THE HONG KONG INSTITUTE OF CHARTERED SECRETARIES THE INSTITUTE OF CHARTERED SECRETARIES AND ADMINISTRATORS

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1 THE HONG KONG INSTITUTE OF CHARTERED SECRETARIES THE INSTITUTE OF CHARTERED SECRETARIES AND ADMINISTRATORS International Qualifying Scheme Examination STRATEGIC AND OPERATIONS MANAGEMENT PILOT PAPER Time allowed 3 hours Section A Compulsory questions Section B 5 long questions (attempt any 3) DO NOT OPEN THIS PAPER UNTIL INSTRUCTED TO DO SO BY THE INVIGILATOR Important Note: Candidates are allowed 15 minutes reading time to read through the question paper before the commencement of the examination between 1:45pm- 2:00pm. During the reading time, all candidates must be silent and must not write or mark anything on their question papers or answer books. Candidates must close all their reference books, notes or other unauthorised materials and put these under their chairs. If any candidates write or make any marks during the reading time, or if they speak or in any other way communicate with anyone either in or outside the examination hall during this period or read any unauthorised materials, they will be disqualified from continuing this examination paper. Once candidates have opened the question paper, they are not allowed to leave the examination hall until 2:30pm. 1

2 SUBJECT NO 11J STRATEGIC AND OPERATIONS MANAGEMENT PILOT PAPER The examination paper is divided into TWO Sections. Section A is compulsory and carries 40 marks. Candidates should attempt THREE questions from Section B, all of which carry 20 marks each. You should allow yourself approximately 70 minutes in total to answer the questions in Section A, and 35 minutes for each of the questions attempted in Section B. Time allowed: 3 hours Question 1 Ocean Park gets engaged SECTION A (Compulsory Answer ALL parts of this question) Seven days a week, Ocean Park chief executive Tom Mehrmann takes at least one walk a day around the amusement park, observing the visitors' reactions to the different attractions, seeing if they're having a good time. Sometimes he has a chat or a laugh with them, but they won't know who he is. For Halloween, Mr Mehrmann was dressed as "The Slider" in make-up and costume and had a set of knee pads with which to skid up to unsuspecting visitors and give them a fright before making them laugh. He has loved the theme park concept since he was a teenager when he first went to work at Knotts Berry Farm in Buena Park, California as a junior park attendant. It became a 30-year career - and counting. When Mr Mehrmann joined Ocean Park in 2004, it was at a time when the economy was sluggish. Hong Kong had been buffeted by the economic downturn, bird flu and then SARS in 2003 and businesses were suffering. The government-owned theme park had also taken a knock in attendances and Mr Mehrmann arrived at a time that saw staff members remaining hard-working, but not as "engaged" as he wanted them to be. Engagement is a word that Mr Mehrmann uses a lot. Ensuring that staff members are on board and enjoying what they are doing is important to the theme park chief executive who has just been given DHL's Executive Award. 2

3 Since joining Ocean Park in 2004, he has directed the activities of the park to achieve the highest attendance and revenue in the company's history, while leading the effort of defining the Concept Master Plan for the future of Ocean Park. The theme park, famous for its animals and sea life, now hosts a very healthy 4 million visitors a year. "As a CEO I'm a coach, a confidante and visionary," said Mr Mehrmann. "Not one day is ever the same, every day is different, which is why I like doing everything I do." Before working at Ocean Park, Mr Mehrmann worked at Warner Brothers Movie World in Madrid after it was taken over by Six Flags Theme Parks, the world's largest chain of theme and amusement parks. When Mr Mehrmann came to Hong Kong he needed to get more visitors to Ocean Park, while working within a non-profit facility. "What was unique for me was working for a non-profit facility with its own natural bureaucracy. This isn't good or bad, but just means that you have to look at opportunities differently," he said. "There are a lot of checks and balances and appropriate oversight when it is a government asset," he said. Working in tandem with chairman Allan Zeman, under the Hong Kong Tourism Board, Mr Mehrmann encouraged his co-workers to take calculated risks. "There was some concern, some aversion to decision making, that people might get blamed personally. But in order for the company to grow, there had to be a bit of calculated risk, a bit of speculation. I had to say that it was OK to take risks and break down that bureaucratic thinking, that check-box mentality." The first thing Mr Mehrmann did as a manager was to organise a staff survey, to gather the thoughts of the staff. He then began working on the engagement aspect. "I'm a good reader of people and can tell by their body language what they are feeling," he said. He instituted partnering sessions, for people to express their views. He also made a point of not removing anyone, but in fact added two executive directors to the mix. Mr Mehrmann had to work on visitor growth and gradually changing the percentages of income taken from admission, food and retail. "Some 15 to 18 per cent of our revenue was from in-park food and retail and 85 per cent was from admissions. The target in the industry is 50:50, which is quite a lofty goal. In the four years I've been involved in the company, we've managed to change it to 35:65." Mr Mehrmann is clearly passionate about his job, and it is difficult to get the conversation on to himself. While delighted by being chosen as the winner of the Executive Award in this year's DHL Awards, he is not happy to claim the award for himself, saying any achievements at Ocean Park have been a team effort. The award came as no surprise to Allan Zeman, who decided Mr Mehrmann was "my candidate" among many other applications for the job of chief executive in "Obviously when I first hired a new chief executive in 2004 he was one of many candidates," Mr Zeman said. "As we sat and talked, I just felt that he was my candidate. He impressed me very much with his personality. He is very easygoing and has a great sense of professionalism. He was working in Spain at the time, and I didn't want to let him back out of the door. 3

4 "We sat, we brainstormed on what to do and the team we needed to put together. He's always been very professional with the staff. He's also very modest. The fact that he refers to the award as a team effort is a sign of a great chief executive. They're only great if they go for good people around them. He's sensitive to his staff and very loyal to them. I've never seen him get angry. We've never had words and it's literally a pleasure to work with him." Required: (Extract from South China Morning Post, 7 December 2007) (a) What was Ocean Park s position when Tom Mehrmann took over? What changes did he make at the company? (b) Some scholars suggest that truly effective leaders are distinguished by a high degree of emotional intelligence. Did Tom Mehrmann show his emotional intelligence? Support your answer with examples from the case study. (Total: 40 marks) 4

5 SECTION B (Answer THREE questions from this section) Question 2 Value chain analysis allows a firm to understand the parts of its operations that create value and those that do not. Illustrate this statement with reference to a company of your choice. Question 3 Diversification creates firm value. Discuss. Question 4 Explain, with examples, the competitive business-level strategies that companies can use to develop their competitive advantages. Which strategy can lead to higher performance according to past evidence, and why does it do so? Question 5 In a rapidly changing world, managers need to increase their skills at diagnosing resistance to change and at choosing the appropriate methods for overcoming it. (a) Describe the causes for resistance to change. (12 marks) (b) Suggest an appropriate way to overcome resistance in a scenario where the change agents do not have all the information they need to design the change, and where others have considerable power to resist. (8 marks) (Total: 20 marks) Question 6 How do the five forces of competition affect an industry s profit potential? Explain with an industry example of your choice. 5