challenges, and external regulatory changes, it should incorporate
additional analytical tools (PEST, SWOT) to assess risks and ensure strategic feasibility. A combined approach
would provide a more comprehensive strategy for sustainable long-term growth.

MARCH 2024/42
Q1: Evaluate the effectiveness of CC’s marketing strategy between 2010 and 2020. [20]

A marketing strategy is crucial for attracting customers, increasing sales, and maintaining brand reputation.
Between 2010 and 2020, CC implemented digital marketing, social media influencers, and a transition to fast
fashion to regain market share. While some strategies aligned with changing industry trends, the overall
execution failed to achieve long-term success.

One major improvement was CC’s investment in digital marketing and online sales from 2010 onwards. The
introduction of fast fashion in 2012 allowed CC to respond quickly to consumer trends, reducing reliance on
seasonal collections. Additionally, dynamic pricing strategies helped target different customer segments,
increasing accessibility. However, customer feedback from 2013 indicated dissatisfaction with product quality,
suggesting that rapid production led to lower quality control. Moreover, the reduction in brand consistency and
lack of differentiation in the fast fashion market weakened CC’s positioning. Thus, while digital marketing
expanded reach, it failed to maintain brand loyalty and product integrity.

Another key failure was CC’s inability to retain its core customer base. The marketing mix shift in 2012 targeted a
younger audience (13–30 years old), abandoning existing loyal customers (30–50 years old). Additionally, the
transition from premium quality to mass-produced fast fashion led to reputational damage, reflected in declining
financial performance. By 2020, profit had dropped from $10m in 2008 to just $1m, despite revenue slightly
increasing. Furthermore, the share price fell from $7 in 2008 to $3 in 2020, indicating declining investor
confidence. These trends suggest that while CC’s marketing strategies created short-term sales boosts, they
compromised long-term profitability and customer loyalty.

The effectiveness of CC’s marketing strategy was also impacted by external competition and internal strategic
decisions. The rise of online-only retailers (2010–2015) intensified competition, forcing CC to adopt aggressive
promotions and price cuts, reducing profit margins. Additionally, high inventory levels (2017–2019) suggest poor
demand forecasting, leading to excess stock and increased costs. The appointment of Sulwar Singh in 2016
introduced viral marketing campaigns, but by 2020, the board lost confidence, indicating that branding efforts
failed to recover CC’s reputation. Thus, CC’s strategic choices were reactive rather than proactive, limiting long-
term sustainability.

An alternative marketing approach could have involved retaining core customers while gradually expanding into
fast fashion. Instead of fully shifting to a younger demographic, CC could have maintained a premium product line
for its original audience while introducing a sub-brand for younger consumers. Additionally, focusing on
sustainable fashion initiatives rather than cost-cutting could have strengthened brand value and improved
profitability.

In conclusion, CC’s marketing strategy was partially effective in increasing digital reach and responding to fast
fashion trends, but it failed to maintain brand loyalty and long-term profitability. The shift in target audience,
quality control issues, and aggressive pricing strategies led to financial decline. A balanced approach—combining
fast fashion with premium offerings—could have preserved brand identity while ensuring sustainable growth.

Q2: Advise CC on an operations strategy to enable its future survival and growth. [20]

An operations strategy is essential for improving efficiency, cost management, and product quality. Given CC’s
declining profitability and market position, its future operations strategy must focus on cost reduction, supply
chain improvements, and quality control to ensure survival and sustainable growth.

One critical area for improvement is quality management. Customer feedback from 2013 indicated dissatisfaction
with product durability, leading to brand erosion and declining sales. To restore consumer trust, CC should
implement Total Quality Management (TQM) and lean production techniques to reduce defects, improve
consistency, and enhance brand reputation. Additionally, benchmarking against leading competitors could help
CC identify industry best practices and ensure higher product standards. However, quality improvements must be
balanced with cost efficiency, as increased production expenses could further reduce profitability.

Another key priority is supply chain optimization. CC’s switch to local fast fashion manufacturers in 2012 enabled
quick response times but resulted in higher costs and excess inventory. Implementing Just-in-Time (JIT) inventory
management could help reduce stockholding costs and improve cash flow. Additionally, negotiating better
supplier contracts could ensure more consistent raw material quality at competitive prices. However, JIT relies on
stable demand forecasting, meaning CC must improve data analytics to accurately predict market trends. Thus,
while JIT can enhance efficiency, its success depends on effective market analysis and supplier reliability.

The success of CC’s operations strategy will depend on external factors such as competition, economic conditions,
and sustainability trends. The fast fashion industry faces growing pressure for ethical sourcing and environmental
responsibility, meaning CC must adapt its supply chain to incorporate sustainable materials and production
methods. Additionally, consumer preferences are shifting toward online shopping, requiring CC to invest in e-
commerce logistics and digital operations infrastructure. These factors highlight the need for a flexible and
adaptive operational model.
An alternative strategic approach could focus on rebuilding CC’s reputation through sustainable fashion initiatives.
By investing in eco-friendly materials, ethical sourcing, and transparent supply chains, CC could attract
environmentally conscious consumers and differentiate itself from competitors. Additionally, adopting modular
production techniques—allowing customization while maintaining efficiency—could create a unique market
position without excessive inventory risks.

In conclusion, CC’s future operations strategy must balance cost efficiency, quality improvement, and
sustainability to ensure long-term survival and growth. Implementing lean production, JIT inventory
management, and enhanced quality control will improve efficiency, while sustainable fashion initiatives could
enhance brand value. A combined approach will allow CC to recover profitability and compete effectively in a
rapidly evolving market.

