The Management Level Case Study: Helping You To Pass Your Exam
The Management Level Case Study: Helping You To Pass Your Exam
The Management Level Case Study: Helping You To Pass Your Exam
Management Accountants
A WALKTHROUGH OF A REAL ANSWER there are 25 marks available, which equates to one quarter of the exam or
45 minutes. In this case there are two requirements per task, equating to 4
TO THE MANAGEMENT CASE STUDY EXAM tasks in total. You can assume that all sub-requirements carry equal marks,
(VARIANT 1) FROM FEBRUARY 2016 thus you should apportion your time equally (This is confirmed in the
allocation of marks provided by the marking guidance document).
As part of an ongoing drive to improve support to CIMA students,
we have published a new exam resource. The following document As you will see from the commentary below, you must answer all parts of
takes you through a real student script from the February 2016 case all requirements to be sure of securing a pass.
study examination; the answer has been transcribed, anonymised and
annotated with observations on strong performance and some areas
where performance could be improved upon. ADDITIONAL SUPPORT RESOURCES
The following documents are referenced at various stages within this
PASSING STANDARD ILLUSTRATED feedback which will enhance your understanding:
The script was selected to demonstrate a comfortable passing standard, Feb 2016 Variant 1 Exam
having earned a score in the 90s. It shows one of many ways in which Feb 2016 Variant 1 Answers
a candidate would demonstrate sufficient competence to earn such a
pass. Please note it is not a perfect answer nor the only one which would Feb 2016 Variant 1 Marking guide
have achieved a passing standard. However, the walkthrough will provide Feb 2016 Examiner’s Report
an idea of what a strong answer looks like and some examples of where
answers might have fallen short and been improved upon. Grade Descriptors for MCS
Our inbound logistics will mainly focus on delivering our dough from our central plant to our Is it suitable for the audience? If I were on the
restaurants across the three countries. In the first instance, orders will need to be placed promptly board of Pizzatime, I would want brief, to the
and correctly in terms of volume to anticipate the next weeks demand. point and comprehensive discussion points. I
would not need a more lengthy analysis to
It’s important that deliveries are then delivered on time and with the correct ingredients equipment
understand the possible application of the value
to ensure that customer demand can be met. It is also important that the individual suppliers are
chain. At the same time, good assumptions have
delivering correctly and on time. Delivery drivers and factory staff will need to be made aware of
been made about the board directors' level of
the implications of untimely and incorrect deliveries cause.
understanding of the business.
HR Management
Essentially given the industry that we are in, we are only as food as our staff serving our pizzas. Steps
need to be taken to ensure that we are recruiting the candidate that we need. By ensuring this, value
is being added both here and in our primary activities of outbound logistics, operations and service.
Technological Development
In a rapidly changing world of technology our customers are becoming more and more attuned to
the fact that they demand quick, efficient service at a reasonable price. The use of technology in our
stores will add value in terms of card machines and point of sale equipment for order taking – all
being convenient for the customer and adding value in their eyes.
Procurement
Our procurement staff (and that of our individual restaurant managers who order ingredients from
local suppliers) will be adding value by sourcing quality ingredients at a reasonable price. We are
likely to be able to take advantage of economies of scale given our position in the market
(particularly in 1- Land). But it is essential that we balance cost with quality as if our ingredients are
bad quality it is unlikely that we will keep our loyal customer base if standards drop.
Low cost strategy’s will generally mean an increase in market share and creates a high barrier to
entry for any competitors wishing to follow suit. It will mean that we are likely to become the Some really good points have been made,
dominant force in the market in the P Land like are in 1 Land. However, a low cost strategy is however, it would have looked better to explain
reasonably easy to copy and could result in price cuts from our main competitors such as Pizza 2 Go. 'why' or 'what'. For instance, why would a low
We may not be able to sustain this approach depending on our margins. It may also alienate our cost strategy prove a barrier to entry for other
customers. Given that we are known for quality, some of our customers, may perceive this cut in providers or, what are our actual margins? As it
price with suspicion thinking that we will had to change (potentially for the worse) our product. stands, this point does not illustrate an adequate
understanding of the business, even though it is
A differentiation strategy will enable us to concentrate on the activities that make us different. We addressing a key issue.
