Total turnover of GUSSIE PERRY Ltd increased from GH¢ 15,144,000 to GH¢ 17,460,000 – an increase of 15.3%.Profit increased from GH¢ 1,230,000to GH¢ 1,652,000 – an increase of 34.30%.
For the company as a whole, the return on sales may be calculated as follows:
Last year – GH¢ 1,230,000 ÷ GH¢ 15,144,000 = 8.1%.
This year – GHs¢1,652,000 ÷ GH¢ 17,460,000 = 9.46%.
Returning to the individual divisions, the following table expresses the various key financial measures.
Divisional assessment
Cruise
As regards the Return on Investment and Residual Income, one could really say that the cruise division had ‘encouraging results’. The returns from its investment is able to cover its cost of capital thus a positive Residual income. Turnover growth in Cruise division is 16.45% more than the Turnover growth rate of the company as a whole thus additional investment in this area might be productive. Although, without knowing the precise market conditions and the needs of this division as regards new shipping or other facilities, the financial performance of this division is very bright to make any firm judgements on investments and capital decisions.
Advise for Cruise Division
It will be advisable to approve and fund decisions for projects and programs of different types (for example marketing programs, recruiting programs, and training programs) for this division as a higher ROI means that investment gains compare favorably to investment costs.
Ferries
Ferries division shows an improvement of 6.55% in sales but 35.42% increase in profits, this is encouraging. It has a ROI of 26%, thus is covering its cost of investment. Capital and additional investments should be approved and encouraged at this division.
Advise for Ferries

Although there was low increment in sales, it translated into a high operating profits. The company should make efforts to increase turnover through company’s pricing policies, inventory management and investment in capital assets.
Bulk Shipping and Containers
In both containers and bulk shipping, the Chairman’s statement is fairly accurate in his pointing to disappointing results in this area. Both are not able to cover its cost of investment. Both Divisions has negative residual incomes.
Advise for Bulk Shipping and Containers
A negative residual income means that the division could have done better by another, risk-free approach. Some analysts refer to residual value as Economic Value Added. If your residual value is negative, you are not truly adding value to what you are doing. There will be no value added if more funds and investments are approved at this division.

• Aaron Yeboahs’ recent exposure to mission statements as part of the strategic management process provides a useful opportunity to evaluate their relevance and value to a small company such as GUSSIE PERRY. In some ways, Aaron is a ‘walking mission statement’. He epitomises the values, behaviour, strategy and purpose of why GUSSIE PERRY exists. Mission statements in defining the reasons why the firm exists, what it aims to achieve, how it aims to achieve its purpose and who it is in business for, can act as a powerful motivating force for the company. In strategic terms it may clarify the markets that the firm intends to serve, the products and services provided for those markets and the way they will be reached. In so doing it may define the boundaries of the organisation chosen by the top management.
• It may also specify the technologies to be used (perhaps important for GUSSIE PERRY and the competencies it will use to compete in its chosen markets. It is therefore a combination of ‘hard’ tangible drivers of the business and the ‘softer’ values and behaviours, which will enable the mission of the business to be achieved.
• Ideally, it should have relevance and resonance with all types and levels of employees. It expresses values and beliefs and in so doing will shape and influence the policies and standards adopted by the firm. They can profoundly influence the attitudes and behaviour of key stakeholder groups both inside and outside the firm and achieve a consistency of purpose for the stakeholders.
• By their very nature mission statements typically come at the beginning of the rational planning process and thereby facilitate consistent strategic decisions. However some commentators have argued that you discover rather than invent your mission.
• Aaron may now be in a position to develop a much more meaningful mission statement reflecting the origins of the company, his preferences, and the environmental conditions influencing the company together with its resources and associated competencies and capabilities.
• As the organisation grows and develops so its need for a formal mission statement may increase, enabling the direction of the company to be understood and for more detailed goal setting and planning to be done against a consistent framework.
• Its ability to communicate what the firm stands for both to stakeholders inside and outside the firm should not be underestimated. As such, development of an effective mission statement will take time and reflect changing conditions faced by the firm.
• Mission statements by their very nature are broad in their scope and intended to positively influence the many stakeholders linked to the company. Effective statements should be brief, adaptable to changing circumstances and clearly show the distinctiveness of the firm and its mission. Ineffective statements will convince nobody, have little or no impact on, or relevance to, what the firm does. They may be merely statements of good aspirations and intentions, and used for public relations purposes to justify actions already taken. Once created, good statements should be re-visited at regular intervals to ensure they are relevant to the environment the firm is operating in.
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• Understanding and managing environmental costs. Environmental costs are often hidden in overheads and environmental and energy costs are often not allocated to the relevant budgets.
• Minimise accidents and long-term environmental effects. Accidents and long-term environmental effects can result in large financial liabilities.
• Companies with poor environmental performance may face increased cost of capital because investors and lenders demand a higher risk premium.
• Environmental protection and ethical labour practices is now a key aspect of corporate social responsibility. Any steps they can take to protect the environment and its employee’s safety are considered both good for the company’s reputation and society as a whole.
•  Pressures on businesses for environmental and safety of employees are increasing.
• Short term savings through waste minimization and energy efficiency schemes can be substantial.
                                                                                                                                                                                  (Any 4 points)

