cima t4 2010 bppmock1answer

8/8/2019 cima t4 2010 BPPmock1answer

http://slidepdf.com/reader/full/cima-t4-2010-bppmock1answer 1/13

T o : S te ve V o dd il a nd J o hn Y ou n g

From: Sen ior Management Accountant

Date : 2010

1 In tro du ctio n

2 T erm s o f re fe re nce

3 I den ti fi ca ti on and p ri or it isa ti on o f i ssues

4 A p pro a ch e s to re s olv in g th e m a in is su e s

5 E th ic a l c on s id e ra tio n s

6 R ec om m en da tio ns

7 Conclusion

Appendices

1 S WO T an alysis

2 M en de lo w's m atrix

3 S ta ff b on us s ch em e

4 S p orts p ro d uc tio n o p po rtu n ity

5 P o te n tia l a cq u is itio n o f C o m pa n y B

6 S lid es re n ew b on us s ch em e

VYP i s a successfu l i ndependent te lev is i on product ion company operat ing i n the tJ K . This is a

la rge market tha t is h igh l y f ragmented w i th many hundreds o f smal l companies b idding to w in

contrac ts to prov ide comm issioned content to the broadcas t companies such as the BBC and ITV .

Some of compet ito rs have i n ternati ona l reputa t ions tha t al low them to make mains tream f ilmssuch as Aardman Animat ions. The major chal lenges facing the industry is the ever-increasing

compet it ion as new companies enter the market, combined w i th l ower commission ing ra tes from

the broadcas ters as they face up to reduced l icence fee and adver ti si ng i ncomes dur ing the pos t-

recession per iod.

2 Terms of reference

As the Sen ior M anagement Accountant the author o f t h is report i dent if ies and eva luates the i ssues

facing VYP an d of fers appropriate recommen dat ions.



3 Identification and prioritisation of issues

The issues be low have been pr io r it ised based on the potent ia l impact each cou ld have on VYP

combined wi th the i r u rgency. A fu l l SWO T ana lys is is presented in Appendix 1 .

3.1 Acquisition of Company A or Company B - first priority

An acqu isi tion o f e i ther C ompany A or Company B wi ll p rov ide VYP wi th a b igger presence in the

potent ia l ly lucra t ive drama genre and the expert ise that wou ld be acqu ired o f fers the potentia l o f

improved fu ture pro fi t marg ins . The impact on VYP wi ll be la rge both f inanc ia l ly and a lso cu l tu ra lly ,

as the in tegra tion o f the two ent i ties wi l l impact s igni ficant ly on VYP's ex is t ing s ta ff .

Company B has requested an in it ia l response wi thin two w eeks which g ives th is issue a h igh leve l

o f u rgency. Th is wou ld be a sh i ft in s tra teg ic d i rec t ion for VYP and the combination o f h igh impact

and urgency makes th is the number one issue.

3.2 Staff bonus scheme - second priority

The reputa t ion and fu ture success o f VYP is in tr ins ica l ly l inked to its s ta f f and the in troduct ion o f

the proposed scheme wi ll impact s ta ff f inanc ia l ly and emot iona lly , as i t w i ll a f fec t perceptions o f

the ir re la tionsh ip wi th management. I f adopted, the scheme may he lp to address the issue o f

fal ling profi t margins.

The scheme is to be announced in 3 weeks and th is urgency, a longs ide the potentia l impact on a

key s takeho lder group (see Appendix 2) , means that th is is the second issue covered in th is report.

3.3 Potential outsourcing of VT editing -third priority

VT ed i ting is a strength o f VYP and i t w i ll be important tha t VT ed i t ing sk il ls are re ta ined, whether

th is is done ' in house ' o r v ia an outsourc ing contrac t to pro tec t current marg ins.

