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ACCA SBL
Case Study
“World Adventure Tours Co”

Answers

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Question 1
1 Slides and accompanying notes – Baldridge Model

Slide 1

The Baldrige Model

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Organisational profile: 

environment, relationships and strategic situation

Strategic planning Workforce focus

Leadership Results

Customer focus Operations

Measurement, analysis, knowledge management

Notes:
The Baldrige model helps organisations to manage all the components of the organisation as a
unified whole, so that plans, processes, measures, and actions are consistent.
1. First look at the environment, relationships and strategic position. For us at WAT this will
determine our target markets, competitors, main suppliers and wider environment (such as
PESTEL considerations). For example, is our holiday business threatened by ecological
considerations, fuel prices and political events? Is our type of holiday still popular?
2. Based on this analysis we can move on to look at leadership, strategic planning and
customer focus. Think of this as:
๏ Strategy planning – where do we want to go?
๏ Customer focus – we need to ensure that customers are with us.
๏ Leadership – any change will need to be carefully managed and led.

For example, the letter of complaint suggests that (on that trip at least) customer focus was
very poor as was local leadership. To improve that we need to plan strategically. How can
we ensure consistent high-quality tours with motivated leaders? Are the holidays offered
popular and do they correspond with the holidays delivered? Do we need to move away
from free-lance guides? What maximum size should tours be (this has implications for our
pricing structures)?

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3. The right-hand part of the diagram looks at detailed implementation of the business plans.
How will operations be carried out? What type of employees do we need and how do we
motivate them?
4. This should all feed into good or better results.
5. The effects of the plans and changes all need to be carefully measured and analysed.

Slide 2
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The Baldrige Model – applied to WAT
Taking into account the letter of complaint and the recent newspaper article we need to
look at:
1. Environment, competitors, reputation
2. What do our customers want?
3. How are we going to plan for higher quality holidays?
4. How should we structure and lead our business?
5. How do we ensure that all holidays run smoothly?
6. How do we recruit, train and motivate local guides and representatives?
7. What ambitions to we have for profits, sales, satisfaction and reputation and how
should these be measured?

Notes:
1. Our reputation appears to have been damaged both by the experience of individual
customers (see the letter of complaint - and there have been others) and perhaps by
articles like the recent one in ‘The Watcher’. We might need to adjust our mission, products
and marketing.
2. Adjusting marketing implies knowing what customers want and value. It means looking at
our products, pricing, target audience and promotion. In fact, all of the marketing 7Ps need
to be considered.
3. If we habitually offer chaotic holidays it will not be long before our poor service delivery
becomes widely known (think Tripadvisor.com star ratings and reviews). It is a matter of
urgency that we plan for quality improvements. Consistent, error-free products are
essential and we have to decide how to quickly deliver those.
4. Can the urgent improvements needed be delivered by existing management and
management structures? Do we need outside help? Do we need to recruit experienced
managers?
5. Our holidays are complex: fluid bookings, flights, accommodation, dietary requirements,
allowing as wide access as possible to a wide range of travellers, individual excursions to be
booked, added days to be organised etc. Almost certainly the only way in which we can
deliver consistent and reliable results is to use a sophisticated IT system.

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6. Our local guides are often with tour groups for several weeks. We are a service business
and the ‘people’ element is vital. The guides are crucial to customers’ impressions and
satisfaction levels. Given the information that we have about guides’ motivation, the
removal in meal allowances and the possible scam involving local representatives asking
for back-handers to provide work it is imperative that we give urgent attention to our
workforce.
7. Realistic, but challenging targets for improvement and performance should be set. These
must not just represent financial measures. Non-financial performance measures are
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essential: satisfaction, quality, guides’ local knowledge, hotel standards etc are all vital
components that have to be measured.

(b) (i) BRIEFING PAPER

To: The board of WAT
From: Product manager
About: The contextual features of change, change pathways and POPIT
Date: X/X/XX

Introduction
Following my presentation on the Baldrige model I have been asked to draft a briefing paper
setting out how the changes implied by that model could be implemented. In particular I will
look at:
(a) The effects of the contextual factors influencing the change process; and
(b) The POPIT model of change.
Contextual features and their implications
Contextual features are used in the Balogun and Hope Hailey approach to change management.
Simply think of the contextual features as variables which affect how change might be best
accomplished. Below are the features and my interpretation of what they imply for WAT Co.

