Strategic Professional – Essentials

Strategic Business
Leader
(SBL)

SBL
September/December 2019 – Sample Questions

SBL ACCA

Time allowed:
4 hours including reading, planning and reflective time.

This question paper is an integrated case study with one section

containing a total of 100 marks and ALL tasks must be completed.

All tasks contain Professional Skills marks which are included in the
marks shown above.

Do NOT open this question paper until instructed by the supervisor.

You must NOT write in your answer booklet until instructed by the
supervisor.
This question paper must not be removed from the examination hall.

The Association of
Chartered Certified
Accountants
Overview
Dulce Co (Dulce) is a listed company which manufactures and sells high quality chocolate and confectionery (other sweets).
It was founded over 100 years ago by the Reece family in Northland, initially operating from one shop in a small town.
Over the years, Dulce has grown steadily and has been very successful, becoming a household name in Northland and
the surrounding countries. Its reputation and success have been built on the high-quality products it manufactures and
sells. It offers products across a wide price range, optimising its appeal and affordability to potential customers. Dulce’s
products include a wide variety of boxed chocolates, confectionery (other sweets such as candies, ice-cream and toffee),
and novelty occasion and seasonal items (such as chocolate teddy bears). Dulce’s products are often bought as gifts on
special occasions and for seasonal events and celebrations.
Dulce manufactures all of its products in its single factory in Northland and the products are then sold through a variety of
sales channels. This comprises Dulce’s own high street shops located in Northland, the Dulce website and a number of
retail partners, including several of the main supermarkets, department stores and gift shops in Northland. At present, Dulce
sells all of its products through retail partners under its ‘own label’. That is, all of Dulce’s products sold by its retail partners
bear Dulce’s name and branding.
Dulce is listed on the Northland stock market and adheres fully to the government’s corporate governance guidelines in
terms of board and committee structure and operations. Dulce operates two divisions: retail and operations. The retail
division is responsible for Dulce’s shops and online sales. The operations division is responsible for managing suppliers and
the production process.
Although Dulce remains one of the most trusted and recognisable brands in Northland, it has faced challenges in recent
years. These challenges have largely been driven by changes in customer tastes and buying habits, increased competition
from online retailers, fluctuating raw material prices and the economic recession impacting on customers’ disposable
incomes. Although Dulce has remained profitable, growth has stagnated in the last three years and the board of directors is
currently undertaking a strategic review, focusing on how it can develop and grow the business and on how it can improve
business performance. The board is also in the process of reviewing its risk management activities with a view to ensuring
that these risks do not impede the achievement of its strategic aims.
You are a senior business manager reporting directly to the finance director of Dulce and you work on a wide range of
strategic level projects and activities. You are often asked by the finance director and other board members to report to them
on a variety of strategic level issues and you are currently working for the board on the current strategic review process.
The following exhibits provide information relevant to Dulce:
Exhibit 1: Extracts from Dulce’s annual report 20X8, highlighting Dulce’s mission, strategic aims, products and ethical
sourcing standards.
Exhibit 2: A slide deck presented by the sales director outlining Dulce’s proposed sales development strategies.
Exhibit 3: A data sheet presenting information relating to proposed orders from Excelsior department store and BB
supermarket.
Exhibit 4: An email containing Dulce’s current risk register.
Exhibit 5: A newspaper article relating to child-labour practices in the supply chain of the chocolate manufacturing
industry.
Exhibit 6: Summary of a brainstorming meeting outlining key business activities and operations of Dulce.

2
The case requirements are included in the tasks shown below:

1 You have recently attended a meeting with the finance director and the sales director, where it was discussed how
Dulce should develop and grow the business. The sales director is about to make a presentation to the rest of the board
on a number of sales development strategies which he proposes will assist Dulce in achieving its stated strategic aim
of developing its product range and its markets.

Required:
(a) The sales director has asked you to provide a set of notes to accompany the presentation he has prepared for
the board, which discuss how the sales development strategies he has proposed will assist Dulce in achieving
its strategic aim.
Note: Slides are not required. (16 marks)
Professional skills marks are available for demonstrating commercial acumen skills in showing clear awareness
of the organisational and wider external factors which could contribute to the achievement of Dulce’s strategic
aim. (4 marks)

At the same meeting, the sales director advised the finance director that Dulce is currently considering manufacturing
a range of three new luxury hand-made chocolate products (A, B and C) for two retail partners, Excelsior department
store and BB supermarkets. However, due to a current shortage of skilled labour in hand-made production techniques,
Dulce would currently be unable to supply both of the retail partners’ orders in full. Therefore, Dulce must decide which
order should be prioritised and be completed in full and which could be partially completed, in order to optimise the
use of the skilled labour available.
Following this meeting, the finance director requested one of the finance team to compile a data sheet for you, relating
to both potential orders, and she has asked you for a full evaluation of the two orders so that a final decision can be
made.

Required:
(b) Prepare a report for the finance director which:
(i) Evaluates the financial and non-financial implications of Dulce prioritising one order over the other; and
(12 marks)
(ii) Recommends, with justification, which order should be prioritised. (4 marks)
Professional skills marks are available for demonstrating communication skills in using compelling and logical
arguments and clarifying the information presented to convey relevant information to the finance director.
(4 marks)

(40 marks)

3 [P.T.O.
2 The audit and risk committee is currently carrying out an annual strategic review of Dulce’s risk management activities.
As part of this review, the chairman of the audit and risk committee has asked you to assist him in considering how
the risks included in the current risk register could have an impact on the achievement of Dulce’s strategic aims.
Exhibit 1
Required:
(a) Compile a table for the chairman of the audit and risk committee which:
(i) Analyses how the risks identified in the current risk register could have an impact on the achievement of
Dulce’s strategic aims; and
(ii) Recommends mitigating activities for each of these risks. (16 marks)
Professional skills marks are available for demonstrating analysis skills in considering the risks identified by
Dulce. (4 marks)

The audit and risk committee is also aware of discussions from a senior leadership team meeting regarding the use of
child-labour on cocoa farms supplying the chocolate manufacturing industry. At this meeting, which you also attended,
there was a discussion regarding Dulce’s response to the findings of a recent news article. The operations director
stated that no response is needed, as most customers are unaware of the issue, and the use of child-labour is common
amongst most cocoa farmers and is an accepted practice. However, the human resource director insisted that this risk
must be removed at all costs and that Dulce must stop using all cocoa farmers who use child-labour immediately and
look for new cocoa farmers. The finance director suggested that Dulce should continue to use its cocoa farmers but that
it must control and monitor them more effectively to maintain ethical standards.

Required:
(b) You have been asked by the chairman of the audit and risk committee to prepare three presentation slides,
with accompanying notes, for presentation at the next board meeting, which:
(i) Identify how each risk response suggested by the three directors would be categorised using an appropriate
risk management framework; (4 marks)
(ii) Evaluate the appropriateness of the risk responses of the operations director and the human resource
director; and (6 marks)
(iii) Consider the suggestions of the finance director, including recommendations for TWO control activities
which should be implemented to assist in managing this risk. (6 marks)
Professional skills marks are available for demonstrating scepticism skills in challenging the opinions of the
board made in relation to the risk responses to the use of child-labour in Dulce’s supply chain. (4 marks)

(40 marks)

3 You recently attended a brainstorming meeting with some of the directors of Dulce. At this meeting the participants
brainstormed the key processes and activities Dulce should focus on to achieve performance excellence, with the aim
of increasing customer retention and loyalty. Following this meeting, the finance director has asked you to consider the
brainstorming meeting summary in order for the directors to evaluate how Dulce is achieving performance excellence.