The fu ture o f VT ed i ting is current ly be ing d iscussed which means that a qu ick reso lu t ion o f th is

issue is requ ired. Ra j and Pau l a lso ho ld 10% of the share cap ita l each, w h ich is s ign i ficant in the

contex t o f contro l o f VYP.

The h igh leve l o f u rgency but lesser impact than issues 1 and 2 makes th is the th i rd pr io r ity in th is

report.

3.4 Sports production opportunity - fourth priority

The proposed jo in t deve lopment o f the sports qu iz wou ld g ive VYP access to an addi tional

revenue s tream which bu i lds on VYP's prev ious experience in the comedy genre . I t a lso o ffe rspotent ia l fo r h igh m arg in in ternational sa les i f successfu l.

ABC's M D is keen to rece ive a prompt response and a number o f other production companies are

be l ieved to be in teres ted in th is pro jec t, g iv ing th is issue a degree o f urgency. However, th is does

not represent a change in s tra teg ic d i rec t ion or involve s igni ficant up front cos ts and for these

reasons this opportunity is the fourth priority in this report



3.5 Other i ssues fac ing VYP

There are i ssues o f lesser impor tance which have not been pr io r it ised i n th is repor t as they are

seen as l ess urgent and as hav ing minor impact on the organ i sa t ion as a who le . For example :

• S ta ff r es igna ti ons a re a lw ays a ma tt er fo r reg re t, bu t t he number and sen io r ity o f those w ho

have lef t means that th is is not a high pr ior i ty issue

Eth ica l i ssues facing the Board w i ll be d i scussed i n a separa te sec ti on .

4 Approaches to resolving the main issues

4.1 Acquis it ion of Company A or Company B

This oppor tun i ty can be assessed us ing Johnson and Scho les Su i tab i li ty , Acceptab i li ty , Feas ib i li ty

model

Suitability

VYP has moved i n to the drama genre i n the l as t year , an example o f p roduc t deve lopment

(Ansoff 's mat ri x) . Large i n it ia l costs and a l ack o f management experi ence has meant l ow marg ins

o f 7. 6% . T h is mar ke t segmen t commands a h igh ave rage commiss ion ing r evenue pe r hou r and t he

acqu is i ti on o f e i ther Com pany A or Company B and the synerg ies resu lt ing f rom shared bes t

prac ti ce present an opportun it y fo r marg in growth . Th i s is a lso a market segment wh i ch i s h igh

pro fi le as programmes w i ll o f ten a i r a t peak t imes and a l a rger presence i n th is genre w i ll improve

VYP 's brand recogn it ion . Acqu is i ti ons are common in th is i ndus try ; f o r example Sh ine Group

comple ted the acqu i si ti on o f i ndependent product ion f irm Brown Eyed Boy i n June 2010.

Company A has ach ieved a good record o f hav ing shows re-commiss ioned and the successfu l

cos t cont ro l t ha t has been implemented i s someth ing that VYP cou ld l earn f rom as i t l ooks to

implement cos t sav ing measures .

Company B has a h igh focus on qua l it y (d if fe renti a ti on focus i n te rms o f Porter' s Gener ic

S t ra teg ies) wh i ch f i ts w i th VYP 's need to main ta in i ts reputat ion fo r high qua l it y programming. Th i s

qua l it y has resu lted i n severa l p rest ig i ous awards and prov ides greater opportun it y o f securi ng

h igh marg in i n ternati ona l sa les . The reg iona l ( i. e . ou tside the M25) l ocati on o f Company B may

a lso be he lp ful i n bu i ld i ng VYP 's re la t ionsh ip w i th the BBC which i s commi t ted to spend ing 30% of

i ts programming budget on reg iona l p roduc t ions . Bu i ld i ng a reg ional capac it y i s an important i ssue;

i n 2008 Ta l kback Thames i nves ted heav il y i n open ing a new of fi ce i n Scotl and.