NOVEMBER 2023/41
Q1: Evaluate PV’s marketing strategy between 2012 and 2021. [20]

A marketing strategy is essential for positioning a business, increasing brand awareness, and driving sales growth.
PV’s marketing approach evolved from targeting a niche market for rare old cars to sponsorship of a Formula 2
team. While some initiatives contributed to brand recognition and revenue growth, others failed to sustain long-
term success.

One notable success in PV’s marketing strategy was identifying a niche market in 2012. Moving from low-cost
used car sales to rare old car restoration allowed PV to build a strong brand identity. By 2014, featuring in a TV
show increased sales by 50%, demonstrating the effectiveness of product placement in reaching a global
audience. The contract to appear in a car restoration TV series (2015-2017) further boosted brand awareness and
demand, as PV’s logo and branding appeared in every episode. Additionally, PV leveraged this exposure to sell
branded merchandise online, creating an alternative revenue stream. However, the TV program ended in 2017,
leading to sales stagnation, highlighting that PV failed to maintain its momentum beyond the initial marketing
success.

Despite early success, PV’s shift to Formula 2 sponsorship (2018-2021) proved less effective. Sponsoring FAST, a
Formula 2 racing team, aimed to increase brand visibility among a male 45-60 demographic. However, league
performance declined in 2020-21 (falling to 7th place), and sponsorship costs increased from $2m to $4m per
year, making the strategy financially unsustainable. Unlike the TV program, which directly appealed to car
restoration enthusiasts, Formula 2 sponsorship failed to generate a direct impact on PV’s niche market, as racing
audiences may not necessarily be interested in classic car modifications. Thus, while sponsorship increased brand
visibility, it lacked direct conversion into higher sales, making it an ineffective long-term marketing strategy.

The effectiveness of PV’s marketing strategy was also influenced by external factors and internal decisions. The
rise of online automotive retailers meant that PV faced increased competition, requiring a more robust digital
marketing approach. However, PV reduced its marketing budget in 2016, despite expanding operations and
investing in specialist technology. Additionally, high gearing (75% in 2016) limited financial flexibility, restricting
PV’s ability to fund future promotional campaigns. These factors suggest that while PV’s early marketing efforts
were successful, the lack of continued strategic planning weakened its long-term impact.

An alternative marketing strategy could have focused on strengthening digital presence and expanding the niche
market appeal. Instead of investing in costly sponsorships, PV could have leveraged social media, influencer
collaborations, and targeted online ads to maintain engagement with car restoration enthusiasts. Additionally,
hosting classic car modification events or expanding into eco-friendly vehicle adaptations could have attracted a
broader yet relevant audience.

In conclusion, PV’s marketing strategy was initially effective in establishing brand identity through niche targeting
and TV exposure but failed to maintain long-term sales growth. The Formula 2 sponsorship proved costly with
limited impact on PV’s market, and budget cuts in 2016 reduced promotional effectiveness. A digital and niche-
focused marketing approach would have been more sustainable, ensuring continued customer engagement and
revenue stability.

Q2: Advise Jimmy on the extent to which external influences will impact on the success of PV’s future business
strategy. [20]

External influences play a crucial role in shaping business strategy, especially in an industry undergoing rapid
transformation. Jimmy’s vision of modifying rare old cars to run on electric power aligns with growing
sustainability trends, but success will depend on how well PV navigates external challenges such as government
policies, technological advancements, and market demand.

One significant external factor affecting PV’s future strategy is the global shift towards sustainable production.
Government policies are increasingly restricting petrol vehicle usage, with congestion charges and outright bans
in major cities. Additionally, venture capitalists are prioritizing investments in green technologies, giving PV an
opportunity to secure funding for electric vehicle (EV) modifications. However, charging infrastructure remains
underdeveloped, making it difficult for consumers to fully transition to electric vehicles. Thus, while regulatory
trends support PV’s business model, infrastructure limitations could slow adoption.

Another critical external influence is technological advancements in battery efficiency. Improvements in EV

battery life and cost reduction are making electric cars more attractive. This trend aligns well with PV’s plan to
convert old cars to electric power, offering a unique blend of nostalgia and modern technology. However, large
car manufacturers are heavily investing in EV R&D, which could lead to direct competition in vehicle conversion
services. Additionally, if major automakers introduce mass-produced, affordable EV models, demand for retrofit
modifications may decline. Thus, PV must ensure that its offering remains differentiated and targets a niche
market that values classic car aesthetics with modern efficiency.

The success of PV’s new strategy will also depend on economic and consumer trends. Disposable incomes are
rising fastest in the 18–30 age range, which represents a potential new customer segment for sustainable vehicle
modifications. Younger consumers are more environmentally conscious and may be willing to invest in classic EV
conversions. However, modifying old cars for electric use could be expensive, potentially making PV’s services
unaffordable for this demographic. Additionally, economic downturns or increased interest rates could reduce
discretionary spending, making it difficult to sustain demand for high-end modifications. Therefore, while
consumer preferences align with PV’s strategy, affordability concerns may limit market size.

An alternative strategic approach could involve collaborating with automakers or battery technology firms to
secure cost-efficient battery supply and ensure PV’s modifications remain competitively priced. Additionally,
expanding into hybrid vehicle conversions rather than full EV conversions could appeal to consumers who are not
yet ready for full electrification. This gradual transition approach would allow PV to cater to a broader market
while mitigating risks associated with full dependence on EV conversions.