Required:
Present a set of briefing notes for the finance director which evaluate the extent to which the criteria for achieving
performance excellence are being met by Dulce, using the findings of the brainstorming meeting. (16 marks)
Professional skills marks are available for demonstrating evaluation skills in using professional judgement to appraise
objectively the findings and opinions of the directors. (4 marks)

(20 marks)

4
Exhibit 1: Extracts from Dulce’s annual report 20X8

DULCE
Make every day special

Who we are
We are Northland’s most famous confectionery maker, providing our
customers with quality chocolate and confectionery for over 100 years.
Mission
Our mission is to be Northland’s best loved confectionery brand, bringing
our customers together to make every day special.
Our strategic aims
1. We aim to develop our product range and our markets, by focusing
on offering customers the products they demand in the locations they
are demanded.
2. We aim to focus on performance excellence in our leadership, operations, supplier management, customer engagement
and staff development to build and maintain strong customer relationships.

What we make
Boxed chocolates Chocolate figures Chocolate bars

Chocolate bags Chocolate truffles Candies

Ice cream Toffee Fudge

What we believe
Ethical sourcing
– We buy most of our cocoa from two of the world’s most respected cocoa suppliers, which are expected to ethically
source all of our cocoa supplies.
– Over 200 different raw materials go into our chocolates, many of which are sourced by our suppliers from cocoa
farmers in the countries of Geeland and Rodia. We demand the highest levels of ethical, social and environmental
standards from our suppliers.
– Our suppliers regularly visit and audit all of the largest cocoa farms each year.
– It is also important to us that all of the farmers who supply our cocoa suppliers are treated fairly and paid appropriately
and in line with local wage standards.
– We like to build long-lasting relationships with suppliers which are open and honest. We buy key cocoa supplies with
forward contracts to reduce, as much as possible, the uncertainty in the cocoa buying process and work with suppliers
to choose the optimal time and quantity for purchases.
– We support international initiatives to improve livelihoods of cocoa farmers and promote responsible labour practices.
Our cocoa suppliers employ thousands of people both directly and indirectly in processing cocoa and monitoring and
auditing the cocoa farms they work with.
– We invest in international initiatives which provide farm workers with basic healthcare services and educational
opportunities.

5 [P.T.O.
Exhibit 2: Proposed sales development strategies

DULCE
DULCE SHOPS
– 165 high street shops – our main sales
channel in Northland (despite declining
annual sales for last three years)
– Require investment in refurbishment and
staff training to improve customer experience
– Close 20 shops next year to focus on most
profitable locations
SALES DEVELOPMENT STRATEGIES

A presentation by the sales director

Slide 1 Slide 2

DULCE WEBSITE RETAIL PARTNERS

– Used to sell our whole range of products (to – Strong growth in sale of Dulce’s boxed
individuals and corporate clients) chocolate ranges to supermarkets in the last
– Possibility to develop other gift ideas (such two years
as flowers, greeting cards, gifts and food – Aim to sell a wider range of our products to
hampers) retail partners in the next two years
– Role in international sales growth – Aim to sell to a wider range of retail partners
– Forecast growth in international website in the next two years (more gift shops and
sales in the next five years department stores)

Slide 3 Slide 4

6
Exhibit 3: Data sheet on proposed orders

DATA SHEET: NEW LUXURY HAND-MADE CHOCOLATE RANGE

General information
– Proposal to manufacture and sell three new luxury hand-made chocolate products (Boxes A, B and C).
– Production constrained by skilled labour availability for hand-made products.
Excelsior order
– Excelsior is a high-class department store, located in the capital city of Northland.
– Dulce has not worked with Excelsior before.
– Reputation for selling high quality, exclusive products.
– Dulce’s new products (A, B and C) would be sold as Excelsior’s ‘own label’ chocolates.
– Order is initially for a three-month period only.
– Considering purchasing other luxury hand-made products from Dulce if these products are successful.
BB supermarkets order
– BB is Northland’s second largest supermarket chain.
– Dulce has been supplying BB with its normal range of Dulce branded chocolates for over five years.
– The proposal is for BB to order the same three products (A, B and C) as above, but to sell them in BB supermarkets
under Dulce’s manufacturing brand label.
– Sales would initially be for three months and only offered in 10% of its supermarkets. However, BB is confident that
sales would be rolled out to the remaining of its supermarkets across Northland after the three-month trial period.
Forecast demand per product per month

Available skilled labour hours per month = 30,000

Box A Box B Box C
Contribution per box ($) 8 9 6
Labour hours per box (Hr) 2 3 3
Contribution per labour hour ($) 4 3 2
Proposed order of each box per month:
Excelsior 2,000 2,000 2,000
BB supermarkets 3,000 3,000 3,000

7 [P.T.O.
Exhibit 4: Dulce’s current risk register
To: Senior business manager
From: Chair of risk and audit committee
Subject: CONFIDENTIAL: Dulce risk register
Please find attached the current risk register compiled by the audit and risk committee, which we are in the process of
reviewing. I have forwarded it for your consideration and assistance.

ATTACHMENT: Dulce risk register

Risk item Risk manager Description Rating

Competitive CEO – The global confectionery market has many strong players. HIGH
marketplace Our competitive position depends on our continued ability
to offer products which strongly appeal to consumers
and which are readily available in the places they are
demanded.
Key input prices Operations director – Adverse changes in certain commodity prices (particularly MEDIUM
are driven by cocoa supplies) could affect our liquidity and profitability.
commodity
markets
Our products Manufacturing – Product contamination (for example, uncleanliness or HIGH
must have the director impurities in the materials or production process) could
highest integrity be harmful to customers.
– Unethical sourcing of materials could severely damage
our reputation.
We depend on the The board – Poor staff management or lack of skills in our whole team MEDIUM
skills, enthusiasm could result in the loss of the competitive advantage
and wellbeing of derived from our highly skilled staff or the loss of staff to
our staff competitors.
– We rely heavily on the loyalty and commitment of our
staff.

8
Exhibit 5: Newspaper article about child-labour

CHILD-LABOUR PRACTICES LEAVE A BAD TASTE FOR

NORTHLAND CHOCOLATE MANUFACTURERS
NORTHLAND BUSINESS TIMES
A report by retail editor Lee Bale

The countries of Geeland and Rodia supply more than 70% of the world’s cocoa. The cocoa they grow and harvest is sold
to 90% of global chocolate companies, including those based in Northland. However, in recent years, several organisations
and journalists have exposed the widespread use of child-labour on cocoa farms in both Geeland and Rodia.
The realities of child-labour
Cocoa is a commodity crop grown primarily for export. As the chocolate industry has grown over the last 20 years, so
has the demand for cheap cocoa. However, on average, cocoa farmers in Geeland and Rodia earn less than $2 per day,
an income significantly below the poverty line. As a result, they often resort to the use of child-labour to keep prices
competitive.
The children of Geeland and Rodia are surrounded by intense poverty, and most begin working at a young age to help
support their families and many offer vital sources of income for the poorest families. Children are mostly used to climb
the cocoa trees to cut bean pods using a machete. These large, heavy, dangerous knives are the standard tools for children
on the cocoa farms, which violates international labour laws relating to eliminating the worst forms of child-labour. In
addition, over 40% of child-labourers in Geeland and 60% in Rodia working on cocoa farms do not attend school.
Is child-labour free chocolate possible?
Despite their role in contributing to child-labour, the chocolate industry has not taken significant steps to remedy the
problem. Within this billion dollar industry, chocolate companies have the power to end the use of child-labour by paying
cocoa farmers a living wage for their product. The chocolate industry is also being called upon to develop and financially
support programmes to educate children working on cocoa farms. However, to date, the industry has seemingly achieved
limited success in removing child-labour and a lack of transparency is characteristic of the chocolate industry as it
consistently fails to act.
The truth is that consumers today have no sure way of knowing if the chocolate they are buying involves the use of
child‑labour. Despite the fact that last month a Northland journalist investigating farms in Rodia (where Northland
chocolate companies buy cocoa) filmed illegal child-labour practices, a recent public survey in Northland highlighted that
less than 5% of customers were aware of child‑labour practices in the chocolate manufacturing industry.
Clearly, Northland chocolate manufacturers have a long way to go to address these unethical activities and until they do,
the ethical standards of these manufacturers must be called into question.

