(b) Explain how Perfect Shopper might re-structure its upstream supply chain to address the problems identified

in the scenario. (10 marks)

(b) What advantages and disadvantages might result from outsourcing Global Imaging’s HR function?

(8 marks)

(c) Explain how Perfect Shopper might re-structure its downstream supply chain to address the problems

identified in the scenario. (10 marks)

(b) Using models where appropriate, what are likely to be the critical success factors (CSFs) as the business

grows and develops? (10 marks)

(b) Assuming that the acquisition proceeds, what steps will Datum Paper Products need to take to build a shared

culture in the two companies? (10 marks)

4 The country of Europia has an extensive historical and industrial heritage. It has many tourist sites (such as castles,

palaces, temples, houses and factories) which attract visitors from home and abroad. Most of these tourist sites have

gift shops where visitors can buy mementos and souvenirs of their visit. These souvenirs often include cups, saucers,

plates and other items which feature a printed image of the particular tourist site.

The Universal Pottery Company (UPC) is the main supplier of these pottery souvenir items to the tourist trade. It

produces the items in its potteries and then applies the appropriate image using specialised image printing machines.

UPC also supplies other organisations that require personalised products. For example, it recently won the right to

produce souvenirs for the Eurasian Games, which are being held in Europia in two years time. UPC currently ships

about 250,000 items of pottery out of its factory every month. Most of these items are shipped in relatively small

packages. All collections from the factory and deliveries to customers are made by a nationwide courier company.

In the last two years there has been a noticeable increase in the number of complaints about the quality of these

items. The complaints, from gift shop owners, concentrate on two main issues:

(i) The physical condition of goods when they arrive at the gift shop. Initial evidence suggests that ‘a significant

number of products are now arriving broken, chipped or cracked’. These items are unusable and they have to be

returned to UPC. UPC management are convinced that the increased breakages are due to packers not following

the correct packing method.

(ii) Incorrect alignment of the image of the tourist site on the selected item. For example, a recent batch of 100 cups

for Carish Castle included 10 cups where the image of the castle sloped significantly from left to right. These

were returned by the customer and destroyed by UPC.

The image problem was investigated in more depth and it was discovered that approximately 500 items were

delivered every month with misaligned images. Each item costs, on average, $20 to produce.

As a result of these complaints, UPC appointed a small quality inspection team who were asked to inspect one in

every 20 packages for correct packaging and correct image alignment. However, although some problems have been

found, a significant number of defective products have still been delivered to customers. A director of UPC used this

evidence to support his assertion that the ‘quality inspection team is just not working’.

The payment system for packers has also been such an issue. It was established ten years ago as an attempt to boost

productivity. Packers receive a bonus for packing more than a target number of packages per hour. Hence, packers

are more concerned with the speed of packing rather than its quality.

Finally, there is also evidence that to achieve agreed customer deadlines, certain managers have asked the quality

inspection team to overlook defective items so that order deadlines could be met.

The company has decided to review the quality issue again. The director who claimed that the quality inspection team

is not working has suggested using a Six Sigma approach to the company’s quality problems.

Required:

(a) Analyse the current and potential role of quality, quality control and quality assurance at UPC. (15 marks)

(c) Assess the advantages and disadvantages to Datum Paper Products taking the greenfield option as opposed

to the acquisition of Papier Presse. (15 marks)

(b) Using relevant evaluation criteria, assess how achievable and compatible these three strategic goals are over

the next five years. (20 marks)

(c) What changes to Churchill’s existing marketing mix will be needed to achieve the three strategic goals?

(15 marks)

(a) Contrast the role of internal and external auditors. (8 marks)

(b) Conoy Co designs and manufactures luxury motor vehicles. The company employs 2,500 staff and consistently makes a net profit of between 10% and 15% of sales. Conoy Co is not listed; its shares are held by 15 individuals, most of them from the same family. The maximum shareholding is 15% of the share capital.

The executive directors are drawn mainly from the shareholders. There are no non-executive directors because the company legislation in Conoy Co’s jurisdiction does not require any. The executive directors are very successful in running Conoy Co, partly from their training in production and management techniques, and partly from their ‘hands-on’ approach providing motivation to employees.

The board are considering a significant expansion of the company. However, the company’s bankers are

concerned with the standard of financial reporting as the financial director (FD) has recently left Conoy Co. The board are delaying provision of additional financial information until a new FD is appointed.

Conoy Co does have an internal audit department, although the chief internal auditor frequently comments that the board of Conoy Co do not understand his reports or provide sufficient support for his department or the internal control systems within Conoy Co. The board of Conoy Co concur with this view. Anders & Co, the external auditors have also expressed concern in this area and the fact that the internal audit department focuses work on control systems, not financial reporting. Anders & Co are appointed by and report to the board of Conoy Co.

The board of Conoy Co are considering a proposal from the chief internal auditor to establish an audit committee.

The committee would consist of one executive director, the chief internal auditor as well as three new appointees.

One appointee would have a non-executive seat on the board of directors.

Required:

Discuss the benefits to Conoy Co of forming an audit committee. (12 marks)