The role of communication during strategy implementation is very critical to the implementation of strategy. Effective communication is needed for successful strategy implementation.
Communication is effective when it is directed to appropriate people who need to make certain decisions or use it to perform their routine tasks. Furthermore, it must be accurate, complete and timely and must convey meaning in a cost-effective manner.
(i) Strategy has to be communicated to all stakeholders. It is important that proposed strategy is known and understood by all especially managers and employees. Understanding the strategy will enable them to accept their roles and become committed to its implementation. Inadequate information on adaptive changes, insufficient instructions and poor feedback on performance can reduce the success of strategy.
(ii) Communication is required for planning, coordination and control.

• Management decision-making requires data for planning. Managers are at the center of a communications system, providing or receiving data planning and implementation.
• Interdepartmental coordination depends on information flows. All the interdependent systems for purchasing, production, marketing and administration can be synchronized to perform the right actions at the right times to cooperate in accomplishing the organisation’s aims.
• Through effective communication, employees receive instructions, rules and procedures in order to help them perform their tasks. Knowing what to do and why motivates and challenges them to their tasks and makes them more effective.
• Distributors and customers must be aware of changes in product characteristics and new products being introduced into the market. The organization must communicate the appropriate information on these issues to them in order to encourage the storage and use of the modified or new product.
• Shareholders must be informed of the introduction of a new strategy particularly as this may affect their dividends. The acceptance of the strategy by shareholders means that management has the authority to use their money in a desired manner and account for it.

Leadership involves influencing others to behave in a desired manner. Strategic leaders are needed to drive the organization towards the achievement of its strategies. Among others, strategic leaders must possess social skills, entrepreneurial skills and must be visionary.
Their importance in strategic management evolves the following functions:
i) They clarify the strategic intent of the organization by helping stakeholders to embrace change. They do this by setting forth a clear vision for the organization.
ii) Leaders shape and refine the organizational structure and make it function effectively to accomplish strategic intent.
iii) Leaders also shape organizational culture. They promote values and beliefs that are useful to the current strategy.
iv) They inspire confidence and energize their followers to enthusiastically achieve the organisation’s mission.
v) They assign responsibilities, allocate resources and supervise the performance of employees in a manner that helps the organization to achieve its strategic objectives.

Nature of competition in the industry refers to five forces analysis and in this particular case each of the forces will be examined.
Threat of new entrants
The competition in an industry get intense when the barriers to entry are weak hence many businesses are able to enter the industry. In the case there are number of factors that show that industry is easily entered.

• Capital requirements – given the fact that the industry has grown from one to over two hundred producers and the assertion that the capital requirements are generally low makes the industry highly competitive.
• Product differentiation/standardised product – the case suggest that basis of competition is price which implies that producers in the industry do not differentiate their products or in other words the product of the industry is standardised which will make competition very keen.
• Switching cost – it appears that consumers face very low switching costs since water is not any technical and sophisticated product. Hence consumers can easily switched from one producer to another without any major cost. This makes competition much more severe.
• Knowledge requirements – no special skill or knowledge is required to operate in this industry hence competition will be more intense.

Bargaining power of buyers
The group of buyer can be power or less power depending on a number of factors. In this particular the industry faces two buyer group – thus corporate buyers and bulk distributers. A number of factors in the case make the buyer groups power.

• Low switching costs – it will not cost buyers corporate and bulk distributors buyer groups to switch from one producer to another. This makes buyer group very powerful relative to the industry.
• Buyers face standardised/undifferentiated product – “all water be water”. This simply means that sachet water or bottle water from one producer is not much different from the next producer hence consumers are really indifferent as to which producer produces what. This makes buyer group very power.
• Threat of backward integration – from the case some bulk distributors are actually venturing into production by bypassing already existing producers and this makes the buyer group very powerful.
• Low profit margins – in the case bulk distributors clearly face low profit margins and so are very sensitive to price increases by producers of Pure Water.

