The Case Analysis Workbook provides an in-depth analysis of the pre-seen material CIMA T4 Case Study, including the application of technical models to the case.
3. 1 Practice makes perfect
At Kaplan, we believe that the secret of success in the case study exam is to
practise using mock exams. However, sitting your first mock exam can often
be quite daunting. Almost like learning to drive, there seems to be so many
things to remember and everything has to be done at the same time.
So, to help break you into your stride for a full exam, this chapter contains a
number of minicase scenarios. Each one replicates a potential paragraph
out of the unseen material and gives the sort of information you would
expect to be provided.
By working through these scenarios, you will feel more equipped to tackle
multiple scenarios at once, within an exam environment.
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4.
Head of International Sales resigns
There have been a number of Board room disputes in recent months that
have resulted in Tom Harrison, Head of International Sales, tendering his
resignation.
The main source of the conflict has been the high level of bonus
payments Tom was receiving, which some members of the Board did
not view as fair given the relatively short period of time that he'd been
with the company.
Tom's contract stipulates that he must provide 3 month's notice.
Requirement
Using the 6 stepped approach detailed above, plan your answer to this
issue.
Reduction in volume of commissioned work.
Sara Mills has just received notification from the BBC that the very
successful drama series produced by VYP last year will not be
recommissioned. The reason given is financial pressure to reduce the
amount spent on commissioned work.
In addition, the following article has just been published in the business
section of a reputable broadsheet newspaper.
Cutbacks in broadcasting spend spells problems for independent
production companies
As a result of significant cutbacks at all of the terrestrial TV channels,
viewers are facing a significant increase in the number of repeats aired
on our screens. And the quality of new programmes being
commissioned is also falling, with programme budgets being slashed
by up to 20%.
All of this spells bad news for the independent TV production
companies (indies). The number of hours of broadcasting
commissioned from indies fell by nearly 15% in 2009. Perhaps no
surprise given the near 25% increase in the number of hours of
repeats shown on TV in the same period.
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MiniCase Scenario 2 Cutbacks in broadcasting spend
Mini Case Scenario 1 Key personnel resignation
6.
Programme costing
5 months ago, production began on a series of 12 documentaries, each
one looking back at particular Kings and Queens of Britain. The series,
a high profile production for the BBC, will be aired to coincide with the
Queen's Diamond Jubilee in 2012. Each programme will contain some
ambitious drama reconstructions involving a combination of outdoor
filming and computer generated imagery (CGI). As a result, the editing
process is one of the most complex ever undertaken by VYP.
To date, 3 programmes have been completed. Delivery is scheduled for
January 2012.
The commission fee per 45 minute programme has been set at £250k
and, following discussions with the producer, director and other key
personnel, it was felt that a 10% margin could be achieved. The
following detailed cost budget was established (per programme):
At last week's programme management meeting, the costs incurred to
date, together with the forecast of costs to complete were presented by
the producer.
Description £'000 Notes
Drama
reconstruction
(outdoor filming)
100 Based on 5 days of outdoor filming
CGI 25 An estimated 30 days of CGI work can be
performed in house at an estimated cost of
£9,000. The remainder will need to be
outsourced at a cost of £500 per day.
Other 100
––––
225
––––
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Mini Case Scenario 3 Review of programme costs
8.
Expansion into children's animation
Following the production of two successful new drama series last year,
Steve Voddil believes that VYP should look to expand further into other
genres.
In particular, he has identified the production of children's TV
programmes as a growth area where the new coalition UK government
has stated that further money must be invested by the public service
broadcasters (BBC, ITV, Channel 4 and Channel 5). Using an idea
suggested by his 4 year old son, Steve has submitted a programme
proposal to one of the broadcasters that VYP has had much success
with in the documentary genre. Initial indications have been good and
VYP has been asked to produce a detailed budget for approval.
In order to successfully produce programmes in this genre it is
necessary to have expertise in animation, as well as the required
equipment to make the animations 'come to life'.
The computer graphics software package currently used by VYP could
be adapted to work with animations for a fixed fee of £100,000. VYP
would need to employ two experienced animators to perform the
estimated 1,000 hours of work required at a cost of £60,000 each.
Alternatively, the work could be outsourced to a specialist animation
production company at a cost of £200 per hour.
