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Strategic And Financial Management July 2009 Question Paper

Strategic And Financial Management July 2009

Course:Higher Diploma In Information And Library Management (Information & Library Management)

Exam Year:2009

STRATEGIC AND FINANCIAL MANAGEMENT
INSTRUCTIONS TO CANDIDATES
SECTION A (60 marks)

KALANDA LIMITED
Kalanda Limited has been in the business of proving library services for the last 15 years. It has grown to 10 libraries located all over the country. The organization has a total of 100 employees distributed in the 10 branches. They are well trained and qualified in their respective fields. Every branch has a branch manager who runs the affairs of the branch.

Six years ago, the company saw tremendous growth in the business. This was prompted by the introduction of digital library services which involve the use of internet connectivity to universities abroad. The need for people to acquire higher academic qualifications from such universities led to the introduction of the digital library services. Alisa, who is the managing Director of the company, attributed the growth to the investment they had put in employees and computers. Apart from the digital library, the company provides contemporary library services. The company is equipped with current books in all areas ranging from science to art. Many members of the public regard the company as a home of knowledge. They have a canteen where soft drinks and lunch is served at a fee. They have standard layouts and equipment all over the branches. There are laid down detailed instructions for services, cleanliness and maintenance of computers. It is the responsibility of the branch manager to train his/her staff to follow the standard procedures. The organization has a staff improvement programme which ensures that they are retained to cope with the ever increasing challenges in the digital world. Alisa has, for a long time, ensured that he goes around all the branches carrying out staff, equipment and financial audit. He does this to ensure that he gives the external auditors an easy time, so he says. In his own worlds, he commented; 'I would like to see my managers and employees on their toes. All branches are required to produced quality audit reports and monthly financial reports showing incomes, expenditures and profits earned. Alisa had convinced other directors that his management system would work well. He personally urged all the managers to follow the system faithfully. Those who kept the system were rewarded with bonuses and perks. Those who failed to follow the system were fired from employment. Despite the hard efforts of Alisa to keep the company running efficiently, signs of hard times started showing in the last three years. The company started experiencing declining revenues, profits and increased labour turnover. The management, however, has not exactly understood the cause of all these problems. These problems have persisted, forcing Alisa to go for early retirement. Hellena was hired two years ago. Her task was to put the business back to profitability. She has laid more emphasis on strategic management. She was quoted as saying that; "the success of this company depends on how well we lay down our strategies".

She has emphasised to the managers on the need to see the internal environment as the foundation of growth. "Growth begins from within the organization and not from without"; she noted. She has introduced a computerized monthly financial reporting system. In the recent past, the online reporting of branch activities has increased efficiency, control and reduced the burden of the managers in administration.

The company is facing competition from upcoming digital library service providers. The world of technology has become more dynamic in terms of systems and equipment. This is calling for the replacement of old computers with those that are faster and more efficient. However, the Managing Director has indicated that there is need to re-brand their services and expand their geographical coverage in order to take services to the people. She has put down strategies to bring the company's traditional values in line with modern realities including globalization, while preserving the style and flair unique to its own business. The challenging question has been how to make the company glocal ( global and local).

The company does not have finance for its expansion programme ahead. The Finance Manager has in mind several options of raising the finance. The first option of issuing shares to the public to raise sh. 50, 000, 000 may prove difficult as the company has not paid dividends for the last two years. The second option is a bank loan at 8% interest.This is also a tricky option, especially for such kind of business which depends on service provision. In the recent annual general meeting the shareholders were not amused by the financial report that was tabled. The following is the profit statement that was tabled.
Income Statement
For the year ended
31 December 2008
Income---------sh 15,000,000
Less expenses:
Wages and salaries----2,500,00
Depreciation-----------400, 000
Transport---------------300,000
General expenses----700,000
-------3,900,000
------------------------------------------------11, 100,000
Taxation-----------------------------------4,000,000
Retained profit--------------------------7,100,000
The shareholders have wondered why the company is not paying dividends despite the profit reported. They have challenged the Finance Manager to provide a cash flow statement as an additional financial statement.
(a) Highlight the nature of internal constraints inhibiting the growth and expansion of Kalanda Ltd.(10 marks)
(b) Discuss the strategic options that are open to the new Chief Executive Officer to take in order to restore the business.(10 marks)
(c) Explain the implications of the failure by the company to pay dividends for the last two years.(10 marks)
(d) Explain the reasons why the cash flow statement would have been an important statement to be presented to the Board of Directors.(10 marks)

2. (a) Explain five measures that the management of an organization should take in order to facilitate effective implementation of organizational strategies.(10 marks)
(b) Highlights the limitations of using the internal rate of return (IRR) as a basis for making investment decisions.(10 marks)

SECTION B (20 marks)
Answer ONE question from this section.

3. (a) Explain the benefits that may accrue to an organization which embraces good corporate governance in its management approach.(10 marks)
(b) Describe the process that should be followed when formulating strategy.(10 marks)

4. (a) Explain five ways that a firms may adopt to manage employees in order to enhance efficiency in the organization.(10 marks)
(b) There are certain driving forces that influence the kind of changes that may take place in the industry's structure and competitive environment. Outline five such forces.(10 marks)

SECTION C (20 marks)
Answer ONE question from this section.
4. (a) Explain the benefits that may accrue to an organization which has installed a cost accounting system.(10 marks)
5. (b) Many public limited companies prefer using long term finance even when short term finance is cheaper. Explain five reasons that may account for this preference.(10 marks)

Strategic And Financial Management July 2009 Question Paper

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