3 Airtite was set up in 2000 as a low cost airline operating from a number of regional airports in Europe. Using these

less popular airports was a much cheaper alternative to the major city airports and supported Airtite’s low cost service,

modelled on existing low cost competitors. These providers had effectively transformed air travel in Europe and, in so

doing, contributed to an unparalleled expansion in airline travel by both business and leisure passengers. Airtite used

one type of aircraft, tightly controlled staffing levels and costs, relied entirely on online bookings and achieved high

levels of capacity utilisation and punctuality. Its route network had grown each year and included new routes to some

of the 15 countries that had joined the EU in 2004. Airtite’s founder and Chief Executive, John Sykes, was an

aggressive businessman ever willing to challenge governments and competitors wherever they impeded his airline and

looking to generate positive publicity whenever possible.

John is now looking to develop a strategy which will secure Airtite’s growth and development over the next 10 years.

He can see a number of environmental trends emerging which could significantly affect the success or otherwise of

any developed strategy. 2006 had seen fuel costs continue to rise reflecting the continuing uncertainty over global

fuel supplies. Fuel costs currently account for 25% of Airtite’s operating costs. Conversely, the improving efficiency of

aircraft engines and the next generation of larger aircraft are increasing the operating efficiency of newer aircraft and

reducing harmful emissions. Concern with fuel also extends to pollution effects on global warming and climate

change. Co-ordinated global action on aircraft emissions cannot be ruled out, either in the form. of higher taxes on

pollution or limits on the growth in air travel. On the positive side European governments are anxious to continue to

support increased competition in air travel and to encourage low cost operators competing against the over-staffed

and loss-making national flag carriers.

The signals for future passenger demand are also confused. Much of the increased demand for low cost air travel to

date has come from increased leisure travel by families and retired people. However families are predicted to become

smaller and the population increasingly aged. In addition there are concerns over the ability of countries to support

the increasing number of one-parent families with limited incomes and an ageing population dependent on state

pensions. There is a distinct possibility of the retirement age being increased and governments demanding a higher

level of personal contribution towards an individual’s retirement pension. Such a change will have a significant impact

on an individual’s disposable income and with people working longer reduce the numbers able to enjoy leisure travel.

Finally, air travel will continue to reflect global economic activity and associated economic booms and slumps together

with global political instability in the shape of wars, terrorism and natural disasters.

John is uncertain as to how to take account of these conflicting trends in the development of Airtite’s 10-year strategy

and has asked for your advice.

Required:

(a) Using models where appropriate, provide John with an environmental analysis of the conditions affecting the

low cost air travel industry. (12 marks)

(d) Family owned and managed businesses often find delegation and succession difficult processes to get right.

What models would you recommend that Tony use in looking to change his leadership and management style

to create a culture in the Shirtmaster Group better able to deal with the challenges it faces? (10 marks)

(c) Identify and evaluate other strategic options ONA could consider to address the airline’s current financial and

operational weaknesses.

Note: requirement (c) includes 2 professional marks (10 marks)

2 Good Sports Limited is an independent sports goods retailer owned and operated by two partners, Alan and Bob. The

sports retailing business in the UK has undergone a major change over the past ten years. First of all the supply side

has been transformed by the emergence of a few global manufacturers of the core sports products, such as training

shoes and football shirts. This consolidation has made them increasingly unwilling to provide good service to the

independent sportswear retailers too small to buy in sufficiently large quantities. These independent retailers can stock

popular global brands, but have to order using the Internet and have no opportunity to meet the manufacturer’s sales

representatives. Secondly, UK’s sportswear retailing has undergone significant structural change with the rapid growth

of a small number of national retail chains with the buying power to offset the power of the global manufacturers.

These retail chains stock a limited range of high volume branded products and charge low prices the independent

retailer cannot hope to match.

Good Sports has survived by becoming a specialist niche retailer catering for less popular sports such as cricket,

hockey and rugby. They are able to offer the specialist advice and stock the goods that their customers want.