Requirement
Using the 6 stepped approach outlined above, prepare your plan for this
issue.
You should include a calculation of the break even number of production
hours at which you would be indifferent between the options together
with the margin of safety in your decision. For the purposes of this
calculation you should assume the cost of adapting the software will be
expensed in the income statement.
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MiniCase Scenario 4 Expansion into new genre
9.
Takeover bid
John Young has recently been approached by Dave Scott, the CEO of
Some4Mode, a global production and distribution company, who
expressed an interest in acquiring VYP for £27m.
Some4Mode is comprised of a group of television, film and new media
production companies from across Europe and the USA. It also includes
an international distribution company, which represents thirdparty
producers and broadcasters together with its own production
companies.
Dave Scott has offered John Young a seat on the UK Board of
Some4Mode, together with an attractive remuneration package. John is
keen to sell. Having outlined the proposals at a recent Board meeting
Paul Maas has also indicated he is in favour of the sale.
In the UK, Some4Mode have a reputation for producing a number of
daytime quiz shows as well as some very popular reality TV
programmes. Their ethos involves high volume, low cost productions.
The other VYP shareholders do not believe that Some4Mode are a
good fit with the VYP brand which has always stood for creativity, quality
and professionalism.
Some4Mode is currently trading on a P/E ratio of 13. It is conservatively
estimated that synergistic savings of £1m per annum could be realised
following the acquisition. This would predominantly come from
redundancies and the relocation of the business into Some4Mode's
premises, nearly 200 miles away from where VYP is currently based.
Requirement
Prepare calculations to asses the value of VYP to Some4Mode and
advise the Board of VYP on whether to accept the offer.
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MiniCase Scenario 5 Takeover bid
10.
Problems with CGI software
6 months ago VYP invested over £350,000 in new computer generated
imagery (CGI) software, together with employing two new highly skilled
and expensive members of staff. The software was sold as having
cutting edge capability to rival and exceed that used in Avatar. On the
basis of this investment VYP proposed and received contract approval
for eight 1 hour comedy shows featuring a human comedian with a CGI
generated side kick. Given the technology involved VYP quoted and
secured a £450,000 per hour revenue for the show.
Unfortunately implementation of the new software has been nothing short
of disastrous. The software should have been up and running by the end
of June 2010, 2 months ahead of the first programme being shot in
August with the human comedian and 6 months ahead of the date for
delivery of the first show at the end of December 2010.
It is now mid September 2010 and the software has yet to be installed.
Significant progress has been made and the software company expects
it to be up and running by the end of September. VYP has already shot
three of the programmes with the human comedian and the TV company
commissioning the series is keen to see the first programme complete
with the CGI character.
Though VYP does not face a financial penalty the client has indicated
that if the series is delivered late (all shows by the end of January 2011)
then it is unlikely to commission any further work. This is a significant
threat as the client involved has contracted up to 20 hours of screen time
a year with VYP. If the software house meets its end of September
deadline, VYP can still meet the client deadline in January.
Requirement
Complete your planning using the 6 step approach, then write out your
answer to this issue. You should include:
(1) Your statement on the issue and its impact
(2) Your analysis of potential solutions
(3) Your recommendations
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MiniCase Scenario 6 CGI software
11.
Quality issue
VYP have recently completed a three part series called ‘The Wonders of
the Universe’ presented by Professor Brian Box. The short series has
taken 9 months to complete. One reason for the long production time is
the fact that the programme is heavily reliant upon computer generated
imagery (CGI). Out of the 168 minutes of footage there are over 84
minutes of CGI. Producing CGI is a painstaking process. Each minute of
CGI takes, on average, 6 times longer to produce than live footage.
Additionally, the cost per minute is, on average, 10 times as expensive
as ordinary film.
When Sara Mills (Head of Programme Commissioning) negotiated the
contract with the broadcasting company she indicated that the CGI and
special effects would be world class and provide a wow factor in the
series that would enable the show to deliver Top 10 viewing figures.
