CS3 Strategic Case Study Exam 2021 - Practice Questions

Question 1 (Slide Company)

CORRECT TEXT

Six months have passed since you first heard of the possibility that Slide might relocate its

Head Office to the Middle East.

You have been called into William Seaton, the Director of Finance’s office:

“After lots of deliberation, the Board has reached a final decision on the Head Office move.

It has been decided that we will relocate to the Middle East.

I need you to draft a report on the following matters:

First of all, we need a strategy for the choice of country to which we are going to relocate. I need you to think about the strategic decisions that will have to be taken so that we obtain the best possible value from the relocation.

Secondly, we have to think about the change management issues with respect to Slide’s senior managers. We have a good team of senior managers and Board members and we wish to see them relocate with the company. I need your thoughts on this.

Thirdly, there will be significant change issues for the other staff members. We cannot justify moving all of them to the Middle East, but we will be relying on them to ensure an orderly transition from the current Head Office to the new one. They will be busy for several months, then most will be made redundant. The rest will be offered new jobs with Slide because we will need a scaled down administrative presence in Kayland. Again, I need your suggestions for this.

Finally, we need to put together a transition team to deal with the many administrative issues that the move will create. I need you to suggest a clear job description for the transition team that explains the main operational tasks required, so that the directors can be left free to focus on the strategic management.”

Answer is in the explanation below.

Question 2 (Slide Company)

CORRECT TEXT

It is now three days since the start of the oil spillage crisis.

You have received the following email from William Seaton, Director of Finance:

From: William Seaton, Director of Finance

To: Finance Manager

Subject: Crisis management issues

Hi,

A quick update on the latest developments.

We have brought Block Associates in to lead the operations on dealing with the oil spill. It has assigned one of its leading consultants to take charge of this for us. We have paid Block Associates an annual retainer for many years, but we have never actually had to call on its services because we have been able to contain any environmental problems using our own resources.

Using Block Associates is going to be expensive. It insists on being free to bring in whatever equipment and personnel are required to resolve matters and to charge that on the basis of cost plus 25%. Our annual retainer is simply the cost of ensuring that it will respond on this basis if required.

We have had some murmurings of discontent already because our own engineers and geologists have made significant progress in identifying the cause of the spillage and they believe that they are capable of bringing it to a successful conclusion. They have suggested that it would be both quicker and cheaper to leave them in charge, while retaining the option to bring in Block Associates at a later date if they fail.

Firstly, what factors should we take into account in deciding whether to leave our own experts in charge of this operation rather than using Block Associates?

Secondly, how should we manage our relationship with Block Associates if we decide that it should be used?

Thirdly, two things: The Board is concerned that Slide’s engineers and geologists have already become disillusioned by the decision to consider calling in Block Associates. We cannot afford to lose their commitment or to see them decide to leave Slide in the longer term. I need you to provide me with some ideas as to how we can motivate them to give their best performance for the duration of this crisis AND to inspire them to remain in

Slide’s employment after the crisis has been resolved.

William

Answer is in the explanation below.

Question 3 (Norland Telegraph (NEW))

Hello

I have attached a news article

Arrfield does not set the price for aviation fuel sold at our airports, but we do receive a percentage of the revenues earned by the fuel companies.

I need your help to prepare for a Board meeting to discuss this matter Please write a paper covering the following

✑ Firstly, explain the impact that the criticisms voiced by the environmental campaigners will have on the frequent PESTEL analysis that Arrfield's Board conducts.

[sub-task (a) = 34%

✑ Secondly, evaluate the commercial logic of Arrfield's strategy of basing charges for non-aeronautical services (such as fuel sales and retail activities) on percentages of the revenues generated by the companies that operate at its airports

[sub-task (b) = 33%)

[sub-task (c) = 33%}

Thanks

Romuald Marek

Chief Finance Officer

Select an option, then click Submit answer.

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Thirdly, recommend with reasons whether Arrfield should attempt to justify strategic decisions to its shareholders when the commercial logic of those decisions is not immediately obvious

Reference / correct answer:

Thirdly, recommend with reasons whether Arrfield should attempt to justify strategic decisions to its shareholders when the commercial logic of those decisions is not immediately obvious

:

Requirement 1

The criticism from the environmental campaigns for sale of cheap fuel at the Arrfield airports is not a good sign but the prices of the fuel are not set by the Arrfield. In most of the countries the fuel prince are regulated through Oil and Gas regulatory authorities. As the Arrfield airports are providing the facilities to airlines to refill fuel at the airport which is necessary for the flying of the plane on commission bases, it contribute a significant portion of profit of the Arrfield.

The environmental campaigners criticism is on the usage use of fuel which cause carbon emissions. The Govt, of the Norland may set the price of the fuel in Norland and regulate the prices of the fuel in Norland. After the criticism Govt, of Norland may think to not allowing the fuel companies to pass the cheap fuel import to the airlines. This may be hostile of the Arrfiled business. Many airline may choose the Norland for the flight operation due to gaining advantage of cheaper fuel refill.

As the airlines are buying more fuel which makes the plane heavier and burn more fuel which harm to the environment is a great concern. This could lead to legal and environmental litigation and penalties. The reputation risk is also here if corrective actions are not taken by Arrfield.

Requirement 2

As the Airfield also rely heavily on the non-aeronautical revenues to make profits and the it increase from a substantial percentage in 2020 as to the preceding year. The fuel companies operate in Arrfied airports which is intrinsic in the airport business. It will be difficult for the Arrfield to provide the fuel by itself. It is worthwhile that the Arrfieid earning commission without involving the fuel operations.

As the Norland is being liked by the airlines for refueling its plane is good for the Arrfield to make profit. Arrfield earn commission as much as the airline buy fuel from fuel companies. But by decreasing the price of the fuel it is also worth mentioning that the Arrfield commission is also remains at lower side.

There are three elements in the scenario: 1- Higher sale higher commission. 2- Sale at lower price lower commission. 3-Reputational and environmental risk involved.

Requirement 3

The shareholders are major stakeholders of the company. They are key players have high amount of power and high level of interest. The Arrfield must communicate true affairs of the business to its shareholders. If the commercial logic of decision are not obvious then the poor understanding of the affairs may lead to chaos. The managers are representative of the shareholders and should do everything in the best interest of the shareholders. If they will make the decisions which are not logically understandable then, the shareholders may lose their trust in the management.

The shareholders must not be justified to the shareholder if they are not commercially valuable. Whether or not the decisions are profitable these may be communicated to shareholders which represent true picture of the decisions breach of CIMA ethical principles.

CS3 – Strategic Case Study Exam 2021