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Multiple Choice (Practice Questions)

43. How would you describe the process capability index?

A. The ability of a process to convert inputs into outputs

B. The capability within a process a process to convert inputs into outputs

C. The statistical ratio and proven capability of a process to produce outputs within specifications limits

D. To be capable of producing project deliverable results within a zero-cost defect

E. None of these are correct

44. Obligations to satisfy the planned project outputs as scheduled?

A. Starts with the project start-up meeting

B. Is ensured by the process measurements applied

C. Is provided by the project quality plan

D. is confirmed in the project tender document

E. The approved internal auditing program

45. How does the project manager conform to the standard set by the quality manager

A. Manage the planning in complaint with the plan quality requirements

B. Manage the quality in conformance with planned quality requirements

C. Control the planned quality requirements in compliance scope requirements

D. All of the above

E. None of the above

46. What are the same general tasks that a project manager and general manager performs?

A. they plan, schedule, motivate and control the task

B. they manage recruitment and appoint teams

C. they manage procurement and production tasks

D. they manage financial and marketing tasks

E. they scrutinize schedule and all tasks

 
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Pear Computer Horizons Case Study

Company Background

Pear Computer Horizons (PCH) started out as the brain child of several engineers in the eighties, with the founding team working out of a garage in Winnipeg, Manitoba. The company originally focused on creating easy-to-assemble hardware (e.g., desktop computers) that the average Canadian could afford. Over time, as computers became the part of everyday life, PCH branched out into several different models and tiers.

In the mid 2000’s, the company went on a large acquisition spree, acquiring several software companies and mobile manufacturing start-ups, allowing the once hardware-only company to diversify into phones, software, and gaming (both video game consoles, as well as game development). The business was reorganized into three segments in 2010. The first segment, computers, focuses on manufacturing computer chips, laptops, desktop computers, and computer accessories. The second segment, phones, was once the smallest business division, but has rapidly grown into the number one segment by total sales in 2017. The third major segment, software and gaming, includes games for computers and video game consoles, as well as anti-virus, word-processing, and analytics software.

PCH products are sold across Canada in various retail stores, as well as through their high-traffic e-commerce site. PCH manages shop-in-shops in electronic stores like Best Buy; specialized areas in big department or electronic stores that only sell PCH products. Products have also expanded in recent years into the US, but market share is low. There are future plans to expand into Latin America and India, two developing economies that do not have as much technology penetration as other more mature markets.

The company’s mission statement, extracted from their 2017 annual report, is included below:

“Pear Computer Horizons strives to be the technological choice for people, businesses, and governments for their innovation, entertainment and security needs.”

The company is publicly traded under the ticker PCH.TO on the Toronto Stock Exchange, and has been paying a steady dividend over the last ten years.

Discussion with Chief Executive Officer (CEO)

Ms. Morrison, CEO, has reached out to you to help her assess the current financial and strategic state of Pear Computer Horizons, evaluate some investment proposals, build a financial forecast for 2018, and evaluate tax consequences of an asset disposal.

“The last five years have been a wild ride,” exclaimed Ms. Morrison, who has risen through the ranks to the top position after 15 years in the company. “We have almost tripled our revenue in the last five years, in large part to some big product launches in gaming and phones that were more successful than we ever imagined. We also benefited from the booming tech industry that continues to see large technological advances in a short period of time.”

“However, now is not the time to get complacent,” continued Ms. Morrison. “We successfully grew in the past through mergers & acquisitions, and we will continue to be on the lookout to snatch any smaller tech companies making noise with innovative ideas. This growth is especially critical in the phone and gaming & software segments, which have seen increasing competition in Canada.”

“We are also facing increasing government regulation relating to customer data, its storage, and its use, especially since we have access to confidential information through our security software. Furthermore, because we possess this information, we are facing more cyber-attacks and data security threats. Thankfully, we have not had any significant breaches yet, but the threat remains. Any serious breach could harm our reputation, as well as our stock price.”

Qualitative & Quantitative Analysis

To help with your assessment of PCH’s current state and the investment proposals, Ms. Morrison recommends that you develop a SWOT analysis and also perform financial statement analysis.

“SWOT stands for strengths, weaknesses, opportunities, and threats,” explained Ms. Morrison. “It is a standard tool used in internal and external assessment, with a focus on qualitative factors. Strengths are things that a company does well, while weaknesses are areas of improvement. Strengths and weaknesses are internal to the firm, meaning that PCH can have substantial control over them. Opportunities and threats are external to PCH, meaning that these are environmental changes that are outside of our control, but could be working for or against our favour. Government regulation is an example of an externality that could be an opportunity or a threat, depending on your business or point of view.”