9 [P.T.O.
Exhibit 6: Summary of brainstorming meeting

Engagement with our

Leading the business:
customers:
Strong leadership team
Regular email and
promotional offers Supported by strong
management team
Customer surveys
Mission and aims
Staff training in customer
regularly reviewed
engagement
Strong corporate
A variety of products to
governance
suit all price ranges

What
do we do
to achieve
performance
excellence?

Engagement and Managing our

development of staff: operations:

Regular staff training Investment in latest

and skills updates production technology

Annual performance Regular product

appraisals re-designs

Staff surveys E-commerce

Measuring our
operations:
Regular reporting of key
performance measures:
profitability/shareholder
returns/customer
Use of big data analytics

MEETING NOTE: During the meeting, the directors used the Baldridge model as a framework to assess Dulce’s approach
to performance excellence.

End of Question Paper

10
Answers
Strategic Professional – Essentials, SBL
Strategic Business Leader (SBL) September/December 2019 Sample Answers

In the Strategic Professional Examinations it is not always possible to publish suggested answers which comprehensively cover all
the valid points which candidates might make. Credit will be given to candidates for points not included in the suggested answers,
but which, nevertheless, are relevant to the requirements. In addition, in this integrated case study examination candidates may
re‑introduce points made in other questions or parts of questions as long as these are made in the specific context of the requirements
of the question being answered.
The suggested answers presented below inevitably give much more detail than would be expected from most candidates under
examination conditions, and include most of the obvious points evidenced from the case information. The answers are therefore
intended to provide a structure of the approach required from candidates, and cover the range and depth of knowledge relating to
each task which might be demonstrated by the most well prepared and able candidates. They are also intended to support revision
and tuition for future examinations.

1 (a) Slide notes (to accompany the sales director’s slide presentation)
DULCE SHOPS
1. As the shops are our primary sales channel, they should play a key role in the growth and development of Dulce and
should help us to achieve our strategic aim. A sales development strategy based on our current shops would be considered
as market penetration, where we aim to increase the share of our existing market using our existing product range.
2. However, this is likely to require us to improve relationships with customers in our shops. Annual sales in our shops have
decreased for the last three years, so we clearly need to focus on customer service to make sure customers return to our
shops, to make repeat purchases throughout the year. This could be helped by investment in refurbishment to encourage
customers into our shops.
3. This could be helped by more investment in staff training and in selecting the best performing shops in the prime
locations. Investment needs to be made in improving our customer experience, which will help us to engage better with
customers and provide them with a wide range of high quality products within a high-quality environment.
4. The closure of 20 of our shops (12%) may be an effective way of improving our image with customers. However, we must
only close those shops which are not profitable or which do not support our brand.
5. These strategies should help us achieve our strategic aim, providing that we ensure the products demanded are available
to customers. Shops are also possibly the best place to assist in achieving our strategic aim, as shops offer our customers
actual experience of our brand and it is where we can build and develop strong customer relationships.
DULCE WEBSITE
1. Our website provides us with the ideal sales environment to offer new products. However, we need to be careful that these
new products do not impact on our confectionery sales nor the high-quality image we strive to achieve. This could help
to achieve our strategic aim only if these new products are actually demanded by the customers. However, we need to
undertake further research to understand the extent to which customers are interested in buying these products through
the Dulce website.
2. Our website provides us with the opportunity to develop our market, as it is a medium to sell our whole range of existing
products to a wider range of customers, such as corporate and international customers. There is a large potential for
international sales growth using the Dulce website, helping us to achieve our strategic aim. However, this will be very
dependent on us developing the suitable infrastructure to support international sales growth.
3. However, we must manage our website sales channel very carefully, to ensure that it supports the Dulce brand image and
that sufficient resources are deployed to ensure that it operates effectively.
4. International website sales, which we are predicting will grow strongly in the coming years, will also help us to develop
our market, through targeting a wide range of overseas customers.
RETAIL PARTNERS
1. We should consolidate our position with our current retail partners, through careful management of our relationship
with our supermarket customers in particular. We have achieved strong growth in supermarket sales of our ‘own label’
chocolate ranges in the last two years and consolidation will maintain strong working relationships with the supermarkets,
some of which are large organisations.
2. Retail partners also give us an opportunity to penetrate the market, by selling more of our own label products to current
retailers over the next few years. This will assist in achieving our strategic aim. We should also aim to sell to a wider range
of retail partners (gift-shops and department stores) which would also help achieve our strategic aim.
3. Producing a luxury hand-made chocolate range is also a potential product development strategy and should help to
achieve our strategic aim in providing a wide range of Dulce products where they are demanded.
4. The production of luxury hand-made products to new retail partners would help us to diversify and should assist in the
achievement of our strategic aim. It could be an exciting development for Dulce but is likely to require some investment
in staff training and appropriate equipment.

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 (b) (i) To: Finance director
From: Senior business manager
Date: 1 September 20X8
An evaluation of the financial and strategic implications of prioritising the order for Excelsior department store compared
with prioritising the BB order
Introduction
The following report will compare and contrast the prioritisation of the two potential orders for our proposed new luxury
hand-made chocolate range. The report will also recommend which order should be prioritised to provide maximum
benefit for Dulce.
An evaluation of the option to prioritise the order with Excelsior
Financial
The calculations presented below take into account the fact that we have a limiting factor in our skilled labour hours and it
is this factor which will limit our ability to manufacture both orders in full. We should focus on maximising the contribution
from the limited skilled labour hours available.
Labour hours per unit 2 3 3
A B C
$ $ $
Contribution per unit 8 9 6
Contribution per labour hour 4 3 2
Production order 1st 2nd 3rd
Total labour hours available per month 30,000
1. Prioritise order for Excelsior
Production for Excelsior A B C
Units 2,000 2,000 2,000 Total hours used
Hours 4,000 6,000 6,000 16,000
Labour hours remaining to produce BB order = 14,000
Production for BB 1st 2nd 3rd
A B C
Units 3,000 2,666 0
Hours 6,000 7,998 0 13,998
–––––––
29,998
–––––––
Contribution per month from prioritising the Excelsior order:
A B C Total
Contribution $ $ $ $
Excelsior 16,000 18,000 12,000 46,000
BB 24,000 23,994 – 47,994
––––––– ––––––– ––––––– –––––––
Total 40,000 41,994 12,000 93,994
––––––– ––––––– ––––––– –––––––
Non-financial considerations:
If we prioritise the order with Excelsior we will achieve our strategic aim of developing our products in a location where
they are demanded, by selling a newly developed hand-made product to a new customer.
However, a concern of this proposed order is that it amounts to a relatively small production run: 6,000 boxes per month
for three months only. These hand-made chocolates will be very labour intensive, requiring nearly 16,000 labour hours
each month. In addition, we will need to take into account additional costs such as training and supervision which will
also need to be factored in to our decision. However, we do not know that Excelsior will place any further orders, but one
of our proposed strategic development opportunities (as proposed by the sales director) is to produce a wider range of
products to sell to other retailers, and therefore it remains a possible opportunity. This new product line could prove to be
highly lucrative if Excelsior places future orders.
A further consideration is that these products will be sold under Excelsior’s own brand name and not Dulce’s. However, it
would be a great opportunity for us to work with Excelsior and develop a new market, but it would not assist in developing
our own reputation in manufacturing a luxury brand.
A further consideration is that undertaking a contract with Excelsior may have a negative impact on our long-term
relationship with BB supermarkets. We must not allow a potential contract with Excelsior to adversely affect this, as we
sell our own label products through BB’s supermarkets. If we prioritise the Excelsior order, then BB will not receive its full
order of Box B and would not receive any Box Cs.