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Feature Implication

Time Are the changes needed urgently? How long have we got? It would seem
that the changes are very urgent. There seems to be a high level of
dissatisfaction amongst customers, there has been an adverse
newspaper article and also an accusation of bribery and corruption that
has been made by one of our longest-serving tour guides against a local
employee. Bad on-line reviews etc will soon hurt us. If the tour guide is
not taken seriously there is a chance that he will go to the press: perhaps
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in The Watcher where the adverse article appeared.

The implication for the change process is that it almost certainly has
to be top-down and speedily imposed on staff and sub-contractors.
We do not have the luxury of time to embark on a lengthy
consultation process.

Diversity This will be high because we have people operating in many countries
and they will have their own cultures. They may expect the changes to be
imposed differently, but the urgency of the required changes means that
we will not be able to spend long tailoring the change process to each
culture.

It will be important to explain the need for urgent change, that it has
to be imposed and that we expect people to comply uniformly.

Capacity This refers to resources such as money and managerial time are available.
It is not clear that sufficient resources are available.

We must make an assessment of our resources and the time they can
devote to the change process. We might need to get help – at least
temporarily.

Preservation There are some good parts to our business. For example, we have a brand
name that is (so far) still worth something, we have expertise, contacts in
many countries and a long-standing core of local guides who normally
get excellent reviews from customers.

Our changes need to try to preserve these assets. For example, at

head office we must try to hold on to staff with experience and
expertise even whilst we attempt to modernise and computerise our
booking system. Locally, we must try to retain the best guides and
they will not stay if they have to continually deal with booking errors
and corrupt managers.

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Readiness Are staff aware of the need for change and are they committed to
making the changes work?

The diverse cultures and experiences of staff might affect this. We

assume local guides, bearing the brunt of customers’ anger, will
readily embrace change. Local managers might resist, particularly if
they are ‘on the take’ – but then we probably don’t want to keep
them anyhow. We need to investigate the attitudes of head office
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staff. They might be complacent and comfortable and refer an easy
life – or they might be aware of the company’s poor performance
and so might also welcome change – particularly if it allows them to
concentrate on more interesting parts of their jobs rather than
routine bookings.

Capability Do we have the capabilities to manage the change? By this we mean the
technical abilities and expertise (basic resources have been covered
already under ‘Capacity’).

Change management can be fraught with difficulty if staff are not to

become disillusioned and we are to avoid upsetting other
stakeholders unnecessarily. We should give some consideration to
hiring outside consultants as it is important to get the change
implemented quickly and correctly.

Even if general change consultants are not needed, we will certainly

require outside help if we decide to develop a new IT system as we
have practically no internal expertise.

Scope How fundamental is the change? Is it a realignment or is it

transformational?

It is suggested that this is a realignment: the basic business model

will probably stay the same but we need to improve our processes
and image. This implied that the change process is less risk than it
might have been, however, the urgency of the changes needed
implies that the nature of the change is ‘big bang’ and this increases
the risk profile once more. It is important to get it right and we will
only get one shot. Again, outside consultants will allow us to transfer
some to the risk to third parties.

Power Do we have the power to push through the change?

Undoubtedly ‘yes’. This is a private company and the owners have

high power – though, as always, we have to keep key-player
stakeholders on-board.

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(ii) The POPIT model

This model for change considers:
๏ People
๏ Organisation
๏ Information technology
๏ Processes
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You will see that there are considerable overlaps between these heading and those of the
Baldrige model.
The model says that for any change being considered, the organisation must give attention to
each of these factors.
People: roles, job description, skills, competence, training, progression, rewards, management
activities, culture and motivation. For example, in WAT, we need to look at the important roles of
customers-facing tour guides and the competence of head office staff.
Organisation: structure, management processes, decentralisation, reporting lines. For example,
in WAT we might decide that permanent employees in some countries is unnecessary and that
head-office can liaise directly with guides.
Information technology: the tasks that can be performed by the IT system. The web-site
capabilities. Communication with customers. In WAT we know that it seems to be essential that
we improve our IT system to provide greater consistency, though this has to be properly
evaluated.
Processes: What is our value chain? Why do people book through us rather than go
independently on trips? Presumable we add value through providing convenience, knowledge
(eg where to go, when to go, where to stay, what to visit how long to spend) and local support.
We know that at WAT our processes have been failing and with that our value chain is liable to
collapse.

