(a)

   Guardian Group’s corporate objectives should address the following, based on its stated organizational aims:

1. International Expansion: Develop specific targets for increasing revenue and market presence in international markets to support long-term profitability, such as achieving a certain percentage of revenue from Zamfrican continent operations within five years.
2. Capital Investment Allocation: Establish clear investment plans to provide adequate funding for business development, including timelines and budgets for capital projects in manufacturing, airlines, and banking divisions.
3. Employee Development: Set measurable goals for training and development programs, such as increasing employee participation in skill-enhancing courses by a specific percentage annually, to align with organizational objectives.
4. Operational Efficiency: Define objectives to improve operational performance across divisions, such as reducing production costs or improving delivery times in materials handling by a set margin.
5. Stakeholder Engagement: Create objectives to enhance stakeholder relationships, including customers and trading partners, by implementing feedback systems or improving service quality metrics.

   (b) Sources of Strategic Management Information:

   1.      Internal Sources:
      • Financial Reports: Divisional financial statements provide data on profitability, costs, and capital employed, enabling performance evaluation across manufacturing, airlines, and banking.
      • Operational Data: Production output, delivery schedules, and customer feedback from divisions offer insights into operational efficiency and market demand.
      • Employee Feedback: Staff surveys and performance reviews highlight workforce capabilities and training needs, critical for human resource planning.
   2.   External Sources:
      • Government Agencies: Provide data on manufacturing activity, demographic statistics, and economic policies in Zamfrican countries, aiding market analysis.
      • Trading Partners: Offer insights into product/service demand, supply chain dynamics, and operational trends, useful for partnership strategies.
      • Banks and Financial Institutions: Comment on economic trends and credit conditions, informing financing and investment decisions.
      • Trade Associations and Research Organizations: Collect industry-specific data, such as market trends and competitor activities, supporting competitive analysis.

           Use in Strategic Decision-Making:

   • Reliable Systems: The usefulness of information depends on robust systems for data collection and analysis. Guardian Group’s commercial intelligence department, staffed with skilled professionals, conducts continuous research to keep management informed of critical issues.
   • Finance Function: Skilled finance staff evaluate financial data to support investment appraisals and budgeting, ensuring strategic alignment with group goals.
   • Support Functions: Marketing and HRM staff provide insights into customer trends and workforce capabilities, shaping market entry and talent strategies.
   • Consultancies: High-profile consultancies may be engaged for short-term strategic input, such as market entry feasibility studies or risk assessments.
   • Applications: Information is used to set divisional targets, allocate resources, assess risks (e.g., economic difficulties in Zamfrican regions), and identify growth opportunities, such as expanding banking services or optimizing materials handling operations.

   (c)

   Evaluation of AE Division:
   Reliance on a single measure such as ROCE can be misleading due to its limitations:

   • Short-term Focus: ROCE reflects a snapshot and may not indicate long-term viability.
   • Manipulation Risk: Accounting conventions can distort results.
   • Relative Measure: Requires careful comparison to be meaningful.

   The AE division’s performance, based on the head office formula, shows:

   	2018	2017	Change
   Net profit before interest and tax	GH¢25m	GH¢200m	-GH¢175m
   Average capital employed	GH¢2,020m	GH¢2,000m	+GH¢20m
   ROCE	1.24%	10%	-87.6%

   This appears poor, but key factors are:

   • Head Office Costs: Uncontrollable by the AE division manager, skewing results.
   • Transfer Pricing: Component prices rose from GH¢26,667 to GH¢37,500, likely for tax purposes rather than cost changes, significantly impacting profitability.

   Using controllable profit (capping transfer prices at the prior year’s level) yields:

   	2018	2017
   Sales	GH¢800m	GH¢800m
   Components at base year price*	GH¢75m	GH¢75m
   Assembly	GH¢427m	GH¢400m
   Gross profit	GH¢100m	GH¢75m
   Average capital employed	GH¢2,020m	GH¢2,000m
   ROCE	4.95%	3.75%

   *Based on GH¢400m/15,000 = GH¢26,667 each

   This shows a less significant ROCE decline. Positive indicators include:

   	2018	2017	Change
   Sales volume	800	750	+6.67%
   Budget shortfall in sales	-11.1%	-16.67%	+5.56%

   Negative points include increased assembly costs.

   Recommendations:

   1. Reassess Transfer Pricing: Ensure consistency in transfer pricing to avoid distorting divisional performance.
   2. Non-Financial Indicators: Develop metrics like customer satisfaction, production efficiency, or innovation rates to evaluate AE holistically.
   3. Additional Financial Metrics: Use residual income or cash flow-based measures to complement ROCE, providing a fuller picture of performance.
   4. Environmental Review: Analyze AE’s business environment to contextualize performance, considering market conditions and competitor actions.                                                                                                                                                                                                                                                                                                                                                                                      (d)

      The board of Guardian Group should consider the following factors for a potential acquisition:

      1. Quality of Research: Conduct thorough due diligence to verify the target’s financial records, asset values, and earnings quality, reducing risks of overvaluation or hidden liabilities.
      2. Business Environment: Understand the target’s competitive landscape, key customers, markets, and distribution channels, especially in non-domestic Zamfrican markets with unique risks and practices.
      3. Valuation: Use methods like future earnings multiples to determine the target’s price, ensuring accuracy to avoid overpayment due to misjudged earnings.
      4. Economic Viability: Evaluate the acquisition’s value-add using NPV or IRR against the group’s cost of capital, or ROCE, despite its limitations.
      5. Strategic Fit: Ensure the acquisition aligns with Guardian Group’s portfolio, e.g., neutralizing a competitor or expanding banking services, enhancing group synergy.
      6. Local Legal and Fiscal Issues: Assess tax implications or local laws, such as requirements for national shareholdings, to avoid regulatory burdens.
      7. Cultural Issues: Address differences in work practices and attitudes in the target’s Zamfrican operations to ensure smooth integration.
      8. Funding Implications: Consider the impact of loan financing on gearing and credit rating, noting risks like loan covenant breaches triggering insolvency actions.                                                                                                                                                                                                                                                                                                                                                   (e)

         To evaluate whether the AE division adds value to Guardian Group, the directors could use:

         1. Economic Value Added (EVA):
            • Formula: Operating profit after tax – (invested capital × WACC).
            • Example: For an acquisition costing GH¢100m, with earnings before tax of GH¢40m, invested capital   GH¢100m, and WACC of 10%:
              • Economic Profit = GH¢40m (after tax, assuming 25% tax = GH¢30m) – (GH¢100m × 10%) = GH¢30m – GH¢10m = GH¢20m.
            • Challenges: Accounting conventions and WACC subjectivity may distort results.
         2. Shareholder Value Analysis:
            • Assess the division’s contribution to the discounted value of future cash flows.
            • Key drivers to evaluate:
              • Sales growth rate.
              • Operating profit margin.
              • Cash tax rate.
              • Fixed capital investment needs.
              • Planning horizon.
              • Cost of capital.
            • This approach ensures long-term value creation is prioritized over short-term metrics like ROCE.
         3. Balanced Scorecard:
            • Incorporate financial and non-financial indicators for a holistic evaluation:
              • Customer Perspective: Measure improvements in customer relations, base growth, or market share.
              • Quality Perspective: Track reductions in complaints, scrap, or defects.
              • Product Innovation Perspective: Evaluate new processes, cost-saving developments, or patents.
            • These metrics align AE’s performance with strategic goals beyond financial returns.

         By combining EVA, shareholder value analysis, and balanced scorecard metrics, directors can comprehensively assess AE’s value-add, addressing both economic and strategic contributions.