STRATEGIC MANAGEMENT DECEMBER 2022 PAST PAPER

MONDAY: 5 December 2022. Morning Paper. Time Allowed: 3 hours.

Answer ALL questions. Marks allocated to each question are shown at the end of the question. Do NOT write anything on this paper.

QUESTION ONE

MICHEZO ACCESSORIES LIMITED (MAL)

Michezo Accessories Limited (MAL) was incorporated in the year 2008 as a sports equipment business in Nairobi, Kenya. It is the largest retail and wholesale dealer in East Africa specialising in sports, promotional items and camping equipment. MAL deals in goods, equipment and apparels of reputable international brands in almost all sporting activities. It was started by Bruce Okello with a lean staff establishment and a skeleton organisation structure.

Bruce’s vision was to create high-quality and stylishly designed clothing and equipment for sporting activities. He built
up a design team, but outsourced manufacturing to low-cost producers, primarily in China. Rather than selling through
existing retailers, Bruce opted to open his own stores all over the East African region. The idea was to staff the stores
with employees who were themselves passionate about body fitness and could act as ambassadors for healthy living
through sports. The first retail store quickly became a runaway success and other stores soon followed suit. In the year
2008 the company went public using the capital raised to accelerate its expansion plans. By the year 2013, MAL had over
210 stores in the East African region, sales in excess of Sh.1 billion, and a market capitalisation of over Sh.4 billion.

In the year 2018, Zuena Aero was hired as the CEO of MAL after the lapse of the term of the immediate former CEO.
She had spent 20 years at Maisha Limited, a fast-moving consumer goods company, overseeing retail operations. She had
a wealth of experience in strategic planning and she had a reputation for turning around companies. She immediately
introduced differentiation as a business-level strategy at MAL. She was fully aware that the strategy would always give a
company a competitive advantage. Getting the product right was undoubtedly a central part of her strategy. Zuena
ensured uniqueness in the company`s products. The fitness-inspired athletic wear was well designed, stylish,
comfortable, and used the best technical fabrics. An equally important part of the strategy was to only stock a limited
supply of an item. New colours and seasonal items kept the product offerings feeling fresh and outstanding. The goal was
to sell sporting gear at a premium price, and to condition customers to buy when they saw it, rather than wait, because if
they do, it would soon be “out of stock.”

Over the years, the strategy has worked; MAL never holds sales, and its items sell for a premium price. MAL continues
to hire employees who are passionate about fitness. Part of the induction process involves taking new hires to fitness
lessons. Seventy per cent of store managers are internal hires who started on the sales floor and grew up the ranks. Store
managers are given an imprest of Sh.300,000 to repaint their stores twice a year. The look and interior design of each
store is completely up to its manager’s discretion. Each store is also allocated Sh.2 million annually to spend on
corporate social responsibility activities.

Employees are trained to eavesdrop on customers` complaints and compliments. Clothes folding tables are placed near
the fitting rooms rather than in a back room so that employees can overhear conversations about their products. In every
store there is a suggestion box for customers to drop their complaints or compliments. These are sent back to headquarters for analysis and action planning. This feedback is then incorporated into the product design process.

The CEO is hands on and she physically visits stores randomly to confirm the authenticity of the daily reports that she
gets from the enterprise resource planning system. She believes that software-generated data can give a company a false
sense of security about the customers. She personally spends hours each week in stores observing how customers shop,
listening to their complaints, and then using their feedback to tweak product development efforts Despite the company’s focus on providing quality, it has not all been plain sailing for MAL. In the year 2020, Covid-19 pandemic hit businesses hard and MAL was heavily affected. Sales plummeted and revenues dwindled. Zuena Aero convinced the management to act fast and take their business online. The results were evident in a span of six months. A balanced score card was used to measure performance and establish whether taking the business online had paid dividends. The balanced score card was the choice tool since it would reveal measures in most aspects of the business. Compared to the same time in the year 2019, all the four measures showed a growth rate of 25% and above.

Most observers in the media and financial community believe that with Zuena Aero as the CEO, the company will continue its growth trajectory for many years to come.

Required:

1.  Discuss FIVE corporate social responsibility activities that MAL stores could spend the Sh.2 million awarded. (10 marks)

2. Balanced Score Card tool was used to measure performance at MAL.

Define this tool. (2 marks)

Examine the FOUR metrics of Balanced Score Card tool identified in (b) (i) above. (8 marks)

3. Analyse FIVE external factors that might affect business at MAL. (10 marks)

4. Evaluate FIVE benefits that could accrue to MAL from the business level strategy that was introduced by Zuena Aero. (10 marks)

(Total: 40 marks)

QUESTION TWO

1. Describe FIVE advantages of using gap analysis in organisational performance measurement. (5 marks)

2. Evaluate FIVE steps involved in strategic management process. (5 marks)

3. A mission statement influences corporate performance since it incorporates the basic business purpose and the reason for its existence.

In view of the above statement, explain the influence of mission statement on performance. (5 marks)

(Total: 15 marks)

QUESTION THREE

1. Examine FIVE limitations of Michael Porter’s five forces of competitive advantage. (5 marks)

2. Controlling is one of the critical functions of management in an organisation.

Describe FIVE guidelines to adhere to when undertaking this function. (5 marks)

3. Assess FIVE weaknesses of hierarchical organisational structure. (5 marks)

(Total: 15 marks)

QUESTION FOUR

1. With reference to cultural dimensions, distinguish between “indulgence” and “restraint”. (4 marks)

2. Dr. John Kotter, a world-renown change expert, introduced eight elements in the change process in his book, “Leading Change”.
Appraise FOUR of these elements. (4 marks)

3. ABC limited uses McKinsey’s 7S model in their strategic planning.

Explain the elements in the model. (7 marks)

(Total: 15 marks)

QUESTION FIVE

1. With reference to international business environment, explain FOUR sources of comparative advantage to an organisation. (4 marks)

2. Outline FIVE benefits of using patterns of strategy development. (5 marks)

3. With reference to the ‘deep dive’ analogy, describe THREE disciplines of strategic thinking one can develop to continually ground a business. (6 marks)

(Total: 15 marks)

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