IBTC lecturer, Nicky Brouwer, has broken down the Strategic Case Study Pre-Seen and highlighted some things you should know when preparing for the February Case Study exam.
Here is what she had to say;
Well, some were elated, some nervously excited, and others completely fearful upon the release of the February 2022 Strategic ICS by CIMA. Are you a gamer? Is a family member a gamer? Or are you on your own here?
The gaming industry is massive, absorbing a greater and greater proportion of the global population. It is creative, technology based and, although dominant in the 18-35 age group, appeals to all ages. There are many different games, as well as types of games, designed for a broad spectrum of tastes and prefrences.
Balanced Scorecard
To give some depth and meaning to this write-up, let’s consider the Norton and Kaplan Balanced Scorecard on how value is created (the strategic performance guidelines) – customer value, innovation and learning, financial and internal processes.
Use the scorecard to assist you to map your understanding of this business and to create relevant KPI’s. The scorecard can further be used as a tool to assess the risk climate, and possibly additional risks over and above the ones in the pre-seen.
Gamers Views (Customer Value)
To get to the core of customer value, let’s harness the input from some real Gamers. The question is what do they value from a game and the gaming experience (and inadvertently from the game provider - in this case Pixlwizz)?
Mahlie Schoultz games with her son. Her feedback on what she values is;
- The game must have an engaging plot/story.
- The controls must be friendly, especially on consoles.
- It should be challenging, but not impossible.
Selebogo Mosoeu enjoys playing Fortnite, an online multiplayer game. Here's what he likes about it:
- It's an online game, where you play against other people and not a programmed computer. This makes the game more interesting and competitive.
- You can play with your friends and team up to play together. You can communicate online via voice chat.
- It's a free to play game. You don't have to buy items to gain a competitive advantage. You can buy costumes or other cosmetic items, but these are purely for visual effects.
- Some free-to-play games disadvantage people who don't buy items. Forcing the user to buy items in order to be competitive.
- They update the game regularly and bring in different game modes and game layout, which makes a player want to explore more (makes a player spend more time in the game)
Armandt Janssen values a progressive storyline, upgrades that unlock with gameplay (not having to spend additional money). He also notes that great graphics are a big factor to assist to immerse one into the experience. This same feedback has also been gained from others.
There appears to be great drive from gamers to take gaming to the next level, for innovation, social interaction and simple clean sophistication. This needs to occur within the games, the types of games, the mode of playing (cloud based or more sophisticated hardware) and gaming activities i.e., esports. Pixlwizz has its work cut out for it.
Internal Processes
Development in the industry is constantly taking place. Hence, we can expect this drive for development to appear in our case study questions. Such development can come via acquisitions (including vertical acquisitions within the supply chain e.g., cloud operator or hardware manufacturer), organic development or joint ventures/alliances. The shift is global, one needs a dynamic, powerful and stable global platform. Easily accessible from anywhere and everywhere.
External change is driven by internal change and focus. We don’t hear too much about Pixlwizz’s internal processes, other than the staff and creative process, but it goes without saying that this needs to be an area of co-operation and continuous improvement. The world is digitising in every way possible. What improvements can Pixlwizz implement to streamline it's processes?
Internal controls and internal audit link in here as well. This is often an area explored within a case study exam. Possibly there is an incident that occurs that was not adequately identified in the risk register. Internal audit will need to audit the adequacy of the risk management system. Is this done in-house or outsourced?
Innovation and Learning
It goes without saying that the level of creativity and ‘fire’ energy that fuels the games market, the scenarios, and the characters needs to be knife sharp and forever leading solid dynamic change. Accordingly, true to their vision, mission, core values and creative processes, people and systems are vital. Be prepared to discuss these softer and less softer issues within the question context.
As the risk register identifies, the reliance on the skilled and creative employee base is a sacred space within the business. It’s the element that enables the business to deliver customer value as described. To keep this creative energy flowing it needs to be honoured in a genuine way, all communication needs to be open and upfront. People need to be treated fairly and need to feel safe yet their passion fueled.
Teamwork also plays a major role here as it allows creative solutions to unfold in the best way possible. A good KPI could be linked to the number of productive team meetings per week, for example. Or, the number of multi-disciplinary teams operating to deliver creative content and solution.
Financial
The company is cash flush, has low gearing and a high dividend payout. It is in a strong position to take the next step in investment, if needed. Although, just more than ½ the cash is from income received in advance from customers pre-purchasing new game access or from annual subscriptions.
In the financial space the most solid ground to gravitate to is total shareholder return - i.e., the dividend returns, as well as share price increase over the past 12 months. This is divided by the share price at the start of the year. The dividend discussion of the value of ‘bird in the hand’ versus the promise of future share price appreciation is a relevant consideration.
Another timeless financial dynamic to hold in mind is that the value of a business is the present value of future cashflows. Yes, a realistic forecast is created by whoever to determining the value and this is discounted at a risk adjusted discount rate. Even when the PE basis of valuation is used, it is still built on the NPV fundamental. PE depicts the quality and sustainability of future earnings, whilst taking into account the risks, both business and financial.
Exam Technique
In preparing yourself for this exam, I suggest completing 5 or 6 different mock exams. Fill in any ‘I CAN’ gaps with questions from your workbook or similar. Prepare your way, prepare to succeed.
Know what you need about the gaming industry and Pixlwizz, although remain level headed, able to take a step back to clearly grasp what you are required to do and then providing a 360-degree robust response.
At the end of the day this is a strategic management accounting exam (nearly said game…) that’s here to test core skills and communications ability. A valuation is a valuation, whatever your company and industry. Be able to balance your response between relevant academic insight, common sense and the Pixlwizz case, remembering you work for Pixlwizz.
In the ICS exams, examiners are not looking for your right answer. Your answer is right, the issue is the quality of your response. Is it well-structured and presented? Well explained, as well as applied to the scenario? Explaining can even happen within your application.
I can’t help but wonder how many Strat ICS students will become gamers by the completion of this process.
From all of us at IBTC, we’re wishing you the very best of luck! This is the final step to completing your CIMA certificate.
