Bmgt 413:Strategic Management April 2010 Question Paper

Bmgt 413:Strategic Management April 2010

Institution: Kabarak University question papers

Exam Year:2010

KABARAK UNIVERSITY
UNIVERSITY EXAMINATIONS
2009/2010 ACADEMIC YEAR
FOR THE DEGREE OF BACHELOR OF
COMMERCE
COURSE CODE: BMGT 413

INSTRUCTIONS:
1. Answer question ONE and ANY OTHER TWO questions.

QUESTION 1
Read the case “The Burnside Division” and answer the questions that follow.
In late 2006, Mr. Jerome Woodlawn, general manager of Burnside Division, was busily involved
in a righteous evaluation of the Division performance over the past seven years. Burnside
Division produce plastic keys that are used on typewriters of other machines. Burnside Division
operate independent of worth manufacturing, Inc., a large diversified concern composed of more
than a dozen operating divisions manufacturing a wide variety of industrial and consumer
products.
The expansion of the plastics key market was very rapid at the late 1990’s. Previously, the
products were delicately constant items requiring many parts and much handicraft production
until seven years ago, a new process was developed by the worth Munufacturing research team.
The process replaced several parts with highly durable plastic innovation, permitting the hand
work to be automated processes.
The improved product was immediately successful because of the wide application and was both
dependable and inexpensive to manufacture. Almost simultaneously, some competing companies
working on the product developed a unit so similar in design, no patent possibilities existed.
Burnside division was established to compete so aggressively in the market for the keys, which
at that time was about 500,000 units per year, and to assume all production and selling functions
for the product.
The latest available industry estimates showed that about 10 companies utilized the improved the
improved-type plastic key and represented the market for Burnside and other manufacturers.
Estimated industry sales rose to 5 million units. As production and sales expended, prices fell
from nearly 50cent per unit to about 20cets. At the time, Burnside competed with 15 companies
and received nearly 15 cents of the available business, 4 others captured another 70%, and the
remaining sales went to smaller firms that made the product utilize idle capacity.
Worth manufacturing, part of a larger conglomerate, acted practically as an independent entity.
Worth executives served on the long range planning committee and worked with divisions like
Burnside, but all responsibility for operating Burnside rested with Mr. Woodlawn, subject to the
quarterly review and evaluation of the committee. However, any capital expenditure over

$40,000 had to be approved by Worth’s planning committee. At the last quarterly meeting the reviewing expressed their concern over apparently sluggish improvements in Burnside’s profit sales ratio. They contended that such a specialty item should yield above taxes profit of 20% of net sales. Furthermore, they suggested that Mr. Woodlawn pursue this percentage as a long run objective for his division and submit shortly a plan for accomplishing this goal within three years. Mr. Woodlawn, a diligent manager, proud of his division and well respected within Burnside, was upset not only because of the lack of recognition for increased profit-earned in the current period, but also by the new objectives, which he doubted were achievable. Immediately, he called his most responsible divisional executives, sales and production managers, research and development head, and controller, he disclosed the events that had taken place at the corporate meeting and indicated that he wanted the controller to take immediate action toward developing a plan for achieving 20% profit/sales ratio within three years without drastically changing present sales and production policies. In the meantime, Mr. Woodlawn, feeling harassed, stated that he intended to review the past performance of Burnside division in order to evaluate critically the profit improvement and to judge the reasonableness of the goal set by the planning committee. Income statements form the division records indicated that current assets amounted to about$ 30,000 and that the net
depreciated book value of the fixed assets was currently $40,000, which was about 50% or the
estimated original cost.
a) (i) Conduct a SWOT analysis for Burnside division. (12 marks)
(ii) What lessons do we learn from the case regarding strategic issues at level below the
corporate level? (8 marks)
b) (i) What are the strategic challenges facing Burnside Division? (5 marks)
(ii) How should its management go about addressing those challenges? (5 marks)

QUESTION 2
a) You just discovered your new employer has no vision nor mission statement for the
business. What would you do to popularize the same? (6 marks)
b) If you are charged with the responsibility of formulating the two statements for your
current employer, what process would you follow? (14 marks)

QUESTION 3
a) You are challenged by some very close competition in the environment and require some
internal capabilities to cope, illustrate how you would build the same. (10 marks)
b) For (a) above, how would you ensure sustainability for competitive
advantages? (10 marks)

QUESTION 4
a) Why is it necessary that strategy is internally consistent for its’ implementation to
be possible? (10 marks)
b) Briefly explain how ratios can be used as control measures in a company. (10 marks)

Bmgt 413:Strategic Management April 2010 Question Paper

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