Page 15 - CIMA May 18 - MCS Day 1 Suggested Solution

SUGGESTED SOLUTIONS

EXERCISE 2

It is important for MENTA to regularly scan the business 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
 Substitutes for bus travel
 Power of customers
 Power of suppliers

Applying these to MENTA will need to consider the following:

 political influences and events – increased taxation (e.g. taxes on the fuel have grown
higher), government legislation re emission control and charges etc. (e.g. environment
friendly vehicles have grown in prominence globally, also receiving higher government
support for their low environmental impact) or changes in policy e.g. recent events
such as Brexit in the UK. Additionally MENTA 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
routes and vehicles. Given the multinational nature of MENTA’s business political
influence may be of increased future relevance with further international expansion
being undertaken. Conversely however, public transport has a potentially strong future
as governments try to tackle the twin challenges of congestion and climate change.

 economic influences – MENTA must be concerned about economic situations 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 size of the

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