MGT603 Assignment 1 Solution

Semester “Fall 2011”

“Strategic Management (MGT603)”

Assignment No. 1 Marks: 15

Let us suppose that you are the Managing Director of “Antillia Network”, a popular TV channels group. In a meeting of its Board of Directors, it is decided to launch a new sports channel in Pakistan to telecast major indigenous and international sports events. As the Managing Director of the group, you are entrusted with the responsibility of launching this new sports channel.

You are required to identify any seven “Key External Factors” which may influence the launching and functioning of your upcoming channel.

Solution # 1

Solution:

Key External Factors

• Social – how consumers, households and communities behave and their beliefs. For instance, changes in attitude towards health, or a greater number of pensioners in a population.
• Legal – the way in which legislation in society affects the business. E.g. changes in employment laws on working hours.
• Economic – how the economy affects a business in terms of taxation, government spending, general demand, interest rates, exchange rates and European and global economic factors.
• Political – how changes in government policy might affect the business e.g. a decision to subsidies building new houses in an area could be good for a local brick works.
• Technological – how the rapid pace of change in production processes and product innovation affect a business.
• Ethical – what is regarded as morally right or wrong for a business to do. For instance should it trade with countries which have a poor record on human rights

Solution # 2

After you line up financing, find a suitable location, hire staff and organize a potentially successful business plan, you must turn to external factors to effectively predict your future. There are a slew of factors to take into consideration that usually are beyond your control. While you may have contingency plans in place to deal with outside influences that affect your business, sometimes the best you can do is improvise when they occur.

Economy

The global economy is one of the biggest external factors that will, at some time, affect your business. Market fluctuations based on politics, terrorism attacks, wars and currency devaluation eventually trickle down to most commercial enterprises.

Finance

Wall Street and the solvency of big banks and financial institutions may not seem to have much to do with your business, but eventually they may affect your ability to continue doing business. Interest rates, the availability of credit and consumer loans are external factors you rarely can control.

Weather

If man could control the weather, vacation resorts would know exactly when to charge the highest room rates. Storms, tornadoes, hurricanes and wildfires are outside your purview of controllable business factors. In addition to the direct impact a storm may have on your ability to open your doors at any given time, widespread weather events often carry a substantial trickle-down effect to a wide range of businesses.

Infrastructure

Zoning laws, highway construction and housing development are particularly important to retail establishments, restaurants, manufacturers and other businesses that rely on a location for success. Changes in the local infrastructure may prove either disastrous or fortuitous to your company.

Laws

State, local or federal changes in the laws can have a direct impact on your business if the service or product becomes highly regulated or outlawed. Cigarette manufacturers learned this lesson when public smoking was outlawed in many areas and smoking indoors has become practically nonexistent. Government regulations such as those that affect the environment or communication are beyond your control and could have a direct impact on your business.

Trends

While you may spend a good part of your profits on marketing in the hopes of favorably influencing trends, some are beyond your control. An increase in technology use by your customers may be built into your strategic planning, but you may not have planned for the widespread use of social media that could affect your business. Celebrities who become advocates for a cause or decide to boycott a certain business practice can start a trend that could seriously affect your business if you’re on the wrong side of the trend.

Customer Base

Your target customer base may change suddenly or slowly over a period of time. The changing makeup of your neighborhood that attracts more singles or young renters can affect your business for example if you cater to a more upwardly mobile, family-oriented customer base. Cultural implications of a changing neighborhood may affect your business negatively or positively depending on your ability to meet the needs of changing demographics.

