Pass the CIMA Certificate G1 Questions and answers with ExamsMirror

The Marketing Director stops you in the corridor and says the following:

"I need your help. A firm of consultants has pitched a proposal to the Board to conduct a value chain analysis for Pizzatime. The Chief Executive is interested, but he would like us to discuss the proposal further at the next Board meeting before we decide whether to brief the consultants. He also feels that there are other areas we should explore, particularly the strategic focus of the company. I have left a copy of the consultants' presentation on your desk.

The Chief Executive has asked me to prepare a board paper on two issues.

Firstly, what would a value chain analysis involve in the case of Pizzatime and how might we involve our staff more in creating value?

Secondly, the Chief Executive is unsure whether we should focus our value chain analysis in a low-cost strategy or a differentiation strategy.

Please draft the board paper for me. I will review it and present it at the next board meeting."

You have received the following email:

From: Matt Spot, Finance Director

To: Financial Manager

Subject: new menu

Hello

As a first stage in its development plans the Board have decided that Pizzatime must develop a new menu that uses top quality ingredients. The menu will include many more healthy and lower calorie options. This project has been given a high priority and we need to start researching and planning the new menu straight away.

I am considering organising some big data research to give us greater insight into our customers' requirements. For example, it would help us find out how important fresh ingredients, the use of local produce and fewer processed meat products are to our customers. I realise that many customers are trying to lose weight and it would also be interesting to know what type of weight loss programmes they are using and what foods are permitted under each one.

I need your help on this one. Please email me your thoughts on the following:

Firstly, what sources of competitor and customer analysis should we use when drawing up a new menu? Please include the possibility of using big data and look at other useful sources of information.

Secondly, what are the downside risks to Pizzatime of introducing a new menu and are they worth taking?

Matt

Extract from promotional pack addressed to potential franchisees

There is no real upper limit to the profits that you might earn as a Pizzatime franchisee. That depends on your hard work and commitment. We have prepared the following projected statement based on a typical franchise operation in I-land. We have adjusted those figures to reflect local circumstances in C-land where appropriate and have converted ongoing running costs that will be priced in I$ to C$ for your convenience.

Our projected annual figures for a typical C-land franchisee are as follows:

These estimates are based on a 'most likely' scenario. We have based the conversion of costs that will be priced in terms of I$ on the average rate that was in force throughout the year ended 31 December 2015.

With hard work and imagination, you could easily exceed these figures. Many successful franchisees in I-land have gone on to open several restaurants and are now very wealthy.

The sky is the limit with Pizzatime!

Six months have passed since your exchange of emails with the Finance Director. Pizzatime has commenced its venture into the C-land market, but very few franchise agreements have been signed.

The Finance Director has asked you into his office

"We have signed fewer than half the franchise agreements that we had planned to have completed by now. Paradoxically, business people in C-land are complaining that the agreement looks very attractive at present because the C-land economy is strong and the C$ is at an all-time high. They are concerned that it will be a different story in the long term when the C$ weakens.

I have sent you a copy of the document we include in the proposal pack that we send out to interested applicants. We sent a copy to a potential franchisee and she complained that it was too simplistic and ignored changes in key variables such as fluctuating exchange rates.

Dennis Chan has asked me to consider acquiring a small logistics company in C-land and using it to import ingredients and consumables from I-land. It would sell at prices set in C$ and would handle the physical distribution. I am concerned about the accounting implications of having a foreign subsidiary and its impact on the overall group figures. If we proceed we will buy 100% of the equity for cash and we will fix selling prices in C$.

Could you do two things for me?

First of all, explain the issues associated with a potential franchisee conducting an analysis around key sensitive variables. How might we address the possibility that our franchise development staff in C-land might be demotivated by such concerns when attempting to find potential franchisees?

Secondly, could you use your knowledge of accounting to help me to identify the impact of currency movements on Pizzatime's consolidated financial statements if we buy a local logistics company and the C$ weakens?"

