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Campus                      Greenwich Maritime

School                      Business

Subject Group               Management

Level                       M

TITLE OF PAPER              Business Analysis and Systems

COURSE CODE                 BUSI1010

Date and Time               Thursday 16th January 2004
                            2.00 - 4.45 pm

This is an open-book examination.

There is FIFTEEN MINUTES reading time at the start. Students may NOT write
anything in this time.

They then have TWO AND ONE HALF HOURS to answer the following questions:

Questions 1 and 2 are COMPULSORY and are worth 80%. They relate to the
SkandiaBanken casestudy, a copy of which you will have received already. A
fresh copy is appended to this exam paper.

Students should then select ONE from questions 3, 4, or 5 to answer. This
question is worth 20%.

Formulae sheet supplied.

January 2004
CourseTitle: Business Analysis and Systems
Course Code: STAT1010

                                    Page 1 of 5

Question One

   (a) “SkandiaBanken’s relationship with its customers is central to its business
       strategy.” Describe SkandiaBanken’s business model and analyse its strategic
       position and discuss how far this statement is true.

                                                                            25 marks

   (b) How does SkandiaBanken use business systems to support its business
       strategy? How sustainable is the competitive advantage it accrues?
                                                                            25 marks
                                                                     Total 50 marks

   Question 2

   (c) The power of information systems raises new ethical dilemmas for the modern
       business organisation. Discuss the ethics of various SkandiaBanken business
       practices mentioned in the case study text. You should mention more than
                                                                           15 marks

   (d) Critically discuss the concepts of connectivity and system security as they
       relate to SkandiaBanken. In particular discuss the opportunities and threats
       that connectivity and system security pose to such an organisation.
                                                                              15 marks

                                                                     Total 30 marks

January 2004
CourseTitle: Business Analysis and Systems
Course Code: STAT1010

                                    Page 2 of 5

NB Students should only attempt ONE of the following questions:

Question 3

A small engineering firm, ABC Ltd, is negotiating the rights to use a proprietary
computer aided manufacturing CAM system, previously not used in the UK, although
already successful in the USA. It is estimated that the net savings which the CAM
system will generate will be £250,000 in years 1, 2 and 3 and £150,000 in years 4, 5,
and 6. The rights agreement will be effective for 6 years only. ABC has a policy of
requiring a 15% return on capital.

(a) ABC have suggested a payment of £750,000 to buy the UK use of the process
outright for 6 years. Use the technique of discounted cash-flow to explain whether
they have negotiated a favourable price or not.
                                                                           (10 marks)

 (b) The seller of the process has made a counter-offer. They will reduce the price to
£470,000, payable immediately, if ABC Ltd will agree not to begin using the process
for three years. Thereafter, they say, the cash-flows could be expected to be identical
to those in the original deal; £250,000 for the first 3 years (years 4,5,6) and £150,000
for the following 3 years (years 7,8,9).

       (i)    Show that the Net Present Value of this new deal (discounted at 15%)
       is almost the same as (in fact slightly better than) the deal outlined in part (a)
                                                                                 (5 marks)

(c) Critically assess the calculations you have made in parts (a) to (b): how crucial
are they to the decision-making (and negotiating) position of ABC Ltd with respect to
the process? What further information would you request to assess the deal(s)?
                                                                              (5 marks)

                                                                          Total 20 marks

Question 4
          i. £10000 is invested in a building society account which offers a
             nominal annual rate of 6.5%, compounded quarterly, the interest being
             added to the principal. How much interest will accrue in the first three
                                                                             3 marks

           ii. If the same amount had been invested in another account with the same
               nominal annual rate, but which compounded interest daily, the interest
               being added to the principal, how much interest would accrue in the
               same period?

January 2004
CourseTitle: Business Analysis and Systems
Course Code: STAT1010

                                      Page 3 of 5

                                                                                 2 marks

             iii. Calculate the APR of each account to an appropriate accuracy and
                  explain what it measures.
                                                                                4 marks

(b)    The debt collection records of three branches of a small trading organisation
were compared. The results are reported below. The billing stationery states that
payment should be made within 30 days.

             Sales Region       Mean Debtor Days               SD of Debtor Days
              South East                    45.3                             9.7
              South West                    53.7                            13.9
                North                       44.9                            18.4

       (i)       What do the figures of the table indicate?
                                                                                 3 marks

       (ii) Calculate the coefficient of variation for the three Sales Regions and
       comment on its applicability in this case.
                                                                             3 marks

       (iii) The manager of South West Sales Region claims that the obvious
       comparison is misleading. What practical grounds might he/she have for
       making this claim and what questions should he/she be asking to advance it?
                                                                            3 marks

       (iv)    The same manager claims that mean and standard deviation are not the
       right statistics for measuring location and variation in this case. What
       comparable alternatives might he/she suggest and what statistical arguments
       might he/she make in support of his assertion?
                                                                                2 marks

                                                                         Total 20 marks

Question 5 <No longer in syllabus>

(a)          A manufacturer of flatpack furniture, Itmar Ltd, produces two kitchen units,
a base unit and a cabinet unit. The base unit requires 90 minutes in the production
department and 30 minutes in the finished department. The cabinet unit requires 30
minutes and 60 minutes respectively in these departments. Each day 210 man-hours are
available in the production department and 180 man-hours are available in the finishing
department. It is planned that no more than 150 cabinet units will be produced per day.
Base units make a contribution of £20 per unit and cabinet units £50 per unit. What is
January 2004
CourseTitle: Business Analysis and Systems
Course Code: STAT1010

                                        Page 4 of 5

the maximum daily contribution possible and what combination of units in production
delivers this contribution?
                                                                             15 marks

As Production Manager for Itmar Limited, you find the situation outlined in part (a) of
this question over-simplistic. Use a model for “disassembling” information into its
constituent parts to critically assess the information contained in part (a). What
further/other information would you require to begin to manage on a more realistic
                                                                                 5 marks

January 2004
CourseTitle: Business Analysis and Systems
Course Code: STAT1010

                                      Page 5 of 5

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