Acceptability

C o m pa n y AThe acqu is it ion o f Company A would generate an expected pos it ive NPV of £320k. I t appears

acceptable therefore in f inancial terms though this analysis is unl ikely to ref lect potent ia l synergies

and i n tegra ti on cos ts pos t-acqui s it ion . A concern i s the negati ve pub l ic i ty sur round ing recent

redundanc ies and the qua l it y o f p rogramming which ra ises doubts about the cu l tu ra l f it o f t he two

organisat ions.



Co m p a n y B

The acqu isi ti on o f Company B wou ld genera te a t wors t an expec ted pos it ive NPV o f £135k

(Appendix 5) . Th is is lower than C ompany A, with cashf lows at a lower longer- term growth ra te .

However B may have greater potentia l to grow quicker than A. In addi tion B 's low sta ff turnover ,

suppor t for loca l chari ties and emphasis on qual it y suggest that the in tegration of the twocompanies wi ll be smoother and more acceptab le to sta ff .

In the case of an acquisi tion staf f are l ikely to feel unc ertain about their posi t ions and their future

remuneration. Senior management in par ticu lar wi ll be concerned about the i r posit ion in the new

ent ity ra is ing the r isk that the sta f f expert ise identi fied in Company A or B wil l leave in the post -

acquis it ion per iod. However , i t i s common for smal l, young, independents to inv ite takeover b ids

f rom a larger corporate parent because of the increased secur ity that th is can br ing, and th is

appears to be the case w i th Company B .

Feasibility

The acquis it ion cost o f Company A is £4,600k and of Company B £4,800k. These are s ign i ficant

amounts and whi le VYP is generating st rong cashf lows i t is l ike ly that VYP wi ll need to borrow in

order to finance an acquis it ion. An a l ternat ive would be for an equi ty stake to be offered to senior

sta ff in the acquired company in order to reduce the cost and incentiv ise them to remain wi th the

business.

The acquis it ion wi ll need to be approved by regulators but g iven the s ize of the companies i t is

un l ike ly that any acquis i tion would be b locked.

4.2 Staff bonus schemeSuitability

The new bonus scheme has the potentia l to a l low VY P to ach ieve i ts a im of enabling employees to

share in the growth of the com pany whi le a lso encouraging a focus on cost cont ro l .

The reduct ion in base sa lar ies means that a por t ion of f ixed sta f f costs are removed and rep laced

by a var iab le cost based on per formance.

However , the fu ture success of VYP is based on nur turing creativ ity and mainta in ing so l id

re la t ionships wi th key sta ff members. The Board of VYP needs to be very carefu l to ensure that

any bonus scheme is perce ived as fa ir and mot ivates sta ff to manage costs, w i thout los ing thedesire to create h igh qual it y programming that meets broadcasters ' and v iewers ' expectat ions and

ensures fu ture re-commission ing and in ternat ional sa les.

Acceptability

Appendix 3 shows that the impact on operating profi t in y/e 31 st March 2010 wou ld have been an

increase of £326k. Th is would have increased operating profi ts by 9.6% and increased operating

prof i t marg in to 13%.

Appendix 3 a lso suggests that sta ff would have been bet ter remunerated overa ll in the year as

bonuses pa id exceed the reduct ion in sa lar ies. However , th is is based on last year when revenuesincreased due to the production of the 2 drama ser ies and these f igures may not be typ ica l go ing

forward.

I t is likely that staf f wi l l react negat ively to the proposa l to reduce base salar ies and this is l ikely to

be an issue on which they take t rade un ion advice. Programme d i rectors in par ticu lar are l ike ly to

v iew the revised scheme negat ive ly, see ing i t as a fur ther a t tack on the ir creativ ity . Th is may lead



them to quest ion the ir ro le in the organisat ion. The exc lus ion of In ternational sa les s taff f rom th is

proposal may a lso be d iv is ive. I f VYP takes over A or B, the p lace of the i r s ta ff in the scheme wi ll

a lso need carefu l cons ideration, par ticu lar ly i f VYP is t ry ing to re ta in the loya lty o f key s taf f from the

company t aken over .

