WhatWe’llCoverinthisSession

• EssentialsforQ4• WhatisDifferentaboutthe34Marker?

• WhyDoStudentsStruggle?• WheretheMarksComeFrom• WorkedExample– June2015

BUSS3Q4Essentials

• Timeallocation– 40mins• When– alwaysanswerlast• Structure:

–Plan(2-3mins)–Three paragraphpoints(7-8mins each)– FullAJIMconclusion(10mins)

WhatisDifferentAboutQ4?

• Onemorefully-developedparagraphpoint(samePAnEL technique)

• Fullyjustifiedconclusion• Buildonprioranalysisandevidence

WhyDoStudentsStrugglewithQ4?

• Leavetoolittletimetodoitjustice• Writetoomanypoints• Bringinnewpointstoconclusion(toolate)• Failtoexpressanopinionandjustifyit

=poorexamtechnique

ExamGoldDust– WhattheExaminerSaw…

• Whatsuccessfulstudentsdid…• What“lesssuccessful”studentsdid• SpecificfeedbackonQ4

Successful Students…

• Answerswerewellplannedanddirectlyansweredthequestion set

• Selectiveargumentswereused&well-developedinrelationtotheactualquestion

• Numericaldata wasusedeffectivelyaswellasrelevantcalculations tosupportarguments

“LessSuccessful” Students…

• Answershadrelevantpoints,butusuallythesewerenotdeveloped

• Tendedtopadoutanswersbysimplyrepeatinginfofromthecasestudy

• Weakeranswerslackedastructure&didnotspecificallyanswertheQ

• Oftenextrapointswereaddedtotheconclusionindicatingalackofplanning

ExaminerFeedbackonQ4

ThekeytoansweringQ4wellisplanning&structure

Successfulstudentsselected

afewkeyargumentsboth

forandagainsttheproposal

WhatCandidatesShouldTakefromtheBUSS3Examiner in2015…

PLAN responses

ANSWER thequestionset

BeSELECTIVEinarguments(points)

Use datatoSUPPORTarguments

JUSTIFYyourconclusion

HowBUSS3ismarked…

MountEVA

L1

L2

L3

L4

L5

E1E2E3

MountKAA

Eachquestion2peakstoclimb…

WheretheMarksareGivenina34Marker

StructuringAnswersinBUSS3

Q2&3 Q4

1stPoint

2ndPoint

Conclusion Answerandjustify

Answerwithafullysupportedjudgement(AJIM)

June2015BUSS3CaseStudy

Chocolatierplc

Kate’sProposal…

• Growth:sellluxurychocolatestoUKsupermarketsratherthanopennewstores

• Operations:– Close existing factory in York– Move production to a new factory in

Poland

HowyoucouldhaveusedtheearlierQs:

• Q1:Investmentappraisal–NPVpositive&greaterthantarget– Paybackperiodlessthan3yeartarget

• Q3:Criticalpath–WillPolandbeopenintime?–OpsDirectorconcerns

ThisisreasonQ4islast!

• TransformChocolatiercapacityandefficiencytoimprovecompetitiveness

• Opportunitytoexploitstronggrowthinluxurychocolatemarketbysellingtolargestsegment(supermarkets)

• MovetoPolandcansignificantlyimproveChocolatierprofits

PLANNINGYourPoints

ArgumentsSupportingKate’sProposal

ArgumentsAgainstKate’sProposal

• Significantoperationalrisksinvolvedincludingpossibledelays&lossofexpertise

• SellingtosupermarketsrisksdamagingChocolatier’sbrandreputationforexclusiveness

• Riskofresistancefromunionsandemployeescoulddamagebusinessreputation

Point1:InSupportofKate’sProposal

OnereasonwhyKate’sproposalshouldbeaccepted isthatitcouldtransformChocolatier’sefficiencyandproductioncapacityandtherebysignificantlyincreaseitscompetitiveness.