In conclusion, external influences will significantly impact PV’s future success, particularly in terms of regulatory
trends, technological advancements, and economic conditions. While growing sustainability trends and rising
disposable incomes support PV’s shift toward electric vehicle modifications, charging infrastructure limitations,
competition from automakers, and affordability concerns may pose challenges. A strategic approach
incorporating partnerships and hybrid conversion options could enhance PV’s market position, ensuring long-
term viability in the evolving automotive industry.

NOVEMBER 2023/42
Q1: Evaluate the impact of FL’s corporate culture on the success of the business between 2015 and 2022. [20]

A corporate culture defines the values, behaviors, and decision-making approaches within a business. FL’s culture,
shaped by intrapreneurial leadership, remote working, and digital innovation, contributed significantly to its rapid
growth but also created challenges that impacted its long-term success.

One major success of FL’s corporate culture was its emphasis on innovation and intrapreneurship. Jane recruited
employees from global tech firms, fostering a creative and adaptive work environment. This culture enabled FL to
develop a unique subscription-based business model, leading to a growth in subscription revenue from $2m in
2017 to $200m by 2020. Additionally, FL’s market share increased from 0.2% to 4%, demonstrating the
effectiveness of its dynamic and technology-driven culture. However, scaling from 12 employees in 2017 to 240 in
2020 may have diluted this culture, making it difficult to maintain the same level of innovation and cohesion as
the company expanded. Thus, while FL’s corporate culture supported rapid growth, its long-term sustainability
was uncertain due to workforce expansion challenges.

Despite initial success, FL’s corporate culture faced challenges following the takeover of GY in 2021. GY operated
factories in low-cost countries, and FL’s weak management control of HR strategy in factories led to unethical
working conditions, resulting in negative media coverage in 2022. This created a reputation risk that contradicted
FL’s dynamic and empowering culture. Additionally, the high gearing ratio from the acquisition limited FL’s ability
to address these concerns effectively. Thus, while FL’s culture enabled expansion into manufacturing, the failure
to integrate ethical business practices exposed weaknesses in corporate governance.
The impact of FL’s corporate culture was also influenced by external and internal factors. The rise of competitors
in the subscription-based fashion market (0 in 2017 to 5 in 2020) meant that FL had to continuously innovate to
maintain its competitive edge. Additionally, FL’s strong brand identity was an advantage, but bad publicity
regarding labor practices could erode consumer trust. Internally, remote working may have limited effective
communication and oversight, making it difficult for FL’s leadership to manage operational and ethical challenges
efficiently. These factors suggest that while FL’s culture promoted growth, its lack of structured HR and
governance mechanisms created vulnerabilities.

An alternative approach could have been a balanced corporate culture that combined innovation with structured
governance. FL could have implemented stronger oversight on HR practices at GY factories, ensuring ethical
compliance while maintaining operational efficiency. Additionally, hybrid working arrangements (combining
remote and in-office work) could have improved leadership coordination, maintaining both employee autonomy
and management control.

In conclusion, FL’s corporate culture was instrumental in its early success, driving innovation, market expansion,
and revenue growth. However, challenges such as poor HR oversight, reputation risks, and difficulty managing
rapid scaling hindered long-term stability. A more structured and ethically governed corporate culture would have
ensured sustainable growth while preserving FL’s brand integrity.

Q2: Advise Jane on whether blue ocean strategy is the most useful approach as she attempts to diversify the
business. [20]

A blue ocean strategy involves creating uncontested market space by combining differentiation with cost
leadership. Given FL’s market saturation in subscription-based fashion, diversification is necessary, but whether
blue ocean strategy is the best approach depends on industry conditions, financial constraints, and market
opportunities.

One key advantage of using a blue ocean strategy is that it allows FL to develop a unique market position,
reducing direct competition. FL’s strong brand identity and intrapreneurial team could help it pioneer a new
product category, differentiating itself from competitors. Additionally, FL’s existing AI-driven subscription model
demonstrates its capability to innovate, making blue ocean strategies viable for expansion into tech-driven
fashion solutions. However, blue ocean strategies require substantial investment in R&D and market creation, and
FL’s high gearing ratio from the GY takeover may limit financial flexibility. Thus, while blue ocean strategy could
offer differentiation, FL must assess its financial capability before pursuing high-risk innovation.

Another limitation of relying solely on blue ocean strategy is that it does not guarantee immediate profitability.
Given the rise in competitors in the fashion subscription market (0 in 2017 to 5 in 2020), FL may need to prioritize
strengthening its core business before venturing into untested markets. Additionally, bad publicity from the GY
factory issue could weaken consumer trust, making it difficult for FL to launch a completely new product
successfully. Thus, FL may need to stabilize its brand reputation before attempting blue ocean expansion.

The effectiveness of blue ocean strategy depends on external and internal factors. Externally, the fast-changing
fashion industry and digital retail growth provide opportunities for innovation, but FL must consider whether
consumers are ready for an entirely new market offering. Internally, FL’s expertise in technology and digital retail
aligns with blue ocean principles, but its weak HR management at GY may indicate challenges in managing new
ventures. These factors suggest that while blue ocean strategy has potential, it may not be the most practical
immediate approach for FL.

An alternative approach could be gradual market expansion through Ansoff’s market development or product
diversification strategies. Instead of entering a completely new market, FL could leverage its AI technology to
introduce new personalized clothing categories or expand its reach through third-party retailers. Additionally,
focusing on ethical manufacturing and sustainability could help FL differentiate itself without requiring a radical
shift in business strategy.