“Financial statement analysis involves the use of ratios to evaluate the performance, financial health, and efficiency of a company, among other things,” continued Ms. Morrison. “I would like you to analyze the liquidity, profitability, efficiency (asset utilization), and solvency (debt ratios) of PCH, and to fully explain what the trend in these ratios are indicating about my company’s historical performance. Ratios can be used to tell a story–what story do you see coming from the numbers?”

Financial Forecast

Ms. Morrison has asked for your help in developing a financial forecast for 2018, using the 2017 income statement as a reference point.

2018 is expected to see a reduction in the rapid growth rate that PCH experienced over the last five years, as total sales are only expected to increase by 10% in 2018. Customers have started hanging on to their older versions of phones, as there has been some customer dissatisfaction with newer mobile models, because they were not offering a unique enough position to warrant an upgrade. For example, the slim smartphone the Pearcer, which was 2016’s best-selling smartphone, had lower-than expected sales for the third version, the Pearcer 3.0. The phone segment is expected to be 50% of total 2018 sales, down from 51.7% in 2017.

Computers will maintain a similar share as a percentage of sales as in 2017, while the gaming & software segment is expected to increase to 17% of sales, due to the launch of the newest version of InPEARmeable antivirus software and the sequel to the best-selling video game “Eternity.” Ms. Morrison wants your forecast to include the dollar amount of sales that each segment should generate in 2018.

“Our company is dependent on big product launches for success,” lamented Ms. Morrison. “These gambles often payoff, but they require thousands of man hours and millions of dollars. We have not had any major setbacks, like some of our competitors, but the risk is always there. Our last three major product releases had countless delays that frustrated some of our core customers. It did build up anticipation for our products in the end, but we will not always come out on top from poor planning. I want us to mitigate some of the risk with smaller projects that have the potential to give a high return. Similar to how movie production studios counter their big budget box office movies with lower-budget dramas and horror films that may offer a higher return on investment.”

Historically, PCH had some of the highest gross margins in the industry, due, in large part, to the cutting edge technology incorporated in most of the products. PCH has focused mostly on the consumer segment, thanks to the larger margins, but is considering long-term partnerships with governments and universities, despite their lower margins, in order to stabilize a long-term revenue source.

However, several macro and micro factors are expected to influence gross margins for 2018. Material costs for aluminum, a key component in PCH computers, are expected to rise significantly in 2018, negatively impacting gross margin by 2%. The depreciating Canadian dollar relative to other currencies is also expected to negatively impact gross margin by -1%. PCH is switching to a more ethical supplier for some of its component parts, due to bad press in 2017 over this supplier’s reported environmental violations. This change will lead to a 1% increase in the cost of goods sold. Finally, there is major uncertainty surrounding NAFTA and trade tariffs at the US border. Ms. Morrison suggests, as a conservative estimate, to include a 1% reduction in gross margin to incorporate this uncertainty. Taking all the aforementioned factors into account will help forecast what the expected 2018 gross margin is for PCH.

Advertising and marketing and also general and administrative (G&A) costs are expected to remain at the same percentage of sales as in the past. PCH lacks a strong advertising and marketing strategy, despite its large advertising budget, because the head of marketing left at the beginning of 2017 for medical reasons. G&A costs will be impacted by minimum wage increases, but those are not expected to take effect into 2019. PCH has managed to keep employee turnover low, despite minimum wages, due to its employee profit-sharing and stock ownership plan.

Research and development (R&D) costs have traditionally been budgeted as 20% of computer sales, because the company’s superior R&D capability has been a competitive advantage. This advantage has helped attract some of the top talent in the country. Unfortunately, PCH’s purchase of a virtual reality company a few years back was not as fruitful as anticipated. The virtual reality company was absorbed as a sub-division of the company, but it is now being divested to cut down on costs, leading to an expected $100M loss in 2018 from a write down of goodwill. Equipment and licenses from that division are also being sold, with a $20M gain from the license sale mitigated by a $10M loss from the equipment sale.

The tax rate, depreciation, and interest rate for PCH are expected to be consistent with prior years. PCH’s long-term debt consists of ten-year bonds that do not mature into 2023. PCH also has a credit facility with $300M borrowing capacity that had no outstanding borrowings at the end of the fiscal year.

Investment Proposals

Ms. Morrison wants you to assess two investment proposals that the PCH investment team is considering.