Bargaining power of suppliers
The supplier group provide the inputs into the production process of the industry. There supplier group include the labour, providers of water and electricity. These supplier groups will be more powerful and hence intensify competition with the following conditions.

• Few or dominant supplier group – currently apart from the few producers who have their own water supply, most industry players depend on Alpha Mineral Water Ltd Water Company which is the sole supplier aside drilled bore hole. This makes powerful as it can afford to hike prices without much input from the industry.
• Limited alternative sources of supply – Currently bore hole drilling is the only available alternative for the industry. But since majority of the producers depend on TWC it may suggest that there could be challenges with owning one’s bore hole which may include locating favourable site and cost of drilling minimum required number of bore holes to supply sufficient water.
• Suppliers’ product is an important input to buyer’s business – without supply of raw water sachet and bottle water will not be produced. It is an indispensable input into the industry.
• Unionisation of labour – will make wage negotiation tougher and makes the labour supply input powerful.

Rivalry among existing firms
This force deals with how the exist firms in an industry contend for the market share. The case points a number of situation that give rise to intense competition among rivals.

• Declining/negative growth – since the industry is declining it will make the fight for remaining market share much intense.
• Equally balanced competitors – from the case it appears that there no one particular firm that dominates the market and since they all have fair share of the market each firm can respond to any price cut by the competitor.
• Many producers – there are over 200 producers in the industry and this makes them weak especially when they have not form any cartel or association to regulate the price.
• Low switching cost – the industry products have no or very low switching costs. This makes the competition keen since each producer would have to make effort to retain the existing customers so they are not taking over by other competitors.

Threat of substitute products
These talks about alternatives to the industry products. In the case it is clear that there are substitutes from imported sources, TWC and other water bodies.

• Availability of substitutes – there are readily available substitute sources to the industry. Some corporate clients are importing sachet and bottle water, TWC is available as well as other water bodies.
• Low switching cost – There is low switch cost in moving from the industry source to other sources available.

Technological Factors
The technological factors raised include the following issues:

• Use of biodegradable plastic – the passage of law requiring the use of environmentally friendly biodegradable plastic reflects improvement in the technology as far as plastic is concerned. The industry rely heavily on plastic as one of its core inputs in the production process.
• Efficient and state of the art – since the industry compete on the price basis it implies that the participants operate on low-cost leadership strategy which calls for efficient production process. This means that the industry needs cutting edge technology as far as its production process is concerned in order to lower cost and achieve competitive advantage.
  Political factors
  The political factors relate to the actions and policies of the government and other political actors such as opposition political party activism. The case before us raises a number of political issues worthy of consideration.
• Removal of subsidies – this will result in higher cost of living in the economy. It will raise cost of doing business in the Alpha Mineral Water Ltd and will also affect households and individuals. This will make the countries businesses less competitive compared to other foreign business that may be enjoying subsidies from their governments.
• Political instability – removal of subsidies is likely to result in agitations and demonstrations from the citizens who are likely to feel the negative impact in terms of increase cost of living. Any such political upheaval will have negative consequences for the economy as a whole.
• Taxation policy – The government appears to have appetite for taxes. It has introduced a bill in parliament, if passed into law, require companies to use biodegradable plastic as well as considering introduction of special tax to deal with plastic pollution. This will further worsen cost of doing business in the economy and will make businesses less competitive.
• Establishment of Industry regulator – setting up of the industry regulator to deal with hitherto unregulated industry will have implication for the cost of doing business in the economy.
  Legal factors
  These factors deal with various laws government passes to deal with the conduct of business in an economy. In this particular case the following legal issues arise:
• Special Tax – The government is considering the introduction of special tax to raise necessary funds to deal with the plastic waste challenge facing the urban centres. This is a major threat to the industry operators as this will result in higher cost of production with limited chance to pass on the effect to the consumers due to price sensitivity.
• Labour laws amendments – since the new law reduces the hiring period of casual labourers from 18 to 6 months and also make it easier for the workers to join trade unions imposes further cost of doing business in the economy. Unionised workers can demand for high salaries and also hiring more workers on permanent basis withal its related costs.
• Law setting up regulator for the industry – this is perceived to limit rate of new businesses entering the industry and existing ones may face high demands on them.
  Environmental Factors
  These factors relates to how the natural or physical environment is affected by the actions and activities of businesses.
• Pollution of environment – the case clearly state how the used sachet and bottles are becoming a nuisance to the environment. The plastic are not biodegradable.
• Floods – choked drains have resulted in serious floods that affect lives and property in the urban centres.
• Pollution of water bodies – serious pollution of environment can affect waters bodies dotted around the country and can even affect their long term sustainability.
• City Authorities budget – high cost of running the cities.