Feasibility

There are no f inanc ia l constra in ts on the in t roduction of the new scheme. The issue here is

whether i t can achieve the a ims of mot ivat ing s taff and remunerating them fa i rly whi le a lso he lp ing

VYP to achieve i ts overal l st rategic object ives.

I t w i ll be necessary to check the procedure that needs to be fo l lowed to change s taff cont rac t

terms.

4.3 Potential outsourcing of VT editing

Impact

VT edi t ing is a core s t rength of VYP and the abi l i t y o f Raj Shah and Paul Maas to produce

excep tiona ll y good f in ished p rogrammes on s it e has been one o f t he reasons f or VYP 's success .

The c losure of ed it ing fac il it ies and the depar ture of two key s taff mem bers who have been w i th

VYP s ince i ts c reat ion is l ike ly to be d is ruptive in ternally and may af fec t the ex ternal perception of

VYP.

Option 1 Negotiate w ith Raj and Paul to ensure a smooth transition and use existing

external VT edit ing supplier

The f inanc ia l impact o f th is to VYP is a net sav ing of £20k th is year . .

Negot ia t ing wi th Raj and Paul wil l ensure a smooth t rans i tion but wi ll m ean that the i r sk i lls wi ll no

longer be a source of compet it ive advantage to VYP.

Option 2 Offer an increased equity stake in VYP

This m ay incentiv ise Raj and Paul to s tay wi th VYP and be convenient log is t ica l ly , but is like ly to

lead to a negative reaction f rom other senior s ta ff mem bers who wi ll perce ive th is as unfa i r.

Fur thermore, i f the dr iv ing force behind Raj and P aul wanting to set up the i r own bus iness is

creative rather than f inanc ia l th is is un like ly to d issuade them

Option 3 Negotiate w ith Raj and Paul to ensure a smooth transition and use their services

as outsource suppliers

Whi le t he cos t o f se rv ices f rom Ra j and Pau l' s new ven tu re a re unknown us ing t hem as an

outsourc ing company to complete VT edi ting would ensure cont inu i ty and reta in these key sk il ls for

VYP.

Shareholdings

The board a l so needs t o reso lve wha t w i ll happen abou t Ra j and Pau l's shares ,as t oge ther t hey

hold 20% of the com pany 's shares. Assuming Raj and Paul se l l , the ir shares could be t ransferred

to other board mem bers , key s taf f such as Sara Mi lls , or d i rec tors or key s taff o f Company B as

par t o f the acquis it ion ar rangements . However i f more than hal f o f Raj and Paul 's combined

hold ing is t ransferred to shareholders other than John and Steve, they wil l lose the i r jo in t m ajori ty

hold ing, assuming no further shares are issued.

prw)



4.4 Sports production opportunity

Suitability

VYP has a s trong background in comedy p rogramming and the p roposed jo int deve lopment

prov ides an oppor tuni ty to use th is exper tise in an area wi th s t rong growth potentia l dom est ica l ly

bu t a lso in t e rms o f h igh marg in inte rna tiona l sa les . The recen t W or ld Cup f ina l was watched bymore than 20m v iewers in t he UK and fo rmats such as They Th ink I t' s A l lOver have p roved

popular and long-lasting.

The p rogramme proposa l submiss ion has a lready been comp le ted , wh ich means tha t VYP wil l not

incur these up front costs . Jo int developments have proved successfu l in the te lev is ion and fi lm

industry , for example both Bean-The Ul t imate Disaster Movie and Bi l ly El lio t were co-produced by

T iger Aspec t and Work ing T i tle, mean ing tha t cos ts and r i sk were shared and bo th par tners

brought the ir areas of spec i fic exper tise to the product ion. However , i t wi l l a lso mean a shar ing of

revenues and is l ike ly to make the product ion process more compl icated.

