Certified Finance and Accounting Professional Stage Examination

The Institute of 6 December 2019

Chartered Accountants 3 hours – 100 marks
of Pakistan Additional reading time – 15 minutes

Business Management and Strategy

Instructions to examinees:
(i) Answer all SEVEN questions.
(ii) Answer in black pen only.

Q.1 Etihad Limited manufactures and sells three products. The following information is
available in this regard:

Product 1 Product 2 Product 3

(See note-1) (See note-2) (See note-3)
Year Total Total Total
Sales Sales Sales
market size market size market size
-------------------------------- Rs. in million --------------------------------
Actual
2017 74 132 3 70 10 100
2018 72 134 2 71 14 120
2019 74 133 2 69 16 140
Forecasted
2020 73 135 2 68 18 160
2021 74 134 1 62 22 190

Note 1: Product 1 is a long-standing product that has been consistently selling in the same
market.

Note 2: Product 2 has been consistently selling in the same market for quite some time.

Note 3: Product 3 was introduced in 2017 and is still considered new in the market.

In the current year, 2019, the market share of the biggest competitor for Product 1 is 20%,
Product 2 is 44% and Product 3 is 37%.

Required:
Analyse the information provided above and devise strategies for each of three products. (14)

Q.2 Alpha, a small management consultancy firm, deals with corporate trainings on various
finance matters. It gets the required training data in an Excel format through email. The data
is kept on a central computer that can be accessed remotely through the internet with a
password.

Recently, a long-standing corporate client has asked Alpha to provide consultancy on an

investment decision. Not willing to pass the opportunity, the directors at Alpha have said
yes to the client as they believe that their senior executives have the capability to perform the
task. However, the directors are concerned about the risks of handling such sensitive and
confidential investment information with the existing IT controls in place.

Required:
(a) Identify and briefly explain categories of business risks that Alpha may be exposed to. (07)
(b) Briefly explain the general system software controls that Alpha should employ to
protect data confidentiality. (04)
 Business Management and Strategy Page 2 of 4

Q.3 Zymal Aryan (Zymal), a chartered accountant has recently been appointed as CEO of Palate
Foods Limited (PFL), which is engaged in the manufacturing and marketing of
ready-to-cook food.

Zymal has noticed that no formally defined corporate code of ethics exists at PFL. There
have been instances that urge the need of having a formal corporate code of ethics to deal
with stakeholder groups. Some of the instances are as follows:

Managers often abuse junior staff with verbal and personal attacks;

Internally reported cases of kickbacks in the procurement department are pending
management action;

Female employees are not hired in the finance department;

Data integrity is highly questionable as personal details of employees, customers and
suppliers are easily accessible; and

No significant CSR activity has been carried out in the past three years.

Zymal’s concerns have further aggravated when in a recent meeting, marketing head
informed her that key ingredients for ready-to-cook food would not be available due to
payment dispute with a foreign supplier. Alternatively, PFL would buy local ingredients
which would not be of as good quality as imported ingredients. However, marketing head
further informed that ready-to-cook food would be aggressively marketed as new and
improved products. When Zymal questions the ethical stance, she is informed that such
practice is a marketing norm and disclosure of that information would adversely impact
product demand and profitability which would not be acceptable to shareholders of PFL.

Required:
(a) List down the statements that might need to be included in the formal corporate code of
ethics to address the concerns of Zymal for each of the following stakeholder groups:

Employees
Customers
Society (06)

(b) Mention the factors that Zymal would need to consider for effective implementation of
and compliance with the corporate code of ethics. (03)

(c) Identify and explain the fundamental principles of Code of Ethics of ICAP that may be
compromised if Zymal proceeds with the marketing head’s strategy. (06)

Q.4 Gertonia is the largest economy in the European region and enjoys a stable and business
friendly government. Its automotive industry is well known for producing top quality speed
car brands and is considered an industry leader in the world. It has an excellent road
network with no speed limit that makes it perfect to meet the Gertonian’s appetite and
demand for quality and speed.