14
 An evaluation of the option to prioritise the order with BB supermarkets
Financial
From the analysis given below, prioritising this order will give us a lower contribution than prioritising the Excelsior order.
This is because if Dulce prioritises BB’s requirements, based on ranking the contribution per hour of labour available,
prioritising the BB order would mean that Dulce will be able to produce and sell 1,000 fewer units of B and has to make
1,000 more units of C. As each unit of B makes $3 more contribution than C, prioritising this order will yield (1,000 x
6 – 1,000 x 9) or –$3,000 contribution, compared with prioritising the Excelsior order. However, non-financial factors
must be considered (as discussed below) before making a final decision.
2. Prioritise order for BB
Production for BB A B C
Units 3,000 3,000 3,000
Hours 6,000 9,000 9,000 Total hours used
24,000
Labour hours remaining to produce Excelsior order = 6,000
Production for Excelsior 1st 2nd 3rd
A B C
Units 2,000 666 0
Hours 4,000 1,998 0 5,998
–––––––
29,998
–––––––
Contribution from prioritising the BB order:
A B C Total
Contribution $ $ $ $
BB 24,000 27,000 18,000 69,000
Excelsior 16,000 5,994 – 21,994
––––––– ––––––– ––––––– –––––––
Total 40,000 32,994 18,000 90,994
––––––– ––––––– ––––––– –––––––
Non-financial considerations:
We must carefully manage our relationship with BB as the second largest supermarket chain in Northland. We have a
strong and established relationship which we could build upon by selling this new luxury range. The main advantage of
prioritising the order with BB is that it would be an excellent opportunity for us to use our proprietary brand name to enter
the luxury chocolate market, which we cannot exploit with the Excelsior order.
BB forecasts it could sell these products in more of its supermarkets after the initial three months trial and therefore
presents us with an opportunity to develop these products into the longer term, thus achieving our strategic aim. However,
future sales would be dependent on improving our availability of skilled labour, which will need further investment if we
are to be able to commit to future orders with BB. It is likely to require a significant number of dedicated staff and more
supervision. Investment in training and equipment will also be necessary. Further analysis and discussions with BB would
need to be undertaken regarding the long-term viability of the contract, but if acceptable, then this investment would be
considered appropriate.
(ii) Recommendation
Based on both the financial and non-financial considerations, despite the lower contribution earned by the BB order, it
is recommended that we prioritise our order with BB. We have a long-standing business relationship with BB and they
have offered us the potential to sell Dulce’s branded luxury chocolates. In purely financial terms, this option is not as
preferable as the Excelsior order but the risks of working with Excelsior are much higher, as a new retail partner with no
absolute guarantee of future orders beyond three months. In addition, the loss of Dulce’s ‘brand’ association with these
new products is not acceptable and would not contribute to the achievement of our strategic aims.

15
2 (a) (i) and (ii) Briefing table

Risk Risk assessment Proposed mitigating activities

Competitive Failure to anticipate/react to changes in consumer Dulce must continue to focus on identifying and
marketplace trends or a failure to invest in our business growth developing new product ideas. For example, our
and development in relation to our competitors is proposal to develop luxury hand-made chocolate
likely to reduce demand for our products, resulting products is offering our customers a greater range
in loss of competitive advantage, reduced market of products to maintain our competitive position.
share and reduced sales.
Developing our staff skills in hand-made chocolate
Failure to invest in maintaining our competitive products will help us build on performance
position may harm the image of our brand, as our excellence which should assist in building effective
competitive position depends on our continued customer relationships and maintenance of our
ability to offer products which appeal to customers competitive position and brand image.
and which are readily available in the places they
Our multi-channel sales network is a means by
are demanded by customers.
which we aim to satisfy consumers’ needs, whilst
If we are not able to satisfy customer needs also mitigating the overall risk to the business from
effectively and/or react to what our competitors are a downturn in any specific sales channel.
doing, this will threaten our sustainability in the
Working with new retail partners widens our
market place as our competitors may respond more
opportunities to increase our sales network and
effectively than ourselves. There is likely to be a
remain competitive in our operational activities.
high risk to the achievement of our strategic aims
of growing and developing our products/markets
and developing and maintaining strong customer
relationships.

Key input Significant adverse changes in certain commodity Dulce must continue to buy its key inputs forward
prices are prices (particularly cocoa supplies) could affect and work with suppliers to choose the optimal
driven by Dulce’s profitability and therefore on our ability to time and quantity for purchases of cocoa supplies.
commodity offer a wide range of products due to a reduction This policy provides a stable cost base for us to
markets in our investment in product development. High make optimum trading and pricing decisions.
commodity prices may result in us having to reduce
By hedging, it may mean that, on occasion,
our range of products which would impact on our
we pay more for our key ingredients than the
ability to meet our strategic aim of developing the
prevailing market rate, but this will protect the
widest range of products for our customers.
consumer from potentially widely fluctuating prices
This may impact on us achieving our strategic and protects us from potential losses and the loss
aim of maintaining and developing customer of trust of our customers.
relationships, as we may lose customers if we
reduce our product range.

Our products Product contamination, caused by unclean We must ensure that we maintain rigorous security
must have production processes or defective raw materials, systems throughout our supply chain to guard
the highest or unethical sourcing of materials could severely against poor quality/defective supplies.
integrity damage our reputation. If our integrity is called into
In the unlikely event that these policies and
question by our customers, then this would severely
systems fail, we must implement a robust process
impact on our ability to develop and maintain
for product recall and consumer communication,
customer relationships, as it would challenge the
in addition to comprehensive insurance cover.
effectiveness of our leadership, operations and
supplier management. Being open and honest with our customers will
be critical in order to maintain strong customer
It would also impact on our ability to develop new
relationships and trust in our product, therefore
markets, as it would be far more difficult to attract
regular communication is vital.
new customers if they question our systems and the
quality and integrity of our products. We must maintain strong relationships with
suppliers to ensure that ethical sourcing from
cocoa farms is being adhered to. This may mean
that we will need to take more control of the
supplier audit process ourselves. We need to audit
all cocoa farms at least once per year.

16
 Risk Risk assessment Proposed mitigating activities
We depend Poor staff management or lack of skills in our whole Management must continually evaluate the
on the skills, team could result in the loss of our competitive balance of skills, knowledge and experience
enthusiasm advantage or the loss of staff to competitors. Any within the team when considering the role and
and wellbeing loss of staff will inevitably result in the loss of skills capabilities required for a particular position.
of our people from our business, which will impact on our ability
Staff must be kept informed of internal
to achieve performance excellence and thus achieve
and external developments through regular
our aim to develop and maintain strong customer
communications.
relationships.
Strong staff appraisal systems and a focus on
Without adequately motivated and skilled staff,
staff development will help to create loyalty and
we are also unlikely to develop the products our
commitment of our staff.
customers demand and thus will not achieve our
other strategic aim of product development. Regular training and skills development should
build on performance excellence, help us to be
We rely heavily on the loyalty and commitment of
innovative in product development and maintain
our staff at all levels of the business and any loss
the loyalty and commitment of staff.
of key staff, particularly in our leadership team, will
inevitably impact on our competitive position and Strong recruitment processes, formalised
our ability to deliver performance excellence. succession planning and on-going individual
training and development plans will mitigate the
risk of the loss of key staff.

(b) (i)
Slide 1:

Summary assessment of risk of suppliers using child-labour

TARA (transfer, avoid, reduce, accept)

High
likelihood
REDUCE AVOID
Finance director Human resource director

ACCEPT TRANSFER
Low Operations director
likelihood

Low impact High impact

A common framework for evaluating response to risk is to use the TARA approach. This considers risk in relation to how
likely is the risk of occurring, and the extent of its impact on us, should it occur.
The human resource director’s recommendation fits with the high impact/high likelihood approach. The impact is high,
particularly on our reputation and on the lives of those being exploited and the likelihood is also high. It is stated in the
article that this is a widespread practice in the industry and therefore it is highly likely that some of the cocoa farmers
who supply us do use child-labour. Therefore, the risk response advocated by the human resource director is to AVOID
this risk, by finding alternative cocoa suppliers.
The operations director’s recommendation fits with low impact/low likelihood approach, in that he believes that the
impact of this risk is low as most customers are unaware of child-labour practices. Therefore, the risk response his
argument most closely follows is to ACCEPT this risk and take no action.
The finance director’s recommendation fits with the low impact/high likelihood approach, in that the risk is likely to be
of low impact in the context of the industry-wide use of child-labour by cocoa farmers and the lack of awareness of its
customers, but the likelihood is high, given the high number of cocoa farmers we use in Geeland and Rodia. Therefore,
the risk response would be to REDUCE this risk, through improved control activities.