During the making of the series the director quickly realised that VYP’s
inhouse computer graphics department was unable to deliver the level
of CGI promised to the client. In order to win the business, Sara had
been overambitious in terms of what VYP could deliver within the time
schedule and budgeted programme cost. Having realised the difficulties
in delivering the world class CGI, the programme’s producer took the
decision to continue to produce the work inhouse to keep within budget
and deadlines. The producer stated that any complaints for the sub
standard work would be dealt with at a later stage if the client was
unhappy.
The completed series was duly delivered to the broadcasting company.
The client has now expressed disappointment in the quality of the
special effects. Whilst the client will accept the series, it is unlikely to
deliver the viewing figures expected. They are demanding the reworking
of over 40 minutes of special effects footage to significantly improve the
quality of the graphics. Additionally, the Head of Science Programmes in
the broadcasting company has stated that they will be very unlikely to
commission any future programmes with VYP unless this problem is
fixed quickly and to their satisfaction.
Requirement
Complete your planning using the 6 step approach, then write out your
answer to this issue. You should include:
(1) Your statement on the issue and its impact
(2) Your analysis of potential solutions
(3) Your recommendations
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MiniCase Scenario 7 Quality issue
12.
New programme idea
A senior VYP programme director has been working on a new format for
a scripted comedy series. The working title is ‘Young, Pregnant and
Proud’ and the programme focuses on the ups and downs of the
youngest daughter (13 years old) of a working class family in
Manchester. The series starts with the daughter finding out she is
unexpectedly pregnant and follows her life through the pregnancy with the
final episode focussing on the birth.
John Young and Sara Mills are supportive of the innovative and edgy
idea format and are confident that a broadcast company will
commission this programme. Initial ‘off the record conversations’
suggest at least two broadcast companies are very keen to secure the
commission. If successful both believe it could create a series with
several repeat commissions and in addition Tom Harrison is also
confident that he will be able to sell the programme or its format rights to
other countries.
At the last monthly commissioning committee meeting Steve Voddil
expressed grave concerns about the subject matter and the use of
comedy to exploit the real plight faced by many children both in this
country and around the world. He concluded that although he does not
see the subject matter as funny in any sense if John and the rest of the
project team wanted to carry on he would not formally block the proposal.
Requirement
Complete your planning then write out your answer to this issue as it
would appear within the ethics section of your report. As an ethical issue
you should include:
(1) Your statement on the issues that should clearly explain the ethical
nature of the problem
(2) Some potential solutions with brief analysis
(3) Your recommendations
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MiniCase Scenario 8 Ethical issue
13. Test your understanding answers
Step 1 Read about and identify the event
The event is the resignation of the Head of International Sales.
Step 2 Consider what the issue is
This is a corporate governance issue
Step 3 Evaluate the impact of the issue. Who is affected, by how
much are they affected and what would happen if no action was
taken?
On page 15 of the preseen information, we're told that Tom Harrison
joined VYP in 2007 and in the last financial year he generated sales of
£1.3 million by selling TV programmes or the format of programmes to
overseas broadcase companies. We're also told that this generates
much publicity for VYP.
Additionally, on page 18 (in appendix 4) we find out that international
sales of programmes increased by nearly 43% from £910,000 in 2008
and that the margin earned on these sales increased from 55.5% to
62.3%.
All of this tells us that Tom clearly does a good job. If he was to leave
VYP, the company would lose all of these benefits that Tom seems to
have brought to the company.
However, we're also told on page 10 that Tom is paid a performance
related bonus of 5% of all contracted international sales revenue. This
means that his bonus alone cost the company £65,000 in 2009/10. This
was more than the dividend received by Janet Black (FInance Director)
who has been with the business for 7 years.
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Mini Case Scenario 1 Key personnel resignation
14. Step 4 What are the alternative solutions?
Issues of this type are best thought of in terms of short term and long
term solutions.
Short term
Initially, the VYP Board must consider whether they should try to convince
Tom to stay. Assuming they decide to let him go, they must find
someone who can fill the role on a temporary basis as finding a long
term replacement could well take time. Options will include another
director, a senior member of the Tom's team or an external consultant. In
addition the Board will need to decide whether to allow Tom to work his
notice period.
Long term
A permanent replacement will need to be found. The options can be
divided between internal or external recruitment.
