May 2012 QP

M12/3/BUSMT/HP2/ENG/TZ0/XX

2212-5012

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SECTION A

Answer one question from this section.

1. Safe Passage (SP)

Trent Peters is one of seven partners at Safe Passage (SP). It provides bodyguard* services to

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%'&+-+-:#*8#;*.9:2&'.$4##5/0$0#&'0<

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=# $2;,*-%'&,%+-:#;9#2$+-:#&-#0C%0'-&!#&:0-,9#+-#3$+&-#,*2-%'9#@#*'#A#*'#B4

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Option Forecast costs Forecast revenue

if successful

Probability: 0.3

Forecast revenue

if not successful

Probability: 0.7

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&# /+$%*'9# *8# 0&'%/J2&70$(#

good infrastructure

4 19 2

2. I88$/*'0#%*#,*2-%'9#A<#/&$#

-*#/+$%*'9#*8#0&'%/J2&70$(#

poor infrastructure

5 16 4

3. I88$/*'0# %*# ,*2-%'9# B<#

under reconstruction after

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6.4 21 4.2

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(This question continues on the following page)

M12/3/BUSMT/HP2/ENG/TZ0/XX

2212-5012

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Turn over

(Question 1 continued)

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5/09# ;0!+0?0# %/&%# $2;,*-%'&,%+-:# 6+!!# .&"&:0# SP’s# EFR4# # 5/09# &':20# %/&%# %/0# /+:/0'# ,*$%$# *8#

*88$/*'+-:#6+!!#;0#,*?0'0.#;9#%/0#8*'0,&$%#/+:/#'0?0-204

(a) Describe two#80&%2'0$#*8#&#)&'%-0'$/+)4## [4 marks]

# D;H# 1C)!&+-#two#;0-0 %$#&-.#one cost to SP#*8#)'0)&'+-:#&#,*-%+-:0-,9#)!&-#*8#%/0#

%/'00#)*$$+;!0#!*,&%+*-$#+-#3$+&4 [6 marks]

# D,H# D+H# K*-$%'2,%#&#82!!9#!&;0!!0.#.0,+$+*-#%'00#&-.#,&!,2!&%0#%/0#)'0.+,%0.#*2%,*"0#

*8#0&,/#*88$/*'+-:#*)%+*-#(show all your working). [6 marks]

# # D++H# K*""0-%#*-#%/0#?&!20#8*'#SP#*8#2$+-:#&#.0,+$+*-#%'00#&$#&#.0,+$+*-T"&7+-:#

%**!4 [3 marks]

# D.H# 1C&"+-0#two disadvantages for SP#*8#$2;,*-%'&,%+-:#+%$#'0,'2+%"0-%#&-.#%'&+-+-:#

of bodyguards. [6 marks]

M10/3/BUSMT/HP2/ENG/TZ0/XX+

2210-5012

– 2 –

SECTION A

Answer one question from this section.

1. New Philanthropy Foundation (NPF)

Steve Dawes founded the New Philanthropy* Foundation (NPF) in 2005. It was set up with a very

generous donation from a retired businessman. It is an online non-profit organization financing

educational opportunities for children in developing countries. Steve has been looking at his financial

statements with concern. NPF’s cash reserves are being used up quickly and in the current poor

economic climate, NPF’s main source of finance – online donations – is falling.

In 2010, NPF has no debt but also no fixed assets. NPF’s outgoings are Internet usage fee,

maintenance fee for servers and computers as well as a web designer’s fee for regularly updating the

NPF web site.

NPF has volunteers from all over the world running the organization. An online community of social

networking web sites connects them with Steve as the chief web site administrator. All funds to

finance educational projects are transferred electronically and only e-mail communication is allowed.

According to its vision statement, NPF aims to become the first paperless charity.

Steve has been asked by a very popular rock band to sponsor a reunion concert, which will be

broadcast only over the Internet. The opportunity would generate substantial public relations

possibilities, but some volunteers on the NPF forums are not convinced. They argue that the money

spent sponsoring the concert should be used to provide further educational opportunities for children.

They also believe that many people watching the concert may be frustrated if global Internet

broadband connections become too slow or fail.

Steve is preparing a cash-flow forecast for the next six months (all figures refer to 2010) based on the

following figures:

Forecast Donations

(millions of US$)

June 40

July 30

August 30

September 20

October 20

November 10

• Donations are transferred to the educational projects one month after the money has been

received.

• Educational projects receive 95 % of all donations.

* Philanthropy: voluntary action for the public good. An activity performed with the goal of promoting the well-being of fellow man.



