Paper 1; Case study: Skandvig Terra PLC

Question 1

What is the vision statement of Skandvig Terra PLC (SVT) ?

Answer 1

“Making the world a safer place”,

Question 2

What is a vision statement?

Answer 2

A vision statement is a business document that describes an organization’s desired future state or goal. It inspires and motivates employees, stakeholders, and customers towards a common objective.

A company’s vision must align with its mission, strategic planning, culture, and core values. A vision statement is not only used in business, as nonprofits and government offices also use them to set strategic goals.

Vision statements are not necessarily unchangeable. They can be reviewed and revised as necessary, as companies adapt to their business environment. But the companies should try to draft a vision statement that lasts long without need to change. If they happen, any changes should be minimal.

A vision statement is a guideline for a company’s strategic plan.

Question 3

Compare vision statement and mission statement

Answer 3

A vision statement describes an organization’s desired future state or goal. It inspires and motivates employees, stakeholders, and customers towards a common objective.

A mission statement, on the other hand, is a statement that defines an organization’s purpose, what it is already doing or intends to achieve, may include particular steps. It serves as a guide for decision-making by setting priorities, goals and aims.

In short, a vision statement outlines the desired future of an organization, while a mission statement outlines its purpose and priorities.

Question 4

What is a monopoly?

Answer 4

A monopoly is a market structure in which a single firm is the sole producer and supplier of a good or service, and there are no close substitutes.

In a monopoly market, the monopolist has complete control over the price of the product and can restrict the quantity supplied, leading to high prices and reduced output compared to a competitive market.

Monopolies can arise due to various factors, including government regulation, network effects, and barriers to entry.

Question 5

How can a monopoly restrict quantities on the market and what can be the result?

Answer 5

The monopolist can do this by limiting the amount of production, slowing down the manufacturing process, reducing the investment in production facilities, or by not expanding its capacity. By restricting the quantity supplied, the monopolist can ensure that demand remains high and the price remains elevated. This results in reduced output compared to a competitive market, which can have negative effects on consumers, such as reduced access to the product or increased prices.

Question 6

What happens when a business expands its business by entering other sectors, to perform new activities and support their production?

Answer 6

Backwards vertical integration

Question 7

What is a vertical integration?

Answer 7

Vertical integration is a business strategy where a company expands its operations to control multiple stages of production and distribution of a product or service. This involves the acquisition or creation of additional business units that are involved in earlier or later stages of the production process, from raw materials to final distribution to the customer. The goal of vertical integration is to increase control over the supply chain, reduce costs, and improve the quality and coordination of the production process.

Question 8

What are the two types of vertical integration?

Answer 8

Forward integration, where a company expands into distribution or retail, and

backward integration, where a company expands into the production of raw materials or components.

Question 9

Disadvantage of vertical integration?

Answer 9

Vertical integration can also lead to: increased costs and
decreased flexibility,

as the company may become locked into a particular set of suppliers, customers, or production processes (e.g. because they may be under common ownership of a parent which requires them to ensure sales of each other)

Question 10

Advantage of vertical integration?

Answer 10

better control multiple stages of:
1. production and/or
2. distribution of a product or service.

Question 11

What is a horizontal integration?

Answer 11

Horizontal integration is a business strategy where a company expands its operations by acquiring or merging with other companies that operate at the same stage of the production process and serve the same customer segments. Horizontal integration can involve the acquisition of companies that produce the same products, provide similar services, or operate in the same geographic regions.

Question 12

What advantage is there from a horizontal integration?

Answer 12

The goal of horizontal integration is to increase market share, economies of scale, and bargaining power with suppliers and customers. By acquiring or merging with similar companies, a company can increase its market reach, reduce costs through the elimination of duplicated operations, and increase its ability to negotiate favorable terms with suppliers and customers.

Question 13

Disadvantage of a horizontal integration?

Answer 13

Horizontal integration can also result in :
1. Increased competition in the sector, as there may be now more investment and production
2. Even a monopoly, the company may face additional govenrmental regulations and will have decreased incentives to invest in research and development.

Question 14

Which type of integration has Skandvig Terra PLC (SVT) gone through?

Answer 14

Backwords vertical

Question 15

What is an organisational structure?

Answer 15

Organizational structure refers to the formal system of authority, communications, roles, and relationships that determine how resources, tasks, and decision-making responsibilities are assigned and coordinated within an organization. It provides the framework for how work is divided and how authority is exercised in the pursuit of organizational goals.

Question 16

What types of structure may a company have?

Answer 16

A Hierarchical structure, a pyramid-shaped (tall) structure that consists of multiple levels of management and subordinates, with clear lines of authority and communication.