Point1:Analysis

Theswitchfromlabourintensiveproduction(York)tocapital-intensiveproduction(Poland)shouldenableChocolatiertobenefitfromimprovedproductivityandeconomiesofscale,whichinturnshouldsignificantlyreduceunitcostsofproduction.Modernautomatedproductionmachineryenableshighlevelsofcapacity,whilststillmaintaininghighproductquality,whichwouldmeanthatthefixedcostsofchocolateproductionarespreadoveramuchhighervolumeofoutput,thereby reducingChocolatier’sunitcosts.LowerunitcostswouldinturnimproveChocolatier’scompetitivenessbyeitherenablingittoofferlowerprices(forexampletogainhigh-volumesalesfromsupermarkets)orimproveitsgrossprofitmargin..

Point1:Application

TheforecastdatainKate’sproposalsupportstheargumentthatthemovetoPolandcouldtransformChocolatier’sefficiencyand,therefore,it'scapacityandcompetitiveness.Table1suggeststhatcapacityatPolandwouldbe160millionunits(400%)peryearhigherthanYork.Themovetoautomatedproductionwouldresultinvariablecostsperunitwhichare50%lowerinPolandthanYork.Ifbothfactorieswereworkingatfullcapacityutilisation,Icalculate(seeworkings)thatoverallunitcostswouldalsobe50%lowerinPoland.Thisisahugelysignificantdifferenceforamanufacturerandarisesbecause,whilstfixedcostsinPolandare£3mperyearhigherthanYork,theyarespreadoveramuchhigheroutput,demonstratingthepositiveeffectofeconomiesofscale

Workings (alwaysshowyourcalculations)

• York:totalcostsat40munits=VC(£20m)+FC(£2m)=£22m.Costperunit=£0.55

• Poland:totalcostsat200munits=VC(£50m)+FC(£5m)=£55m.Costperunit=£0.275

• Difference inunitcostsatfullcapacityutilisation: ((0.275/0.55)– 1)=50%lower

Point1:Evaluation

Theopportunitytoeffectivelyhalvetheunitcostsofthebusinessseemstobea verystrongreasontosupportKate’sproposal.ThepotentialimpactofthecombinationofautomationandeconomiesofscalewouldgiveChocolatiermanyoptionstobuildmarketsharebyacceptingsupermarketordersand/orimproveprofitmarginsonexistingsalesthroughChocolatierstores

TheConclusion!

34MarkerConclusion

ExampleConclusionusingAJIM

Overall,IsupportKate’sproposal,thoughIhavesomereservationsabouttheexecutionofKate'splan.IjustifymysupportforKate’sdecisionmainlyonthetransformationaleffectthemovetoPolandwouldhaveontheefficiencyandcapacityofChocolatier,whichwouldthenenableittoaccessthelargestsegmentoftheluxurychocolatemarket.InorderforChocolatiertoachieveitscorporateobjectiveofalargeincreaseinmarketshare(from5%to15%)itneedstoachieveastep-changeinrevenues,anditcannotdothisjustbyrelyingontheYorkfactorywhichisalreadyoperatingatfullcapacity.Thefactthattheluxurymarketisexpectedtogrowsostrongly(33%)indicatesthisisanopportunity thatistooimportanttomiss.OfcoursethemovetoPolandinvolvesChocolatiertakingsomesignificantrisks,particularlyoperationally,anditseemslikelythatPolandwillnotbereadyforproductionasquicklyasKatepredicts(theOpsdirectorthinksso).ChocolatierwouldalsohavetotakegreatcarehandlingtheHRMissuesfromclosingYork,particularlyiftheunionsthereresisttheclosure.AsIhaveargued,thepotentialdamagetoChocolatier’sbrandfromapoorly-managedclosureisashort-termthreattothebusiness.However,themostimportantreasonforsupportingKate’sproposalisthepositiveinvestmentappraisalresultswhichmeetshareholderrequirementsanddemonstratethesignificantpotentialforprofitgrowthfrommovingtoYorkandsupplying thesupermarketswithluxurychocolates.EvenifthereisadelayingettingproductioninPolandupandrunning totherequiredquality,thelong-termbenefitsoftheproposalfaroutweighthecosts.

StructuringAnswersinBUSS3

Q2&3 Q4

1stPoint

2ndPoint

Conclusion Answerandjustify

Answerwithafullysupportedjudgement(AJIM)

So– toconcludeforQ4

PLAN responses

ANSWER thequestionset

BeSELECTIVEinarguments(points)

Use datatoSUPPORTarguments

JUSTIFYyourconclusion