We asked one of our Strategic Case Study experts for her thoughts on the upcoming Case Study exam. Preparing for the Case Study Exam can be an overwhelming task for any student, especially since this is the final chance for CIMA Case Study students to write on the 2015 syllabus. Here is some insight on the pre-seen and great tips on how to tackle this exam.
Runn Review – November 2019 Strategic Case Study
As a freelance academic the courier is a vital part of my existence. In fact, only yesterday the courier delivered my Runn Case Study pack. The courier delivers exam papers to my door, collects them when I’m done and returns them to the relevant college, this is if it has been a paper-based exam rather than an online assessment. I can work and be time effective and they can be brilliant at logistics, delivery and driving. We each have our role.
I’m sure most of you reading this have shopped online and had a courier deliver the goods, if not, it’s time to taste this experience (even if simply for exam purposes). When the courier arrives maybe be more engaging and responsive to their world, chat a bit. In addition, find out how the business you work for or with uses a courier service. Start to feel the pulse of the industry as it connects us all.
Now to the case study – Runn - the key words that stood out for me are ‘flexible and responsive’, this well-established business is tuned into the needs of its diverse customer base. Its perpetually striving for improved efficiency and effectiveness that respond to the changing market.
Importantly note your new role is to report directly to the Board, not via a CFO. Bear this in mind in the way you think and act from now on. Start drafting your business communications in an appropriate tone and thoroughness as you step into this role and deliver as expected.
The case study presents financial statements for both Runn and its primary competitor (market pacer) Fronnt. Once you have analysed the financial information you will get a reasonable feel for returns, gearing ratios and working capital dynamics. Runn’s performance appears stronger than Fronnt, although its gearing is marginally higher. Debtors collection seems to be on a par.
Relevant issues that may require response in the case study exam:
Shifting business focus, new initiatives and service offerings: flexible and client responsive; change issues; outsourcing partner for corporates; the role of the evolving 3D printers.
The 3D printer: what is the potential role of these printers on future business? Fronnt is investing in development. Refer to note at the end of the case study on 3D printers and do perform your own research.
Sale of Cargo fleet: rather rent from larger airlines with more modern quieter planes.
Acquisitions (mergers): Runn has grown both organically and by acquisition. This trend will in all likelihood continue. Funding needs to be considered in both cases – debt, equity, convertibles, cash or combination. Consider existing gearing profile.
Valuations of acquisitions: methods and suitability of each.
Beta of Runn: Runn’s beta is given as 1.37, which indicates the company’s share price is over responsive to the market. How does this impact on share price movements or when issuing shares for an acquisition?
As a take-over target: issues of defences, as well as value.
International exposure: note the FCTR equity balance and consider hedges foreign investments or cash flows or fair value.
Value of leading-edge IT: logistics, technology and digital dynamics are in essence the supporting and enabling skeleton of the business. This IT provides the platform for efficiencies and new directions.
Pricing: responsiveness and affordability.
Dividend policy: in 2019 83% of earnings were paid out as dividend. What is dividend related considerations? How would you respond if a Board member proposed a drop-in dividend payout ratio to fund an acquisition?
Goodwill and intangibles on the statement of financial position: arisen from previous acquisitions. What about goodwill impairment? What are the other intangibles and issues related thereto?
Corporate Governance: the dominance of Ronald Hellers in the Board committees needs to be noted.
Sale of businesses or closing of business lines: close/sell what is not a key focus or segment that is underperforming.
Stakeholders: always essential to consider the key stakeholders, who are they, what is their interest?
Outsourcing / partnering: this is a growing solution to optimising any business value chain. What are the qualities of a valuable outsource partner? What are value chain considerations?
Needs of employees, working conditions: expectations fair; have a heart although focus on top quality delivery; contractors versus employees.
Confidentiality and security: keep this fundamental issue in mind.
Management accounting reports: consider optimal layouts to optimise management decisions. What information is key?
Exam technique and preparation:
1. Plan your answers before starting to flesh them out. Practice, practice and practice this. It is critical to ICS exam success!
2. Allow your experience to come through in your communications. Let your responses flow.
3. Every point well explained can earn you 2 or even 3 marks. Everything you say should be explained. In fact, start writing your emails differently and more clearly at work. Before pushing the ‘send’ button make sure your message is very clear, without repeating yourself though.
4. Keep your communications at the strategic level remembering that the technical skills were examined in the OTs.
5. Do your chosen mock exams two or even three times, become brilliant at them, rather than do too many mocks getting 50% each time. In other words teach yourself to fly (runn..) rather than be borderline or below.
As you work through practice mock exams and become more embedded in Runn and the Industry you can add to the above list and ensure you practice communicating your thoughts and views, which although not theory, may be informed by a blend of theory, experience and knowledge.
Now it’s play time with my new chocolate Labrador puppy that was couriered to me from Johannesburg last weekend, by a pet airline company on a British Airways flight – cargo section.
Note in 3D printing:
3D printing is when 3D solid objects are made from a model on a computer. 3D printing is done by building up the object layer by layer. Usually, 3D printers use plastic, because it is easier to use and cheaper. Some 3D printers can 3D print with other materials, like metals and ceramics. (Wikipedia)
3D printers can make many things, although the strength and durability has historically been weaker than a manufactured part. Hence replacement car parts can be made by a 3D printer. The press articles in the case study notes the improvement in 3D printers and the quality of the object printed, which can ow be from a far stronger resin than previous plastics used.
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