MGT613 Assignment 1

Question N0.1
What would be the core areas you have to cover in order to have a most accurate forecast for the company?
Answer:-
Forecasting is a natural extension to the types of data analysis typically performed on the historical data stored in analytic workspaces. Using Analytic Workspace
Manager, you can quickly generate forecasts of your measures. Here I discuses
Some core areas for accurate forecast related to inventory management because in the above scenario the major mismanagement noticed is especially in the area of inventory management.
Counting current stock:-
All business must know what they have on hand and evaluate sock levels with respect to current and forecasted demands. Company managers must know what they have in stock to ensure that they can meet the demands of the customers and production and be sure that you are ordering enough stock in the future. Counting is also important because it is the only way you will know if there is a problem with theft occurring at some point in the supply chain of inventory.
Cyclical counting:-
Companies prefer to count inventory on a cyclical basis to avoid the need for shutting down operation while stock is counted. This means that a particular section of the warehouse or plant is counted at particular times, rather than counting all inventory at once. In this way, the company takes physical count of inventory,
But never counts the entire inventory at once.
Controlling supply and demand:-
Whenever possible, obtain a commitment from a customer for a purchase. In this way, you ensure that the items your order will not take space in your inventory for long. When this is not possible, you may be able to share responsibility for the cost of carrying goods with the salesperson, to ensure that an order paced actuallyresults in a sale.
Stock control:-
Approval procedures should be arranged around several factors. You should set minimum and maximum quantities which your buyers can order without prior approval. This ensures that you are maximizing any volume discount available through your vendor and preventing over-ordering of stock.
Keeping accurate records:-
Any time items arrive at or leave a warehouse, accurate paperwork should be kept, itemizing the goods. When inventory arrives, this is when you will find breakage or loss on the goods you ordered. Inventory leaving your warehouse must be counted to prevent loss between the warehouse and the point of sale. Records should be processed quickly, at least in the same day that the withdrawal of stock occurred.
Managing employees:-
Buyers are the employees who make sock purchases for your company. Reward systems should be set in placethat encourage high levels of customer’s service and return on investment for the product lines the buyer manages. Incentives programs can help employees keep this in perspective. When they see a difference in their paychecks from poor inventory management, they are more likely to take precautions to prevent shrinkage.
Question N0.2
1. What are the steps you would like to follow in the design of a most effective forecasting process? Give your suggestions after analyzing the variances in given table.
Answer:-
Keys like to follow for most effective forecast.
Time series:-
Time series forecasting methods are based on the premise that you can predict future performance of a measure simply by analyzing its past results.
These methods identify a pattern in the historical data and use that pattern to extrapolate future values. Past results can, in fact, be a very reliable predictor for a short period into the future. You can generate this type of forecast very quickly and easily, and you do not need either forecasting expertise or an in-depth knowledge of your data.
The modeling techniques used by the time-series methods are relatively simple and run very fast. Time-series forecasting is extremely useful when hundreds or thousands of items must be forecast.
Use Scenario-Based Forecasts:-
One forecast is not enough. Consider what will happen if conditions change. For example, how might your forecast change if your competitors react strongly to your strategy? How might it change if they don’t react at all? If the government changes a policy that makes your product tax free. All of these factors will influence sales, so the smart executive considers multiple scenarios. While the executive may not expect the government to make something tax free, scenarios can be created that consider favorable government regulation, stable regulation, and negative regulation, just as one can consider light competitive reaction, moderate reaction, or strong reaction.
Use Multiple Methods:-
Since forecasts are estimates, the more estimates generated from various methods, the better. For example, combining expert opinions with a trend analysis could help you not only understand what is happening but also why. Every forecast results in decisions, such as the decision to hire more people, add manufacturing capacity, order supplies, and so forth. In addition, practice makes perfect, as they say. The more forecasts you have to make and resulting decisions you have to live with, the better you will get at forecasting.
Track Actual Results and Adjust:-
As time goes on, forecasts that have been made should be adjusted to reflect reality. You must have an annual forecast, the forecast changes regularly based on how well the company is doing. Further knows how strongly competition has reacted and can adjust the company’s estimates accordingly.
Use tools wisely:-
Many companies tend to rely solely on qualitative tools-the opinions of experienced manager and salespeople derive forecast ignoring such quantitative tools as regression and time-series analysis. The key is that both quantitative and qualitative tools are integral to effective forecasting problem. Without understanding where qualitative techniques, time series and regression do and do not work effectively, it is impossible it is impossible to analyze the cost and achieve the benefits of implanting new forecasting tools.
Measure:-
Obviously, before forecaster can be rewarded for excellence, a company must first develop system for measuring performance, tools for providing feedback, and standards and targets for what constitutes forecasting excellence. Without the ability to effectively measure and track performance, there is little opportunity to identify whether changes in the development and application of forecasts are contributing to business success.

