Graduate Diploma in Purchasing and Supply

Transcription

1 Graduate Diploma in Purchasing and Supply Strategic Supply Chain Management LEVEL 6 L6-02/Jul11 DATE: 19/07/11 TIME: to DURATION: 3 hours Instructions for Candidates: This examination is in TWO sections. Section A Has TWO compulsory questions, worth 25 marks each. Section B Has FOUR questions; answer TWO. Each question is worth 25 marks. 1. Do not open this question paper until instructed by the invigilator. 2. All answers must be written in the answer booklet provided. 3. All rough work and notes should also be written in the answer booklet. QP - 01

2 SECTION A You are strongly advised to read carefully and analyse the information in the case study before attempting to answer questions 1 and 2. ROTHERSTONE AND HAMPSTON Introduction Rotherstone and Hampston (R&H) is a medium-sized advertising agency situated in the UK. It creates, plans and places advertising for its clients in order to help them sell their products and services. Typical clients include tourism organisations, holiday companies, solicitors, colleges, a zoo and an employment agency. It uses a wide range of media, such as national press, regional press, television, radio, outdoor billboards, and direct mail. Steve Rotherstone set up R&H 25 years ago and is the managing director. When asked about the success of his company, Steve puts it down to his principles of honesty, value for money, and hard work. Recession has hit the advertising industry badly. The problem is that the advertising budget is an easy target for cost-cutting and is one of the first types of expenditure to be curtailed in a recession. There is no question of the company failing. Like most advertising agencies, the R&H business model is based on intellectual capital: its fixed costs are low and it has no borrowings. Steve is more concerned that changes are taking place in the industry that will affect how successful the company will be once the upturn in the economy begins. The Changing Face of Advertising People are spending less time reading newspapers and magazines, but are going to the cinema more, listening to more radio and turning in ever-increasing numbers to the internet. The internet in particular has been busy building advertising-media market share. This year the internet will account for 12% of all advertising spending, up from 10% in the previous year, and double what it was four years ago. Online advertising spending is forecast to be almost a third of the total advertising market in three years time. The success of e-commerce firms such as Amazon and ebay, and the rising popularity of web-based social-networking and community sites are driving this trend. The rise in internet advertising has led to the formation of specialist interactive agencies, which offer a mix of web design, search-engine marketing, internet advertising, and e-commerce consulting. R&H does not have a presence in the internet advertising market but Steve insists that the arrival of new media such as the internet does not spell the demise of the old. As he points out, TV never killed radio, which in turn never killed newspapers. They did pose huge creative challenges, but that is OK, we are relentlessly inventive; that is what we do. A second change is that consumers have become better informed than ever before, with the result that some of the traditional methods of advertising simply no longer work. There are plenty of alternatives to straightforward advertising, including a myriad of marketing and communications services. They range from public relations to direct mail, consumer promotions (such as coupons), in-store displays, business-tobusiness promotions (like paying a retailer for shelf-space), telemarketing, exhibitions, sponsoring events, product placements and more. Large advertising agencies now provide integrated marketing services, incorporating a mix of these activities, but R&H is not able to do so. 2

3 Allied to this change is the consolidation of the advertising industry. In most countries this is dominated by the big four agencies, Omnicom, WPP, Interpublic and Publicis, which hold a substantial aggregate market-share. R&H finds it difficult to compete with the scale and reach of these players and many other medium-sized advertising agencies have been taken over. Steve s son, who has recently graduated with an MBA, thinks that R&H should succumb to the inevitable and sell out, but Steve still feels that there is scope in the industry for independents. Consumers are becoming far more sophisticated in their reaction to all forms of advertising, so smarter ways have to be used to reach them. This is where smaller agencies can still compete by being more nimble. Another change taking place is the growing influence of advertising in emerging markets. Countries such as China have survived the economic crisis better than Western countries, Chinese companies are keen to gain a foothold in Western markets, and they still have money to spend on advertising. Steve is keen to exploit this opportunity but does not really know where to start. Advertising agencies have been worrying for years that advertising alone will not pay enough to keep them in business. This year clients have slashed their advertising budgets which has heightened that anxiety. As a result, many have branched out into other business activities. One agency boss recently likened the industry s business model to an accordion: We keep stretching it to meet our clients needs. His company has expanded by adding a public-relations unit and a data-analysis and investmentmanagement arm. Another has acquired its own music label, while a third agency has added an entertainment and event-planning company. One enterprising agency has started a separate Recession Marketing Practice to counsel companies on how to use their marketing budgets wisely. Some advertising agencies have tired of coming up with clever ideas for clients without winning a share of the resulting revenues. So one firm has set up a unit which designs, markets and distributes its own products. Its successes include a range of pre-packaged vegetarian food sold in a leading British supermarket, and a security device that imitates the sound of a woman s scream. Steve wonders whether he should also look to expand the range of his business activities. The Clients Two of R&H s clients have responded to the recession in different ways: client A is determined to buy advertising more effectively and is more concerned than ever about achieving value for money. What increasingly matters is not what it costs to put an advertisement in front of 1,000 people (a traditional industry measure), but how effective that cost-per-thousand is client B is bundling together all its marketing activities, including advertising, and outsourcing them to a third-party provider. The information in this case study is purely fictitious and has been prepared for assessment purposes only. Any resemblance to any organisation or person is purely coincidental. PLEASE TURN OVER 3

4 QUESTIONS Questions 1 and 2 relate to the case study and should be answered in the context of the information provided. Q1 Assess the corporate strategies that R&H might adopt to take advantage of the changes taking place in the advertising industry. (25 marks) Q2 (a) Analyse the supply chain strategies that Client A might adopt in order to buy advertising more effectively and achieve value for money. (12 marks) (b) Evaluate the decision of Client B to bundle together its marketing activities and outsource them to a third-party provider. (13 marks) SECTION B Answer TWO questions from section B. You are strongly advised to read carefully all the questions in section B before selecting TWO questions to answer. Q3 Two supply managers were discussing different supply chain approaches. One was convinced that her organisation should adopt lean supply and partnership arrangements with suppliers in order to achieve sustainable competitive advantage, while the other argued that agility was the key. Evaluate the different views of the supply managers. (25 marks) Q4 (a) Evaluate the resource-based approach to corporate strategy. (12 marks) (b) Evaluate network sourcing as a strategic supply chain model. (13 marks) Q5 BMW announced in 2009 that it would be extending its guidelines on sustainability to its second-tier suppliers, which would be required to meet social and environmental standards. (Supply Management, 2009) (a) Analyse the benefits to BMW of adopting sustainable supply chain management. (13 marks) (b) Explain how BMW can gain commitment to sustainability throughout its supply chain. (12 marks) 4

5 Q6 Compare and contrast the characteristics of supply chains in the following sectors: (i) Manufacturing. (ii) Services. (iii) Retail. (iv) Public sector. (25 marks) END OF QUESTION PAPER 5

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