In conclusion, blue ocean strategy could provide long-term growth for FL, but it may not be the most suitable
immediate approach given financial constraints and operational challenges. A more practical strategy would
involve gradual diversification into complementary markets while strengthening FL’s core business and addressing
reputation risks. Combining innovation with structured expansion would ensure sustainable growth and reduced
market uncertainty.

NOVEMBER 2023/43
Q1: Evaluate the extent to which RT’s operations strategy has supported the success of the business from 2015
to 2023. [20]

An operations strategy focuses on improving efficiency, cost management, and production capacity to drive
business success. RT’s strategy, which included lean production, vertical integration, and capacity expansion,
contributed to growth and cost savings but also created financial and operational risks.

One major success of RT’s operations strategy was the implementation of lean production techniques between
2016 and 2018. By adopting just-in-time (JIT) inventory management and waste reduction methods, RT increased
efficiency and lowered costs, resulting in higher profit margins. The introduction of Critical Path Analysis (CPA) for
factory expansion in 2021 ensured smooth project execution while minimizing delays and cost overruns.
However, lean production also increased supply chain vulnerability, as seen in supply interruptions due to late
cotton deliveries, highlighting the risks of relying on minimal inventory levels. Thus, while lean production
improved efficiency, it exposed RT to supply chain disruptions that could impact long-term stability.

Another key element of RT’s operations strategy was vertical integration through the acquisition of cotton farms
in 2019 and CF in 2022. This move secured RT’s supply chain, reducing dependence on external suppliers and
ensuring raw material availability. Additionally, the takeover made RT one of Brazil’s top five fabric producers,
strengthening its market position. However, managing both farming and textile production introduced new
operational complexities, as farm management requires different expertise than factory operations. Furthermore,
the 2022 CF takeover led to a significant increase in gearing from 60% to 90%, raising financial risks due to high
debt obligations. Thus, while vertical integration secured supply stability, it also increased RT’s financial leverage
and operational complexity.
RT’s success was also influenced by external market conditions and internal financial decisions. The rising demand
for Brazilian fabric exports created new market opportunities, but RT’s focus on domestic supply may have limited
international expansion prospects. Additionally, despite increasing capacity by 66% in 2021, RT’s return on capital
employed (ROCE) fell from 26% in 2021 to 9% in 2023, suggesting that investments have not yet generated
proportional financial returns. These factors indicate that while RT’s operations strategy improved production
efficiency, financial sustainability remains a concern.

An alternative approach could have involved gradual capacity expansion with a stronger focus on international
markets. Instead of rapid debt-financed acquisitions, RT could have formed strategic partnerships with
international buyers, reducing financial risks while expanding revenue streams. Additionally, a hybrid lean
production model that combines JIT with buffer inventory could have mitigated supply chain disruptions.

In conclusion, RT’s operations strategy contributed to efficiency, cost savings, and supply chain security, but also
introduced financial risks and operational complexities. While lean production and vertical integration
strengthened RT’s market position, challenges such as supply disruptions, high gearing, and unproven return on
investments raise concerns. A more balanced strategy with controlled expansion and diversified market reach
would enhance long-term success.

Q2: Advise Carlos on which approaches RT should use to develop a business strategy to achieve ‘profit through
diversification’. [20]

A business diversification strategy aims to expand product lines, enter new markets, and reduce reliance on a
single revenue source. Given RT’s strong domestic presence but limited global reach, Carlos must adopt a
structured approach to diversification while managing financial constraints.

One key approach is Ansoff’s Matrix, which categorizes diversification options into market penetration, market
development, product development, and diversification. RT could use market development by exporting fabric
internationally, capitalizing on Brazil’s increasing global competitiveness. Additionally, product diversification into
soya bean production could leverage RT’s existing farming operations, creating a new revenue stream with
minimal additional capital investment. However, entering the soya bean market requires expertise and
infrastructure, which RT currently lacks. Thus, while Ansoff’s Matrix provides structured growth pathways, RT
must assess feasibility before expanding into unrelated markets.

Another useful approach is PEST analysis, which helps evaluate political, economic, social, and technological
factors affecting diversification. Given Brazil’s growing textile exports, a PEST analysis could highlight key
international trade opportunities and regulatory challenges. However, PEST does not provide direct strategic
guidance, meaning Carlos must complement it with other decision-making tools. Thus, while PEST analysis is
useful for external assessment, it should be combined with a structured strategy like Ansoff’s Matrix for
actionable diversification planning.

The success of RT’s diversification strategy depends on external market conditions and internal financial capacity.
Gearing has risen from 60% to 90%, meaning that further expansion may strain RT’s finances unless supported by
external investment or strategic partnerships. Additionally, profitability has declined (ROCE fell from 26% to 9%),
suggesting that RT should prioritize optimizing current operations before aggressively diversifying. These factors
indicate that while diversification is necessary, financial constraints must be carefully managed.

An alternative approach could involve strategic joint ventures instead of full-scale diversification. RT could partner
with an established global distributor to expand exports while minimizing risk. Additionally, investing in premium
fabric innovations rather than entering unrelated markets could enhance RT’s profitability within its core industry.

In conclusion, Carlos should use Ansoff’s Matrix to structure RT’s diversification strategy and PEST analysis to
evaluate external market conditions. While diversification into international markets or soya production presents
growth potential, financial constraints require a cautious approach. A combination of gradual expansion, joint
ventures, and product innovation would ensure profitable diversification while minimizing risk.

