Graduate Diploma in Purchasing and Supply

Strategic Supply Chain Management

LEVEL 6
DATE: Tuesday 19 May 2009

L6-02/May09

TIME: 13.30 to 16.30

DURATION: 3 hours

Instructions for Candidates:

This examination is in TWO sections. Section A Has TWO compulsory questions, worth 25 marks each. Section B Has FOUR questions; answer TWO. Each question is worth 25 marks. 1. Do not open this question paper until instructed by the invigilator. 2. All answers must be written in the answer booklet provided. 3. All rough work and notes should also be written in the answer booklet.

QP - 01

SECTION A You are strongly advised to read carefully and analyse the information in the case study before attempting to answer questions 1 and 2. EXCELL BREWERIES Excell Breweries (Excell), which is based in the USA, is the third largest brewery in the world. Of the 14 billion litres of beer sold annually by Excell, nearly 82% is sold in the USA, and the majority of its operations are based there. Excell's next largest market after the USA is China, which accounts for nearly 13% of the companys turnover (based only on sales in the northeast of the country), followed by Western Europe (mainly the UK) and Canada, both of which account for 2% of Excell's sales by volume. Excell accounts for 50% of Americas beer sales, but revenues have stagnated recently in what is a very mature market. Market growth in the next five years is likely to be confined to imported premium lagers, which the company does not offer. In addition, the company will also face increasing competition following a recent joint venture between its largest US rival and a major South African player, which is likely to put further pressure on margins. Rising costs are also a problem. Furthermore, Excell has a very high level of debt, with a long-term debt to equity ratio of 295%. Global beer volumes are expected to increase by over 28 billion litres in the next five years, driven by emerging markets. This drive will be led by China, closely followed by the other BRIC countries (Brazil, Russia and India). Other major players will include Ukraine, Mexico and Vietnam. The problem is that Excell has a limited presence in China and a negligible share of the other markets. The Television Advertising Supply Chain Brand image is very important in the brewing industry, and Excell spends about 8% of its turnover on sales and marketing. One of the ways in which it promotes its numerous brands is through the sponsorship of artistic and sporting events. Such sponsorship often requires the production of television advertisements (adverts). There are a number of players in the television (TV) advertising supply chain: the client (in this case Excell), the advertising agency, the film production company (usually focused around a particular film director), and a range of freelance contractors providing film production services such as cinematography, lighting, hairdressing, make-up and postproduction. The latest TV advert created for Excell was for its leading brand of beer. The advert was required for a deal that Excell had secured to sponsor a national basketball tournament. The process that Excells product-dedicated marketing team went through to procure the advert was standard and consisted of a number of stages. First, the marketing team developed a creative brief for the advert and passed it to FFC, the advertising agency which Excell has always used. FFC, which had assisted in previous adverts for this product and had considerable knowledge of the emotional benefits of the brand (more, in fact, than Excell itself), suggested storyboards for the advert, and recommended the film production companies it thought would be best suited to making the advert.

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The Excell marketing team and the agency managers then refined the proposed story and agreed the final content of the advert. FFC then decided which production company would win the business. Excell does not possess its own cost information about the advertising supply chain, so needed to be guided by FFC in this matter. As always with Excell's advertising campaigns, timescales were tight and decisions had to be made quickly. Time was too short for any in-depth analysis to be undertaken. Once the content of the advert and the film company had been finalised, Excells media buyers (who work in the marketing department) contacted media agencies and booked advertising slots for the time of the tournament. After the media space had been bought, FFC's managers started to work with the film production company (and particularly with the director and the producer) to make arrangements for filming. Decisions were made on the location, the specialist equipment and the actors required and the details of the script. The film production company was also tasked with putting together the technical team. The team on this occasion consisted of 36 contractors. The people that the film company contracted were favoured contractors who were familiar to the company, had worked with the director before, and knew her style of working. Once the film company was ready to film the TV advert, representatives from Excells marketing team and FFC joined up with the director, her producer and the technical team at the location, and the filming commenced. The filming for this particular advert, which was 32 seconds in length, took four days. Having completed the filming, the next stage was the development of the footage by the post-production team. The film was edited and the music and graphics were added, after which the final version was submitted to the client for approval, and aired for the first time, as planned. The whole process was completed with six days to spare. The price paid was determined by the number of hours that FFC and the contractors had spent on the project.
The information in this case study is purely fictitious and has been prepared for assessment purposes only. Any resemblance to any organisation or person is purely coincidental.

Please tUrn oVer

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QUESTIONS Questions 1 and 2 relate to the case study and should be answered in the context of the information provided. Q1 Analyse the strategic options that Excell may adopt in order to achieve market growth and improve performance. (25 marks)

Q2 Evaluate the effectiveness of Excell's procurement processes in the television advertising supply chain, and suggest possible areas of improvement. (25 marks)

SECTION B Answer TWO questions from section B. You are strongly advised to read carefully all the questions in section B before selecting TWO questions to answer. Q3 Evaluate Mintzberg's contribution to the debate on strategy and strategic management. (25 marks)

Q4 Explain how an organisation can achieve a fully integrated supply chain, and demonstrate the benefits of doing so. (25 marks)

Q5 (a) Examine how organisations can address both the 'hard' and 'soft' elements of change when implementing corporate strategies. (12 marks) (b) Assess how an organisation can achieve commitment to its purpose and goals. (13 marks)

Q6 Evaluate the concept of 'lean' as an approach to strategic supply chain management. (25 marks)

END OF QUESTION PAPER

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