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Question 2
MEMORANDUM
To: IT Director
From: Manager, Accounts Department
About: Business case for a new IT system
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Date: X/X/XX

Introduction
This memorandum explains, critically reviews and evaluates the business case created by for the
new computer system for the booking system.
Needs analysis
A proper analysis of the type of IT system we need is not included in the proposal. The writer, a
new recruit to the IT department, says that it has been clear for some time that the current IT
system is inadequate and that a new system will prevent errors.
This might be so, but no evidence has been produced as to what has caused the errors. For
example, if our holiday offerings have not changed in pattern or complexity for several years, yet
our delivery has deteriorated whilst using the same IT system, it is difficult to see why the IT
system (a constant feature) is to blame. There has recently been higher staff turnover at head
office and it might be that the relative inexperience of new employees is what has caused the
problems.
Having said that, a new and more comprehensive IT system might improve consistency and
quality, but the case has not yet been convincingly made.
Deliverables
The first three items on the list of deliverables should be simple (and useful) to implement.
The fourth matter (advice on visas, immunisation etc) implies that we will keep our system up-do
date with detailed requirements for the many countries we visit and also with respect to the
various nationalities of our customers. This could be a considerable administrative burden and
we could be liable to customers if the wrong advice were given. We need to look carefully at how
we can reliably keep this information up-to-date.
In theory, the fifth matter, automatic booking of flights, accommodation and local trips, should
provide great benefits to the company, but is likely to be a difficult system to develop. Customers
will want to travel from different airports, might want to travel earlier or later, might be price
sensitive, might be part of an air miles scheme so that they favour particular airlines. Plans might
change, trips cancelled. Careful analysis is essential to assess how feasible this degree of
automation might be.
The final item, reliable booking of additional services, might also be difficult to achieve fully
automatically as it will require two-way communication with local suppliers so that bookings
made are confirmed automatically too.

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The cost-benefit analysis
The following need to be investigated:
1. The basis of the capital cost of $1m.
2. The basis of the running cost figures and the implied 5% increase per year.
3. The basis of the staff saving costs and the implied 5% increase per year.
Although these figures need to be substantiated, they are tangible costs and benefits and
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reasonable justification should be possible. Presumably the 5% uplifts are related to expected
inflation.
4. The basis of the figures for saving on booking errors avoided will be more difficult to
estimate. Has an attempt been made to assess the cost of historical errors? Why do they
increase at 10% pa?
5. The basis for the figures relating to the increase in goodwill will be very difficult to
estimate. These largely impossible even to estimate in retrospect as the value of goodwill is
only crystallised upon sale. The calculation seems to show extra goodwill of $100,000 per
year growing at 10% pa. This seems highly speculative. Most serious, however is that any
increase in the value of goodwill is not an annual cash flow and should not be in an NPV
calculation.
Perhaps the drafter of the NPV calculation meant increase in net profit instead of increase
in goodwill, but that needs to be confirmed. It would still be a difficult figure to estimate
with confidence.
6. How has the 10% discount rate been chosen?
7. How has the project life of five years been chosen?
8. Will benefits start at time 1?
The present value of the savings on errors avoided and the goodwill amount to $1,363,000 and
$454,000 and; the NPV of the project is $202,000, so without either of these components the
NPV would be heavily negative.
Risk analysis
It is essential that a risk analysis is carried out on this project. The new software system will be a
fundamental part of WAT’s operations and if it does not work properly or performance will
deteriorate further. Furthermore, the transition from the old to the new system is a particularly
risky time and there would have to be careful changeover arrangements.
Time horizon
The project cost-benefit analysis has a time horizon is 5 years (justification needed), but no
information has been provided when the new system will be operational. How long will it take to
develop, test and implement the new system? Will it be ready in time to deal with the urgent
need for WAT to improve its services?


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Question 3
MEMORANDUM
To: CEO
From: Assistant
About: Evaluation of the suggestions for business growth
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Date: X/X/XX

Introduction
This memorandum categorises and evaluates the various suggestions made for increasing
profits and expanding the company. Four suggestions were made at the recent staff meeting:
1. Cost cutting
2. Attract older clientele.
3. Offer other types of holiday in addition to adventure holidays.
4. Expand into an entirely different type of business (fitness).

Categorisation of the proposals

The changes can be categorised and evaluated using Ansoff’s Matrix

Existing products New products

Withdrawal

Existing Consolidation Product

market Penetration development

Efficiency gains
Diversification
New markets Market development • Related
• Unrelated

Cost cutting (existing markets, existing products)

Cost cutting is a strategy which offers relatively low risk, but low returns. It is often not possible
to radically cut costs without seriously interfering with the operation of the business and quality
of the products offered. For example, we could not run trips unless at least 12 people are
booked, but that will cause many more cancellations and hurt our reputation. We could increase
the maximum number of people on trips, but this would again damage customer satisfaction -
as has been pointed out in the recent letter. Only if products can be delivered in a radically
different way can revenue be preserved whilst costs are cut.
In general, cost cutting will make marginal, limited improvements to profits.