JUNE 2023/41
Q1: Evaluate whether LH made the correct strategic decision to take over PS. [20]

A strategic takeover aims to expand business operations, gain market share, and achieve synergies. LH’s
acquisition of PS in 2018 was intended to enhance international brand recognition and expand into luxury
markets. However, the financial strain, operational inefficiencies, and reputational risks suggest that the decision
may not have been fully beneficial.

One key advantage of the takeover was PS’s established international brand awareness, which allowed LH to
expand beyond national corporate customers. By retaining the PS brand name internationally (2018-2021), LH
ensured a strong market presence in luxury gift retailing. Additionally, PS’s short trade receivables period (15
days) improved cash flow efficiency compared to LH’s prior 50-day receivables period. However, by 2021, LH
discontinued the PS brand, indicating that the expected branding benefits were not sustained. Thus, while the
acquisition initially strengthened market reach, LH failed to leverage PS’s brand effectively for long-term growth.

Despite initial benefits, the takeover created significant financial burdens. Gearing increased from 10% in 2017 to
85% in 2020, indicating high reliance on debt financing. Additionally, operating profit margin declined from 32%
(2017) to 11% (2020), suggesting inefficiencies and rising costs post-acquisition. A decline in dividend per share
(DPS) from $5 in 2017 to $0.5 in 2020 further indicates shareholder dissatisfaction. These financial challenges
suggest that while LH gained international exposure, the takeover significantly weakened financial stability.

The success of LH’s takeover was also influenced by external market conditions and internal operational
challenges. PS’s weak online expertise was a critical drawback, as the luxury retail market increasingly shifted to
e-commerce. Furthermore, PS’s inefficient inventory control conflicted with LH’s efficient stock management,
likely contributing to the drop in acid test ratio from 0.7:1 in 2017 to 0.2:1 in 2020, indicating liquidity constraints.
Additionally, by 2022, LH faced increasing negative customer reviews due to delivery delays, incorrect orders, and
poor customer service, suggesting that post-takeover operational integration was ineffective. These factors
indicate that the acquisition lacked proper strategic alignment, leading to operational inefficiencies and
reputational risks.
An alternative approach could have involved a phased integration strategy rather than a complete takeover.
Instead of fully merging operations by 2021, LH could have retained PS as a semi-independent subsidiary,
leveraging its brand value while gradually aligning operational practices. Additionally, investing in PS’s online
capabilities rather than focusing on brand consolidation could have helped maintain a competitive edge in luxury
e-commerce.

In conclusion, while the takeover of PS expanded LH’s international reach, financial strain, operational challenges,
and brand dilution indicate that it may not have been the best strategic decision. A more gradual integration
approach with better operational alignment and digital investment could have ensured long-term success without
compromising financial stability.

Q2: Advise Sanjay on an operations strategy for LH to overcome the problems it is experiencing. [20]

An operations strategy focuses on improving efficiency, customer satisfaction, and risk management. Given LH’s
outdated IT systems, quality control issues, and reputational damage, Sanjay must develop a comprehensive
strategy that prioritizes technological upgrades, supply chain improvements, and customer service
enhancements.

One critical priority is IT infrastructure modernization to enhance data security and operational efficiency. The
2023 cyber-attack corrupted 75% of LH’s IT systems, leading to customer data loss, canceled orders, and
reputational damage. Implementing cloud-based data storage and cybersecurity upgrades would ensure better
data protection and recovery systems. Additionally, integrating Enterprise Resource Planning (ERP) software could
improve supplier data management, order tracking, and customer communication. However, ERP implementation
requires significant investment, and LH’s current financial constraints (low acid test ratio and high gearing) may
limit funding availability. Thus, while IT upgrades are essential, cost management is crucial for successful
implementation.

Another key area for improvement is supply chain optimization to enhance product quality and delivery reliability.
Negative customer reviews in 2022 cited incorrect orders and delivery delays, indicating inventory
mismanagement and logistical inefficiencies. Implementing Total Quality Management (TQM) and Just-in-Time
(JIT) inventory systems could ensure higher accuracy in order fulfillment and reduce stockholding costs.
Additionally, diversifying supplier partnerships would minimize risks of incomplete supplier data issues caused by
the cyber-attack. However, JIT systems require highly reliable suppliers, and any further disruptions in supply
chain operations could worsen delays. Thus, while supply chain improvements would enhance customer
satisfaction, supplier reliability must be ensured.

The success of LH’s new operations strategy will depend on external market conditions and internal financial
capacity. The luxury food gift industry relies heavily on customer trust and high service quality, meaning that
restoring brand reputation is crucial for LH’s recovery. Additionally, LH’s high gearing (85%) limits its ability to raise
further capital, suggesting that cost-effective solutions must be prioritized. Internally, Sanjay must ensure
employee buy-in for operational changes, as resistance to new technologies or procedural adjustments could
slow down efficiency improvements. These factors indicate that while IT upgrades and supply chain
improvements are essential, financial feasibility and employee adaptation must be carefully managed.

An alternative approach could involve outsourcing customer service and IT support to specialized firms rather
than developing in-house solutions. This would allow LH to rapidly improve service quality and data security
without requiring large upfront capital investments. Additionally, enhancing online self-service options for
customers could reduce dependence on call center support, lowering operational costs while improving response
times.

In conclusion, LH’s operations strategy must focus on IT security enhancements, supply chain optimization, and
customer service improvements. Upgrading ERP systems, implementing TQM, and ensuring reliable supplier
partnerships would enhance efficiency and restore customer trust. However, given financial constraints, a cost-
effective phased implementation strategy with selective outsourcing may be the most feasible approach for long-
term operational stability.