Increasingly since 2000 Good Sports has become aware of the growing impact of e-business in general and e-retailing

in particular. They employed a specialist website designer and created an online purchasing facility for their

customers. The results were less than impressive, with the Internet search engines not picking up the company

website. The seasonal nature of Good Sports’ business, together with the variations in sizes and colours needed to

meet an individual customer’s needs, meant that the sales volumes were insufficient to justify the costs of running

the site.

Bob, however, is convinced that developing an e-business strategy suited to the needs of the independent sports

retailer such as Good Sports will be key to business survival. He has been encouraged by the growing interest of

customers in other countries to the service and product range they offer. He is also aware of the need to integrate an

e-business strategy with their current marketing, which to date has been limited to the sponsorship of local sports

teams and advertisements taken in specialist sports magazines. Above all, he wants to avoid head-on competition

with the national retailers and their emphasis on popular branded sportswear sold at retail prices that are below the

cost price at which Good Sports can buy the goods.

Required:

(a) Provide the partners with a short report on the advantages and disadvantages to Good Sports of developing

an e-business strategy and the processes most likely to be affected by such a strategy. (12 marks)

(b) Good Sports Limited has successfully followed a niche strategy to date.

Assess the extent to which an appropriate e-business strategy could help support such a niche strategy.

(8 marks)

(b) Explain how the process of developing scenarios might help John better understand the macro-environmental

factors influencing Airtite’s future strategy. (8 marks)

(b) Analyse how effective project management could have further improved both the process and the outcomes

of the website re-design project. (10 marks)

4 Global Imaging is a fast growing high tech company with some 100 employees which aims to double in size over the

next three years. The company was set up as a spin out company by two research professors from a major university

hospital who now act as joint managing directors. They are likely to leave the company once the growth objective is

achieved.

Global Imaging’s products are sophisticated imaging devices facing a growing demand from the defence and health

industries. These two markets are very different in terms of customer requirements but share a related technology.

Over 90% of sales are from exports and the current strategic plan anticipates a foreign manufacturing plant being set

up during the existing three-year strategic plan. Current management positions are largely filled by staff who joined in

the early years of the company and reflect the heavy reliance on research and development to generate the products

to grow the business. Further growth will require additional staff in all parts of the business, particularly in

manufacturing and sales and marketing.

Paul Simpson, HR manager at Global Imaging is annoyed. This stems from the fact that HR is the one management

function not involved in the strategic planning process shaping the future growth and direction of the company. He

feels trapped in a role traditionally given to HR specialists, that of simply reacting to the staffing needs brought about

by strategic decisions taken by other parts of the business. He feels even more threatened by one of the joint managing

directors arguing that HR issues should be the responsibility of the line managers and not a specialist HR staff

function. Even worse, Paul has become aware of the increasing number of companies looking to outsource some or

all of their HR activities.

Paul wants to develop a convincing case why HR should not only be retained as a core function in Global Imaging’s

activities, but also be directly involved in the development of the current growth strategy.

Required:

Paul has asked you to prepare a short report to present to Global Imaging’s board of directors:

(a) Write a short report for Paul Simpson on the way a Human Resource Plan could link effectively with Global

Imaging’s growth strategy. (12 marks)

3 Clyde Williams is facing a dilemma. He has successfully built up a small family-owned company, Concrete Solutions

Ltd, manufacturing a range of concrete based products used in making roads, pavements and walkways. The

production technology is very low tech and uses simple wooden moulds into which the concrete is poured. As a

consequence he is able to use low skilled and low cost labour, which would find it difficult to find alternative

employment in a region with high unemployment levels. The company has employed many of its workforce since its

creation in 1996. The company’s products are heavy, bulky and costly to transport. This means its market is limited

to a 30-mile area around the small rural town where the manufacturing facility is located. Its customers are a mix of

private sector building firms and public sector local councils responsible for maintaining roads and pavements. By its

nature much of the demand is seasonal and very price sensitive.