Step 5 Identify the advantages and disadvantages of the
proposals (including resource requirements and implications)
Short term proposals
The Board could attempt to convince Tom to stay with VYP. However,
this option is rarely successful as once a resignation has been tendered
other members of the Board or of the International Sales team may
doubt Tom's commitment to the company.
Given the situation surrounding the departure (Board room disputes over
pay terms), it seems likely that his departure may be necessary to avoid
future conflict. Attempts could be made to renegotiate Tom's contract
although he may not feel that this was acceptable. The only alternative
would be to increase the pay given to other key personnel. The costs
associated with this would have to be carefully weighed against the
benefit of keeping Tom.
The risk that Tom could poach ideas of contacts from VYP is fairly low.
All of the contacts he deals with are his anyway. This will make
replacing him all the harder since many of the International Sales are
made of the basis of relationships. If a solution could not be found that
would allow Tom to stay, the Board should at least insist that he works
his notice period. It would facilitate an efficient handover process with
his successor as well as allow Tom to continue making sales in the
period.
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16.
Step 6 Decide on your recommendations and think about who
should do what, by when and how
To score well for your recommendations, you will need to give plenty of
detail on who, what, when and how, provide justifications for what you
are recommending and consider the implications (including resources
required) of your suggestions.
Given the brief information in this scenario, an external candidate would
appear to be the best long term solution. The fact that Tom only has a
small support team would imply that there isn't anyone of sufficient
seniority to carry off the role. Sara Mills, the only other internal candidate
has a key role in her current position of Head of Programme
Commissioning. It would therefore not seem wise to move her into this
role. Since the level of international sales is growing so rapidly, neither
would it appear sensible to combine the roles.
As a result of this decision, the short term replacement becomes more
of an issue. Tom should be made to work his notice period. This at
least will provide the Board with three months grace. If a longterm
replacement cannot be found after this time, an external consultant would
appear to be the best option. This will at least ensure the role is given
sufficient attention for any intervening period.
In terms of the who, what, when and how Ralph White, the Human
Resources Director should prepare a job specification in consultation
with the Joint Managing Directors. The job vacancy should be
announced immediately and interested parties should be sent the job
specification. Interviews should be arranged within the month and
should principally be conducted by the Managing Directors.
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17.
Step 1 Read about and identify the event
The event is the falure to have a successful show recommissioned.
Step 2 Consider what the issue is
Failure to have the show recommissioned represents a threat to the
delivery of results.
More fundamentally, the cutbacks facing broadcasters (as evidenced by
the BBC's actions and the recent newspaper article) represents an event
that may force VYP to reconsider its strategic direction.
Step 3 Evaluate the impact of the issue. Who is affected, how
are they affected and what would happen if no action was taken?
The impact of the issue can be broken into operational, financial and
strategic.
On a financial level, drama series accounted for £520k operating profit
in 2010, 15.4% of total. Although the genre delivered the lowest
percentage operating margin, the level of profit per series was higher
than any other. Given the successes of the series, recommissioning
would have seemed likely. That it hasn't been therefore gives a clear
sign of broadcaster cutbacks. In the face of cutbacks, achieving new
commissions, at least at the fee levels seen last year, would also appear
difficult. As a result profitability will fall unless action is taken.
From an operational perspective, unless new profitable commissions
are gained, VYP will have too many staff for the work required and they
will need to consider making redundancies in order to preserve
profitability. However, their reliance on outsourced services will reduce
the impact of this.
From a strategic perspective, the issue reflects the high power
broadcasters (customers) have over the indies. The Board of VYP must
therefore consider their strategic direction since their lack of
diversification means they are very exposed to a downturn in
broadcaster spend. Other areas for growth must be found.
Step 4 What are the alternative solutions?
In this issue two potential solutions have already been provided. Your
answer must therefore evaluate those proposals. You could also make
further suggestions on actions that could be taken but try to limit your
discussions on these to avoid spending too much time on the issue.
Even though we've been given two solutions, we can still consider them
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MiniCase Scenario 2 Cutbacks in broadcasting spend
18. under the financial, operational and strategic headings.
From a financial and operational point of view, VYP could make some
employees redundant in order to save costs.
Strategically, new growth areas must be found if the company is to
remain profitable.