JUNE 2023/42
Q1: Evaluate the extent to which leadership contributed to BV’s effective strategic management between 2009
and 2022. [20]

Strategic leadership plays a crucial role in guiding business growth, ensuring adaptability, and making key strategic
decisions. BV’s leadership, particularly under Rohit, contributed significantly to business expansion, brand
positioning, and financial sustainability. However, challenges such as external market disruptions and the
transition to a public company created difficulties in maintaining control and consistency.

One major success of BV’s leadership was Rohit’s vision and strategic direction. As the founder and Managing
Director, Rohit set a long-term aim to transform BV into a national brand in every US city, providing a clear
strategic focus. His entrepreneurial approach allowed BV to expand rapidly, from a single restaurant in 2009 to
over 100 owned restaurants and 50 franchises by 2022. Additionally, Rohit’s decision to sell 45% of BV to a
venture capitalist in 2011 provided $1m in funding, fueling expansion. However, selling 90% of shares in 2015 to
the public reduced Rohit’s ownership to just 5%, limiting his influence on strategic decisions. Thus, while Rohit’s
leadership was critical in the early years, the shift to public ownership may have diluted strategic control.

Another key factor in BV’s success was its ability to adapt to external challenges through strong leadership
decisions. During the 2020-2021 global pandemic, most BV restaurants were forced to close, yet Rohit decided to
continue paying employees, reinforcing BV’s ethical corporate identity. Additionally, the introduction of a joint
venture with a delivery business enabled BV to enter the takeaway market, ensuring business continuity despite
operational restrictions. However, the pandemic also resulted in BV’s first recorded loss, highlighting that while
leadership decisions prioritized employee welfare, financial sustainability remained a challenge. Thus, while
Rohit’s leadership ensured brand loyalty and business survival, financial risks increased due to high operating
costs during the crisis.
BV’s leadership effectiveness was also influenced by internal organizational changes and external competition.
The 2016 shift to a new organizational structure introduced hierarchy and department specialization, allowing
better decision-making in finance, supply chain, and marketing. However, as BV transitioned into a franchise
model, franchisees required independent leadership skills, making centralized leadership less influential.
Furthermore, competition in the vegan food industry increased, requiring continuous innovation. These factors
suggest that while leadership was instrumental in BV’s early success, its impact became less direct as the business
expanded.

An alternative leadership approach could have involved maintaining a larger ownership stake and implementing a
structured leadership succession plan. Instead of selling 90% of shares in 2015, Rohit could have retained a
controlling stake (e.g., 25%) to influence long-term strategy. Additionally, establishing regional leadership teams
could have ensured consistent brand management across franchises.

In conclusion, Rohit’s leadership was a driving force in BV’s strategic success, enabling rapid expansion, strong
ethical branding, and adaptive decision-making. However, the transition to public ownership, financial risks
during the pandemic, and franchise growth challenges weakened centralized leadership effectiveness. A balanced
approach, including ownership retention and structured leadership succession, could have sustained long-term
strategic control.

Q2: Advise the Board of Directors on a marketing strategy to use when BV enters the market in country X. [20]

A marketing strategy determines how a business positions itself, attracts customers, and differentiates its
offerings in a new market. BV’s planned expansion into country X presents opportunities for growth but also
challenges related to brand awareness, consumer preferences, and financial investment. The board must decide
between a pan-global marketing strategy (standardized approach) or adapting to local differences.

One key advantage of using a pan-global marketing strategy is that BV can leverage its existing brand identity and
operational success in the US. BV’s core competencies—strong ethical branding, high-quality products, and
customer service—align with global vegan trends. Additionally, standardized marketing allows BV to benefit from
economies of scale, reducing advertising and operational costs. However, brand awareness in country X is
currently only 5% compared to 60% in the US, meaning that customers may not recognize BV’s value proposition.
Furthermore, only 8% of the population in country X regularly consumes vegan food, compared to 12% in the US,
suggesting a smaller target market. Thus, while a pan-global strategy is cost-effective, limited brand awareness
may slow customer adoption.

Alternatively, BV could adopt a localized marketing strategy tailored to country X’s market preferences. Given that
the government is expected to support vegan food growth, BV could develop marketing campaigns aligned with
national health initiatives, increasing consumer engagement. Additionally, customizing the menu to local taste
preferences could attract a broader audience beyond existing vegan consumers. However, adapting to local
preferences increases operational complexity and costs, requiring new product development, market research,
and additional staff training. Thus, while a localized approach enhances market fit, it requires higher financial
investment and longer implementation time.
The effectiveness of BV’s marketing strategy will depend on external and internal factors. Economic growth in
country X is projected at 5% (higher than the US at 1.5%), suggesting a favorable environment for business
expansion. Additionally, low competition in the vegan food market provides BV with a first-mover advantage.
However, income levels in country X ($24,000) are lower than in the US ($32,000), meaning BV must carefully
position its pricing strategy to ensure affordability while maintaining premium quality. These factors suggest that
BV must balance standardization with localized adaptation to maximize market success.

An alternative approach could be a hybrid strategy combining elements of both pan-global and local adaptation.
BV could retain its global brand identity while customizing its menu and promotional campaigns to suit local
preferences. Additionally, forming a joint venture with a local partner could help reduce market entry risks and
improve local consumer trust.

In conclusion, a purely pan-global approach may be cost-effective but would struggle due to low brand awareness
and cultural differences. Meanwhile, a fully localized strategy increases costs and complexity. A hybrid
approach—maintaining BV’s core branding while adapting product offerings and marketing messages to country
X’s preferences—would ensure both cost efficiency and market appeal.