17
 (ii)
Slide 2:

Consideration of risk responses

HR DIRECTOR
AVOID
– Unlikely high impact
– Impractical
– High costs
– Will not address the issue
OPERATIONS DIRECTOR
ACCEPT

Notes:
HR director
AVOID
To avoid the issue of child-labour is not the most suitable solution for Dulce. The newspaper article indicates the scale of
the issue in the whole industry and, therefore, identifying and using cocoa farmers who do not use child-labour may be
impractical, taking into account the large number of cocoa supplies we need. There are advantages, in that it may attract
a new range of customers who only buy products from guaranteed ethical sources but it is unlikely that these gains will
off-set the cost of sourcing new cocoa farmers and the potential loss of customers due to likely price increases of our
products.
The impact of this issue is not considered to be high, as most customers are not aware of these labour practices and are
unlikely to change their buying behaviour if they did. As chocolate is a low value product for consumers, this issue is
unlikely to be a major factor in the purchasing decision of most customers.
Overall, it would be better to remain working with these cocoa farmers to put in place controls to ensure child-labour
practices are monitored and assistance is given to provide education and support to both farmers and the children working
on these farms. Therefore, the suggestion by the human resource director may not be the best solution to the risk.
Operations director
ACCEPT
Although the use of child-labour in cocoa farming is common practice, that does not mean that we should merely accept
it and not attempt to improve the situation.
Although the risk of child-labour which would be used by our cocoa farmers is likely to be of low impact on our overall
business, from the evidence in the news article, it is likely to be of high likelihood and therefore the assertion by the
operations director may not be justified. Evidence suggested in the article indicates that the majority of the cocoa farms
located in the two cocoa growing countries do use child-labour. Therefore, it would seem highly likely that some, if not a
significant number of the cocoa farmers supplying our key suppliers, do use child-labour.
Obviously, doing nothing will cost nothing and it means no change in what we do. However, it goes directly against our
stated beliefs as an organisation, as evidenced in the ethical sourcing statement of our annual report. We also run the risk
that ethical consumers in Northland will seek alternative chocolate suppliers. Our strategic aim is to develop and maintain
strong customer relationships and this approach would likely go against this aim.
We have clearly stated in our beliefs that we promote responsible labour practices. This must include the use of child‑labour,
therefore to merely accept this and not attempt to address this use with positive actions to assist cocoa farmers and the
children they employ would be against our ethical beliefs.

18
 (iii)
Slide 3:

FINANCE DIRECTOR
REDUCE
– Unlikely to be eliminated but can:
o Reduce child-labour
o Invest
– Improve reputation
– Increase costs
CONTROL ACTIONS:
1. Annual audit
2. Review payment rates
3. Investment

Notes:
This is likely to be the most realistic option, given that the impact of the risk for our business is probably quite low, but
the likelihood of the use of child-labour by cocoa farmers is high. We should consider how we can reduce the levels
of child-labour used by cocoa farmers and try to work with these farmers to improve the working and living conditions
of child-labourers. As an organisation which believes strongly in its ethical stance, we must take positive action where
possible by paying fair prices and providing a premium to invest in local communities.
Importantly, this should have positive benefits for the farmers and the people they employ. For us as a business, it should
improve our reputation in the industry and thereby attract more customers. However, we will also have to consider the
costs involved, as if we decide to increase our rate of pay to cocoa farmers to reduce the need for child-labour, then this
may impact on our customers, through pricing, and our overall profitability.
Control actions:
1. Undertake regular audits. We must play a more active role in the audit process of the cocoa farmers to ensure that
we are satisfied with the labour practices being used. We must also cease using any supplies from cocoa farmers
who do not adhere to the standards which we set.
2. We should regularly review the rates we pay for our cocoa supplies to ensure that this is fair and is not forcing the
exploitation of child-labour. We must monitor industry standards and national wage rates in the countries where our
cocoa farmers are located and ensure that we set a fair rate above the poverty line.
3. We should invest in and support international initiatives for training of farm owners and workers in the issues around
using child-labour.
Note: Only TWO control activities are required and only two will attract marks.

3 Briefing notes

The criteria used to assess performance

The term ‘performance excellence’ refers to an integrated approach to organisational performance management which results in:
– delivery of increasing value to customers and stakeholders
– improvement of overall organisational effectiveness
– organisational and personal learning
The Baldrige framework used by the directors during the brainstorming meeting is a holistic approach which sees the organisation
as a group of linked processes with each criterion linked to the others.
Evaluation of Dulce’s processes
1. Leadership
This area considers our senior leaders’ responsibilities, with the aim of creating an organisation which is successful now and
in the future. Senior leaders play a central role in communicating and setting values and directions for all stakeholders and
creating an organisational focus on action.
We identified in the brainstorming session that Dulce has a strong leadership team but we also need to assess how our senior
team leads the organisation and develops plans for the future. An example to support our effective leadership is that the board
regularly reviews our mission and aims, which is a key process of effective leadership.
A further key question to ask in relation to our leadership processes is how is Dulce governed and how do we manage our
relationships with the wider society? Although in the brainstorming session we identified that we have ‘strong governance
procedures’, in that we follow our government’s corporate governance guidelines, we need to analyse this further to understand
whether our current governance processes are effective and how effectively we interact with the wider society.

19
 We clearly have processes in place to engage effectively with our customers but we also need to consider other processes which
may allow us to engage with all stakeholders, in particular our investors and suppliers. More effective interaction with the wider
community may bring positive attention in the wider society and present us with more opportunities to attract new customers.
2. Strategy
This category considers how we develop strategic objectives and action plans, implement them, change them if circumstances
require, and measure progress. This category stresses that our organisation’s long-term organisational success and competitive
environment are key strategic issues which need to be integral parts of overall planning.
This area was not considered as part of our brainstorming session and therefore is an area which requires attention. While
we clearly review our vision and mission and undertake strategic planning, how we execute these plans effectively needs to
be considered. Given the nature of our market place, as identified in the risk register, our market demands us to be agile and
prepared for unexpected change, including volatile economic conditions or changing customer tastes which could impact on
our marketplace.
3. Customers
This category requires us to consider how we engage customers for long-term marketplace success, and stresses customer
engagement as an important outcome of an overall learning and performance excellence strategy. For Dulce, the voice of the
customer will provide meaningful information not only on our customers’ views but also on their behaviours and on how these
contribute to our current and future success in the industry. Therefore, we need to ask how do we obtain information from
customers and how do we engage with customers and build long-term relationships with them?
In the recent brainstorming session, we identified a number of processes which we carry out in relation to our customers,
including sending out regular email and promotional offers to customers in order to stimulate interest and loyalty which
should assist us in understanding their views and maintain a relationship with customers. Customer surveys are a useful
way of engaging with customers to assess and respond to their needs. We also identified training our staff in customer
engagement which is likely to be an important process in developing and maintaining customer loyalty and retention and
building relationships with our customers.
4. Measurement, analysis and knowledge management
This category is the main point within the criteria for all key information on effectively measuring, analysing, and improving
performance and managing organisational knowledge to drive improvement, innovation, and organisational competitiveness.
Key to this use of data and information are their quality and availability.
In our brainstorming session, we identified our performance measurement activities relating to key financial, shareholder and
customer performance measurement. Importantly, we must consider how useful this information is to us and how we can
use it to drive improvement and innovation. We also identified our use of big data analytics which should be a key driver in
analysing and understanding key performance information and using this for our competitive advantage (particularly in relation
to customer activity and preferences).
5. Workforce
This category addresses key workforce practices. This includes those directed toward creating and maintaining a
high‑performance environment and those directed toward engaging our staff to enable them and the organisation to adapt to
change and succeed.
One of the key questions to evaluate our staff processes is how do we build an effective and supportive workplace? From the
brainstorming session, we identified the process of undertaking regular staff training and skills updates, which should help our
staff to remain loyal and motivated, which in turn should impact on the quality and innovation of our products.
A second question to consider is how do we engage with staff to achieve a high-performance work environment? From the
brainstorming session, we identified the use of annual appraisals and staff surveys which should assist in making staff feel
engaged. However, we would need to assess this further by asking staff how far they believe that these performance appraisal
and staff surveys assist in their overall engagement in the business. Staff surveys will only assist in achieving performance
excellence if staff feel engaged and committed to the process and believe that their opinions are valued and acted on by senior
leadership.
Engaged and committed staff throughout our business, from senior management to shop assistants, will drive product innovation
and customer engagement and loyalty, assisting in us achieving our strategic aims.
6. Operations
This category asks how do we focus on our organisation’s work, product design and delivery, innovation, and operational
effectiveness to achieve organisational success now and in the future. Key questions we must ask are how do we design,
manage and improve our key products and work processes and how do we ensure effective management of our operations?
From our brainstorming session, we identified the investment we have made in the latest production processes, which should
improve our operational effectiveness. Also, investment in e-commerce should assist us in developing and delivering our
operations overseas and to new customers. We also identified our regular re-design of products which is a key criterion in our
ability to be innovative, in order to continue to satisfy customer needs and build long-term relationships.
7. Results
This category provides a systems focus which encompasses all results necessary to sustain our organisation: our key processes
and product results, our customer-focused results, our workforce results, our leadership and governance system results, and
our overall financial and market performance. This is not something which we considered in our brainstorming session.