There are a number of approaches which can be used in answering this question. Candidates might focus on aspects such as market and environmental analysis or on segmentation, targeting and positioning. Marks will be awarded as to how appropriate their approach is to improving the situation for Gaspo. However it is expected that most candidates will apply the marketing mix model, the most commonly used to this scenario.

It would appear that Obed needs to develop an appropriate marketing mix to facilitate the entry into this new Ghanaian market segment. This mix usually comprises four elements – product, place, price and promotion. These need to be integrated together, to mutually reinforce the impact of a marketing offensive and not in isolation where one aspect may counteract the influence of another. For example the development of a luxury brand image (promotion) will be harmed if a price strategy concentrates on a low or a ‘penetration’ price.

The product needs to be focused on a domestic/household market. A utilitarian office approach may not fit in well with the prevailing household image. Quality may have a higher priority here. The style of the furniture will also need to match the furniture in the rest of a household – there may need to be a choice between classical and modern styles. Furthermore size may be more critical. Houses are frequently smaller than offices so the furniture may need to be more compact.

It may be advantageous not only to supply the finished products but the company could add value by providing both design and installation services. This, of course, will require a stronger Ghanaian presence. This could be achieved by having a good distribution network (place). Although the products are manufactured in India because of the lower costs, the customer will be looking for a presence locally. Stock must be available locally so as to avoid delays in order processing. This will provide reassurance. Furthermore potential customers will wish to see examples of the products, layout and workmanship before they commit themselves to purchase. Gaspo will need to have a number of showrooms in major centres where business is expected. Not only will these be depots for supply but they will also act as centres for marketing. This will be an expensive facility, offsetting the cheaper labour costs. The company will have to ensure that these new markets can generate sufficient revenue to compensate for these increased costs.

These showrooms will be part of the promotion element of the mix but they will have to be complemented by other media activities. Advertisements in furnishing or household style magazines could attract new customer groups. It may also be possible to buy mailing lists of people who work from home. Directors of small companies and self-employed individuals frequently receive direct mail from financial institutions about banking services and also offers from IT suppliers. Why not information about office furniture and other services? The company should also be aware of the benefits of promotion by using the world-wide web.

Price also needs to be considered as a competitive tool in this new venture. The price must not be so low that prospective purchasers question the quality of the product. However it must also be remembered that in certain circumstances this furniture cannot be offset against tax as a cost as it can in a bona fide company transaction. Therefore the company needs to be careful not to price itself out of the market. They have to be aware of what competitors are offering. It may be sensible to have competitive prices for the furniture but charge a premium for the design and installation work.

[There are no precise solutions as to how the marketing mix is to be determined. Candidates may propose different approaches. These will be accepted, assuming that there is an inherent logic in their application and that they are not inconsistent with a candidate’s premises and the objectives of the company]

A company, which has acquired a competitive advantage, should not relax its vigilance. In business nothing is permanent and competitors will soon retaliate. There are a number of methods by which a company can attempt to maintain its position.

• If the company’s strength is built on being a low-cost producer it must attempt to continue to get low cost supplies by buying in bulk, ensuring regular deliveries to avoid heavy stock-holding costs. It must control its labour costs and continue to innovate so as to maintain production advantages by simplifying the production process. It must keep overheads low and ensure low distribution costs. However if a company’s competitive position is derived from its ability to differentiate its products or services it must ensure that it maintains its lead in marketing by emphasizing a strong brand identity, a strong corporate image and by having technological superiority. This can be done by enhancing its research capability and in designing unique products.
• It is also critical to be aware of customer needs and so marketing research is an important input. Companies can also maintain their advantage if they can develop and build prohibitive switching costs into their products/services. These costs which tie a customer to a supplier can include financial links, the supply of materials and the supply of specialist services (in the case of Gaspo it could be the provision of design and installation services).
• As mentioned earlier the development of a strong brand name can tie consumers more closely to the supplier. Patents and trademark legislation can also protect the competitive advantage of certain companies although there are sometimes difficulties in certain markets where intellectual property rights are not always fully protected.
• However companies who rely mainly on the law to protect a competitive advantage run the risk that they may become reactive, hanging on to what they have. These firms would be well advised to continue to seek ‘new’ strengths either in marketing or manufacturing rather than rely on the protection of ‘old’ strengths.