A flat structure which has the opposite characteristics.

A tall or flat structure may be based on:

Function: A structure based on grouping similar activities or functions together, such as sales, marketing, or production.

Product: A structure based on grouping activities by product with each division operating as a separate entity within the organization, having own functions such as own production, sales etc (some functions may be still centralised)

Geography/region: A structure based on grouping activities by region with each division operating as a separate entity within the organization, having own functions such as own production, sales etc (some functions may be still centralised)

A flat structure may be also a:

Matrix/project structure: A combination of functional and divisional structures, where employees report to both functional managers and product managers. Teams may be built when there is a order and dissolved afterwards.

Question 17

What factors should be considered when making decision about the organisational structure ?

Answer 17

There is no best structure. The choice of organizational structure depends on the size, complexity, and goals of the organization, and can have significant effects on communication, collaboration, and performance.
Company which produces simple products may choose to have less focus on products and more focus on marketing. Having a function based structure would mean in this case having people of similar activities working together. They may feel more motivated, growing professionally. e.g.

Question 18

What type of structure does the company have?

Answer 18

Product-based

Question 19

Which leadership styles enable quick decision-making?

Answer 19

Autocratic: In this style, the leader makes decisions unilaterally and expects subordinates to follow without question. This style can be effective in crisis situations or when rapid decision-making is necessary.

Paternalistic leadership is a style in which the leader takes on a supportive and caring role, similar to that of a father figure, while also exerting authority and making decisions. The leader may make decisions that prioritize the needs of the individual over the needs of the organization. This can be effective in creating a motivated workforce.
However, this style can also lead to dependency and a lack of initiative among subordinates, as they may become overly reliant on the leader to make decisions for them. Staff can even try to manipulate and benefit from this relations.

Laissez-faire: In this style, the leader provides little direction and delegates responsibility to subordinates. This can be effective in empowering subordinates to make decisions quickly without seeking approval.

In situational style, the leader assesses the development level of the subordinates and adjusts their leadership style to match their level of competence and commitment. For example, the leader may adopt a directive style with subordinates who are new to a task and need clear direction, but adopt a supportive style with subordinates who are more experienced and need less direction.

Question 20

Where does the Fresh Water Division store the water?

Answer 20

The water is collected and stored in large manufactured reservoirs.

Question 21

Who is Yannick Pedersen? the director of the Fresh Water Division

Answer 21

the director of the Fresh Water Division

Question 22

How well did find Yannick Pedersen manage to find alternative sources of potable water?

Answer 22

He did it very quickly

Question 23

Which leadership style does Yannick have?

Answer 23

situational

Question 24

Who is Ariadne Johansen?

Answer 24

the director of the Engineering Division

Question 25

Which leadership style does Ariadne Johansen have?

Answer 25

Autocratic

Question 26

How successful is Ariadne’s leadership style ?

Answer 26

His division is one of the industry leaders in productivity per employee

Question 27

What type of authority do the heads of these divisions have?

Answer 27

Operational and tactical authority. these refer to different levels of decision-making and responsibility within an organization. Operational authority refers to the authority and responsibility to manage the day-to-day operations of the organization, including managing resources, executing processes, and delivering results. This level of authority typically resides with middle managers or operational leaders. Tactical authority refers to the authority and responsibility to make short to medium-term decisions and take actions to support the achievement of the organization's goals. This level of authority typically resides with front-line managers or supervisors who are responsible for implementing the operational plans and ensuring that work is carried out effectively. Allocation of authority between these levels will vary depending on the size, complexity, and goals of the organization. In some cases, operational and tactical authority may be combined into a single role, while in other cases, they may be separated into distinct positions. C

Question 28

What was caused by the climate change in the case study?

Answer 28

shortages of potable water in some countries

Question 29

What is the productivity per employee

Answer 29

Productivity per employee, also known as labor productivity, is a measure of the output of goods and services generated by an average worker in a specific time period. It is calculated by dividing the total output of an organization by the number of employees. It can provide insights into how effectively the organization is utilizing its resources. It's important to note that productivity per employee is just one of many measures of productivity and that organizations should consider a range of metrics to gain a comprehensive understanding of their performance. Additionally, factors such as technology, equipment, and processes can also impact productivity and should be considered when evaluating labor productivity.

Question 30

Limitation of productivity per employee measure?