have recently launched our new healthy range. All be in a small way. However none of our
competitor are yet to do so this makes us unique in the market. A push on this initiative and proper
investment in the R & D may help us add value to our business. We could develop it further to Given the value chain analysis, although the
include allergy – friendly recipes such as gluten or diary free – again an initiative our competitors question does not explicitly request a
have not developed. The issue here though is that we essentially have a ceiling in terms of price recommendation, it would be expected at this
– that is the price of our competitors (both other pizza chains and other varieties of cuisine level and your role within the organisation, that
restaurants), if we are to push for a differentiation strategy the chances are that we will have to it would have been appropriate to give an
make considerable investment in both R & D and the price of specialised ingredients are likely to opinion of which strategy may be best suited to
increase – unless we are willing to sacrifice our margin. We will need to increase our price and given Pizzatime. A stronger score could have been
the nature of our product – in that it is fairly elastic there is only a certain price that customers will achieved by drawing relevant conclusions that
pay for eating out a at a pizza restaurant. follow logically from the analysis.
TASK 2
Requirement 1:
I need you to email me your thoughts on the following:
How can we organise our supply chain better to prevent a recurrence? Clearly, flour is only one of
the many ingredients that we purchase.
SUPPLY CHAIN ORGANISATION This is another good layout of the answer, with
Given our JIT system in the factory, this scandal will have caused major disruption. Clearly our flour each point being explained in a new paragraph.
supplier has acted unethically in supplying the flour that was out of date, but there is also an issue
here in terms of internal control and understanding of what is acceptable.
In future we will need to ensure that our suppliers are meeting our quality standards – given the
nature of food production and the end consumer. This is not a trivial matter and is now resuming in
us potentially having to pay out serious amounts of compensation. In a JIT system, close
collaboration is key to success in the system. Any new supplier of flour (or any ingredient) we will
need to meet with and discuss the standards that we are expecting. There may be potential for a
contract here, and potentially we could make penalty clauses as a part of this contract.
Relationships with our supplier will be key here, and we will need our procurement staff to identify
potential new suppliers for flour and meet with them to ensure that they have a good understanding
of our standards. A JIT System is of course susceptible to the supply chain, and so again, it may be
wise for procurement staff to liaise with current suppliers to strengthen their relationships and
re-clarify standards to strengthen our present relationships. It may have been helpful to reflect a little more
We will also need to have much tighter control of our inbound logistics. Any deliveries will need to on cost vs benefit in this paragraph and the
be checked and if necessary, rejected, should they not be in date or be of a high enough quality etc. consequences of rejecting orders.
This unfortunately is a bad reflection of our staff in the factory and even though it is not necessarily
The answer in general could have been improved
the stance that all staff take, the actions of one has tainted them all. It is vital that all staff
by focusing more detail on improvement ideas
understand the gravity of bad/out of date ingredients, and so training of our staff on what checks
and how this could be incorporated by the
need to be made.
business, given the various stakeholders in
question. By looking at the grade descriptors for
people skills, there are obvious areas of
Requirement 2: improvement.
I need you to email me your thoughts on the following:
How can we address the inevitable claims that we have acted unethically and against the public
interest?
We will need to make it clear to the public that we find the situation absolutely unacceptable and
This seems a bit extreme in terms of identifying
are working as quickly as we can to identify new suppliers and remedy this.
new suppliers, particularly as the candidate
The public will need reassurance that this will not happen again so we will need to communicate mentions investigating the matter fully to
that we are to implement far tighter controls and a staff training scheme to ensure this isn’t ascertain responsibility later in the answer,
repeated. which seems a contradiction of this point.
We also need to ensure that it is known that we are considering this matter as extremely serious
and there will be serious investigations into exactly how and why it was allowed to happen and who
was directly responsible. There may even be a need to suspend the employee in question and / or
the factory manager to show that we are dealing with this in an ethical but serious way.
There is of course potential to take action against our flour supplier here although it may be wise
not to go as far as this until serious investigations have been concluded and a decision has been
made on how to proceed.
Requirement 3:
I need you to email me your thoughts on the following:
What are the accounting issues associated with determining the need for a provision in the
financial statements?