20
 Therefore, we must now capture and measure the ‘real-time’ information (measures of progress) for evaluating, improving, and
innovating processes and products, in alignment with our overall organisational strategy. Using all of the information we have
gathered from understanding the importance of the processes we carry out in the previous six areas, we need to now focus on
monitoring the outcomes of our operational performance which can then help us to predict our future performance and drive
performance excellence throughout our business.

21
Strategic Professional – Essentials, SBL
Strategic Business Leader (SBL) September/December 2019 Sample Marking Scheme

1 (a) Award up to 1 mark for each relevant point explained in relation to the proposed sales development strategies (up to a
maximum of 6 marks for each sales development category).
Up to a maximum of 16 marks.
Key points
DULCE SHOPS
– Market penetration – increase share of the existing market using existing products.
– Primary sales channel to increase the penetration of products.
– Focus on creating better relationship with customers – customer service.
– Investment in refurbishment to encourage customers into shops.
– Investment in staff training and best location.
– Investment in improving customer experience, to engage better with customers and provide them with a wide range of
high quality products.
– Closure of 20 shops (12%) an effective way of improving the customer perception.
– BUT – only close under-performing shops or those which do not enhance image.
– Help us achieve strategic aim, providing that products which customers demand are provided in the shops.
– Shops are possibly the best place to achieve strategic aim – customers experience for themselves the brand.
DULCE WEBSITE
– Ideal sales environment to offer new products ideas.
– Means of achieving product and market development.
– New products should not detract from confectionery sales – not impact on the quality image of Dulce.
– Could help achieve strategic aim if new products are demanded by the customers.
– Undertake research to establish whether customers are interested in new products through website.
– Website provides opportunity to develop the market, sell whole range of existing products to a wider range of customers
(corporate clients and international customers).
– Large potential for international sales growth but dependent on developing suitable infrastructure to support international
sales growth.
– Must manage website carefully, to ensure it complements overall brand image.
– International website sales allows us to develop our market reach further – allows opportunity to sell products to customers
who are not able to purchase them elsewhere.
RETAIL PARTNERS
– Consolidation strategy with current retail partners – management of relationship with our supermarket customers.
– Strong growth in supermarket sales of ‘own label’ chocolate ranges in the last two years – consolidation will maintain
strong working relationships.
– Opportunity for market penetration – sell more ranges of own label products to current retail partners over the next two
years.
– Counteract the fall in sales which may arise from the closure of shops.
– Assist in achieving strategic aim.
– Producing a luxury hand-made chocolate range is also a potential product development strategy.
– Complement sales of other chocolates currently sold by retail partners. This should help to achieve our strategic aim.
– Luxury hand-made products sold as own label products – diversification strategy.
– Open up a new market but will require investment in staff development.

23
Professional skills may be additionally rewarded as in the following rubric:

How well has Not at all Not so well Quite well Very well
the candidate
demonstrated
professional
skills as
follows:

Commercial The candidate has The candidate has The candidate has The candidate has
acumen not demonstrated demonstrated limited demonstrated good demonstrated excellent
skills in commercial acumen. commercial acumen. commercial acumen. commercial acumen.
showing clear The candidate has failed Some attempt has been Most of the discussion All of the candidate’s
awareness to link their discussion made to link the sales recognises the link discussion within all of
of the of Dulce’s sales development strategies between the sales the sales development
organisational development strategies to the strategic aim. development strategies strategies considered
and wider to the achievement of Some of the discussion of and its strategic aim. recognises the link
external factors its strategic aim. The the product and market The candidate’s answer between the product and
which could candidate has failed strategies demonstrated has demonstrated good market circumstances of
contribute to demonstrate any commercial awareness commercial awareness Dulce with its strategic
to the awareness of either the but the candidate has in recognising some aim. The candidate’s
achievement organisational factors or failed to appreciate of the external and answer has demonstrated
of Dulce’s the wider external factors a number of the organisational factors a very high level
strategic aim. in Dulce’s achievement of organisational and affecting the achievement of judgement and
its strategic aims. external factors affecting of its strategic aims, commercial awareness of
the achievement of its for example, customer a wide range of external
strategic aims. demand for its new and organisational
products. factors impacting on the
achievement of Dulce’s
strategic aims.

0 1 2 4

24
 (b) (i) 1 mark for each correct calculation (up to a maximum of 8 marks).
For each evaluation, award up to 4 marks for relevant supporting calculations.
1 mark for each non-financial issue identified, relevant to prioritising Excelsior order (up to a maximum of 4 marks).
1 mark for each non-financial issue identified, relevant to prioritising BB order (up to a maximum of 4 marks).
Up to a maximum of 12 marks in total.
(ii) Up to 2 marks for each point made and justified in relation to an overall recommendation (up to a maximum of 4 marks).
Key points
Prioritising the Excelsior order
Non-financial considerations:
– Achieve strategic aim of developing both products and markets, by selling hand-made product to a new customer.
– However, products sold under Excelsior’s own brand name.
– Opportunity to develop a new market opportunity but will not assist in developing own reputation.
– Could prove to be highly lucrative in the future but further orders not yet agreed.
– Proposed order is very short term at only three months (only 6,000 boxes per month).
– Very labour and cost intensive – require 16,000 hours of labour per month for this order.
– Risk there may be no long-term benefit in relation to Excelsior. However, proposed strategic development opportunities
are to produce a wider range of products through production of chocolates for other retailers, and therefore it is a possible
opportunity.
– May have negative implications on relationship with BB Supermarkets.
– Have a long-term relationship with BB, an established customer.
– Must be careful not to allow a contract with Excelsior to damage this relationship.
– If this order optimised, BB will not receive its full order.
– If Dulce undertakes Excelsior order, it must maintain a strong relationship with BB.
Prioritising the BB Supermarkets order
Non-financial considerations:
– BB is second largest supermarket chain in Northland and an established relationship with Dulce which we could build
upon through selling this new luxury product.
– The biggest advantage of prioritising the order with BB – great opportunity to enter luxury hand-made chocolate market
with own label.
– Excellent opportunity to develop product range in the longer term and improve our brand image, achieving our strategic
aim.
– Future sales dependent on improving availability of skilled labour – need investment.
– Likely to require significant number of staff and, in addition, more supervision and investment in training and equipment.
Recommendation
– Despite lower contribution earned by the BB order, it is recommended that order with BB is prioritised.
– A long-standing relationship with BB and presents Dulce with potential to sell own brand luxury chocolates.
– In purely financial terms, not as preferable as the Excelsior order but risks of working with Excelsior are much higher.
– Excelsior – new retail partner. No real guarantee of future orders beyond three months.
– Loss of own brand association with this new product is not acceptable and would not contribute to the achievement of
our strategic aims.