A further six months have passed and the Pizzatime home delivery scheme has been operational for two months, with deliveries being made from just over 200 restaurants.

Pizzatime has contracted out the actual deliveries to Town Logistics. The agreement is that Town Logistics will station between two and four small motorbikes at each participating Pizzatime restaurant. Each motorbike has been fitted with an insulated box to carry pizzas behind the rider. Town Logistics has agreed to base sufficient riders at each restaurant to provide a full delivery service during its opening hours.

You have received the following email:

From: Monica Lall, Chief Executive

To: Financial Manager

Subject: Town Logistics

Hi,

Please read the attached article from this morning's press. I need your advice.

I can confirm that Town Logistics is owned by the wife of our Marketing Director. The contract with them is worth I$6 million per year. Are we required to account for this as a related party transaction? Assuming that the rules don't require us to make the disclosure, should we report it on a voluntary basis?

Also, how can we deal with the conflict between the restaurant staff and the delivery staff? We cannot change wage rates, so any suggestions have to take a different approach.

Regards

Monica Lall

Chief Executive

Pizzatime

One month has passed and more detailed decisions are now needed on pricing and the change management issues associated with the introduction of the new menu and hi-tech ordering system.

You have just received the following email from the Finance Director:

From: Matt Spot, Finance Director

To: Financial Manager

Subject: pricing and change management

Hello

Things are moving fast. We have just had feedback from a select group of customers. They were asked to test out the new menu and hi-tech ordering devices. The feedback was very positive, especially about the ordering devices which, they said, add an element of fun to the restaurant experience as well as speeding up the food ordering process. Families with young children were particularly enthusiastic about them and found that even young children enjoyed ordering their own food. They all agreed to keep the project secret, so we're hoping they will!

I have meetings arranged with Bilal Mukherjee, Marketing Director, and Helga Schmidt, Human Resources Director, to draw up plans for pricing and for change management and I need some information from you in preparation for them.

In terms of pricing, I am expecting that Bilal will suggest that we price the new menu quite high to begin with, following the example of a new burger chain which has been successful at charging higher prices for a top quality product and has attracted a lot of young working adults as customers. However, I am not convinced that this will work for Pizzatime.

Bilal has been given permission to organise a major promotional campaign to sell the health benefits of the new menu and show children and young adults having fun using the new ordering devices.

Clearly, there are going be some major changes in the roles and positions of staff within the restaurant team. Now that orders can be placed by customers from their tables the roles of restaurant staff are going to change significantly. Helga is concerned that there are likely to be some job losses and she may be right on that. We need to have a plan in place to make sure we are prepared for every eventuality so that we can manage the changes properly.

I need you to prepare some ideas on the following:

Whether I should support Bilal's suggestion to charge high prices initially. Do you think that this is likely to be a successful strategy for Pizzatime?

What types of concerns employees might have about the new ordering system and how we can best prepare staff for the change and help smooth the process to make this new venture an immediate success.

Matt

Job advert for Pizzatime

Three weeks have passed since your email correspondence with the Finance Director regarding the evaluation of the all-day opening proposal. You have received the following email:

From: Matt Spot, Finance Director

To: Financial Manager

Subject: board report

Hello

The Board has decided to proceed with a pilot venture by introducing all-day opening at the ten restaurants in the I-Town region.

We have already drafted an advertisement (attached) to help recruit more staff. We have been coming under pressure to ensure that we are not guilty of discrimination in our recruitment, so we need to ensure a good spread of ethnic groups and employees with disabilities when we appoint new staff. This raises a number of ethical and safety issues. We also need to spend some time looking at how best to set budgets and targets for all-day opening.

Please give me your thoughts on the following:

How can we implement equality and diversity practices when recruiting staff to cover new all-day opening times and have assurance that they have been correctly followed? Please comment on whether the statement on disability groups in the advertisement is sensible.

What are the challenges in setting targets for individual restaurants with respect to all-day opening, and how may they be overcome?

Matt