FIN621 GDB Solution

Discussion Question

“Mr. Jahanzaib has set up a new sole proprietorship business one year ago. At the end of the financial year, he has to prepare financial statements of the business. In the last month of the closing year, he had an offer to sell the freehold land for Rs. 600,000/- which was previously purchased for Rs. 400,000/-. Mr. Jahanzaib had reported the land in his balance sheet at Rs. 600,000/- considering the offered value.

Required:

Do you think that Mr. Jahanzaib has rightly reported the land’s value in the Balance Sheet? Justify your answer in the light of accounting principle(s) discussed in the video lectures. You are only required to mention the name of applied principle(s). Details are not required.”

Note: Your comments should not be more than 40 words.

Solution # 1:

The Cost Principle is violated in the said case. We have to record the assets at the price not on the current market value.

The second principle violated here is the Going-Concern Principle as we have bought the asset for use in the business and not for resale Mr. Jahanzaib is looking at the price which the buyers are offering him, he is wrong in his approach.

Solution # 2:

Cost Principle From an accountant’s point of view, the term “cost” refers to the amount spent (cash or the cash equivalent) when an item was originally obtained, whether that purchase happened last year or thirty years ago. For this reason, the amounts shown on financial statements are referred to as historical cost amounts.

Because of this accounting principle asset amounts are not adjusted upward for inflation. In fact, as a general rule, asset amounts are not adjusted to reflect any type of increase in value. Hence, an asset amount does not reflect the amount of money a company would receive if it were to sell the asset at today’s market value. (An exception is certain investments in stocks and bonds that are actively traded on a stock exchange.) If you want to know the current value of a company’s long-term assets, you will not get this information from a company’s financial statements - you need to look elsewhere, perhaps to a third-party appraiser.

FIN623 GDB

FIN623 GDB

A recent research report has revealed that only (2 percent) people pay tax in Pakistan. Which measures should be taken by the legislative bodies and CBR to improve the tax revenue of Pakistan?


Solution 1:

With the help of following measures Tax revenue can be increase:

• Relief for the taxpayers by providing concessions and rationalizing the excise tariffs, thereby creating a conducive and business-friendly environment for the taxpayers.
   
• Broadening of tax base by minimizing exemptions and bringing more services in the excise regime.
  
  
• Simplification of tax laws to make them easier for the taxpayers and compatible with international best practices.
  
  
• Removal of irritants and impediments in fiscal laws and procedures.
  
  
• Reducing the cost of doing business by furthering the automation of business processes and minimizing taxpayer interface.
  
  
• Improving tax compliance through better relationship between taxpayers and tax officials as well as by introducing stronger penalties for deliberate and repeated offences.
  
  
  

Solution 2:

FIN630 GDB Solution

Discussion Question

ABC Fertilizer Company has a high share in KSE 100 Index.  Today, at the end of the business activity, suddenly news was heard that major shareholders of the company are planning to withdraw.

In your opinion, how this news will affect the existing shareholders of company and the potential investors’ response on the next business day?  You are also required to discuss whether it will have an effect on Lahore Stock Exchange (LSE) and Islamabad Stock Exchange (ISE) trading or not?  Give supporting arguments.


Solution:

According to the Situation of ABC Fertilizer Company It will have a Negative impact on the Goodwill of Company that even after a high share rate the major shareholders are planning to withdraw from the company and it will create a problem for existing shareholders to find the Share holders with the same or higher financial or Professional Strength who could invest more to Stabilize their share price in the Market.

            And yes it will effect the LSE and ISE as it will be tend in the Karachi Stock Exchange because they are inter related with each other. 



Solution 2:

The stock markets in Pakistan as well as the world are interrelated with each other. If something happens in USA this also affect the stock markets in Pakistan. The above news will affect all the stock markets in Pakistan as the company occupies a big share in the market.

The investors sell the shares when they do not see any gain in a company or if the market is not worth investing, this will lead to bearish trend in the market. The stock price of the company ABC will fall and will devalue the exiting stock of the company. The other investors may likely to withdraw their money from the stock market also.