25
Professional skills may be additionally rewarded as in the following rubric:

How well has Not at all Not so well Quite well Very well
the candidate
demonstrated
professional
skills as follows:

Communication The candidate has The candidate has The candidate has The candidate has
skills in using demonstrated poor skills demonstrated some basic demonstrated good demonstrated excellent
compelling in presenting a logical communication skills. communication skills. The communication skills.
and logical argument for either The candidate has used candidate has presented The candidate has
arguments and the Excelsior order or an appropriate report most of the relevant presented a clear,
clarifying the the BB order. The style format but the tone of the information required by balanced and logical
information and presentation of the answer is not appropriate the finance director. The report, showing clearly
presented to candidate’s argument for presentation to arguments are mostly the arguments for either
convey relevant would not be suitable the finance director. presented in a logical way optimising the Excelsior
information for presentation to The candidate has and the candidate has order and the BB order.
to the finance the finance director. demonstrated some used most of the relevant The candidate has used
director. There was no overall evidence of presenting information needed to an appropriate tone
recommendation made, a logical argument in support their argument. for the finance director
demonstrating poor favour of either the The candidate has used and has presented a
communication skills. Excelsior or BB order in an appropriate tone for compelling and logical
parts of the report but the finance director. recommendation.
most of it is not clear or
logically presented.

0 1 2 4

26
2 (a) (i) Award up to 2 marks for each relevant point made and discussed in relation to the impact of each risk identified in the
risk register on the achievement of the strategic aims (up to a maximum of 4 marks for each risk category identified).
Up to a maximum of 8 marks in total.
(ii) Award up to 2 marks for each mitigating activity identified and justified.
Up to a maximum of 8 marks in total.
Competitive marketplace
Risks
– Failure to anticipate/react to consumer trends/failure to invest in business growth and development likely to reduce
demand.
– Resulting in loss of competitive advantage, reduced market share and reduced sales.
– Failure to invest in maintaining competitive position may harm Dulce brand.
– Competitive position depends on continued ability to offer products which appeal to customers and are available in places
demanded.
– If not able to satisfy customer needs and/or react to competitors, this will threaten sustainability in the market place.
– High risk to the achievement of strategic aims.
Mitigating activities
– Focus on identifying and developing new product ideas.
– Develop staff skills in hand-made chocolate products to build on performance excellence – assist in building customer
relationships and maintaining competitive position and brand image.
– Invest in multi-channel sales network to satisfy consumers’ needs, whilst mitigating the risk to the business from a
downturn in any specific sales channel.
– Work with new retail partners and opening Dulce cafés widens opportunities to increase our sales network.
Key input prices are driven by commodity markets
Risks
– Adverse changes in commodity prices (particularly cocoa supplies) affects profitability and ability to offer a wide range of
products.
– High commodity prices may result in reducing range of products.
– Impact on ability to meet our strategic aim of developing wide range of products.
– Impact on achieving strategic aim of maintaining and developing customer relationships – may lose customers if we
reduce our product range.
Mitigating activities
– Continue to buy key inputs by forward contracts.
– Work with suppliers to choose optimal time/quantity for purchases of cocoa supplies.
– This policy provides a stable cost base.
– By hedging, may pay more for key ingredients than prevailing market rate, but will protect consumer from widely
fluctuating prices and protects Dulce from potential losses.
Our products must have the highest integrity
Risks
– Product contamination could severely damage our reputation.
– If integrity is called into question – severely impact on ability to develop and maintain customer relationships.
– Challenge the effectiveness of our leadership, operations and supplier management.
– Impact on ability to develop new markets – difficult to attract new customers if question systems, quality and integrity of
products.
Mitigating activities
– Maintain rigorous security systems throughout supply chain.
– If these fail, must implement a robust process for product recall and consumer communication and comprehensive
insurance cover.
– Open and honest with customers to maintain strong customer relationships and trust – regular communication is vital.
– Maintain strong relationships with suppliers to ensure ethical sourcing from cocoa farms is being adhered to.
– May need to take more control of the supplier audit process ourselves.
– Audit all cocoa farms at least once per year.
We depend on the skills, enthusiasm and wellbeing of our people
Risks
– Poor staff management/lack of skills – result in loss of competitive advantage or loss of staff to competitors.
– Loss of staff will result in loss of skills from our business – impact on ability to achieve performance excellence.
– Without motivated and skilled staff – unlikely to develop products customers demand.
– Rely heavily on loyalty and commitment of staff – any loss of key staff impact on competitive position and ability to deliver
performance excellence.
Mitigating activities
– Evaluate balance of skills, knowledge and experience within the team when considering the role and capabilities for a
position.
– Keep staff informed of internal and external developments through regular communications.
– Strong staff appraisal systems and a focus on staff development.
– Regular training and skills development should build on performance excellence.
– Strong recruitment processes, formalised succession planning and on-going individual training and development plans.

27
Professional skills may be additionally rewarded as in the following rubric:

How well has Not at all Not so well Quite well Very well
the candidate
demonstrated
professional
skills as
follows:

Analysis skills The candidate has The candidate has The candidate has The candidate has
in considering demonstrated poor demonstrated limited demonstrated good demonstrated excellent
the risks or no analysis skills. analysis skills. Some of analysis skills. Most analysis skills. All of
identified by The candidate has the candidate’s points of the candidate’s the candidate’s points
Dulce. made points which are arise from evidence points are based on are based on evidence
not supported by the identified from the case evidence identified from identified from the
available evidence and but the consideration the scenario and the scenario and throughout
has not investigated of the impact on the candidate has made a the answer there is a
how these risks link strategic aims is often reasonable attempt to clear consideration of the
to the achievement of missing or unclear. consider the impact of impact on the strategic
the strategic aims. The The candidate has the risks on the strategic aims. The candidate has
candidate has not used a presented the answer in aims. The candidate has presented the answer in
suitable format to answer a reasonably clear format presented the answer in a a logical structure and it
the question. but has not investigated clear format and most of is entirely suitable for its
all of the risks adequately the risks are investigated intended audience.
for the intended adequately for the
audience. intended audience.