Gertonia’s automotive industry is the largest industry sector and employer in the country
which includes from the large car manufacturers to extensive support network of many
subsystems, component and parts manufacturers. The industry is well supported by iron and
steel industries, efficient financial and IT systems, well reputed technical education
institutes, heavy public and private expenditure in education and highly skilled workforce.
There is an intense competition and a constant pressure on manufacturer to innovate.

Fredrick Dunden, Head of Auto Industry Union, believes Gertonia has developed a national
comparative advantage over many other countries, however, he is hesitant about the future
leadership position for speed cars mainly due to the tougher regulations on emission
requirements prompted by Gertonia’s deteriorating environmental conditions, petrol
depended engines and systems of speed cars, government plans to introduce speed limits on
all areas to reduce the increasing rate of car accidents in some areas, changing needs of the
tech-savvy consumers and the rising trend of people interested in driving rented speed cars
rather than owning one.
 Business Management and Strategy Page 3 of 4

Required:
(a) Explain how Gertonia achieves the national comparative advantage over many other
countries. (06)
(b) Discuss the threat(s) and weakness(es) of the automotive industry for speed cars
presented in the case, and provide suggestions to Fredrick Dunden to tackle these
issues. (12)

Q.5 (a) WinTech Limited, a US based company is looking for a candidate to fill a key position
in finance department at its Karachi office. The potential candidate would be expected
to lead a large team of accountants in a complex environment where strict deadlines
for reporting would need to be met. The candidate would be reporting to CFO and
would also need to frequently liaise with the head office in US. Human resources
manager in liaison with CFO has prepared the following job description to be
advertised shortly:

WinTech Limited is looking for an enthusiastic individual to fill a

vacancy in finance department at its Karachi office. The person will be
reporting to CFO. Job responsibilities include:

Monitoring day-to-day financial operations of the company.

Preparing periodic financial reports and statements.

Developing strategies to ensure that financial risk is minimized.

Ensuring compliance with financial regulations and legislation.
Salary: Competitive
How to apply: email us financejobs@wintech.com

Required:
Identify the shortcomings in the above advertisement / job description. Also make
suggestions to overcome the identified shortcomings. (06)

(b) Solutions Limited (SL) is known for having strong sales force. To attract the talented
sales personnel, SL offers higher than industry base pay. Although opportunities for
promotions are limited due to the size of the firm, SL compensates sales personnel by
means of lucrative cash bonuses. Financial targets are communicated to sales groups at
the beginning of each quarter and cash bonuses are paid on the basis of collective
performance of the group members.

However, recent increase in turnover of sales personnel despite having an attractive

reward system has been a matter of concern for the management of SL.

Required:
Critically evaluate the existing reward system for sales personnel at SL. Your evaluation
should include discussion of shortcomings and suggestions for improvement. (10)

Q.6 Fahad Ahmad (Fahad) owns a small retail store that sells computer parts and accessories. In
an effort to expand the business, Fahad is planning to attract a wider customer base by
launching its own e-store to sell the goods online.

Required:
(a) Discuss whether it is advisable for Fahad to launch its own e-store. (06)
(b) Mention the alternatives available to Fahad to sell the goods online and recommend
the most suitable alternative(s). (05)
 Business Management and Strategy Page 4 of 4

Q.7 (a) The expected role of accounting function in devising and implementing marketing
strategies in an organization is much broader than just performing investment analysis
on the basis of financial return.

Required:
Discuss the expected role of accounting function in devising and successful
implementation of marketing strategies in an organization. (03)

(b) Rivaaj Group is intending to introduce a new product line under the brand name
‘Super Athlete Sportswear’ (SAS) that would manufacture and market sportswear such
as shoes, apparels and related accessories.

SAS would offer two variants of sportswear; premium variant with unique features
targeting high-end customers and economy variant with basic features targeting middle
and low income customers. Sportswear would be offered through SAS dedicated
outlets, distributors who would supply to the major retail chains and SAS official
website.

Required:
Recommend marketing strategy to SAS for each of the following 4 P’s of the marketing
mix:

Product
Price
Place
Promotion (12)

(THE END)