Page 14 - CIMA MCS Workbook November 2018 - Day 1 Suggested Solutions

CIMA NOVEMBER 2018 – MANAGEMENT CASE STUDY

EXERCISE 2

It is important for GRAPPLE to regularly scan the business’s external environment which may
present threats or opportunities to its future success. These threats will be in addition to those
presented by the increasing competition. This requires an appraisal to be undertaken by
management of factors relevant to the organisation’s current and future activities.

Two useful frameworks which can assist in this process:

PEST (EL) framework which helps in the analysis of the macro or general environment, and divides
the business environment into six main areas:

 Political

 Economic

 Social (and cultural)

 Technical/technological

 Ecological/environmental

 Legal

Porter’s Five Forces which examines the attractiveness and profitability of industries by analysing
and understanding the nature of the competitive environment by examining:

 New entrants into a market or industry
 Rivalry amongst existing and new competitors
 The threat of substitute products
 Power of customers
 Power of suppliers

Applying these to GRAPPLE will need to consider the following:

 political influences and events – increased taxation e.g. sugar tax, regulations defining
which ingredients can be used, government legislation re environmental control and
charges etc. have all grown in prominence globally, as has receiving higher government
support for low environmental impact or changes in policy e.g. recent events such as
Brexit in the UK. Firms must provide nutritional information of their product to the
customer. Additionally GRAPPLE will also need to be aware of world‐wide austerity
measures which will directly affect one of the key constraints of unpredictable
consumer numbers and therefore selection of the most appropriate and profitable
products. Given the nature of GRAPPLE’s business vision, political influence may be of
increased future relevance particularly if any international expansion is considered.

 economic influences – GRAPPLE must be concerned about economic conditions in this
context as they will have a direct effect on their future growth plans. Particular areas of
concern might include: changes in employment, changes in interest rates, consumers’
income and expenditure and the inevitable effect on disposable income. The soft drink
industry experiences market shocks in periods of recession. The most relevant aspect is

64 KAPLAN PUBLISHING