0 1 2 4

28
 (b) (i) 1 mark for each correct application of the risk responses within the TARA framework (up to 3 marks).
1 mark for using the TARA framework (up to a maximum of 4 marks).
(ii) Award up to 2 marks for each point discussed in relation to consideration of the HR director’s response (up to a maximum
of 4 marks).
Award up to 2 marks for each point discussed in relation to consideration of the operations director’s response (up to a
maximum of 4 marks).
(iii) Award up to 2 marks for each point discussed in relation to consideration of the finance director’s response (up to a
maximum of 4 marks).
Up to 2 marks for each control activity recommended (up to a maximum of 4 marks).
Up to a maximum of 16 marks in total for 2b.
(i)
– Use of the TARA approach.
– HR director response fits with the AVOID approach.
– Impact is high, particularly on reputation and lives of those being exploited.
– Likelihood is high. Widespread practice in the industry.
– OD’s recommendation fits with ACCEPT approach.
– He believes impact is low as most customers are unaware of child-labour practices.
– Therefore – take no action.
– FD’s approach fits with REDUCE approach.
– Low impact in the context of the industry-wide use of child-labour by cocoa farmers and the lack of awareness of its
customers.
– Likelihood high, given high number of cocoa farmers used in Geeland and Rodia.
(ii)
– To avoid issue is not the most suitable solution for Dulce.
– Identifying and using cocoa farmers who do not use child-labour impractical.
– May attract new range of ethical customers but unlikely these gains will off-set cost of sourcing new cocoa farmers.
– Impact not considered high, as most customers are not aware of these labour practices and unlikely to change their
buying behaviour.
– Unlikely to be a major factor in the purchasing decision of most customers.
– Better to work with cocoa farmers to put in place controls to monitor and assist.
– Although the use of child-labour in cocoa farming is common practice, does not mean that we should merely accept it
and not attempt to improve the situation.
– Child-labour likely to be low impact on overall business, but is high likelihood and therefore assertion by OD may not be
justified.
– Likely that some, if not a significant number, of cocoa farmers supplying key suppliers do use child-labour.
– Doing nothing will cost nothing.
– Directly against our stated beliefs as an organisation, as evidenced in the ethical sourcing statement of our annual report.
– Strategic aim is to develop and maintain strong customer relationships – this approach likely go against this aim.
(iii)
– Most realistic option, given impact is probably quite low, but likelihood is high.
– Need to consider how to reduce levels of child-labour used by cocoa farmers/try to work with farmers to improve conditions
of child-labourers.
– Must take positive action by paying fair prices and providing a premium to invest in local communities.
– Should have positive benefits for the farmers and the people they employ.
– Should improve Dulce’s reputation in the industry and attract more customers.
– Consider the costs involved – increasing our rate of pay to cocoa farmers may impact on our customers, through pricing,
and our overall profitability.
Control actions:
– Undertake regular audits. Play active role in audit process of the cocoa farmers to ensure that we are satisfied with
practices being used.
– Cease using supplies from cocoa farmers who do not adhere to the standards set.
– Regularly review rates we pay for cocoa supplies to ensure that this is fair and not forcing the exploitation of child-labour.
– Monitor industry standards and national wage rates in the countries where our cocoa farmers are located and set a fair
rate above poverty line.
– We should invest in and support international initiatives for training of farm owners and workers in the issues around
using child-labour.

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Professional skills may be additionally rewarded as in the following rubric:

How well has Not at all Not so well Quite well Very well
the candidate
demonstrated
professional
skills as
follows:

Scepticism The candidate has failed The candidate has The candidate has The candidate has made
skills in to challenge the opinions made a weak attempt at made a good attempt at an excellent attempt at
challenging the presented by the board challenging the opinions challenging most of the challenging the opinions
opinions of the members to assess how presented by the board opinions of the board presented by all of
board made in realistic their proposed members and by doing so members. They have the board members
relation to the risk responses are for did not adequately probe also made some attempt identified in the question.
risk responses Dulce. and question the opinions to probe the sources of They have probed and
to the use of of the directors or the information presented in questioned all of the key
child-labour in information presented in the scenario but this was sources of information in
Dulce’s supply the sources given in the not presented in the most the scenario and have
chain. scenario. professional manner. used this to justify, in a
professional manner, their
challenge to the opinions
presented.

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3 Up to 2 marks for each point from the brainstorming summary discussed and applied correctly to the Baldrige framework (up to a
maximum of 16 marks).
If the candidate has NOT used the Baldridge model but has adequately discussed performance excellence in Dulce, using the
brainstorming information, then award up to the maximum marks available. However, answers must be centred on performance
excellence.
Up to a maximum of 16 marks.
Leadership
– Considers senior leaders’ responsibilities – senior leaders play central role in communicating/setting values, direction and
creating organisational focus on action.
– Dulce has strong leadership team but need to assess how senior team leads organisation and develops plans for the future.
– Board regularly reviews mission and aims, which is key process of effective leadership.
– Brainstorming session identified ‘strong governance procedures’, but must analyse this further to understand effectiveness of
governance processes.
– Need to consider processes to engage with all stakeholders, in particular our investors and suppliers.
– More effective interaction with the wider community.
Strategy
– Considers how to develop strategic objectives and action plans, implement them, change them and measure progress.
– Stresses that organisation’s long-term organisational success and competitive environment are key strategic issues and integral
parts of overall planning.
– This area was not considered in brainstorming session and therefore an area which requires attention.
– How we execute our plans effectively needs to be considered.
– Market demands for Dulce to be agile and prepared for unexpected change, including volatile economic conditions or changing
customer tastes.
Customers
– Consider how to engage customers for long-term marketplace success.
– Customer engagement as an important outcome of an overall learning and performance excellence strategy.
– How do we obtain information from customers and how do we engage with customers and build long-term relationships with
them?
– In the brainstorming session, identified a number of processes in relation to customers, including regular email and promotional
offers.
– Customer surveys useful in engaging with customers to assess/respond to needs.
– Training staff in customer engagement – developing/maintaining customer loyalty and retention and building relationships.
Measurement, analysis and knowledge management
– Measuring, analysing, and improving performance and managing organisational knowledge to drive improvement, innovation,
and organisational competitiveness.
– Key to this use of data and information are their quality and availability.
– In brainstorming session, identified performance measurement activities relating to key financial, shareholder and customer
performance measurement.
– Consider how useful this information is how to use it to drive improvement and innovation.
– Big data analytics a key driver in analysing and understanding key performance information.
Workforce
– Considers key workforce practices.
– Creating and maintaining high-performance environment directed toward engaging staff.
– How do we build an effective and supportive workplace?
– From brainstorming session, Dulce undertake regular staff training and skills updates.
– How do we engage with staff to achieve a high-performance work environment?
– From the brainstorming session, identified use of annual appraisals and staff surveys to assist staff engagement.
– Need to assess this by asking staff how far they believe these assist in overall engagement.
– Only assist if staff feel engaged and committed to the process and believe opinions are valued and acted on.
– Engaged and committed staff throughout business drive product innovation and customer engagement and loyalty.
Operations
– Considers how we focus on our organisation’s work, product design and delivery, innovation, and operational effectiveness to
achieve organisational success.
– How do we design, manage and improve key products and work processes?
– How do we ensure effective management of our operations?
– From brainstorming session identified investment made in the latest production processes, which should improve our operational
effectiveness.
– Investment in e-commerce should assist in developing and delivering operations overseas and to new customers.
– Regular re-design of products key criterion in ability to be innovative, in order to continue to satisfy customer needs and build
long-term relationships.
Results
– Considers a systems-focus which encompasses all results necessary to sustain organisation.
– Key processes and product results, customer-focused results, workforce results, leadership and governance system results, and
overall financial and market performance.
– Not considered in our brainstorming session.

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 – Must now capture and measure ‘real-time’ information (measures of progress) for evaluating, improving, and innovating
processes and products.
– Need to focus on monitoring the outcomes of operational performance which can help to predict future performance and drive
performance excellence.
Professional skills may be additionally rewarded as in the following rubric:

How well has Not at all Not so well Quite well Very well
the candidate
demonstrated
professional
skills as
follows:

Evaluation The candidate has failed The candidate has The candidate has The candidate has
skills in using to demonstrate evaluation demonstrated weak demonstrated good demonstrated excellent
professional skills. The candidate has evaluation skills. The evaluation skills. The evaluation skills. The
judgement not effectively appraised candidate has shown candidate has shown candidate has shown
to appraise the information presented limited professional good professional excellent professional
objectively the and has merely listed judgement in appraising judgement in selecting judgement in selecting
findings and information already the information provided and applying a suitable and applying effectively
opinions of the given or has presented but has used an framework to evaluate a suitable framework
directors. a purely theoretical appropriate framework. the findings of the board to evaluate the findings
answer with no However, the candidate members. The candidate of the board members.
evaluation demonstrated. has not used the has made some The candidate has
The candidate has framework appropriately reasonable assertions made sound and very
demonstrated poor to evaluate the findings in their appraisal of well justified assertions
professional judgement of the board members in the findings and has and has demonstrated
by failing to use an the most effective way. demonstrated in a clear and objective
appropriate framework to They have demonstrated number of areas effective judgement of the findings
structure their answer. weak judgement of the judgement of the findings of the board members in
findings of the board of the board members in relation to performance
members in relation to relation to performance excellence.
performance excellence. excellence.

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