Answer 30

Reliance on input measures: Productivity per employee is calculated based on the number of employees, which may not accurately reflect the input required to produce a given output. For example, the productivity of a worker using advanced technology may be higher than that of a worker using older technology, even though both workers are counted as one employee. Lack of differentiation: Productivity per employee does not differentiate between workers with different levels of experience, skill, or motivation, which can impact the accuracy of the measure. Does not reflect quality: The measure of productivity per employee is based on output, which may not accurately reflect the quality of the goods and services produced. A higher level of output does not necessarily indicate a higher level of quality. Ignores external factors: The measure of productivity per employee does not take into account external factors that may impact the efficiency and effectiveness of the workforce, such as the state of the economy, changes in laws and regulations, or advances in technology.

Question 31

The directors of which divisions had a clash and over what?

Answer 31

Heads of Fresh Water Division and Engineering Division over a machinery needed to update water treatment plants

Question 32

What priorities of Engineering Division are visible?

Answer 32

Seemingly - Lowering costs (having best productivity per employee rates in the industry)

Question 33

Internal vs external growth strategies

Answer 33

Internal and external growth strategies are two different approaches that organizations use to expand their business and increase their market share. Internal growth strategies focus on developing and utilizing the resources and capabilities of the organization to generate new opportunities for growth. This can include expanding existing product lines, improving processes, increasing marketing efforts, and investing in research and development. External growth strategies, on the other hand, focus on acquiring or merging with other organizations to expand the organization's reach and capabilities. This can include acquiring companies, entering into joint ventures, or pursuing mergers and acquisitions. Both internal and external growth strategies have their own benefits and risks. Internal growth strategies allow organizations to maintain control over their operations and processes, but they also require significant investments of time and resources. External growth strategies can provide organizations with access to new markets and resources, but they also come with the risk of cultural clashes and the potential for loss of control over operations. Organizations often pursue a combination of internal and external growth strategies in order to balance the benefits and risks of each approach. The choice of strategy will depend on the organization's goals, resources, and the market conditions.

Question 34

What type of company is the Geng PLC

Answer 34

A major water supplier in the United Kingdom (UK). It was acquired to complement the Fresh Water Division

Question 34

What type of growth is the acquisition of Geng PLC

Answer 34

External

Question 35

What are the two main activities of the Desalination Division providing 2 income streams?

Answer 35

1. Manufacturing and 2. operation of desalination plants

Question 36

What are two main products of the Desalination Division?

Answer 36

1. Large desalination plants 2. Small desalination plants for sea vessels

Question 37

What are the estimates for global water desalination market growth?

Answer 37

will double in the next 10 years

Question 38

How many states use desalination plants?

Answer 38

120

Question 39

In how many states does the Desalination Division operate?

Answer 39

19

Question 40

For which product of the Desalination Division is there 300% growth since 2015

Answer 40

Small plants for sea vessels

Question 41

Which are the old divisions?

Answer 41

Fresh Water Division Engineering Division

Question 42

Which divisions were forms as a result of external growth?

Answer 42

1. Desalination Division, 2. Consumer Products Division

Question 43

What was the employee turnover of H4’s factories in 2015/2016 after joining the company?

Answer 43

Labour turnover refers to the rate at which employees leave an organization and are replaced by new hires. It can be expressed as a percentage of total employees or as a numerical value. Here seemingly 25% High labour turnover can indicate a number of issues within an organization, such as low job satisfaction, poor working conditions, and lack of opportunities for career advancement. On the other hand, low labour turnover can indicate a positive work environment and strong employee engagement.

Question 44

Who are the customers of the Engineering Division?

Answer 44

The companies another division: Fresh Water Division and others, as they also produce turbines for electricity.

Question 45

What is a takeover?

Answer 45

A takeover refers to the acquisition of one company by another. This can occur through a merger, where two companies combine to form a single entity, or through the purchase of one company's shares by another company, resulting in the acquiring company gaining control of the target company. Takeovers can be friendly or hostile, depending on whether the target company's management and board of directors approve of the acquisition or not. Takeovers can bring a range of benefits, such as increased market share, economies of scale, and access to new technology or markets. However, they can also result in job losses, cultural clashes, and other challenges.

Question 46

What did the H4 produce?

Answer 46

steam and gas turbines

Question 47

what was the ownership form of the acquired H4?

Answer 47

Family-owned

Question 48

What mae be the features of a family-owned business?

Answer 48

Shared ownership and decision-making power among family members. Emphasis on family values and traditions. Sense of loyalty among employees. Long-term focus on preserving the business for future generations. Potential for conflicts between family members to arise. Limited access to outside capital and business expertise. A personalized and often less formal corporate culture.

Question 49

REasons of cultural clashes between H4 and the takeover?