Acceptability

The f igu res p rov ided by ABC's MD show an inc rease in VYP's opera ting p rof it o f £232 ,500 . Th is i s

a very h igh return achiev ing a margin of 18%. W hi le th is may ref lect the fact that VYP has not had

to incur up front programme proposal costs i t a lso ra ises quest ions about the accuracy of ABC's

f igures and a lso the quali ty of the programmes envisaged, g iven that broadcast ing companies

wou ld expect p roduc tion compan ies t o be genera t ing marg ins in t he reg ion o f 10%. Th is t ype o f

p rogramme may a lso have a h igh r isk o f adverse v iewer and c r it ic comment. Some recen t se r ies ,

f o r examp le James Corden 's Wor ld Cup L ive , have been c r it ic ised heav il y f o r poor con ten t and

performance.

The rumours o f cash flow p rob lems and s taf f departu res a re a concern. Th is p roject exposes VYP

to r isk in terms of i ts reputat ion and whether ABC is actually able to fu lf il i ts obligations, r isks that

are increased by the fact that the pro ject w i ll be cont ro lled by an ABC Programme director.

Feasibility

At p resen t t he TV b roadcas t o rgan isa tion is unaware o f t he p roposa l f or t he p rogrammes to be

jo int ly produced and i ts v iew on th is needs to be c lar if ied.

This venture does not require s ignif icant up front investment and appears feas ib le g iven that it is in

a f ie ld where VYP has s ignif icant exper ience.

5 Ethical issues

I t i s al leged tha t Tom Har rison has o f fe red a share o f h is bonus i f VYP p rogrammes a re

purchased. Whi le th is is an attempt to increase VYP's in ternational sa les i t is ef fect ive ly a bribe.

A meet ing should be a rranged w i th Tom Har rison immed ia te ly t o d iscuss t h is i ssue .

If the a llegations of the Austra lian executive are found to be t rue, d isc ip l inary act ion should be

taken in accordance w i th VYP's d isc ip l ina ry code




Suitability

VYP has a s trong background in comedy p rogramming and the p roposed jo int deve lopment

prov ides an oppor tuni ty to use th is exper tise in an area wi th s t rong growth potentia l dom est ica l ly

bu t a lso in t e rms o f h igh marg in inte rna tiona l sa les . The recen t W or ld Cup f ina l was watched bymore than 20m v iewers in t he UK and fo rmats such as They Th ink I t' s A l lOver have p roved

popular and long-lasting.

The p rogramme proposa l submiss ion has a lready been comp le ted , wh ich means tha t VYP wil l not

incur these up front costs . Jo int developments have proved successfu l in the te lev is ion and fi lm

industry , for example both Bean-The Ul t imate Disaster Movie and Bi l ly El lio t were co-produced by

T iger Aspec t and Work ing T i tle, mean ing tha t cos ts and r i sk were shared and bo th par tners

brought the ir areas of spec i fic exper tise to the product ion. However , i t wi l l a lso mean a shar ing of

revenues and is l ike ly to make the product ion process more compl icated.

Acceptability

The f igu res p rov ided by ABC's MD show an inc rease in VYP's opera ting p rof it o f £232 ,500 . Th is i s

a very h igh return achiev ing a margin of 18%. W hi le th is may ref lect the fact that VYP has not had

to incur up front programme proposal costs i t a lso ra ises quest ions about the accuracy of ABC's

f igures and a lso the quali ty of the programmes envisaged, g iven that broadcast ing companies

wou ld expect p roduc tion compan ies t o be genera t ing marg ins in t he reg ion o f 10%. Th is t ype o f

p rogramme may a lso have a h igh r isk o f adverse v iewer and c r it ic comment. Some recen t se r ies ,

f o r examp le James Corden 's Wor ld Cup L ive , have been c r it ic ised heav il y f o r poor con ten t and

performance.