Step 5 Identify the advantages and disadvantages of the
proposals (including resource requirements and implications)
Operational and financial Redundancy programme
This alternative involves cost reduction and downsizing. Staff are the
main variable cost in the business and initiating a redundancy
programme would start the process of cutting back.
This would bring cost savings, although we should question how
significant these would be given that VYP only employ 60 staff in total.
The move need not result in decreased capacity as more work could be
outsourced (VT editing and even programme directing) see below.
Key disadvantages to this include the loss of skills, potential
demotivation of remaining staff and the one off costs associated with the
redundancy payments. Of these, the loss of skills and demotivation are
the most important. Staff are key to the ideas and innovation
underpinning the business and although the roles could be outsourced,
VYP could lose its competitive advantage and suffer reputational
damage.
Strategic Corporate videos
VYP could identify other markets it could enter in order to maintain
profitability. The area suggested is corporate videos where growth is
being seen.
This would allow VYP to diversify its portfolio of products and reduce its
reliance on the top broadcasters. This will reduce risk for the company.
However, VYP does not have any expertise in this area. Its reputation is
primarily for comedies and documentaries meaning it may find it difficult
to win work. It is possible that the directors may feel such work is
beneath them and lacks the prestige of a major TV series. This could
lead to demotivation.
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19. Step 6 Decide on your recommendations and think about who
should do what, by when and how
On balance, pursuing a growth strategy by moving into corporate videos
would appear to be the better approach. It is more forward thinking and
allows the company to preserve its skill base in anticipation of an uplift in
its core market.
Key to the success of such strategy is the route to market. The Board
must carefully consider how it can win work in this area and must
leverage off its reputation for producing great TV programmes. Building
relationships will be essential and the key personnel (Steve, John and
Sara in particular) must reach out to their network of contacts in order to
identify opportunities.
The strategy must be communicated to staff. In particular, the
programme directors must be aware of why this action is being taken to
avoid any decline in morale.
Operationally, VYP will need to ensure it has sufficient expertise. This
can easily be obtained by outsourcing aspects where existing staff do
not have the required skills. However, the market for corporate videos
will still requrie innovative ideas and skillful VT editing and so existing
staff should work closely with subcontracted staff as a way of
developing expertise inhouse.
An example of some specific recommendations (including who, what,
when, how) could be:
Hold a staff meeting The Board should hold a staff meeting to
communicate the strategy clearly to everyone.
Approach contacts Steve, John and Sara (as a minimum) should
should seek out corporate entities wanting promotional videos by using
their network of contacts. If no leads are discovered, the Board should
consider some small scale advertising in order to increase awareness
that they offer this service.
The other aspect that would score highly is to recognise the cost
implications of all of the above (especially something like a marketing
campaign)
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23. The forecast assumes a cost per programme of approximately £92,500,
which equates to 5 days at £18,500 per day. Questions must be asked
regarding:
Given the experience of the first three programmes, these forecast costs
to complete seem unachievable.
Computer generated imagery (CGI)
The original budget per programme comprised 30 days of internal CGI
work at a total cost of £9,000; this implies a per day cost of £300, and
£16,000 (£25,000 £9,000) of outsourced cost at £500 per day. This
means 32 days of outsourced work was included in the original budget.
Total time allocated was therefore 62 days (30 inhouse + 32
outsourced)
The producer's notes tells us that all CGI work has been 100%
outsourced for the first 3 programmes at an actual cost of £500 per day.
From this we can work backwards to find out how many days have been
used (£87,000 ÷ £500 = 174). This implies it has taken 58 days to
complete each programme.
Once again, we can carry out variance analysis to quantify the cause of
the overruns. This time though we will need to revise our budget in order
to reflect that the original budget was inaccurate.
• whether the director can deliver the quality required if filmed over 5
days? This is a high profile production using cuttingedge
techniques so a deterioration in quality would cause significant
damage to VYP's brand.
• what evidence exists of this?
• the directors views on the reason for the overruns?
3 programmes completed to date 9 programmes still to complete
Actual costs to date Original budget Forecast costs Original budget
£'000 £'000 £'000 £'000
87 3 × 25 = 75 225 9 × 25 = 225
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27.
Steps 4 6: Analysis of alternatives and recommendations
Outsourcing the work appears to be the better option on financial
grounds. It would also help reduce the risk arising from lack of expertise
since any outsourced vendor will specialise in animation.