Answer 49

● Different degrees of formality – H4 may be less formal ● Different languages ● Different leadership styles – H4s may have paternalistic, as a family-owned business ● Different orientations to tasks and to people – some organizations are task-oriented (our company)and others are relationship-oriented (H4). ● Different practices (working shifts, 7/7 days; 24 hours.)

Question 50

What other problems may arise due to cultural clashes besides high labour turnover?

Answer 50

● Lower productivity – because of unfamiliarity with norms and procedures. ● Higher labour turnover – is especially troublesome when a primary purpose of the merger was to form greater human capital. ● The stress of a merger can “bring out the worst” in people, ● Decreased profitability

Question 51

What is an organisational culture?

Answer 51

✓ Organizational culture is the attitudes, beliefs and values of an organization.

Question 52

Economies of scale?

Answer 52

The cost advantage a firm experiences as its production increases. As a company grows, it often becomes more efficient and is able to produce goods or services at a lower cost per unit. This can be due to a variety of factors, such as increased purchasing power for raw materials, more efficient use of equipment, and reduced administrative costs per unit of output. Economies of scale can give a company a competitive advantage, allowing it to offer its products at lower prices than its competitors or to increase its profit margins. However, these advantages can sometimes diminish at very large scale, a phenomenon known as diseconomies of scale.v

Question 53

Financial methods of motivation

Answer 53

1. Salary- motivation through security of receiving a regular income. 2. Wage (time rates) motivation - possibility of overtime pay 3. Wage (piece rate), motivation to increase output 4. Comission - for results, usually for sales 5. Profit-related pay -PRP is ordinarily used with those employees whose productivity or output cannot be measured precisely. However, the pay is based upon pre-established performance targets. Ordinarily, in a PRP system, employees receive a salary and are expected to reach certain targets. Employees exceeding the targets are then paid an additional amount 6. Employee share-ownership schemes (either giving the shares instead of cash or giving possibility to buy shares cheaper). sense of ownership may motivate 7. Fringe payments (perks), e.g company cars

Question 54

Non-financial methods of motivation

Answer 54

Job-enrichment Job rotation Job enlargement empowerment (access to resources and information to do their jobs and the power to make decisions) Purpose or opportunity to make a dierence Teamwork -socialisation

Question 55

What are the responsibilities of HR?

Answer 55

Recruitment Trainings and development Motivation (advise the line management of financial and non-financial rewords) Conflict resolution Dismissal Ensuring legal compliance

Question 56

Terms of working contract, such as shifts etc?

Answer 56

Full time Part time Permanent vs fixed term Contract Freelance Teleworking/homeworking Flexitime Casual Friday Three-day-weekend Career break Job share Downshifting Study leave

Question 57

Reasons of resistance to change?

Answer 57

● Mistrust ● Poor communication ● Job insecurity ● Loss of power of a skilled worker (if other skills needed) ● poor timing etc.

Question 58

Methods to overcome resistance to change?

Answer 58

1. Develop a vision of the change process and outcomes 2. Forecast and allocate resources 3. Involve employees in the earlier stages 4. Communicate to stakeholders regularly (reporting problems or implementation dips are encouraged) 5. Trainings 6. Clear communication of the first benefits of change 7. Support employees throughout the change

Question 59

What is a payment to leave a company?

Answer 59

Compensation for termination (Severance pay) is a form of compensation that an employee receives when they are let go by a company. In other words, it is money or benefits that an employer pays an employee who loses their job through no fault of their own

Question 60

What is an induction training?

Answer 60

that focuses on making a new employee familiar with the way the business functions and with lines of authority

Question 61

How much time did the SVT need to find 300 new highly skilled people?

Answer 61

3 months

Question 62

How well was the labour turnover managed in the end in H4s?

Answer 62

labour turnover figures in these factories have been consistently below the national average.

Question 63

Payment on leave?

Question 64

How many wind turbines are now produced?

Answer 64

10 per year

Question 65

Which division produced the first wind turbine?

Answer 65

Former H4 factories of Engineering Division

Question 66

What is the Consumer Products Division producing?

Answer 66

Water filters for use in households.

Question 67

Can be the household water filters sold in African countries?

Answer 67

The filters don't remove bacteria or viruses in the water, so are not suitable for use in countries that have problems with access to potable water.

Question 68

What the household water filters remove?

Answer 68

calcium, chlorine, copper, cadmium and zinc

Question 69

How did financial performance of the Skandvig (SVT) improve the Between 2005 and 2010?

Answer 69

SVT’s share price rose by 65 % and annual profits doubled

Question 70

How did the improved profitability Between 2005 and 2010 translate to shareholders?

Answer 70

the company increased its dividends each year.

