Prezzo plc runs a chain of restaurants in the UK that serve mainly Italian style food including pizza, pasta, and grilled dishes as well as a few Chimichanga Mexican restaurants. During 2012, the number of restaurants in the group increased from 184 to 210. Prezzo shares are listed on AIM, which is a stock market for smaller growing companies. Extracts from Prezzo’s annual report 2012, including financial statements for the year to 30 December 2012 and extracts from the director’s report, are given:

Table FA.1

Table FA.2

Table FA.3

Required:

a) Using extracts from the Annual Report, compute the following profitability ratios for Prezzo plc for 2012 and 2011 and interpret your findings, giving a possible reason for any observed changes in each ratios:

• return on capital employed

• operating profit margin

• use of assets

• gross profit margin

Identify one other profitability ratio that might enable you to gain a better understanding of the company's profitability. Compute that ratio for both years and discuss your findings.

b) Use ratios to assess the liquidity of the company at both year-ends and explain what has caused the movement in the ratios between the two year-ends.

c) Use the company’s statement of cash flows to discuss what has happened to the company’s cash position during 2012.

d) Complete the following table of share information and investment ratios:

Table FA.4

Interpret the investment ratios, explaining what they reveal to shareholders about the return their shares have generated.

e) Describe two other sources of information that might have enabled you to give a fuller interpretation of the company’s performance and financial position and explain how that information could have been used.

BARCLAYS BANK: HOW (NOT) TO COMMUNICATE WITH STAKEHOLDERS

In 2003, Barclays, a UK-based bank and financial services group, appointed a new advertising agency, Bartle Bogle Hegarty (BBH). BBH was hired to spearhead a 'more humane' cam­paign, after the bank was lambasted for its 'Big Bank' adverts in 2000 that featured the slogan 'a big world needs a big bank'. Barclays had spent £15 million on its 'Big' campaign, which featured celebrities such as Sir Anthony Hopkins and Tim Roth. The adverts were slick and had received good pre-publicity, but they turned into a communication disaster when they coincided with the news that Barclays was closing about 170 branches in the UK, many in rural areas. One of the earlier adverts featured Welsh-born Sir Anthony Hopkins talking from the comfort of a palatial home about the importance of chasing 'big' ideas and ambitions. The adverts provoked a national debate in the UK when a junior government minister, Chris Mullin, said that Barclays' customers should revolt and 'vote with their feet'. Barclays' image crisis worsened when communication executives announced that the new Chief Executive, Matthew Barrett, had been paid £1.3 million for just three months' work. At the time, competitors - including NatWest - quickly capitalized on the fall-out from the Big Bank campaign and were running adverts which trumpeted the fact that it had abolished branch closures.

Local communities that had lost their branch were particularly angry at the closures. The situation was further aggravated by the arrogance with which Barclays announced and justified the decision. Matthew Barrett had explained the branch closures by saying, 'We are an economic enterprise, not a government agency, and therefore have obligations to conduct our business in a way that provides a decent return to the owners of the business. We will continue to take value-maximizing decisions without sentimentality or excuses.' Barclays was openly admitting that its main focus was on shareholder returns and larger customers across its investment and retail businesses. Perhaps the most amusing story of the many that emerged during that period was of the fact that the village where Anthony Hopkins was born was one of the victims of the branch closures. He was seen as a traitor to his heritage, and the local Welsh Assembly Member wrote to him as part of her campaign about the closures. Hopkins was moved to write back to her, complaining about being used as a scapegoat when in fact he was just an actor and felt that he needed to set the record straight by pointing out that he did not run Barclays Bank. In an attempt to respond to the image crisis, Barclays extended opening hours at 84 per cent of its branches and recruited an extra 2,000 staff to service the extra hours. However, the damage to its reputation with some of its previously most loyal customers had already been done.

QUESTION

1. In your point of view, what broader lessons does the case imply for corporate communication? (10m)

The Office for National Statistics (ONS) in the UK last year proposed a new price index-a CPI that includes housing costs-called the CPIH. The rationale given for this proposal is that

"the biggest cost for most homeowners is the cost of repaying their mortgage. But mortgage interest payments are not included in the CPI, nor are a variety of other costs, such as house depreciation, buildings insurance and ground rent, and house transaction costs such as estate agents' fees, survey costs and conveyancing charges. Council tax is not included in the CPI either."

Briefly evalute this proposal. What are its advantages and disadvantages? How do you think the CPIH would have behaved in the past 5 years relative to the CPI? Would the CPIH be a useful inflation target measure?

A huge international oil company is considering its strategy in the Arctic Sea. The UK government has announced that a new drilling site in the Arctic Sea will be offered for sale on a competitive tender basis, the site going to the company making the highest bid. Temporary exploration of the site indicates that, over its life, it can be expected to generate revenue of around £1500 million if the oil reserves turn out to be high, but only £500 million if they turn out to be low. Seismic tests have indicated that the probability of high reserves is 0.60.

If the company is successful in its bid, it will also have to decide whether to construct a new oil rig for the site or to move an existing oil rig which is currently operating at an uneconomic site. The costs of the new rig are around £250 million and for moving the existing rig around £100 million. A new rig would be able to boost production by £150 million if reserve levels turned out to be high. The company has decided that if it is to bid for the site, the maximum bid it can afford at present, because of its cash flow situation, is £750 million. In the past, 70 per cent of the company’s bids for such sites have been successful.

However, the company is also under pressure to refurbish some of its existing rigs for both efficiency and safety reasons. The £750 million could be used for this purpose instead. If the money is used for refurbishment, there is a 50 per cent chance of increasing efficiency to generate a return on the £750 million of 5 per cent, and a 50 per cent chance of generating a return of 10 per cent. If the decision to refurbish takes place after the bid has been made and failed, only £500 million will be available.