JUNE 2023/43
Q1: Evaluate RHR’s marketing strategy between 1995 and 2021. [20]

A marketing strategy plays a crucial role in a company’s ability to expand its customer base, maintain brand
consistency, and increase market share. RHR’s marketing strategy, based on pan-global branding, digital
platforms, and collaboration with a global travel agent, contributed to its international growth but also posed
strategic challenges.

One key success of RHR’s marketing strategy was its pan-global approach, which helped establish a consistent
luxury brand image across multiple countries. By collaborating with a global travel agent in 1995, RHR gained
access to wider distribution networks, increasing its market share and customer reach. Additionally, the
centralized marketing budget allowed for brand consistency and high-quality promotional campaigns,
strengthening RHR’s reputation. However, pan-global strategies can overlook local market preferences, potentially
limiting customer engagement in culturally diverse regions. Thus, while RHR’s standardized marketing approach
improved brand recognition, it may not have fully adapted to regional customer preferences.

Another major development was RHR’s investment in digital marketing and customer engagement tools. The
launch of RHR’s website in 2009-2010 allowed customers to book directly online and leave reviews, reducing
reliance on third-party travel agents. Additionally, the introduction of the RHR app in 2012 enabled direct
customer interaction, loyalty programs, and additional service purchases. These innovations enhanced customer
experience and strengthened brand loyalty. However, no investment in new locations between 2012-2014
suggests that digital growth was not fully utilized to drive physical expansion, potentially slowing revenue growth.
Thus, while RHR successfully leveraged digital platforms, the lack of investment in new markets may have
restricted expansion opportunities.
The effectiveness of RHR’s marketing strategy was also influenced by external economic conditions and internal
strategic decisions. The 2009-2010 global recession significantly reduced sales, indicating high sensitivity to
economic downturns. Additionally, in 2021, RHR ended its collaboration with the global travel agent, opting for
direct selling and promotion. While this provided greater control over branding and pricing, it also meant losing a
key distribution channel, potentially increasing marketing costs and customer acquisition challenges. These
factors highlight that while RHR’s marketing strategy facilitated growth, economic downturns and changing
partnerships created uncertainties.

An alternative approach could have involved a hybrid marketing model, combining pan-global branding with
localized marketing efforts. RHR could have customized promotional strategies in key growth markets (e.g., Asia)
to better align with regional preferences. Additionally, instead of fully discontinuing the travel agent partnership
in 2021, RHR could have maintained selective collaborations while expanding direct-selling efforts.

In conclusion, RHR’s marketing strategy effectively built a strong luxury brand and facilitated international
expansion through pan-global branding and digital platforms. However, over-reliance on a standardized marketing
approach, economic downturns, and strategic shifts in partnerships posed challenges. A balanced strategy—
combining global branding with localized market adaptation—could have ensured sustained growth and
resilience against market fluctuations.

Q2: Advise Carmen on whether the use of a core competence framework is sufficient to develop a successful
new business strategy for RHR. [20]

A core competence framework focuses on identifying a company’s unique strengths to guide business strategy.
Carmen believes that RHR’s strong leadership, customer loyalty, and service excellence are sufficient to expand
into business hotels, but additional strategic approaches may be necessary for success.

One key advantage of using a core competence framework is that it allows RHR to leverage its existing strengths
in hospitality and customer experience. RHR’s high levels of customer loyalty indicate a strong brand reputation,
which could attract business travelers looking for premium service. Additionally, RHR’s expertise in delivering
high-quality customer experiences aligns well with the expectations of business travelers who prioritize efficiency
and comfort. However, core competencies alone do not guarantee market success. Entering the business hotel
industry requires a deep understanding of corporate client needs, pricing strategies, and competitive positioning,
which may not be fully addressed through core competencies alone. Thus, while core competencies provide a
foundation, they do not cover all necessary market factors for a successful transition.

Another limitation of relying solely on core competencies is that it does not assess external market conditions or
competitive dynamics. The business hotel industry operates differently from the luxury holiday sector, requiring
different pricing models, operational efficiency, and corporate partnerships. A PEST analysis could help RHR
evaluate political, economic, social, and technological factors influencing the business travel market, ensuring a
data-driven expansion strategy. Additionally, Porter’s Five Forces analysis could identify competitive pressures and
potential barriers to entry, helping RHR develop a strong differentiation strategy. Thus, while core competencies
highlight internal strengths, additional analytical tools are required for a well-rounded strategy.
The success of RHR’s new business strategy will also depend on external financial conditions and internal
adaptability. Given that RHR used external financing in 2021 to buy back its 49% stake, financial resources may be
limited for new expansion efforts. Additionally, shifting from holiday tourism to business hotels requires
operational adjustments, such as location selection, technology integration, and service customization for
business clients. These factors indicate that while core competencies provide a strategic starting point, external
financial and market considerations must also be factored into the decision.

An alternative approach could involve a phased expansion strategy, where RHR initially tests business hotels in
select locations rather than committing to full-scale expansion. Additionally, conducting detailed market research
and pilot projects could help identify specific business traveler needs, allowing RHR to refine its service offerings
before widespread rollout.

In conclusion, while the core competence framework highlights RHR’s strengths in leadership, customer loyalty,
and service excellence, it is not sufficient on its own to develop a successful business strategy. Expanding into
business hotels requires external market analysis, competitive assessment, and financial feasibility studies. A
combined approach—leveraging core competencies alongside PEST analysis, Porter’s Five Forces, and a phased
expansion plan—would ensure a well-informed and strategically sound market entry.