2210-5012

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Turn over


Millions of US$

Opening balance in June 2010 1

Donations received in May 2010 50

Internet usage fee 1 to be paid in June and September

Maintenance fee for servers and computers 0.25 per month

Web designer’s fee 0.5 per month

Concert sponsoring fee 5 to be paid in November

(a) Define the following terms:

(i) vision statement [2 marks]

(ii) public relations. [2 marks]

(b) (i) Using Steve’s forecast figures, prepare a cash-flow forecast for NPF from

June to November 2010, clearly showing the opening and closing monthly

cash-flow forecast balances. [6 marks]

(ii) Comment on your results from part (i). [3 marks]

(iii) Explain two possible solutions to the liquidity problems highlighted in

parts (i) and (ii). [6 marks]

(c) Analyse the impact of two external threats on NPF’s decision to sponsor the

concert. [6 marks]


2210-5012

– 6 –

SECTION B

Answer two questions from this section.

3. The Q-Drum: “A Revolution in Thinking and Innovation”

The problem is obvious. Millions of women and children worldwide endure backbreaking labour

carrying open, unstable heavy water containers for long distances.

[Source: http://www.globaleducation.edna.edu.au/images/1002501.jpg, 20 October 2008]

The solution: the Q-Drum, invented by brothers Hans and Piet Hendriske. The brothers have

obtained a patent (intellectual property rights) for producing the Q-Drum.

[Source: http://ecoscraps.com/files/2008/09/qdrum1.jpg, 20 October 2008]

Even a child can pull up to 50 litres of water in the doughnut shaped plastic drum as it rolls along

the ground. In a recent test, one family of 13 used the Q-Drum daily, travelling 12 000 km in

20 months, providing 120 000 litres of transportable water.

“The Q-Drum represents a revolution in thinking and innovation”, claimed Dr Paul Polak, who runs

an organization helping poor farmers become entrepreneurs. He added, “A billion customers in

the world need a US$2 pair of eyeglasses, a US$10 solar light and a US$100 house. Why do

innovators and designers only research and develop products that target the needs of the planet’s

richest 10 %?”.

However, despite its simplicity and life-saving innovation, the Q-Drum has only sold several

hundred so far. At US$50 the price is too high for those who need it most. Until it can be

manufactured more cheaply and appropriate distribution channels can be found, sales will remain low.

A non-government organization (NGO) sponsored by the United Nations has offered to help with

the market development of the Q-Drum, but the brothers know that significant marketing issues

still remain.



2210-5012

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(i) innovation [2 marks]

(ii) distribution channels. [2 marks]

(b) Explain the role and importance of obtaining a patent (intellectual property

rights) for the Hendriske brothers in producing the Q-Drum. [6 marks]

(c) Analyse two reasons why “innovators and designers only research and develop

products that target the needs of the planet’s richest 10 %”. [6 marks]

(d) Discuss an appropriate marketing mix to increase sales of the Q-Drum. [9 marks]

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N10/3/BUSMT/HP2/ENG/TZ0/XX

8810-5012

– 6 –

SECTION B

Answer two questions from this section.

3. The battle of the online search engines

The online search engine market doubled from US$40 billion in 2008 to US$80 billion

by 2010. Google, with the largest market share, benefited most from this growth. An executive

from Microsoft, a market rival, says that the industry will be better served by having an alternative

to the dominance of Google.

Microsoft’s objective is to quickly gain a bigger share of the online search engine market by

external growth. After pursuing unsuccessful internal growth strategies, Microsoft launched a

US$45 billion hostile takeover bid for the search engine business Yahoo!.

Yahoo! has many other services, such as e-mail. However, because of its lack of focus,

Yahoo! has fallen behind Google. Yahoo! recently suffered a decline in profit causing its shares to fall

by 40 %. As a consequence Yahoo! cut 1000 jobs.

If successful, Microsoft’s takeover of Yahoo! will combine the second and the third largest

companies in the online search engine market. This takeover would result in extensive job losses

but also in cost savings of at least US$1 billion. Moreover, the combination of the two companies’

engineering resources and expertise would expand the research and development (R&D) capability

to produce more innovative services.

The proposed takeover is likely to attract government investigation into the market share of the

combined organizations. Together, Microsoft and Yahoo! would account for 35 % of the online

search engine market.

Yahoo! has so far been able to resist the takeover bid. Microsoft is now looking for alternative growth

strategies such as mergers with other possible partners.

[Source: adapted from Dominic Rushe, Where to?, The Sunday Times, 10 February 2008 and

Richard Waters, Microsoft challenges Google’s grip, Financial Times, 2 February 2008]


N10/3/BUSMT/HP2/ENG/TZ0/XX

8810-5012

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Turn over



(i) market share [2 marks]

(ii) external growth. [2 marks]

(b) Draw The Boston Consulting Group (BCG) matrix for 2010 and distinguish

between the position of Microsoft’s online search engine and Google’s online

search engine. [6 marks]

(c) Examine the possible effects that a successful takeover bid by Microsoft of

Yahoo! would have on employees and one other stakeholder. [6 marks]

(d) Discuss Microsoft’s decision to launch a hostile takeover bid for Yahoo!. [9 marks]

Documents

May 2012 QP