The rumours o f cash flow p rob lems and s taf f departu res a re a concern. Th is p roject exposes VYP

to r isk in terms of i ts reputat ion and whether ABC is actually able to fu lf il i ts obligations, r isks that

are increased by the fact that the pro ject w i ll be cont ro lled by an ABC Programme director.

Feasibility

At p resen t t he TV b roadcas t o rgan isa tion is unaware o f t he p roposa l f or t he p rogrammes to be

jo int ly produced and i ts v iew on th is needs to be c lar if ied.

This venture does not require s ignif icant up front investment and appears feas ib le g iven that it is in

a f ie ld where VYP has s ignif icant exper ience.

5 Ethical issues

I t i s al leged tha t Tom Har rison has o f fe red a share o f h is bonus i f VYP p rogrammes a re

purchased. Whi le th is is an attempt to increase VYP's in ternational sa les i t is ef fect ive ly a bribe.

A meet ing should be a rranged w i th Tom Har rison immed ia te ly t o d iscuss t h is i ssue .

If the a llegations of the Austra lian executive are found to be t rue, d isc ip l inary act ion should be

taken in accordance w i th VYP's d isc ip l ina ry code



5.2 Issues at Computer Graphics Company

Janet B lack h as wr i tten to XYZ informing them that it needs to reduce thei r pr ices by a further 15%

or VYP w i ll change suppl ier . I f VYP changes suppl ier i t w i l l a lmost cer tainly result in redundancies

in the local economy.

The Board o f XYZ should be select ing suppl iers that offer the best value, but a duty also exists to

pay a fair pr ice for services provided and give suppl iers reasonable not ice of contract changes.

Recent ly Tesco and Asda have at t racted negat ive publ ic i ty for perceived "bul ly-boy" tactics in

forc ing suppl iers to reduce pr ices.

A meet ing shou ld be ar ranged w i th XYZ to di scuss the s ituat ion and what pr ice reduc ti ons are

feasible and fai r. Ba sed on those discussions VYP is ent it led to change suppl ier or bring these

services in-house but XYZ should be given fai r not ice of VYP's intent ions.

6.1 Acquisition of Company A or Company B

The Board shou ld contac t the Board o f Company B as soon as poss ib le to ind ica te that VYP i s

interested in pursuing an acquis i tion subject to sat is factory due di ligence being completed and

conf irmat ion that there are no regulatory blocks to the combinat ion.

This is due to the expected f inancial return f rom the acquis i tion but of greater s ignif icance is the

high level of st rategic and cul tural f it between the two comp anies, which is l ikely to make

integrat ion of staff and systems signif icant ly easier . The high profi le nature of Company B 's

programming and the oppor tuni ty for internat ional sales growth makes i t an att ract ive par tner .

G iven that Company B favours an acqu is i ti on, VYP shou ld l ook to negot ia te the purchase pr ice

and terms of the acquis i t ion.

VYP should identi fy key staff membe rs in Company B and take steps to retain these staf f, of fer ingloyalty bonuses in order to incent iv ise staff to stay wi th the business. V YP should also draw up a

detailed plan of integrat ion and discuss the plans wi th staf f at an ear ly stage in order to reassure

them about thei r posi t ions.

The proposed bonus scheme shou ld not be i nt roduced i n the nex t 3 weeks as proposed and

should not be introduced wi thout s ignif icant consul tat ion wi th af fected staf f and careful

considerat ion of i ts compat ibi li ty wi th plans to reward the loyal ty of the staff of the acqui red

company. 02 i n troduced a revamped bonus scheme for s tore s taf f i n May 2010 but on ly a f te r

consul tat ion v ia focus groups and onl ine surveys. The potentia l f inancial savings to VYP areat tractive but the r isks of a negat ive staff react ion are high and this has the po tentia l to harm VY P's

image a nd threaten future growth potentia l.

