CIMA lecturer, Nicky Brouwer, has broken down the Strategic Case Study Pre-Seen and highlighted some things you should know when preparing for the August Case Study exam. 

Here is what she had to say;

It's case study time again! This time we are presented with another business theme that has blossomed over the past few years – fast food order and delivery. Snakwheel is a platform that provides a service to its primary stakeholders, namely; suppliers (the restaurants), customers (individuals/families), as well as employees/contractors (courier drivers). We could call it a platform of convenience and efficiency. It adds value to the fast-food restaurants and assist expand the market and service offered.

What does the platform facilitate in our world? It facilitates business partnership and connection. One business need not do it all, the pie can be split, and each party becomes/is an expert in their own field. For example, food preparers, delivery logistics, drivers and eaters.

Once I have engaged with a case study, I sit back and reflect on what comes forward as most relevant. In terms of Snakwheel, I am producing the below themes;

IT/Digital 

the Snakwheel IT/data system has both strong and weak elements. The real-time back up being a vital strong point. The software can be divided into three areas of interaction;

1. Restaurants

This was adapted by external consultants from a pre-existing retail system. The direct upload for each restaurant system was complicated. My question is - what happens when Snakwheel expands to new restaurants or purchases another business that needs integration? Do they need to look at an entirely new system than is custom built and easier to roll out to new restaurants? These costs will be high, how will this be funded?

2. Customers

This is an in-house system. Is the intellectual property secure and well documented?

3. Couriers

This is another in house system with a robust team that worked on the app to ensure that upgrades, expansion, and repairs can be effectively carried out.

IT/data security is an area that is bound to be addressed in an exam variant. What if there is a data breach or a systems failure? What does the company do now (in the next 24 hours) and going forward to address the issue? 

Valuation

This is a critical area from F3 that will invariably be tested. Potential corporate action will trigger the need for a valuation of Snakwheel/ a division/ potential acquisition or merger, and you would need to explain potential valuation techniques with relevance to the situation. Cover all methods and expand on the most relevant, which is usually the Free Cash Flow basis of valuation. Remeber to apply your response, it cannot be purely theoretical.

Tucked under valuation we can also add the importance of knowing different funding options, namely debt (e.g. from the bank or bonds) and equity (e.g. rights issue or placement). 

Staff

This comprises of employees and independent contractors. These are critical ‘business partners’ who need to be kept happy and be fairly treated. We can already see in the blogs at the back of the pre-seen that the issue of too much idle time is appearing. Couriers sell their time and they cannot afford to be sitting around.

Healthy foods

Maybe it's my attention to healthy food speaking, but considering that the fast-food delivery market is at almost full saturation, a potential expansion area is healthy foods. Snakwheel has the platform, has the relationships with couriers, so would simply need the outlets, and funding.

An expansion on the platform need not be limited to health foods, it could be anything.

Quality/Reputation 

Quality and reputation go hand in hand and are vital ingredients for successful business. Practice discussing considerations in this regard. For example, if quality has been compromised, how do they recover and what are the implications? Again, try and take a neutral balanced stance/reflection rather than head off with a stick in one direction.

Intangibles

As we can see on the statement of financial position, there is both goodwill (arisen from acquisition(s)) and software (internally generated and purchased). Know the requirements for recognising these intangibles, specifically the software. Having these items opens the door to include the calculated intangible valuation (CIV) method if discussing value of the company.

 

 

CIMA Case Study Exams are specific in their nature and require an equally specific approach and response from the students. Below is a comprehensive guide on exam technique and how to prepare for as well as write the case study exam;

  • Be in the company, write about us. Become so familiar with working in and for Snakwheel that you almost replace your other job reality with this one. Write you emails and other communications as if writing the exam. Make your points clear, explain them, and ensure the reality of the situation is captured in a deep enough manner. 

  • Questions are more and more requiring your ideas and practical solutions. Yes, there is sound financial and strategic theory embedded in the tasks, yet as a deeply subtle backbone. In other words, it extremely unlikely you will be asked a theory-based question. You really need to place your work hat on and present plausible real solutions and ideas.

  • You are asked to present issues for consideration by a Board who can then make the decision(s). You are not the decision maker. There is no right or wrong answer. There needs to be a comprehensive communication presented of issues to consider. Sometimes you need to evaluate, provide pros and cons (risks and opportunities), action to be taken, or simply identify issues to consider.

  • With an ethical question, keep an open mind to present the implications of various avenues. Yes, walk the high road yet be open minded, tactful, and comprehensive in responses presented. You may need to scope out the possibility and implications of two or three courses of action.

  • Practice interpreting the task requirements correctly. What do the different verbs require? I would suggest gaining this knowledge from mock exam practice and suggested solution layouts. To paint the picture of three possible task requirements: 1. Provide the merits(benefits) of two different actions – here give merits of each for comparative purposes rather than pros and cons of each; 2. Evaluate usually implies look at both sides of the situation like pros and cons of one course of action; 3. Describe a course of action on, for example, communicating a merger to employees – here you need to discuss a number of actions to be taken.

  • Be on constant look out for the word “and”. This splits a task in two. Give each part equal weighting and present under two separate headings so the marker can see your split.

  • Present on what is asked, avoid temptation to go off on a tangent to put down things you know.

  • This brings us to planning - the most vital part of your exam. This contemplative 10 to 20 minutes at the start of every task is an area to perfect. Write down your points that will then serve as headings for each point, this is after determining how many points you need from the % allocation. Pause that extra moment before diving in. This ensures focused direction the full way through answering your task.

  • Use examples for exchange rate related questions. Create simple scenarios like if the exchange rate goes up from A$1: M$1.5 to A$1: M$1.7, and paint the impact on a transaction and hedge.

  • Know the corporate governance standing of the Board and its committees. What are strengths and what are pitfalls. This is often incorporated into questions.

  • With all questions, have a strategic approach of your own. For example, share price of a company is the present value of future cashflows. The extent to which the share price reflects future cash flows is via the efficient market hypothesis. Be able to chat comfortably about these topics. 

  • Ensure holistic presentations in all aspects.

  • It is not advisable to make assumptions of any form.

  • A few minutes prior to the end of question time do pause and read your answer for sense and to ensure you earn the marks due to you.

 

That’s it from my desk. Melt into Snakwheel. Try some fast food ordering if you haven’t already, and enjoy the journey of preparing for your exam. Good luck!