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Business Environment And Strategic Management Question Paper

Business Environment And Strategic Management

Course:Higher Diploma In Business Management (Business Management)

Exam Year:2009

HIGHER DIPLOMA IN BUSINESS MANAGEMENT
MODULE 1
BUSINESS ENVIRONMENT AND STRATEGIC MANAGEMENT
INSTRUCTIONS TO CANDIDATES
This paper consists of THREE sections; A, B and C.
Answer FOUR questions as follows:
The TWO compulsory questions in section A.
Any ONE of the TWO questions in section B.
Any ONE of the TWO questions in section C.
The marks for each question are as indicated.
This paper consists of 5 printed pages.
Candidates should check the question paper to ascertain that all the pages are printed as indicated and that no questions are missing.
SECTION A (60 marks)
Answer Questions 1 and 2 which are compulsory.
1. Read the case below and then answer the questions that follow.
FRUITEX APPAREL TRADERS (FAT) LTD

Fruitex Apparel Traders (FAT) Ltd was established some ten years ago by the family of Mr Devchand Kamji, with Mr Kamji as Executive Director. It is a private limited company located at the Export Processing Zone (EPZ) area in Athi River. It produces mens' jeans for the export market.

The company was established as a reaction to the Government drive to encourage local entrepreneurs to venture into the export business. It was also established so as to exploit the opportunities afforded by the United States Government initiative to promote its trade with Africa through the Africa Growth and Opportunity Agreement (AGOA). Mr Kamji, being a shrewd business and descendant of other shrewd businessmen, saw immense potential in the agreement, and took immediate steps to exploit the opportunities.

He organized family members both locally and in the home of their ancestors in India to raise the necessary capital. He arranged all the necessary legal paperwork for the establishment of the company, and finally got the operating license in late 1997. Machinery was sourced at very attractive terms from India. No duty was paid for the machinery and equipment in accordance with the laid down Government incentives to promote manufacturing for export through the EPZ's.

The bulk of the raw materials for the company comes from the Far East, mainly China. This is because the local cotton market is virtually dead. It was systematically killed by Government lack of sensitivity to the needs of farmers over a long period. The farmers, faced with poor commodity prices, high input costs, worn-out infrastructure, and corrupt public service officials, neglected their crops and finally moved to other activities. Whatever little of the crop is available locally is of such poor quality that it is not worth considering.

The company mainly sells to the American market in line with the AGOA terms. These terms have allocated specific quotas to exporters from the country. However, the quality standard requirements are quite stringent which increases the cost of manufacture. It is also a part of the terms of the Agreement that after a certain stipulated period of time, the goods must be produced using local raw materials, and not foreign sourced raw materials. This is posing a major problem to the company, and other similar companies, as the stipulated time period is about to end in two years time, while local manufacture of cotton has not picked up.

There are many other companies in the various EPZ regions throughout the country producing a similar product for the same market. There is also the problem posed by unethical traders who actually import manufactured fabrics from the Far East, disguise them as raw materials, only to repackage and export them as their own manufactured products. This greatly undermines the efforts of genuine manufacturers such as FAT Ltd. However, the Governmental seems to have woken up to the dangers posed by such unethical practices, and surveillance at the main entry ports is now greatly enhanced, with costly penalties being imposed on culprits who get caught.

The company is also finding it extremely difficult to keep afloat due to escalating costs of doing business in the country. To start with, the cost of labour has been shooting up progressively through Government initiated minimum wage legislations. The need to maintain appropriate working environments in accordance with the health and safety legal requirements have compounded the problems. The company has of late been experiencing strained labour relations with its workers, with frequent disruptions of operations through wild-cat strikes. The fact that the company has many semi-skilled expatriate employees, mainly from India, further strains its relations with the trade unions. This has greatly eroded the company's competitiveness, and it has been operating at a loss for some time now.

The American apparels market has become highly competitive. This is especially so after the liberalization of the Chinese economy. The Chinese merchants, with their very low costs of production, have aggressively marketed their products, thus edging out exporters from other countries. This is unlike the situation in the export of other products given preferential treatment under the AGOA terms. Such products include certain varieties of food items and handicrafts.
The management of FAT Ltd is therefore viewing the future with apprehension, and trying to appraise its options. Their apprehension has been further raised by the very high increases in the energy costs in the country, the high rate of inflation, and the as yet volatile political environment.
(a) Explain the threats facing FAT Ltd in its operations.(10 marks)
(b) Evaluate the strategic options available to the company in the light of the problems facing it.(10 marks)
(c) Suggest the measures that the firm could take in order to resolve its labour problems.(10 marks)
(d) Assess the limitations of the form of business adopted by FAT Ltd.(10 marks)

2. (a) Explain the principles of strategic planning.(10 marks)
(b) The rate of inflation in country A has been rising rapidly in the recent past. Analyze the types of decisions that a business enterprise has to make under such conditions.(10 marks)

SECTION B (20 marks)
Answer any ONE of the TWO questions in this section.
3. (a) Explain the ways in which moral values in an organization are developed as a way of fostering an ethical culture.(10 marks)
(b) Ms Fatuma, the owner-manager of Tama Enterprises, intends to adopt the use of new technology in her business in order to gain a competitive edge. Explain the factors that she should consider in choosing the technology.(10 marks)

4. (a) Company B has been losing many of its workers to some other competing firms. Suggest the factors that may account for this loss of labour to competitors.(10 marks)
(b) Explain the ways in which members of co-operative societies exercise control over the operations of the societies.(10 marks)

SECTION C (20 marks)
Answer any ONE of the TWO questions in this section.
5. (a) Analyze the basic requirements for strategy development in an organization.(10 marks)
(b) Explain the ways in which an effective information system within an organization facilities strategy implementation.(10 marks)

Business Environment And Strategic Management Question Paper

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