MARCH 2023/42
Q1: Evaluate the success of S2U’s marketing strategy between 2016 and 2022. [20]

A marketing strategy aims to increase brand awareness, attract customers, and drive revenue growth. S2U’s
strategy, based on dynamic pricing, digital promotion, and direct selling, contributed to significant expansion but
also created profitability and customer satisfaction challenges.

One key success of S2U’s marketing strategy was its effective use of promotional tools. The 2018 partnership with
Kareem, a TV personality, significantly increased brand recognition and trust, allowing S2U to reach a larger
audience. This contributed to market share growth from 5% in 2018 to 28% in 2021, demonstrating the impact of
targeted promotion. Additionally, sales revenue surged from $11m to $100m, suggesting that the strategy
successfully captured new customers. However, Kareem’s departure in 2022 weakened S2U’s promotional
effectiveness, leading to slowing sales growth. Thus, while S2U’s marketing approach initially drove expansion, its
heavy reliance on Kareem made it unsustainable in the long term.

Another strength of S2U’s strategy was its use of dynamic pricing to attract cost-sensitive businesses. Given that
57% of businesses lacked IT support, adjusting prices based on demand allowed S2U to compete effectively in a
price-sensitive market. However, profit margins declined from 6% in 2018 to just 2% in 2021, indicating that while
revenue increased, profitability suffered. The focus on aggressive expansion through lower prices may have
reduced S2U’s ability to reinvest in service improvements, leading to long-term sustainability concerns. Thus,
while dynamic pricing helped increase customer acquisition, it negatively impacted financial health.

The effectiveness of S2U’s marketing strategy was also influenced by external market conditions and internal
operational challenges. The IT support industry has low entry barriers, making price competition intense.
Additionally, customer satisfaction declined from 98% in 2018 to 72% in 2021, possibly due to service quality
issues arising from rapid expansion. This suggests that S2U’s marketing strategy focused on growth at the expense
of customer retention, potentially harming long-term brand loyalty. These factors indicate that while S2U’s
marketing strategy succeeded in capturing market share, its failure to maintain quality and profitability created
future risks.

An alternative approach could have been a balanced growth strategy, focusing on customer experience alongside
market expansion. Instead of relying heavily on Kareem’s TV promotion, S2U could have invested in content
marketing, targeted online ads, and partnerships with industry influencers. Additionally, gradual price
adjustments rather than aggressive discounting could have maintained profit margins while still appealing to cost-
conscious businesses.

In conclusion, S2U’s marketing strategy effectively increased market share and brand awareness but failed to
sustain long-term profitability and customer satisfaction. While dynamic pricing and TV promotion drove initial
success, over-reliance on Kareem and declining service quality weakened sustainability. A more balanced
strategy—combining brand-building with operational improvements—could have ensured sustained growth and
customer loyalty.

Q2: Advise Ruhi on whether Porter’s five forces analysis is the most useful approach when developing S2U’s
new business strategy. [20]

A business strategy must consider market conditions, competitive positioning, and internal capabilities. Porter’s
Five Forces provides a framework for assessing competitive pressures, but whether it is the best tool for S2U’s
strategic planning depends on its ability to address key business challenges.

One advantage of using Porter’s Five Forces is that it helps analyze competitive intensity and industry profitability.
S2U operates in a market with low barriers to entry, meaning that new competitors can emerge easily.
Additionally, buyers have high bargaining power and are price-sensitive, suggesting that S2U must differentiate
itself through service quality or pricing strategies. By assessing these factors, Porter’s model can help S2U refine
its competitive approach. However, Porter’s Five Forces does not provide specific strategic recommendations,
meaning that S2U would still need additional tools to develop actionable business plans. Thus, while Porter’s
model helps identify competitive pressures, it lacks prescriptive guidance for decision-making.

Another limitation of relying solely on Porter’s Five Forces is that it focuses only on external factors and ignores
internal capabilities. S2U’s recent decline in profit margins and customer satisfaction suggests that internal
operational issues may be as important as external competition. A SWOT analysis could provide a more holistic
view by identifying S2U’s strengths (e.g., brand recognition), weaknesses (e.g., over-reliance on Kareem),
opportunities (e.g., expansion into new markets), and threats (e.g., intense price competition). Additionally, a
PEST analysis could help assess regulatory and technological trends in the IT support industry, ensuring that S2U
adapts to broader market changes. Thus, while Porter’s model highlights external threats, it does not fully
address S2U’s internal weaknesses or opportunities.
The effectiveness of S2U’s strategy will depend on external market trends and financial conditions. Given that
profit margins declined from 6% to 2%, focusing purely on competitive rivalry (as Porter’s model suggests) may
not be sufficient. Instead, S2U must explore cost control strategies, service improvements, and revenue
diversification. Additionally, the departure of Kareem in 2022 reduces brand influence, requiring a stronger focus
on marketing and customer experience rather than just competitive forces. These factors suggest that while
Porter’s analysis is useful, additional tools are needed to create a well-rounded strategy.

An alternative approach could involve combining Porter’s Five Forces with Ansoff’s Matrix to explore growth
strategies such as market development (expanding internationally) or product diversification (offering
cybersecurity services). Additionally, using investment appraisal techniques could help S2U determine the
financial viability of new initiatives.

In conclusion, Porter’s Five Forces is useful for understanding competitive pressures but is insufficient on its own
to develop a complete business strategy. S2U must also assess internal capabilities (SWOT), external market
trends (PEST), and strategic growth options (Ansoff’s Matrix) to ensure a well-rounded and actionable strategy.