The scheme as suggested changes the emphas is too fa r f rom qua li ty and c reati v it y to cos t contro l.

It i s unlikely that a one s ize f i ts al l bonus scheme can be appl ied to all staff .

The Board shou ld consu lt w i th s ta f f and T rade Unions ( key p layers i n Mendelow 's Mat ri x Append ix

2) on the bonus scheme and al low staf f to have an input into the process. This wi l l a l low staf f to

feel par t o f the process and ensure they buy i n to the scheme. Les F isher shou ld adv ise on any

lega l o r contractual i ssues w i th implement ing a new bonus scheme. A working part y i nc lud ing



~rr~Jil.A R N IN G M I D I A

Ralph Wh i te shou ld be es tab li shed to oversee this p rocess , a im ing to in t roduce new bonus

schemes f rom 1 Apr il 2011 .

Any scheme int roduced shou ld be based in part on overa l l company per fo rmance to re inforce t he

team eth ic but it must a lso be based on what s taff can cont ro l and their ind iv idual objectives.

Bonuses fo r Programme d i rec to rs shou ld t he re fo re have a greate r emphas is on qua li ty and inc lude

facto rs such as award , repeat commissions and v iewing f igures whereas Programme producerbonuses shou ld have a g reater emphas is on cost con t ro l .

6.3 Potential outsourcing of VT Editing

A meet ing should be ar ranged wi th Raj and Paul to d iscuss their in tentions. I f they wish to leave

and se t up t he ir own bus iness t he Board o f VYP shou ld no t s tand in t he i r way bu t ra ther work w i th

them to ensure a smooth t rans i t ion.

VYP should negot ia te wi th them to provide VT edi t ing serv ices for VYP to ensure that the h igh

level of qual ity is reta ined. Les Fisher should be involved in drawing up a serv ice level agreement.

The board needs to consider the impl ications of new sharehold ing pat terns that could result fromRaj and Pau l 's departure . Once d iscuss ions have taken p lace the agreed way fo rward shou ld be

shared wi th s taf f to remove any in ternal uncer ta inty .


VYP should not proceed wi th the jo int development wi th ABC. Whi le i t appears f inanc ia lly at tractive

the expected profi t is based on estimated cost figures and VYP wi l l have l im i ted cont ro l over these

costs , as wel l as l im i ted creative and ar t is t ic input in to the programmes. Potentia l cashf low

prob lems and concerns over staf f mora le and qua li ty o f p rogramming make ABC an unsu it able

par tner in an industry where reputat ion is cr it ica l .

VYP shou ld con tac t ABC's MD as soon as poss ib le t o in fo rm ABC o f th is dec is ion bu t a lso t orequest a meet ing to d iscuss the poss ib il it y of th is ent i re pro ject being sub-cont racted to VYP i f

ABC is unable to fu lf il i t s obl igat ions. The TV broadcast organisat ion wi l l need to be involved in th is

p rocess and VYP shou ld review ABC's cos t est imates t o con fi rm i f t hey a re reasonable be fo re

proceeding.

7 ConclusionThe recomm endat ions made in th is repor t a im to ass is t VYP in achiev ing i ts fu ture growth

objectives and mainta in ing i ts cur rent reputat ion in the broadcast ing community . In expla in ing the

pr ior ity order of activ it ies to be under taken and of fering practica l adv ice on how they should be

implemented th is should ass is t the Board in ensur ing the future success of the company.