REALISTIC TARGETS
There are several ways that we could go about setting a realistic and motivating target for our
Overall, this seems to be quite a poor response
restaurant managers. As I already mentioned we need to assess the trend across the board with
and doesn’t really answer the question. It would
some accuracy if we are to continue to assess managers in terms of profitability. This would see a
have been strengthened by focusing on setting
reduction in profit margin as the target.
realistic targets, particularly from a financial
However, there may be many other ways to set these to make them more relevant. The biggest perspective. The examiner’s report has some
problem that we have right now is loss of sales and customers. Our main focus should be gaining the good suggestions.
trust of these customers since the flour scandal. It may be wise for us to set a target for our
restaurant managers in terms of the amount customers through the door and further breaking this
down through whether they are new or returning customers. This could be ascertained through a
simple question from staff to our customers when they are here. However this method may be
susceptible to some creativity from staff. We could remedy this by monitoring growth in revenue.
Again focusing on customers their satisfaction and peace of mind is going to be key in retaining/
retracting those that we have lost. Word of mouth is a powerful force and so if customers who have
come back to us have had a pleasant experience then they are likely to pass this on. At the same
time a bad experience will also be passed on. We could certainly assess our managers in terms of
customer satisfaction. A simple survey to be completed on line or instore (perhaps with the added
incentive of being entered into a prize draw on competition) about their experience would enable us
to see whether managers are performing well in terms of both themselves and their staff
maintaining high customer service levels.
Requirement 3:
We need to decide on the following:
Looking forward, beyond the present concerns about the documentary, should we consider linking
the restaurant managers’ bonuses to a balanced scorecard approach? What would the
implications of that be?
BALANCED SCORECARD
Given the current circumstance that Pizzatime is in, it is unlikely that maintaining profitability Given the examiner’s answer, the candidate has
targets will be motivating for restaurant managers. The introduction of a balanced score card system approached this well. They have not recited the
could provide many benefits. We are already using a similar system in our PCCS programme and so theory of the BSC and have applied it to the
we could build on this to implement a full balanced scorecard system. scenario and business, instead picking up on
some important aspects like short termism and
As I already stated, profitability it is potentially on the back burner for the time being, given the loss
dysfunctional behaviour.
of sales that we have experienced. By using a range of non-financial and financial measures to assess
the performance of our managers we are encouraging a long term view of pizzatime. Right now, our
strategy needs to focus on getting our lost customers back from competitors and restoring their
faith in us. By using a balanced scorecard system (and PCCS) we can assess our customers’
perception of us and alter our appearance to attract more.
This system is also likely to be very motivating for managers. Looking beyond what is a difficult time
for us, profitability may be an unfair ways assess in the long term. Given our geographical spread,
margins are likely to vary from area to area and so what might be considered poor in one area or
outlet may be considered strong in another. Using a BSC will provide consistency across the board as
well as enforcing our expected standards, measures such as cleanliness and customer satisfaction are
all things that managers are in control of and so assessing them on this basis makes sense.
When using financial measures alone, the focus on gaining maximum sales may come at the
detriment of other important aspects of Pizzatime. It is likely that if managers are pushing to It is always worthwhile trying to leave a little
decrease table turnover time during a sitting, it will impact on the customer experience. This view time to sense-check the answer. Whilst this
would encourage short termism in the managers but in the long term we may have potentially just paragraph is a pertinent point, there is a
lost a loyal customer because they feel uncomfortable and rushed. By measuring performance from contradiction in that they probably meant
four perspectives, the aspects are balanced increasing turnover as opposed to decreasing it.
The risk of introducing a BSC system however is that managers may view these measures as
subjective and possibly not take them seriously. It still leaves room for some dysfunctional behavior
for example under the learning perspective – if a manager was being assessed on training days of
staff alone there may be potential for them to go too far with these and training becomes excessive.
There is also the danger of the content of these days being poor or inadequate so really we have not
gained better staff but the manager has got the “tick in the box” that they want. It’s therefore
important that we ensure that these measures can be controlled and the risk of dysfunctional
behaviour minimised.
TASK 4
Requirement 1:
Please email me your thoughts on the following:
What impact will the disposal of the subsidiary have on Pizzatime’s consolidated financial
systems?
Requirement 2:
Please email me your thoughts on the following:
How will this arrangement affect our management of the supply chain?