BA&SC Exam January 2004 Summary answers to selected questions Question 1 (a) Business model USP > solely internet based - unique - no branches part of skandia group - heavy engineering Niche type business strategy - targetting only some customers no separate accounts - all in one generate compensating income via long term loans - car and home finance monthly capitalisation Analyse it strategic position Could use value chain model of Porter Could use SWOT Defining value customer strategy - the socalled "Mickey Mouse" diagram Relationship with customers truthfulness, simplicity, high interest high interest rate - 2-3% higher than competitors low cost operation Claim to be customer led High functionality on internet portal call centre for complatints and problems on-line speed for credit approval Clearly this is all central to strategy - need to say so! Question 1 (b) Skandiabanken was set up "as a system" - not an organic organisation In a sense, their strategy rolls out from their systems. * Low cost * Highly targetted and focussed * Informal staff structure relies on the formality of the system * Data mining for customer targeting * Maintaining a simple user-friendly web-site * Simplicity - staff using the same website as customers * Customer suggestions collected and used. Competitive advantage - probably use 5 force model * Set up as an innovative "do better things" company * But now must operate as a do things better company… * Advantage not particularly sustainable - but early entrants are advantaged. Question 2 (c) Ethical dilemmas Students should discuss the rights and wrongs of various rather than merely list or mention them. They get credit for linking their discussion to particular ethical principles eg Golden Rule The dodgy practices include: electronic data gathering - it is surreptitious, far reaching, not necessarily in customer interest passing on customer details to their dealer network - invasion of privacy bumping rich customers up the phone queue - unfairness relying on an internet only business model - reducing the job opportunities – if every one did it??? encouraging a false "collaborative" interaction between the bank and the customer with the bank eg suggests they limit their withdrawals. by claiming to be "truthful and simple" etc, the bank is setting itself up as a moral entity probably on fraudulent grounds. Question 2(d) Connectivity and security: They should consider the usual kinds of threat > Denial of service > Hackers > Poor data > Physical loss of computing power > etc Should mention encryption as an important tool Also variable access profiles Denial of service - can only really have a contingency plan for what to do 3. (a) Yes, a favourable price, since the IRR is well above the required 15% (b) Just a little better – NPV = £53380 compared to £45995 (c) Given the technology, the delay and reliability of the product are probably more important than the exact level of profits, provided these are above the 15% required. 4. (a) (i) Interest = £2134 (ii) Interest = £2153 (iii) APR (a) = 6.660% APR (b) = 6.715% (b) (i) The South West is the worst performing region – near 20% worse than the North, which is best. Variability means lack of control. (ii) Coefficients of Variability: South East = 21.4% South West = 25.9% North = 41.0% Lack of variability suggests a deliberate policy – in which case SW and SE are fairly lax, given the policy ought to be 30 days. (iii) On the obvious comparisons, the SW manager is performing worst. Do they measure debtor days the same way? Are the comparisons valid? Are the averages based on the same time period? Perhaps his average is being lowered by historical data, or by a single “rogue” point. The obvious alternatives are median and semi-interquartile ranges, which are not influenced by extreme (and possible spurious or “rogue”) values. 5. Not supplied.
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