(a) Construct a decision tree for this problem.

(b) Using the decision tree, suggest a suitable decision for management.

(c) Determine the value of perfect information about the size of the reserves on the new site.

Vanguard Method as opposed to the traditional managerial thinking typically found in
many organisations ( Jaaron and Backhouse, 2012).
The Vanguard Method embraces the principle that employees need to think, analyse,
judge, and make decisions on the work on hands. Therefore, team members training is
not the focus in the preparation process for this kind of job, it is actually educating them
on “why” a failure happen and then finding ways to eliminate it from the system. To
accommodate for the requirements of the Vanguard Method, managers’ role shifts from
command-and-control to supporters. This keeps managers very close to their employees
to interact with their work when necessary. Bhat et al. (2012) provide a constructive view
about the interactive leadership style and organisational learning. According to them, the
capacity of an organisation to learn how to learn, to change old ways of doing things, and
to produce original knowledge is positively related to interactive leadership styles. Due to
this type of relationship and due to the whole service processes being owned by team
members, the structure of the organisation changes. The organisation becomes
organically structured ( Jaaron and Backhouse, 2014).
The Vanguard Method in practice
The above philosophy usually follows three main practical steps of “check-plan-do” for
implementation. These steps are summarised in Table II.
Check. This stage aims at understanding the system and why it behaves in such a
way that failure demand is achieved. A specially formed team, called the check team,
from the workplace collates information about what customers expect and want from
the organisation and what matters to them most, they need to be able to use views of
different people involved in the problematic system to build the “real situation”
(Checkland, 1995). Once the team understands the type of demand received and how
capable the system is to respond to it, it can start to map the flow of processes in the
system. For this purpose, a visual representation of each operation carried out in the
workplace is developed as a flow chart. Identification of waste (actions not adding any
value from the customer’s point of view) present in the service operations flow is then

carried out (Seddon, 2008). All processes classified as waste are marked in red on the
process flow chart. While processes that add value from a customer’s point of view are
marked in green.
Plan. This stage starts with redesigning the processes flow charts taking into
account what has been learned by considering the customer “wants” and then mapping
out the new service system design. Typically, this stage is focussed on minimising
non-value adding activities from a customer point of view. The final step in the “plan”
process is to build performance measures and the future system success criterion. This
is usually how good employees are in creating a value demand and the percentage of
value demand out of the total demand received ( Jaaron and Backhouse, 2012).
Do. At this stage the new design is used in an experimental environment with the
check team using the new model after it has been discussed with the people doing
the work. The new processes are induced gradually with careful observation of both
employees’ reaction to it and customers feedback. The processes are tested,
re-designed, and re-tested again to make sure that customers get the best possible
service before going fully live. This is much slower process than the check phase as the
slogan at this stage is to “do it right rather than do it quick” ( Jackson et al., 2008).
The Vanguard Method cycle starts with the “check” stage in order to show business
managers the failings of their current system, and to provide them with a solid evidence
for the need to change the way they think and manage things ( Jackson et al., 2008).
To ensure continuous improvement of the new system, the check-plan-do cycle is a
continuous cycle (Seddon, 2008; Jackson et al., 2008). It is, therefore, a learning system
by itself: the process of acquiring knowledge and taking action to improve the situation
is continuous ( Jackson et al., 2008). In addition to continuously altering business
processes to improve the service offered, the Vanguard Method cycle involves the
identification of new demands coming in to the service department. This is followed by
designing new processes to ensure dealing with new demands as value demands
(Seddon, 2008).
4. Research methodology
A case study approach is adopted in this research inquiry in order to build an
understanding of the nature of the research phenomena (Voss et al., 2002). Case studies
have the advantage of being able to answer questions like “what”, “how”, and “why”
(Yin, 2009). This accommodates the type of question presented at the beginning of this
paper. Two case studies were chosen with the help of “extreme case sampling”
technique (Patton, 2002; Creswell, 2004) that displayed evidence of full employment of
the Vanguard Method in their logistics service operations. An earlier research work
conducted with the help of the Vanguard Method consultant of these two case studies
helped researchers in confirming that the Vanguard Method is fully employed in their
logistics operations, and also ensured easy access to both case studies.
According to Aastrup and Halldórsson (2008), the use of case studies in logistics
management research is an enabler for the causal depth required for understanding the
real domain of logistics operations and its performance. Case study research design
typically has the unique strength in providing a full range of evidence through the use
of multi-sources of data, which can achieve data triangulation (Voss et al., 2002). For
this purpose, the mixed methods design (Tashakkori and Teddlie, 1998) is used as the
technique for conducting the research process. Three different sources of data
collection methods are used in the two case studies; these are semi-structured

What is the particularity of vanguard method? (1point)

Why we need this method in logistics? (1 point)

Modigliani and Miller (M&M) hypothesized that both dividend policy and capital structure policy are irrelevant in determining the value of a firm. Outline the arguments they used to reach their positions, including the assumptions underlying those arguments. With reference to relevant academic literature, discuss at least one reason why the M&M hypotheses might not hold in practice for BOTH dividend and capital structure policy.

Imagine you were conducting research on the relationship between academic performance (e.g., better grades) and different levels of loudness of music (interval scale) while studying.

How would you design the study using a correlational design?

How would you design the study using a quasi-experimental design?

How would you design the study using an experimental design?

Int Business -3: Strategy Formulation and Implementation

For a great breakdown of academic literature, please visit: https://www.lib.unb.ca/research/success/understanding.php

Answer the following questions

Define global integration as used in the context of strategic international management. In what way might globalization be a problem for a successful national organization that is intent on going international? In your answer, provide an example of the problem.