2010-2011

Q2. Compute the following financial ratios for Merck’s and Company Inc(December 2008):
a) Liquidity ratios (Current Ratio and Quick Ratio)

b) Leverage Ratios (Debt-to-Total Assets, Debt-to-Equity, and Long-term Debt-to-

Equity Ratios)
c) Activity Ratios (Inventory Turnover and Total Assets Turnover)

d) Profitability Ratios (Gross Profit Margin, Operating Profit Margin, Return on

equity)

Q4. Based on the strategic position and action evaluation (SPACE) Matrix, recommend
and discuss 2 types of strategy that may help Merck & Company Inc. to remain competitive
in the information-technology industry. Provide justification for your answer.

2013-2014

Question 2
a. Based on the information given below, calculate the external and internal factor (IFE and
EFE) evaluation matrix for P and G Company.

Key variable weight Rating

1. Proposed sale of Pringles line of snack in 2011 for $1.5 billion 0.12 4
2. P & G focus solely on the beauty and personal care product 0.08 4
3. In 2011, fortune ranked P & G the number one soap and 0.04 4
cosmetic
4. The new CEO Mr. McDonald focuses on lower end product 0.07 4
aimed at price sensitive customers
5. P & G operates under a SBU structure 0.05 4
6. 23 P & G brand routinely earn ovr 4 1 billion in revenue per year 0.10 4
7. Bran, bounty pampers are all top brand owned by P & G 0.10 4
8. Invested over $ 2 billion in R & D in 2010 0.05 4
9. Market share grew in 14 of top 17 countries in 2010 0.07 4
10. EPS is 3.94 0.05 4
11. No published vision statement 0.02 1
12. $57 billion in goodwill on balance sheet 0.04 1
13. Profit declined 5% in 2011 yet revenue increased by 2.9% 0.03 2
14. Weak profitability ratios 0.03 2
15. Not operating as efficiently as Johnson & Johnson 0.05 1
16. Spent $772 million in advertising to Johnson & Johnson $366 0.07 1
million
17. Consumer may not associate all of our brand with P & G rather 0.03 1
view them as their own district companies
18. Higher demand for higher-priced products such as prestige 0.08 3
cosmetic and fragrance
19. Younger customers are attracted by social media advertising 0.06 2
20. Social media advertising is more cost affective than traditional 0.06 2
advertising.
21. The beauty and cosmetic industry is expected to increased 0.06 3
globally by 8.5 per cent in 2014 according to recent research
from euro monitor international
22. There is an endless possibility to celebrities endorsing 0.04 2
fragrance, these product are successful because many are
persuaded by fame of the celebrity
23. Men are increasingly concerned with their appearance this 0.08 3
provides a opening to grab new branch of customers.
24. Increased in online purchasing, average monthly visits in the 0.06 3
U.S to beauty related websites topped 60 million and grew 94%
over the past 3 year
25. Consumer are interested in product that are made with all 0.03 2
natural products
26. Research shows that by 2015, global woman purchasing power 0.05 3
is expected to increase by 5 trillion and beauty is the category
these consumers are mostly likely to purchase.
27. Volatile foreign exchange rates 0.02 4
28. Subject to anti-trust investigation in Europe 0.03 3
29. Increased in competitor expansion globally from Colgate- 0.08 4
Palmolive, unlevered and Clorox.
30. Regulation are increased due to the voicing of different group 0.07 3
about harmful chemical ingredient in cosmetic product
31. Diamond food struggling financially, may not be able to 0.08 2
purchase Pringles
32. Premium cosmetic are a prime target for counterfeiters. 9% 0.04 2
according to the global congress on combating counterfeiting,
of all the world trade companies counterfeits goods.
33. Discounting premium cosmetic can damages its prestige image 0.04 3
for th consumer who purchase these products
34. The estee lauder companies rank number one in prestige skin 0.07 3
care and number two in makeup in the channel.
35. Considerable investment is necessary to bring new product to 0.05 4
the market and to maintain their high profile.

