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1、Answers Professional Level Essentials Module Paper P3 Business AnalysisDecember 2007 Answers Tutorial note These model answers are considerably longer and more detailed than would be expected from any candidate in the examination They should be used as a guide to the form style and technical standar
2、d but not in length of answer that candidates should aim to achieve However these answers may not include all valid points mentioned by a candidate credit will be given to candidates mentioning such points 1 a Strengths 1 Strong brand identity particularly with the citizens of Oceania A quoted recen
3、t survey suggested that 90 of people preferred to travel ONA for regional flights and 70 preferred to travel ONA for international flights 85 of respondents were proud of their airline and felt that it projected a positive image of Oceania 2 ONA have an exemplary safety record There have been no fat
4、al accidents since its formation in 1997 3 Excellent customer service recognised by the Regional Airline of the Year award and the Golden Bowl as provider of the best airline food in the world 4 High business class load factors particularly in the regional sector This appears to suggest that ONA are
5、 particularly strong in the business market 5 Relatively strong cargo performance In the period 2004 2006 when passenger air travel revenue had increased by 12 and air travel to Oceania by 15 and cargo revenue by 10 ONA increased cargo revenue by 11 just above the industry average 6 Financially alth
6、ough the net profit margin has fallen see weaknesses the gross profit margin remains relatively stable Hence the cost of sales excluding wages salaries and financing has moved roughly in line with revenue The gross profit margin for 2004 is 37 04 and for 2006 it is 36 98 very little change 7 The set
7、tlement of debt is an important issue for an organisation The average settlement period for receivables is concerned with how long it takes for customers to pay the amounts owing This is low at ONA 29 days and reducing suggesting effective credit control and an industry where many customers pay befo
8、re they are able to use the service It is likely that much of the debt is tied up with commission sales and cargo services 8 The gearing ratio measures the contribution of long term lenders to the long term capital structure of the business Gearing for ONA remained relatively stable during the perio
9、d 2004 2006 It stood at 71 13 in 2006 a marginal increase on the 2004 figure of 71 05 9 Conveniently scheduled flights to business travel for the regional sector Allows business to be conducted in one day with a flight out in the morning and a flight back in the evening Most cities in this sector al
10、so receive an extra flight in the middle of the day 10 Highly motivated courteous employees Weaknesses 1 High cost base The most tangible evidence of this is the average pilot salary given in Table 1 Pilot salary costs appear to be over 10 higher than their competitors The scenario also suggests tha
11、t ONA pay above industry average salaries offer excellent benefits such as free health care and have a generous non contributory pension scheme Other hints of high costs insourced non core activities such as catering highly unionised are also mentioned in the scenario High costs are also hinted at i
12、n Tables 1 and 2 with ONA having relatively older aircraft presumably requiring more maintenance and lower utilisation hours than their competitors The average wage of an employee rose by about 7 during the period under consideration 2 Poor growth rate The scenario makes the point that in the period
13、 2004 2006 passenger air travel revenue has increased world wide by 12 and revenue from air travel to Oceania by 15 However ONA only recorded a 4 6 increase in passenger revenue in this period 3 Low frequency of flights in the international sector where there is on average only one flight per day to
14、 each destination This makes it very difficult for the airline to gain any operational economies of scale in this sector 4 The mixed airliner fleet is largely a result of the merger of the two airlines that formed ONA The airframes for the bulk of the fleet are from two competing manufacturers Boein
15、g and Airbus The information given in Table 1 suggests that the two aircraft types Boeing 737 and A320 are very similar The need to service and maintain two aircraft types creates an unnecessary cost 5 Although the airline offers on line booking it does not currently offer on line check in Hence ove
16、rheads still remain in the embarkation process Business travellers particularly favour on line check in as it means they can leave their homes and meetings later In 2006 the New Straits Times reported a recent global survey that showed that air travellers spend an average of four days in a year in queues at airline check in counters 6 Table 2 shows below average load factors in standard class seating This is particularly significant on international sector flights 7 Return on capital employed RO