Append ix 1: SW OT analysis

Strengths Weaknesses

• Reputat ion • Reducing margins

• Loyal s taff - pos it ive atmosphere • Recent resignat ions

• Profitable

• VT edit ing

Opportunities Threats

• Potentia l acquis i tion of Co A or Co B • Lower commission ing ra tes

• New staf f bonus scheme • Increasing co mpet it ion

• Joint development of spor ts quiz • VT edi ting s taf f leav ing to set up own

business

Appendix 2 : Mendelow's matrix

H igh Interest, L ow Pow er K eep In form ed

Permanent em ployees

Outsourc ing par tnersSupported charities

Competitors

XYZ

H igh In terest H igh Pow er K ey Players

Board

Trade unions - s taf f bonus scheme

TV broadcasting companies



Appendix 3: Staff bonus scheme proposal

Savings

Reduct ion in salar ies

Saving in operat ing costs

Removal o f o ld scheme

480

500

150

Costs

Bonus based on revenue i ncrease

(£27,310k - £19,710k @ 7%)

Bonus based on cos t sav ings(272)

(£3,200k - £480k @10%)

Net ef fectT ax @ 30% 326(97.8)

228.2

Appen dix 4: Sports production opportunity

~ofrevenue

(£285,000 x 27/60)

~ofcosts

(£15,000 x 7hr )

Prof i t per programme

~Profi t

Vy~) S k c~ , ~i) 6 j{

£ 23 ,2 50 p er p ro gra mm e

x 10 programmes

£232,500 (18% m argin)

~rw~ 172



Append ix 5: Potent ia l acquisi tion of Company B

£ '0 0 0 £ '0 0 0 £ '0 0 0

T 1 T 2 1 3

D o m e s t ic c a s h f lo w s @ 1 2 % m a rg in 5 5 0 5 9 0 6 0 5

I n t e r n a t i o n a l c a s h f l o w s @ 6 0 % m a r g in 1 6 0 1 8 5 1 9 5

T o t a l 7 1 0 7 7 5 * 8 0 0 + 7 ,3 4 5

T a x @ 3 0 % ( 2 1 3 ) ( 2 3 2 . 5 ) (2 , 4 4 3 .5 )

T o ta l 4 9 7 5 4 2 . 5 5 , 7 0 1 . 5

D F @ 1 2 % 0 .8 9 3 0 .7 9 7 0 .7 1 2

P V 4 4 4 4 3 2 4 ,0 5 9

T o t a l 4 , 9 3 5

T o ta l T 4 - ln f in i t y 8 0 0 (1 .0 1 ) = 7 ,3 4 5

0 .1 2 - 0 .0 1



Appendix 6: S l ides re bonus scheme

Answer to Quest ion 1 b

Slide 1 - Advantages of new staf f bonus scheme

• In c re as e i n o pe ra ti ng p ro fi twould have increased opera ting pro fi ts by £326k (9 .6%) in y /e 31 sl March 2010

• R e du ctio n in fi xe d s al ary c os ts

15% reduc tion in sa lar ies means tha t VYP is less exposed to opera ting r isk

• G re ate r fo cu s o n c os t c on tro l

ef fec ti ve cos t contro l i s rewarded by th is scheme

• Sc heme app lies t o a ll s ta ff memb e rs apar t from in te rnationa l s a le s te am

cur rent scheme has the potent ia l to be d iv is ive

Sl ide 2 - Disadvantages of new staff bonus scheme

• Insufficient f oc us on quali ty and c re ativi ty

these c ruc ia l a reas are exc luded f rom th is scheme

One size f its all

staf f have di f ferent responsibi li ties e.g. d i rectors (creativ ity) , producers (costs)

Negative reaction of staff

the drop in sa lary w ith l im i ted consu lta tion may. c reate prob lems w i th t rade un ions

Uncontrollable factors

s lower revenue growth may be due to ex terna l fac tors , no t employee per formanceNo change to Head of Internat ional Sales bonus scheme

Tom Harr ison 's bonus scheme is unchanged which may be perce ived as unfa ir

Conclusion

bonus scheme shou ld not be in troduced as proposed

a new scheme re flect ing d i ffe rent ro les w i th VYP shou ld on ly be in t roduced a f te r

proper consul tat ion.

need to consider incenti ves fo r acqu ired company 's s ta ff

cima t4 2010 bppmock1answer

Documents