10 marks
b. Based on the information below, calculate the SPACE MATRIX and suggest any possible strategies
for P & G Company. 15 marks

INTERNAL ANALYSIS EXTERNAL ANALYSIS

Financial position (FP) and Stability Position (SP) and
Competition position (CP) Industry Position (IP)
Return on Equity (ROE) 4 Rate of inflation -2
Return on Assets (ROA) 4 Technological changes -2
Debt/Equity ratio 6 Price elasticity of demand -2
Gross margin 6 Competitive pressure -4
Current ratio 5 Barriers to entry into market -3
Market share -1 Growth potential 7
Product quality -3 Financial stability 7
Customer loyalty -2 Ease of entry in to market 3
Technology know how -2 Resource utilization 5
Control over suppliers and -2 Profit potential 6
distribution

Question 3
From the market analysis below, P & G company need to pursue new strategy to stay competitive
in the existing market. From the top management perspective, P & g company decide to evaluate
2 strategies planning matrix. 1) increased R & D , 2) increased advertising. Develop a quantitatives
strategies planning matrix (QSPM) for P & G company that includes 2 strategies, internal and
external factor. Based on the QSPM result, identify strategy that appear to be the best for the
company to pursue.
25 marks
Increased R&D Increased
advertising
Key variable weight AS AS
1. Proposed sale of Pringles line of snack in 2011 for 0.12 0 0
$1.5 billion
2. P & G focus solely on the beauty and personal care 0.08 0 0
product
3. In 2011, fortune ranked P & G the number one soap 0.04 0 0
and cosmetic
4. The new CEO Mr. McDonald focuses on lower end 0.07 3 2
product aimed at price sensitive customers
5. P & G operates under a SBU structure 0.05 0 0
6. 23 P & G brand routinely earn over 4 1 billion in 0.10 3 2
revenue per year
7. Bran, bounty pampers are all top brand owned by P 0.10 1 2
&G
8. Invested over $ 2 billion in R & D in 2010 0.05 3 1
9. Market share grew in 14 of top 17 countries in 2010 0.07 2 4
10. EPS is 3.94 0.05 4 3
11. No published vision statement 0.02 0 0
12. $57 billion in goodwill on balance sheet 0.04 0 0
13. Profit declined 5% in 2011 yet revenue increased by 0.03 2 2
2.9%
14. Weak profitability ratios 0.03 0 0
15. Not operating as efficiently as Johnson & Johnson 0.05 0 0
16. Spent $772 million in advertising to Johnson & 0.07 3 3
Johnson $366 million
17. Consumer may not associate all of our brand with P 0.03 3 3
& G rather view them as their own district companies
18. Higher demand for higher-priced products such as 0.08 4 2
prestige cosmetic and fragrance
19. Younger customers are attracted by social media 0.06 1 4
advertising
20. Social media advertising is more cost affective than 0.06 1 4
traditional advertising.
21. The beauty and cosmetic industry is expected to 0.06 3 4
increased globally by 8.5 per cent in 2014 according
to recent research from euro monitor international
22. There is an endless possibility to celebrities endorsing 0.04 1 4
fragrance, these product are successful because
many are persuaded by fame of the celebrity
23. Men are increasingly concerned with their 0.08 4 2
appearance this provides a opening to grab new
branch of customers.
24. Increased in online purchasing, average monthly 0.06 0 0
visits in the U.S to beauty related websites topped 60
million and grew 94% over the past 3 year
25. Consumer are interested in product that are made 0.03 4 2
with all natural products
26. Research shows that by 2015, global woman 0.05 1 3
purchasing power is expected to increase by 5 trillion
and beauty is the category these consumers are
mostly likely to purchase.
27. Volatile foreign exchange rates 0.02 0 0
28. Subject to anti-trust investigation in Europe 0.03 0 0
29. Increased in competitor expansion globally from 0.08 3 2
Colgate-Palmolive, unlevered and Clorox.
30. Regulation are increased due to the voicing of 0.07 3 1
different group about harmful chemical ingredient in
cosmetic product
31. Diamond food struggling financially, may not be able 0.08 0 0
to purchase Pringles
32. Premium cosmetic are a prime target for 0.04 0 0
counterfeiters. 9% according to the global congress
on combating counterfeiting, of all the world trade
companies counterfeits goods.
 33. Discounting premium cosmetic can damages its 0.04 0 0
prestige image for th consumer who purchase these
products
34. The estee lauder companies rank number one in 0.07 2 3
prestige skin care and number two in makeup in the
channel.
35. Considerable investment is necessary to bring new 0.05 4 3
product to the market and to maintain their high
profile.

Question 4
Based on the case study of P & G Company.
a. Discuss 3 reasons why continuous emphasis on R & D proves to be advantageous for a
company like P & G. 10 marks

b. Discuss 3 major R & D approaches to implementing strategies which may have been adopted
by P & G in its endeavour towards achieving its vision, mission and objective.
15 marks