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Attracting older clientele
This can be categorised as developing a new market ie market development. The potential
increase in profits can be substantial as an entirely new source of revenue is accessed. However,
risks are higher because money, time and effort have to be spend on developing and promoting
the new products, yet they might no be successful. We will be entering a market where our
brand is relatively unknown. Additionally, there is a risk that our brand becomes ‘muddied’. As
was said by KK, we are synonymous with the youth/adventure market and our standing there
might be compromised. Dual branding could be used do keep the sectors distinct. It would even
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be possible to use conventional branding and e-branding to keep the products and markets
separate.
Despite appealing to a different market, some synergies should be possible (similar skills
needed, similar processing of bookings).
Additional types of holiday for young people
This can be categorised as product development. Once again there is the potential for large
increases in revenue and profits, but there are risks that we will not be successful after having
spent resources in developing the products. There will be competitors who will fight back and
this will mean that success is not assured. It would be important to try to go market new
products to the existing market segment whilst our brand name is strong there – yet another
reason to improve what we are doing currently to safeguard our position before trying to
expand.
Despite offering different products, some synergies should be possible (similar skills needed,
similar processing of bookings).

Diversification
Unrelated diversification is a high-risk strategy. WAT has no experience in the fitness/gym
market. Additionally, WAT’s experience is offering up-market products to demanding clients
whereas Best4Fitness is a low-cost operation. It is difficult o see that synergies would arise that
would lead to gains being made after a fair-value takeover. Indeed, there is a risk that WAT will do
harm because it has no experience in the fitness market.
Where synergies are not available, with quoted companies there is generally no benefit arising
from a company diversifying because shareholders can themselves diversify in whatever ways
they choose. However, this is a private company and diversification would then provide some
portfolio effect for the major shareholders.
Nevertheless, it is a high-risk option and the company would almost certainly be better
concentrating on markets and products which it knows and where it already has some
recognition or knowledge of how the markets operate.
Recommendation
The options are not mutually exclusive.
Costs should always be carefully controlled as a matter of good housekeeping and efficiency and
greater efficiency does not imply poorer products or services. Therefore, processes and costs
should be reviewed and improvements sought.
For the reasons set out above, diversification is not recommended as it is difficult to understand
how that would add value.
Additional types of holidays for young people is a viable course of action, but it has considerable
risks arising from the steep learning process involved: different countries, different pursuits etc.

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Altering holidays or adding new holidays to also attract older people is also viable. It should be
possible to do this without harming the strength of the existing brand. For example, instead of
just one holiday being offered to, say, Chile two types could be offered: one strenuous and one
less so. The company already has knowledge about the places visited and has a network of
experienced guides who could also be used to provide new types of holiday. There appears to be
relatively little downside risk in adopting this option.
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Question 4
BRIEFING PAPER
To: The board of WAT
From: Assistant to CEO
About: Ethical decision-making
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Date: X/X/XX

The importance of ethics in the current business environment

Apart from any moral imperative to be ethical, good ethics make excellent business sense.
Unethical behaviour is now frequently uncovered. Whistle-blowers are given statutory
protection and social media soon communicates any suspicion of mis-behaviour. When
unethical behaviour is uncovered both legal and reputational consequences can be severe.
Ethical behaviour:
๏ Reduces the risk for shareholders because the company has acted properly and has ‘no
skeletons in the cupboard’.
๏ Lower risk means that capital can be raised more cheaply (the cost of capital and risk are
linked).
๏ Goodwill towards the company is increased – improving sales.
๏ Adverse publicity is avoided.
๏ Regulatory compliance is easier to achieve, reducing the cost of damages and fines.
๏ Good candidates are attracted to companies with good reputations.
๏ Joint ventures are easier if the company has a good reputation.

A framework for ethical decisions

Tucker devised a five-question approach to ethical behaviour and this can be a useful framework
for determining the most ethical outcome in a given situation. Not all criteria might be relevant
in every situation.

The questions are:

๏ Is it profitable?
๏ Is it legal?
๏ Is it fair?
๏ Is it right?
๏ Is it sustainable or environmentally sound?

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Not all of these questions will produce definitive answers. In particular:
๏ ‘Is it fair?’ is influenced by whose perspective you are looking at the problem from and
different stakeholders are likely to have different views.
๏ ‘Is it right?’ will depend on your ethical stance which in turn depends on your culture, religion,
outlook and so on.