However, the production time need only overrun by 10% before this
option would end up costing more. By tackling the job inhouse, the
variable costs are replaced by fixed costs. It is therefore necessary to
weigh up the likelihood of overruns. Given this is a new genre for VYP,
overruns should be regarded as highly likely.
By tackling the work inhouse you will be gaining expertise in animation
meaning any future commissions can be expected to take less time.
The amendment to the software package can also be utilised on future
projects meaning margins on further commissions will be much higher.
Of greatest concern will be whether VYP could deliver the required
quality given the lack of expertise. If the programme isn't of a good
enough standard, further commission would be unlikely and VYP's
reputation could be damaged.
As Steve has managed to attract interest in the project, it is
recommended that the Board proceed to the detailed budget and
hopefully contract approval stage.
It is further recommended that the project is outsourced. Since this is the
first venture into this genre, this will help to minimise the risks and
provide the required expertise at this point. VYP cannot afford to
damage their reputation.
Only if the programme is successful and the Board wish to produce
another children's programme should consideration be given to bringing
the animation process in house.
Steve Voddil should assign a producer and director to the project and
work should immediately start on finding a suitable vendor to which the
animation work can be outsourced. This will enable a more accurate
detailed budget to be prepared.
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28.
To fully evaluate an issue such as this, it is necessary to consider the
perspectives of the different parties. Your evaluation should start with
some calculations to show the financial impact before thinking about
other factors to consider.
Advice to the Board of VYP
You cannot attempt to provide advice without first preparing some
calculations. As with any calculations within the case study, you must
keep it simple.
Since a P/E ratio is quoted in this issue, this is the valuation method you
should adopt. It isn't worth showing calculations relating to the other
methods as you simply don't have enough information. A comment in
the main body of your report dismissing the net asset method (as a
service business it would be expected that most of the value was in
intangible assets such as staff) would suffice. As for recognising the
DCF method as the more superior approach, this would sit well within
your recommendatons section but since you don't have any forecasts for
the business, you are unable to apply the technique at present. VYP
should prepare some forecasts for the next 5 years and then perform
such a calculation before accepting or declining the offer.
Using the P/E for Some4Mode that we are provided with, VYP would be
valued at just below £30 million (£2,274k × 13). However, no adjustment
has been made to the P/E to reflect that VYP is an unquoted business,
and therefore brings additional risk as an investment. Typical
adjustments could reduce the valuation by 20% 30%, suggesting a
valuation of £20 million to £24 million. The offer of £27 million could
therefore be regarded as quite generous.
Although this simple calculation will gain credit under the application
criteria, the bulk of marks would be gathered under judgement for your
discussion on the validity of this valuation.
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MiniCase Scenario 5 Takeover bid
30.
Below is an illustration of what you could have written as your answer to
this issue. The planning guidance has not been given.
1. Issue and impact
Porter identified a number of generic strategies that organisations can
follow to gain and maintain a competitive advantage. VYP follows a
differentiation strategy, establishing its advantage based on key players
within its team and the creative and distinctive programme offerings that
they create. In this case, such a distinctive offering involved innovative
use of cutting edge technology. However, its failure to function on time
threatens to undermine VYPs ability to sustain this strategy as it risks
gaining a reputation for failing to deliver.
2. Analysis of potential solutions
VYP could accept the assurances of the software house regarding
timings of the installation. It could then allocate additional resources to
the project to ensure any delays are kept to a minimum. This requires
the company to have faith in the current supplier which may be
misplaced given their current track record.
VYP could revisit the concept of the show to remove or reduce the role of
CGI and revert to its existing systems, While this reduces dependence
on the technology it is of doubtful value as it may not be permitted by the
client as the whole appeal of the series may lie in the use of CGI
graphics.
VYP could seek assistance from a third party provider who already has
advanced CGI facilities available. This is likely to increase costs and it
may be hard to find an alternative company to help given the cutting
edge nature of the technology. However, it may make success more
likely as VYP will have access to established facilities.
3. Recommendations
It is recommended that the company continues to work with the current
software supplier and accepts their deadline of the end of September in
good faith. The process of implementation should be overseen at the
highest level by either Steve Voddil or John Young, with the Managing
Directors receiving daily progress reports. This high level supervision
and reporting should be put in place immediately. Persisting with the
implementation will allow the company to capitalise on its investment.