It is important for the management of Starline Fruits to consider many factors before deciding on which mode of entry into the international market would be suitable. The factors are discussed as follow:
i. The firm’s marketing objectives: It is important for management of Starline Fruits to consider its international marketing objectives relating to how much it wants and can sell in overseas markets – i.e. volume – the timescale and coverage of market segments. If Starline Fruits management expects overseas sales to be low in volume, or if the products are only to be on sale for a limited time period, then setting up an overseas production and distribution facility would be inappropriate. In this case, exporting might be an appropriate strategy. On the contrary, if management intends to cover a large segment of overseas markets as well as operate for a long time then establishing an overseas production and distributing outlet would be an appropriate mode of entry.
ii. The firm’s size: A small firm is less likely than a large one to possess sufficient resources to set up and run a production facility overseas. It is important for management of Starline Fruits to consider whether the resources of the company could provide the investment capital and organisational ability to set up an overseas production facility. It would also need to consider whether it can support the costs of continuing operations. If not, then overseas production facility would be precluded as an appropriate entry mode. Management would have to consider a mode of entry that requires a relatively lower investment in terms of cost and human resource ability.
iii. Mode availability: A firm might have to use different methods of entry to enter different markets. Some countries only allow a restricted level of imports, but will welcome a firm if it builds manufacturing facilities which provide jobs and limit the outflow of foreign exchange. It is important for management to consider the policies of different overseas governments through research. This will inform it of what kinds of entry modes are available for it in each oversea market it seeks to enter.
iv. Mode quality: In some cases, all modes may be possible in theory, but some are of questionable quality or practicality. The lack of suitably qualified distributors or agents, for instance, would preclude the export, direct or indirect, of high technology goods needing installation, maintenance and servicing by personnel with specialist technical skills. Whatever mode management are considering, it is important for them to put it to the practicality test.
v. Human resources requirements: Starline management would have to consider the human resource requirements for whichever mode it wants to use. HR requirements vary according to which method of entry is used. For instance, if it would be difficult for Starline Fruits Ltd. to recruit suitable international marketing staff at home or overseas, they may have to resort to indirect exporting or the use of agents based overseas, which in this case would be the only realistic option.
vi. Market feedback information: It is important for management to consider the effectiveness of receiving feedback information on its marketing efforts in overseas markets. In some cases a firm can receive feedback information about the market and its marketing effort from its sales staff or distribution channels. In these circumstances direct export or joint ventures may be preferred to indirect export.
vii. Learning curve requirements: Management of Starline needs to be clear about its future involvement in international business. If it intends a heavy future involvement in overseas markets, then it would be necessary for it to gain the experience that close involvement in an overseas market brings. They would, therefore, have to select mode(s) of entry that would offer them the opportunity to experience international business management for themselves. This argues against the use of indirect exporting as the mode of entry.
viii. Risks: There are risks involved in operating in overseas market such as the risk of expropriation, risk of political instability, etc. Management would have to assess the nature of the risks in particular overseas markets in order to inform them which mode offers the lowest risks. For instance, some firms might prefer the indirect export mode as assets are safer from expropriation.
ix. Control needs: Starline management should assess the level of control it seeks to retain over its overseas operations. For instance, production overseas by a wholly owned subsidiary gives a firm absolute control while indirect exporting offers only limited control over the marketing mix to the exporter.
                                                                                                                                                                                   (Any 4 points)

There is good corporate governance when an organization is properly directed and controlled. This involves two issues – good performance in terms of value creation, resource utilization, risk management; and conformance which means complying properly with relevant regulations and being accountable and trustworthy. The company should operate in a manner that serves the best interests of its stakeholders including its shareholders and investors by performing well economically.
Good corporate governance is intended to manage the agency problem which is that directors act as agents of the company but may find their interests conflicting with those of the company. Directors are in a privileged position and are likely to act to serve their interests at the expense of shareholders and other stakeholders.

The key stakeholders are customers, employees, directors and management, suppliers, competitors, lenders and financiers, regulators, government and the community.
Interests of stakeholders:
Shareholders – wish to see a good return on their investment and a stable future.
Employees – wish for a steady job and decent pay/conditions
Directors/management – wish to comply with their responsibilities as well as having similar interests to other employees.
Customers – look for appropriate, safe and reasonably priced products plus excellent customer service
Suppliers – are interested in sales volume and price, fair payment terms and long-term relationships.
Competitors – are keen to ensure there is vigorous but fair competition in the market.
Lenders and financiers – are keen for security and to see repayment of their investment in line with the agreed terms.
Regulators – wish to see the company complying with relevant rules and engaging with ideas for further improvement
Government wishes to see a stream of tax income plus a company which is a good corporate citizen.
The community – is interested in the company providing employment and preserving/supporting the environment