Airtite was set up in 2000 as a low cost airline operating from a number of regional airports

in Europe. Using these

less popular airports was a much cheaper alternative to the major city airports and supported
Airtite's low cost
service, modelled on existing low cost competitors. These providers had effectively
transformed air travel in Europe
and, in so doing, contributed to an unparalleled expansion in airline travel by both business
and leisure passengers.
Airtite used one type of aircraft, tightly controlled staffing levels and costs, relied entirely on
online bookings and
achieved high levels of capacity utilisation and punctuality. Its route network had grown each
year and included new
routes to some of the 15 countries that had joined the EU in 2004. Airtite's founder and Chief
Executive, John
Sykes, was an aggressive businessman ever willing to challenge governments and
competitors wherever they
impeded his airline and looking to generate positive publicity whenever possible.
John is now looking to develop a strategy which will secure Airtite's growth and development
over the next 10
years. He can see a number of environmental trends emerging which could significantly
affect the success or
otherwise of any developed strategy. Airtite has seen its fuel costs continuing to rise
reflecting the uncertainty over
global fuel supplies. Fuel costs currently account for 25% of Airtite's operating costs.
Conversely, the improving
efficiency of aircraft engines and the next generation of larger aircraft are increasing the
operating efficiency of
newer aircraft and reducing harmful emissions. Concern with fuel also extends to pollution
effects on global
warming and climate change. Co-ordinated global action on aircraft emissions cannot be
ruled out, either in the
form of higher taxes on pollution or limits on the growth in air travel. On the positive side
European governments
are anxious to continue to support increased competition in air travel and to encourage low
cost operators
competing against the over-staffed and loss-making national flag carriers.
The signals for future passenger demand are also confused. Much of the increased demand
for low cost air travel to
date has come from increased leisure travel by families and retired people. However families
are predicted to
become smaller and the population increasingly aged. In addition there are concerns over the
ability of countries to
support the increasing number of one-parent families with limited incomes and an ageing
population dependent on
state pensions. There is a distinct possibility of the retirement age being increased and
governments demanding a
higher level of personal contribution towards an individual's retirement pension. Such a
change will have a
significant impact on an individual's disposable income and with people working longer
reduce the numbers able to
enjoy leisure travel.
Finally, air travel will continue to reflect global economic activity and associated economic
booms and slumps
together with global political instability in the shape of wars, terrorism and natural disasters.
John is uncertain as to how to take account of these conflicting trends in the development of
Airtite's 10-year
strategy and has asked for your advice.
Required
(a) Using models where appropriate, provide John with an environmental analysis of the
conditions affecting the
low cost air travel industry. (15 marks)
(b) Explain how the process of developing scenarios might help John better understand the
macroenvironmental
factors influencing Airtite's future strategy. (10 marks)
(Total = 25 marks)