Question 71

How did the Consumer Products Division grow after 2010? internal vs external?

Answer 71

by both external and internal growth. From 2010, SVT began to take over many small water filter manufacturers in both Europe and the United States of America (USA)

Question 72

What does a brand leader mean?

Answer 72

a brand that has the largest share of sales in its market compared to other brands in the same market

Question 73

Which division of the SVT aims to become a brand leader?

Answer 73

Consumer Products Division

Question 74

Which is a marketing budget? How important is it for SVT?

Answer 74

A marketing budget outlines all the money a business intends to spend on marketing-related projects over the quarter or year. In our case SVT Consumer Products Division produced even a 5 year budget. It is advisable to be part of a wider marketing plan. We don't have data if the company has a marketing plan

Question 75

What is a marketing plan?

Answer 75

Most small- to mid-size companies operate from a budget only — without a written plan to accompany it. This explains why so many marketers are tactically focused – they’re figuring out how to spend a defined budget, instead of thinking about goals and strategies. Writing a marketing plan is a time-consuming exercise, but it forces you to think through your strategies and relevant tactics. A good marketing plan typically includes: Financial goals Positioning strategy Brand strategy Product/service overview Detailed goals by product, distribution channel &/or customer segment Sales plan Major marketing campaigns Detailed budget Dates to review progress

Question 76

What is the Outreach Programme ?

Answer 76

It is a project set up by the SVT as part of the company’s commitment to helping people in less economically developed countries (LEDCs).

Question 77

What is a career break?

Answer 77

A career break is a period of time out from employment. It is commonly used for people to take time out of their career for personal or professional development.

Question 78

How SVT support the career breaks of own employees?

Answer 78

SVT pays the employees’ travel expenses and accommodation costs and continues to pay their salary if after 10 years of continuous employment they want to participate in the Outreach Programme in less developed states

Question 79

How many employees have participated in the Outreach Proframm?

Answer 79

6 000 over last 10 years

Question 80

Which director participated in the Outreach Programm and in what capacity?

Answer 80

Jayne Dees, spent three months teaching English in village schools in Sudan in 2019

Question 81

What business idea was developed by Jayne Dees after and based on her career break?

Answer 81

To develop low-cost, easily transportable water purifiers, using solar power, and lasting 10 years.

Question 82

Which new business idea fitted well with the company's Vision?

Answer 82

To develop low-cost, easily transportable water purifiers, using solar power, and lasting 10 years.

Question 83

Who won the prize in a competition to develop a water purifier that met strict criteria in terms of cost, usability and longevity.

Answer 83

James Azuki, a university student from Tanzania.

Question 84

Why would the winner product named “WF15”

Answer 84

it was designer's fifteenth attempt that finally produced potable water in sufficient quantity

Question 85

What pricing strategy will be used for WF15?

Answer 85

Several directors believe the WF15 should be a not-for- profit operation A minority feel that SVT should go further and subsidize the product to make it affordable to as many people as possible. Two directors are against subsidizing the WF15, as they believe subsidies will negatively impact SVT’s overall profitability, making other stakeholders in the business unhappy.

Question 86

What distribution strategy will be used for WF15?

Answer 86

This is an unresolved issue. SVT has little experience of distributing consumer products in LEDCs and no distribution channel in place for this new product.

Question 87

Examples of pricing strategies?

Answer 87

1. Price cuts (permanent) 2. Promotional Pricing/price promotion 3. Skimming 4. Penetration 5. Cost-plus/mark-up 6. Psychological/perceived value/99.9 7. Loss leader 8. Price discrimination (based on customers' characteristics) 9. Dynamic pricing (based on changing market conditions, like Bolt) 10. Economy pricing 11. Premium Pricing (based on quality) 12. Bundle pricing (less cost in a bundle then separately) 13. Complementary pricing (Paying small amount for main product and large amounts for details, like food in petting zoo

Question 88

Examples of distribution strategies?

Answer 88

Direct distribution (zero intermediary) Indirect distribution (1+ intermediary- wholesalers, retailers..) Exclusive distribution (restricting to one or several distributors/outlets) on-line distribution (exclusively or not) Multychanel distribution etc

Question 89

Why the SVT conducted a secondary market research?

Answer 89

To investigate the spending 135 patterns of low-income families in LEDCs and their access to media.

Question 90

What marketing strategy will be used for WF15?

Answer 90

Unresolved

Question 91

Which channels for advertising were researched in less developed states? Which was promising?

Answer 91

Televisions Newpapers and magazines Social media Levels of social media usage were fast approaching the levels seen in advanced economies.