The framework applied to WAT

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Our activities are profitable and aim to be legal. Profitable means that we are able to offer
employment and income to hotel staff, restaurants and guides. We are also offering our
customers products which they value. Our profits are taxed (as is the money spent abroad) and
this provided governments with income to carry out their policies.
Our legality has been potentially compromised by local agents accepting bribes and defrauding
customers and we need to investigate these allegations urgently and to correct behaviour where
necessary.
The author of the newspaper article seemed to object to tourists from affluent countries visiting
poor countries. National and international wealth distribution can undoubtedly be seen as
‘unfair’ but it is not clear that WAT’s activities are contributing to that. If anything, wealth is being
redistributed from richer to poorer.
Additionally, the author seems to think there is something reprehensible about viewing different
cultures from a privileged position. However, one does not have to suffer malnutrition to be able
to observe that it is an evil. There is no evidence that our activities exploit the local population.
However, there might be a case for being able to show that our activities are a force for good
(apart from spending money in the various locations). For example:
๏ Facilitating our customers to make voluntary donations to local charities.
๏ Buying meals and goods from local cooperatives.
๏ Incorporating voluntary activities in some of our holidays such as helping with small business
projects and teaching languages.
Not only would these options help to defuse criticism of our business, they could genuinely do
good and, furthermore, many of our customers would welcome these opportunities.
Sustainability and environmental effects is quite difficult for us to achieve. There is no escaping
the fact that we do use many long-haul flights and that these have an adverse environmental
effect. It will be difficult to carry on a holiday business without these adverse effects, but they
can be mitigated by asking our customers to contribute to a carbon offset scheme.
There might also be adverse effects once tourists arrive at particularly popular destinations:
waste management, pressure on water supplies, more energy consumed, erosion of popular
pathways. Many of these adverse effects are beyond our control and will depend on local
government action (such as restricting trekking permits). However, we can try to influence
matters such as favouring accommodation that uses solar power, ensuring that we remove all
our waste from national parks.

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Question 5
BRIEFING PAPER
To: The board of WAT
From: Assistant to CEO
About: Reported fraud and corruption.
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Date: X/X/XX

Introduction
One of our long-serving and respected tour guides (Chas Tiaz) has written to us alleging that our
local representative in Farland is corrupt and fraudulent. This briefing paper sets out some of the
issues that arise.
The legal position of the whistle-blower, Chas Tiaz
In the UK, whistle blowers (employees, trainees, agency workers) are protected by law if they
report (amongst other things) a criminal offence, eg fraud or bribery. Mr Tiaz is may be classed as
an agency worker, though he does not supply services here in the UK his contract for services is
with us. We need further advice on this issue, but irrespective of the strict legal position we
might feel ethically bound to protect his position.

To enjoy legal protection, the whistle-blower must:

๏ Have made the disclosure in good faith – in other words you must be disclosing the
information because it is in the public interest and is clearly wrong.
๏ Reasonably believe that the information is substantially true.
๏ Reasonably believe you are making the disclosure to the right prescribed person.

It would appear that he has complied with these conditions.

Bribery
Our local agent has been reported as receiving bribes from hotels and local guides and, as we
are his employers, we are also liable for his actions. Bribery is a criminal offence with severe
penalties. To defend ourselves we need to show that we have adequate anti-bribery procedures
in place.

These require:
Proportionate procedures
Proportionate to risks faced and size of company.

Commitment by management
Management should assess the nature and extent of risks faced and develop appropriate
procedures to manage that risk.

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Risk assessment
The organisation must assess the nature and extent of its exposure to the risks of bribery.

Due diligence
The company should apply due diligence procedures in respect of company personnel who are
at greater risk of offering bribes.
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Communication
To ensure all employees / connected persons are aware of the company’s culture and attitude.
This includes training and education procedures.

Monitoring and review

Procedures should be regularly reviewed and improved as necessary.

Even if the incidence of alleged bribery had not been reported to us by Mr Tiaz, it is important
that we adopt these procedures to protect ourselves in the future.

Fraud

If what is reported by Mr Tiaz is true then undoubtedly Mr Souprier has been defrauding the
company and possibly guests.

Next steps

This cannot be solved from here. It requires a visit by a senior member of the company who must
interview hoteliers and other guides to find out if the offences have been committed and their
scale. Additionally, if confirmed, we cannot assume that these incidents are confined to Mr
Souprier and the might be wide spread. This must be investigated.

Irrespective of the findings it is important to:

๏ Put adequate procedures in place to prevent bribery.
๏ Put adequate internal controls in place to prevent fraud.

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