A large international civil engineering company has recently approached Clyde with an opportunity to become a

supplier of concrete blocks used in a sophisticated system for preventing coast and riverbank erosion. The process

involves interlocking blocks being placed on a durable textile base. Recent trends in global warming and pressure in

many countries to build in areas liable to flooding have created a growing international market for the patented erosion

prevention system. Clyde has the opportunity to become the sole UK supplier of the blocks and to be one of a small

number of suppliers able to export the blocks to Europe. To do it he will need to invest a significant amount in CAM

(computer aided manufacturing) technology with a linked investment in the workforce skills needed to operate the

new technology. The net result will be a small increase in the size of the labour force but redundancy for a significant

number of its existing workers either unwilling or unable to adapt to the demands of the new technology. Successful

entry into this new market will reduce his reliance on the seasonal low margin concrete products he currently produces

and significantly improve profitability.

One further complication exists. Concrete Solutions is located in a quiet residential area of its home town. Clyde is

under constant pressure from the local residents and their council representatives to reduce the amount of noise and

dust created in the production process. Any move into making the new blocks will increase the pollution problems

the residents face. There is a possibility of moving the whole manufacturing process to a site on a new industrial estate

being built by the council in a rival town. However closure of the existing site would lead to a loss of jobs in the current

location. Clyde has asked for your help in resolving his dilemma.

Required:

(a) Using models where appropriate, advise Clyde on whether he should choose to take advantage of the

opportunity offered by the international company. (12 marks)

3 Local neighbourhood shops are finding it increasingly difficult to compete with supermarkets. However, three years

ago, the Perfect Shopper franchise group was launched that allowed these neighbourhood shops to join the group

and achieve cost savings on tinned and packaged goods, particularly groceries. Perfect Shopper purchases branded

goods in bulk from established food suppliers and stores them in large purpose-built warehouses, each designed to

serve a geographical region. When Perfect Shopper was established it decided that deliveries to these warehouses

should be made by the food suppliers or by haulage contractors working on behalf of these suppliers. Perfect Shopper

places orders with these suppliers and the supplier arranges the delivery to the warehouse. These arrangements are

still in place. Perfect Shopper has no branded goods of its own.

Facilities are available in each warehouse to re-package goods into smaller units, more suitable for the requirements

of the neighbourhood shop. These smaller units, typically containing 50–100 tins or packs, are usually small trays,

sealed with strong transparent polythene. Perfect Shopper delivers these to its neighbourhood shops using specialist

haulage contractors local to the regional warehouse. Perfect Shopper has negotiated significant discounts with

suppliers, part of which it passes on to its franchisees. A recent survey in a national grocery magazine showed that

franchisees saved an average of 10% on the prices they would have paid if they had purchased the products directly

from the manufacturer or from an intermediary – such as cash and carry wholesalers.

As well as offering savings due to bulk buying, Perfect Shopper also provides, as part of its franchise:

(i) Personalised promotional material. This usually covers specific promotions and is distributed locally, either using

specialist leaflet distributors or loosely inserted into local free papers or magazines.

(ii) Specialised signage for the shops to suggest the image of a national chain. The signs include the Perfect Shopper

slogan ‘the nation’s local’.

(iii) Specialist in-store display units for certain goods, again branded with the Perfect Shopper logo.

Perfect Shopper does not provide all of the goods required by a neighbourhood shop. Consequently, it is not an

exclusive franchise. Franchisees agree to purchase specific products through Perfect Shopper, but other goods, such

as vegetables, fruit, stationery and newspapers they source from elsewhere. Deliveries are made every two weeks to

franchisees using a standing order for products agreed between the franchisee and their Perfect Shopper sales

representative at a meeting they hold every three months. Variations to this order can be made by telephone, but only

if the order is increased. Downward variations are not allowed. Franchisees cannot reduce their standing order

requirements until the next meeting with their representative.

Perfect Shopper was initially very successful, but its success has been questioned by a recent independent report that

showed increasing discontent amongst franchisees. The following issues were documented.

(i) The need to continually review prices to compete with supermarkets

(ii) Low brand recognition of Perfect Shopper

(iii) Inflexible ordering and delivery system based around forecasts and restricted ability to vary orders (see above)

As a result of this survey, Perfect Shopper has decided to review its business model. Part of this review is to reexamine

the supply chain, to see if there are opportunities for addressing some of its problems.

Required:

(a) Describe the primary activities of the value chain of Perfect Shopper. (5 marks)