Part A) 30 marks
In 2005 Jade Jaffrey set up a privately
owned UK limited company, Learnalot Limited, producing educational puzzle and quiz games for very young children. The games were based on simple questions on small plastic cards, with picture answers engraved on durable wooden blocks, with the scores achieved recorded manually on a wooden abacus. As a parent of very young children Jade had spotted what appeared to be a gap in the market as many other games were expensive for customers to purchase. Some used only paper and card, which did not last long, but were sold at a premium price; others used technological equipment. Initially, Jade produced the games at home, and sold them to local nursery schools, play groups, and friends with young children. As word spread, demand for the puzzle and quiz games increased and in 2006 Jade used savings to rent a small building, employed 5 staff on a part-time basis, paid at the UK minimum wage level, to produce the games, and advertised the products in local newspapers and on a website. Despite these additional costs, the company certainly benefited from its low cost operations. Increasingly customers ordered by phone and on-line and received the games via the postal service ? mail order. The materials supplier - a very reliable supplier of high quality materials, to Learnalot, a company called Wood Board Limited, as part of its commitment to wider society, allowed Jade three months credit. This was despite Learnalot being one of its smallest customers. Annual sales in 2005 had been ?25,000 and had grown to ?250,000 by 2010, with operating profit margins of 15%, with all profits after taxation re-invested in the company as no dividends were taken by Jade, the sole shareholder, with Jade taking a company salary as Managing Director (in fact, the only director). In 2010 Learnalot Limited entered into a contract with a nationwide games retailer, Funplay plc. Initially sales to Funplay increased in 2010 and 2011, but by 2012 had stabilised at about 30% of total annual sales. Funplay used its bargaining power to demand payment terms for settlement of bills from Learnalot to be 3 months. Keen to stimulate growth, at the start of 2012, Jade then decided to expand into puzzle and quiz games for people in rehabilitation following accidents and other physical injuries, as medical research indicated that engaging in mental thinking activities could increase recovery speed and success rates. Sales were targeted at hospitals and private physiotherapy clinics ? there were many of both, and Jade felt that they would leap at the opportunity to purchase games to help patients. To boost sales Jade decided to cut the sales price for the hospitals and clinics. The expansion required the acquisition of a bank loan (at a relatively high interest rate) used, in part, to purchase larger premises, and a need for more staff. The expansion saw the company benefit from the closure of a local large automotive supply company resulting in large numbers of people looking for jobs. Jade ensured that salaries and wages were above the average market rate, and accompanied by excellent terms and conditions of employment, the staff were, and still are, hard-working and committed to Learnalot. The company employed 25 full time staff by the end of 2012. Local people viewed the company as a desirable place to work. Jade felt, and continues to do so, a significant degree of responsibility to the staff and, indeed, the local community. The expansion into games for rehabilitation was slow, with low sales growth. Staff in local hospitals had concerns about endorsing just one product of this nature, whilst the physiotherapy clinics were continually seeking purchase price discounts. Both of these matters came as a surprise to Jade. By the end of 2014 it was clear that rehabilitation-linked sales would only ever be about 5% of total annual sales, even though the hospitals and clinics reported that the patients who used the games certainly benefited and would like to retain the option of purchasing games as and when required. Unfortunately, the requirement to pay bank interest and repayments, and the constant cash flow needed to pay staff, by then numbering 40, was proving a headache to Jade. Jade found it difficult to balance the management of day-to-day operations with the pressures of planning for strategic growth. Unwilling to appoint and trust another senior manager, he continued as the sole director. By the start of 2015 Jade felt confident about embarking on strategies which would, at least potentially, see sales increase substantially. Funplay suggested that Learnalot expand into the purchase and re-sale of a technological quiz game, Push-Pull, indicating that it would be happy to be Learnalot?s sole customer for these games, providing Learnalot stored and delivered the games on a just-in-time basis, with terms being on a sale-or-return basis. Jade committed to a three year contract and increased the size of the bank loan accordingly, paying an even higher rate of interest than before, mortgaged on Learnalot?s assets and Jade?s personal home. A year later, Jade realised that a major mistake had been made. The market for technological games had settled on downloads and apps, and Push-Pull was a disk-based game, with Funplay ordering fewer and fewer games. (Despite that, sales to Funplay of the original plastic cards and wooden blocks games still totalled about 25% of Learnalot?s annual sales.) Looking into 2016 and beyond, Jade realised that unless something was done, Learnalot?s future would be bleak as cash flow was worsening on a monthly basis. Additionally, Funplay was suffering from a downturn in sales and reduced cash flow and had indicated that the credit terms might be increased from three to four months, although would commit to maintaining its current level of purchases from Learnalot. Unwilling to downsize of because of the negative consequences for staff ? unemployment levels were still high in the local area, Jade decided to explore the possibility of moving into downloads and apps for games, targeting the wider European Union market. Jade mentioned this to a relative, an accountant, who was blunt, pointing out that it was clear that Jade had no stated vision, mission, and clear strategic objectives for the business. Additionally, the relative emphasized that with no strategic objectives there could be no meaningful performance measurement system, and any move into an international arena should not be entertained without undertaking full business environment analysis and assessing the possible impacts upon performance targets. The relative felt that the business had reached a stage on its life cycle where Jade should consider employing an experienced person to run daily operations, allowing Jade to focus on strategy. Jade was perplexed. There was no money to hire another senior manager, and if the company was to be saved, there was little, if any, time, to carry out all the recommendations of the relative.
( 3500 words)
-Identify the stakeholders who might have an interest in the success of Learnalot, and undertake a stakeholder analysis, highlighting their degree of influence on the company?s future direction, and how they might be managed. In so doing, identify how the outcomes of the stakeholder analysis might impact upon the development of a performance measurement system. (Use no more than 750 words ? you may use fewer) (8 marks)
-Advise Jade on the lessons to be learnt from the ventures into rehabilitation-linked games, and the disk-based games, not least in the context of future strategy. (Use no more than 750 words ? you may use fewer) (8 marks)
-Jade is actively considering expanding from the UK into the wider European Union market. On behalf of Jade, apply, in so far as you are able, PESTLE and 5 Forces analyses of the external environment of the business, and suggest how the outcomes of the analyses will impact performance measurement and management. (Use no more than 1,000 words ? you may use fewer) (14 marks)
Part B) 20 marks
-At a recent business briefing, one of the speakers stated assertively: ??in every organization I have managed, people have always caused problems. They never do what we as senior managers require them to do. An effective management control system is essential if employees are to do what is required of them. We need to keep them on a leash. Otherwise, all is lost.?? Some other speakers disagreed with this view and a heated debate between the speakers ensued. So fierce was the debate that the essence of management control was lost in the fierce arguments and not made clear. Required a) Critique the statement above, and in so doing explain the nature, purpose and significance of management control in the context of performance management. (Use no more than 750 words ? you may use fewer) (10 marks)
-Identify ways in which management control may be enacted, drawing upon differing types of control, and analyzing their strengths and weaknesses. In so doing refer to the implications for styles of management, and for performance systems. (Use no more than 1,500 words ? you may use fewer) (10marks).
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