Ms. Morrison is considering purchasing a small, but cutting-edge, Canadian camera company that is developing high-quality cameras for mobile phones. While only at the prototype stage, the initial tests have been positive, with the camera’s pixel quality and image resolution rated almost four times better than the leading mobile product currently on the market. The company has had difficulty with battery life and software, which is why it is seeking a strategic buyer with the capability to improve on the current iterations of its products. Ms. Morrison is wondering if the company should pursue another acquisition so soon after the failure of the virtual reality sub-division, and she is worried about the ability of PCH to fund this purchase after the $100M loss

Prepare an assessment for each of the investment proposals included below, with a rationale that is aligned with the SWOT analysis and financial statement ratio analysis. Recommend if PCH should go forward with any of the proposed investments based on this analysis.

 
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The “Glass Ceiling”

Lisa Weber never doubted that she would be a partner in her Wall Street firm. A graduate of a prestigious business school with a doctorate in economics, she had taught briefly at a major university. She was the first woman hired as a market analyst in her well-regarded firm. Within two years, she became one of four senior portfolio managers reporting directly to a senior partner. Her clients give her the highest commendations for her outstanding performance; over the past two years, she has brought in the largest number of new accounts to the firm.

Despite the admiration of her colleagues and their seeming acceptance of her, there is a disturbing, if flattering, aspect to her job. Most of her peers and some of the partners visit her office during the day to discuss in private her opinions on market performance and financial projections. She enjoys these private sessions but is dismayed that at the weekly staff meetings the CEO, Michael Breyer, usually says something like, “Okay, let’s get started and bring Lisa up to date on some of the trouble spots.” None of her peers or the partners mention that Lisa knows as much as they do about what’s going on in the firm. She never protests this slight to her competence and knowledge of firm business, nor does she mention the almost-daily private meetings where her advice is sought. As the only woman on the executive level, she prefers to be considered a team player and one of the boys.

In the past year, one of her peers has been promoted to partner, although Lisa’s performance clearly surpassed his, as measured by the success of her accounts and the amount of new business she brought to the firm. Having heard no mention of partnership for herself, she approached her boss, one of the partners, and asked about the path to a partnership. He replied, “You’re doing great, Lisa, but professors do not partners make. What happens if you are a partner and you make a huge mistake? How would you take it? And what about our clients? There’s never been a female partner in the 103 years of our firm. ”Shortly thereafter, another woman, Pamela Tobias, was hired as a marketing analyst. Once, when the CEO saw Lisa and Pamela together, he called out to the men, “Hey, guys, two women in one room. That’s scary.”

During the next six months, Lisa meets several time with the CEO to make her case for a partnership on the basis of her performance. She finally realizes that there is no possibility of change in the foreseeable future and decides to leave and form her own investment firm.

Questions

  1. What advancement barriers did Lisa encounter?
  2. What should the firm’s top executives, including Michael, have done differently to retain Lisa?
  3. What type of organizational policies and opportunities might have benefited Lisa and Pamela?
  4. What could the organization do to raise the gender consciousness of Michael and Lisa’s male colleagues?
 
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Higher cost of JET A1 fuel resulted in more expenditures which affected the net profit of MAS. Malaysia Airlines reinstated a fuel surcharge on its tickets price from 18 sept, 2018 onwards but their competitor such as AirAsia BHD had introduced a no-fuel-surcharge policy. This will encourage more passengers to travel by AirAsia because they offer much cheaper rates.

• Service quality is one of the main keys of passengers satisfaction such as waiting time , staff enthusiasm in problem solving , boarding time , flight schedule and boarding system. Lack of comfort and satisfaction of passengers may affect the reputation of MAS causing people to be more inclined towards chosing other airlines for travelling.

• Technology has to be in par with other leading airlines. In-flight entertainment can currently act as a differentiating factor, in future it will become a major part of passengers’ expectation especially in long-haul flights. The impact of IFE would be felt indirectly, through increase in passenger loyalty which should have a positive impact on airline revenues. Otherwise, passengers may be more inclined for other airlines hence reducing sales.

• Need of professionals who are not only responsible but also focus on customers needs such as Cabin Staff and ground staff. Their communication skills and staff interaction have significant influence on customer purchase intentions. Superior service quality leads to a highly purchase intention in mind of customers. Incase this is not met; it can have a huge impact on MAS sales following unsatisfied customers.

• Technical problems need to be managed promptly and efficiently because if they are not taken care of a lot of money will be wasted. Such as Aircraft parts are not cheap everything is almost touching to a few thousand dollars. Furthermore, after MAS having two unwanted incidents many passengers are not confident to fly with them anymore even though there’s was no technical issue on the planes. So, to encounter this technical side of the aircraft must be in well kept conditions. Otherwise, it will affect the reputation and sales of MAS.

Above are the impact of Malaysia Airlines. Based on the impacts, how did the management of Malaysia airlines deal with the issues?

 
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