Going external would solve the short term problem for the client but not
the longer term problem of getting their own system to work. At the same
time a team of programme directors working under the coordination of
Sara Mills should be replanning the work schedule to ensure that the
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MiniCase Scenario 6 CGI software
32.
Below is an illustration of what you could have written as your answer to
this issue. The planning guidance has not been given.
1. Issue and impact
VYP has deliberately reduced the level of CGI used on a series in order
to cut costs and achieve the programme budget. Whilst cost control is
obviously important for VYP, the reduction in programme quality has led
to the broadcasting company being dissatisfied, potentially leading to
the loss of future business. Porter used his five forces model to gain an
insight into the competitiveness of an industry. In the UK there are only 5
major broadcasting companies, giving them strong bargaining power.
Thus VYP needs to ensure that their key client is satisfied with the
programme series. Losing a broadcaster as a client would lead to
reputation damage on the part of VYP and make it very difficult to win
future business with other clients.
Indeed there is an opportunity here for VYP to enhance its reputation as
a producer able to deliver world class science programmes. Professor
Brian Cox’s Wonders of the Solar System recently attracted over 5
million viewers on BBC2 – the highest viewing figures for a science
programme since Sir David Attenborough’s last series. VYP has an
opportunity to match these figures – but it will only do so if the special
effects are up to quality demanded by the viewing public.
2. Analysis of potential solutions
The solutions to this issue are best thought of in terms of shortterm and
longterm.
Shortterm
Do nothing
The client has stated that they are willing to accept the series in its
current state and so VYP could essentially ‘do nothing’ with the
programmes. This would be a high risk strategy for VYP. Viewing figures
are unlikely to meet expectations and other broadcasters would see the
low level of work produced by VYP endangering its ability to win new
commissions with special effects involved. Maintaining a reputation as
a company able to produce high quality work is important in an industry
with intense competitive rivalry.
Outsource work
Alternatively, VYP could approach a CGI specialist company and
outsource the work. This would enable quality standards to be met
leading to a satisfied broadcasting company. However, this is likely to
chapter 8
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MiniCase Scenario 7 Quality issue
35.
Issue and impact
VYP is considering pursuing the commissioning of an edgy comedy
series that focuses on the trials and tribulations of the youngest daughter
of a working class family who recently fell unexpectedly pregnant. There
is a conflict in the management team as to whether VYP is ethically right
to pursue a profitable programme idea that focuses on such a difficult
and emotive subject matter. Steve Voddil is strongly against the
programme idea on the basis that VYP should not be seeking
profitability from the exploitation of such a situation faced by many
children and their families.
A strong business case is likely to exist for the programme as interest is
being shown from two broadcast companies and a successful series will
have a good opportunity to be recommissioned as well as generating
high margin income from international sales. However serious business
damage may be incurred if the ethical conflict between the key
stakeholders is not satisfactorily resolved.
Alternative solutions
Several alternatives exist to manage this ethical issue:
Recommendations
It is recommended that the commissioning proposal be revised to
include a documentary programme to be controlled by Steve Voddil that
explores the real life situation of children faced with an unexpected
pregnancy. The documentary will be a fundamental part of the overall
commissioning proposal and will be designed to be shown immediately
after the final episode of the comedy series.
A second VYP programme director, with core documentary experience,
should be drafted into the commissioning project team with Sara Mills
sounding out the interested broadcast companies to the revised
(1) VYP could take what would be seen as a high moral position and
cease the commissioning process of ‘Young, Pregnant and Proud’.
This may cause resentment between the main stakeholders and
potential future conflict if similar programme ideas are raised.
(2) VYP could alternatively decide to proceed with the planned
commissioning project, ignoring the concerns of Steve Voddil and
potentially being seen to be putting profitability above programme
making moral integrity. Again this could lead to future difficulties and
key stakeholder conflict.
(3) A third approach would be take a pragmatic view and try to resolve
or reconcile the two key stakeholder positions with this being the
recommended option.
Planning your answer: Mini-case scenarios
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MiniCase Scenario 8 Ethical issue