NESTA is a large chain of fixed-price discount stores based in the country of Eyanke. Its stores offer ambient
goods
(goods that require no cold storage and can be kept at room temperature, such as cleaning products, stationery,
biscuits and plastic storage units) at a fixed price of one dollar. Everything in the store retails at this price.
Fixedprice
discount chains focus on unbranded commodity goods which they buy from a number of small suppliers, for
which the dollar shops are the most significant customers. Profit margins on the products they sell are low and
overheads are kept to a minimum. The target price is fixed. The products tend to be functional, standardised and
undifferentiated.
NESTA has observed the long-term economic decline in the neighbouring country of Eurobia, where a
prolonged
economic recession has led to the growth of so-called 'dollar shops'. Three significant dollar shop chains have
developed: ItzaDollar, DAIAD and DollaFellas (see Table One). The shops of these three chains are particularly
found
on the high streets of towns and cities where there is significant financial hardship. Many of these towns and
cities
have empty stores which are relatively cheap to rent. Furthermore, landlords who once required high rents and
long
leases are increasingly willing to rent these stores for a relatively short fixed-term lease. The fixed-price dollar
shop
chains in Eurobia advertise extensively and continually stress their expansion plans. Few weeks go by without
one
of the chains announcing plans for a significant number of new shops throughout the country.
NESTA has recognised the growth of fixed-price discount retailers in Eurobia and is considering entering this
market.
NESTA recently commissioned a brand awareness survey in Eurobia. The survey results showed that NESTA
was
relatively well-known to respondents who work in the consumer goods retail market. Most of these respondents
correctly identified the company as a discount fixed-price company with a significant presence in Eyanke.
However,
amongst general consumers, only 5% of the respondents had heard of NESTA. In contrast, the three current
fixedprice
dollar shop discounters in Eurobia were recognised by more than 90% of the respondents.
NESTA itself has revenue of $120,000 million. It has cash reserves which could allow it to lease a significant
number of shops in Eurobia and establish a credible market presence. It has recognised competencies in
effective
supplier selection and management, supported by effective procurement systems. Its logistics systems and
methods are core strengths of the company.
There are also many conventional supermarket chains operating in Eurobia. The largest of these has annual
revenue
of $42,500 million. Supermarkets in Eurobia tend to increasingly favour out-of-town sites which allow the
stores to
stock a wide range and quantity of products. Customer car parking is plentiful and it is relatively easy for
supplying
vehicles to access such sites. As well as stocking non-ambient goods, most supermarkets do also stock a very
wide
range of ambient goods, often with competing brands on offer. However, prices for such goods vary and no
supermarkets have yet adopted the discount fixed-price sales approach. In general, the large supermarket chains
largely compete with each other and pay little attention to the fixed-price dollar shop discounters. Many
supermarkets also have internet-based home ordering systems, offering (usually for a fee of $10) deliveries to
customers who are unable or unwilling to visit the supermarket.

Required
(a) Use Porter's five forces framework to assess the attractiveness, to NESTA, of entering the discount
fixedprice
retail market in Eurobia. (15 marks)
(b) Discuss the potential use of scenarios by NESTA's managers as part of their analysis of NESTA's possible
entry into the discount fixed-price retail market in Eurobia. (10 marks)
(Total = 25 marks)

Susan Grant is in something of a dilemma. She has been invited to join the board of the troubled Marlow
Fashion
Group as a non-executive director, but is uncertain as to the level and nature of her contribution to the strategic
thinking of the Group.
The Marlow Fashion Group was set up by a husband and wife team a number of years ago in an economically
depressed part of the UK. They produced a comprehensive range of women's clothing built round the theme of
traditional English style and elegance. The Group had the necessary skills to design, manufacture and retail its
product range. The Marlow brand was quickly established and the company built up a loyal network of
suppliers,
workers in the company factory and franchised retailers spread around the world. Marlow Fashion Group's
products were able to command premium prices in the world of fashion. Rodney and Betty Marlow ensured that
their commitment to traditional values created a strong family atmosphere in its network of partners and were
reluctant to change this. The Group continues to operate a traditional finance function, which is responsible for
overseeing all financial matters affecting the business. Tasks undertaken by the finance team commonly involve
the
processing of accounting transactions, maintaining records and preparing month end reports.
Unfortunately, changes in the market for women's wear presented a major threat to Marlow Fashion. Firstly,
women
had become a much more active part of the workforce and demanded smarter, more functional outfits to wear at
work. Marlow Fashion's emphasis on soft, feminine styles became increasingly dated. Secondly, the tight
control
exercised by Betty and Rodney Marlow and their commitment to control of design, manufacturing and retailing
left
them vulnerable to competitors who focused on just one of these core activities. Thirdly, there was a reluctance
by
the Marlows and their management team to acknowledge that a significant fall in sales and profits were as a
result
of a fundamental shift in demand for women's clothing. Finally, the share price of the company fell
dramatically.
Betty and Rodney Marlow retained a significant minority ownership stake, but the company has had a new
Chief
Executive Officer every year since.
Required
(a) Write a short report to Susan Grant identifying and explaining the strategic strengths and weaknesses in the
Marlow Fashion Group. (13 marks)
Susan is aware of benchmarking as a useful input into performance measurement and strategic change.
(b) Assess the contribution benchmarking could make to improving the position of the Marlow Fashion Group.
(7 marks)
(c) Susan Grant recently read an article about the changing role of the finance function in modern business and
the rise of the business partner model.
Briefly explain the meaning of the ‘finance function as a business partner’ and outline the potential benefits
of making the finance function a business partner at the Marlow Fashion Group. (5 marks)
(Total = 25 marks)