acca-p3

Business Analysis (BA)

Chapter 1:

The Nature of Strategic Business Analysis

The Strategic Planning Process

Levels of Strategic Planning

Johnson, Scholes and Whittington

Johnson and Scholes Lenses

Business Analysis

Chapter 2:

The Environment and Competitive Forces

PESTEL Analysis

This model examines the growth prospects for the industry

as a whole. This is achieved by examining 6 factors that

are outside the control of the companies in the industry:

• Political factors

• Economic factors

• Social factors

• Technological factors

• Environmental factors

• Legal factors

Porter’s Diamond

Convergence in Industries

Porter’s 5 Forces Model

The Product Life Cycle

Sales

£

Time

Introduction Growth Maturity Decline

The four stages of a products life

Strategic Groups

These are organisations with:

• same industry

• similar strategic characteristics

• following similar strategies/ competing

on a similar basis

• can have similar assets and skills

Strategic Group Positioning

Chapter 3:

Marketing and the value of goods and services

Customers and Markets

•There are 3 strategic questions that are

used to analyse customers:

– segmentation

– motivation

– unmet needs

Market Segmentation

Marketing styles

There are three ways to market a product

in order to account for the fact that

different segments have different needs:

• undifferentiated marketing

• differentiated marketing

• niche/target marketing

Marketing Mix Strategies

Critical Success Factors

“performance requirements that are

fundamental to an organisation's success. In

this context CSFs should thus be viewed as

those product features that are particularly

valued by customers. This is where the

organisation must outperform competition.”

Value Chain Analysis

Benchmarking

“to provide a target for action in order to

improve competitive position.”

They can take many forms:

• strategic

• historical

• industry

• best-in-class

• international

Chapter 4:

Internal resources and competencies

Capabilities

Resources Basic Unique

Threshold Core

Same as Competitor

Easy to Copy

Different and

Difficult to Copy

Competencies

Resource Audit (M’s model)

An organisations resources can be organised into the following categories:

• Men

• Money

• Markets

• Materials

• Management

• Make-up

• Manufacturing/Machinery

Sustaining Competitive

Advantage

The capabilities needed to sustain

competitive advantage are:

• Value of strategic capabilities

• Rarity of strategic capabilities

• Robustness of strategic capabilities

Other ways to gain

competitive advantage

• innovation– by the time the competition catch up, the innovator

has built up brand loyalty and a defendable position

• knowledge management– this encourages innovation and sharing, and it

reduces complexity. It also ensures continuity as

staff turnover

SWOT Analysis

Chapter 5:

Stakeholders, ethics and culture

The need for corporate

governance

• The gap between ultimate beneficiaries and

those making day-today decisions can be large

and agents might not know what the

beneficiaries want.

• Self-interest can cause agents to work for

their own benefit at the expense of their

principals (remuneration packages, share

options, budget padding, short-termism to make

current results look good at the expense of

long-term performance).

Typical features

• boards should have non-executive directors – to advise and warn the executive directors. Executive and non-executive directors (NEDs) should be in balance so that neither group dominates

• there should be a separation of the roles of chairman and chief executive

• executive remuneration should be decided by a remuneration committee, consisting of non-executive directors

• an audit committee, comprising non-executive directors should look after the appointment of supervision of auditors.

Impact of Corporate Governance

• Greater shareholder power

• Greater pressure

• Greater scrutiny

• Greater need for risk assessments

Stakeholder Mapping

Minimal

Effort (A)

Keep

Informed (B)

Keep

Satisfied (C)

Key

Players (D)

Level of Interest

Power

High

High

Low

Low

Ethics

Ethical issues arise at three levels:

• Macro level

• Corporate level

• Individual level

Ethical Stances

„The extent to which an organisation will

exceed its minimum obligations to

stakeholders.‟

Corporate Social Responsibility

The following are common areas where

businesses get involved in CSR issues:

• work creation and training programmes

• sponsorship of the arts and sport

• employee welfare programmes

• community welfare programmes

• support for educational institutions and links with

business

• contributions to overseas aid

• environmental programmes.

Organisational culture

The concept of the cultural web is a useful device for mapping

out change but its real worth is in the fact that we can identify

which elements of culture need to change.

Mission Statements

A mission statement should contain the following:

• purpose

• strategy

• policies and Standards of Behaviour

• values.

Also:

• mission statements should be short – typically half a page

• note that mission statements can have a valuable role in

setting ethical standards and organisational culture.

Chapter 6:

Strategic Choice I

Corporate Parenting

The issue for corporate parents whether

they:

• add value to the organisation and give

business units advantages that they

would not otherwise have

• add cost and so destroy the value that

the business units have created.

Rationales for adding value

A well-managed corporate parent should be able to add value. Johnson, Scholes and Whittington identify three corporate rationales or roles adopted by parents in order to do this:

• portfolio managers

• synergy managers

• parental developers.

Boston Consulting Group Matrix

Relative Market Share

% r

ate

ma

rke

t g

row

th

+1 -1

<10%

>10%

Chapter 7:

Strategic Choice II

TOWS AnalysisInternal Factors

External

Factors

Strengths (S) Weaknesses (W)

Opportunities

(O)

Examine strategies

that use strengths

to make use of

opportunities (SO).

Examine strategies

that take advantage

of opportunities by

overcoming or

avoiding

weaknesses (WO).

Threats (T) Examine strategies

that use strengths

to overcome or

avoid threats (ST).

Examine strategies

that minimise the

effect of

weaknesses and

avoid or overcome

threats (WT).

Directions for Growth - Ansoff

Existing

Existing

New

New

Products

Ma

rkets

Market

penetration

DiversificationMarket

development

Product

development

Diversification

CORE ACTIVITY

FORWARD VERTICAL INTEGRATION

BACKWARD VERTICAL INTEGRATION

HORIZONTAL

DIVERSIFICATION

UNRELATED

DIVERSIFICATION

Implementing growth

Organic Growth

• Internal development

• Easier to control?

• Can be risky if not enough skills or

experience

Implementing growth

Mergers & Acquisitions

Assess by synergy

Transfer of Skills Sharing activities

Implementing growth

Joint Development

Joint Venture

Franchise

Licence Agency

Strategic

Alliance

Strategies for Competitive

AdvantageThere are three generic strategies through which an organisation could achieve competitive advantage:

• Cost leadership, where there is great emphasis on keeping costs down. This opens up the profit margin by lowering costs, ideally more than any competitor can.

• Differentiation, where a better product or service is sold. This opens up the profit margin by raising selling prices.

• Additionally an organisation can choose a focus strategy, where the organisation concentrated on a small segment of the market. Within the focus strategy, the organisation must choose whether or not to become a cost leader or a differentiator.

The Strategy Clock

Strategies for hyper-competition

• Reposition on the strategic clock

• Competing successfully

• Fight and overcome competitors‟

strategies

• Overcome previous barriers to entry

Strategy Evaluation

Key words

Acceptability

FeasibilitySuitability

Chapter 8:

Organisational Structure

The boss

Everyone else

Entrepreneurial structure

Organisational structure

Organisational structure

Functional Structure

Board

Production Sales R&D Finance HR

Organisational structure

Divisional Structure

Division 1 Division 2 Division 3

Board

Central functions

eg finance, HR

Production Sales R&D

Organisational structure

Matrix Structure

Production

Manager

Purchasing

Manager

Manager

Customer B

Manager

Customer A

Virtual Organisations

An example:

Chapter 9:

Business Process Change

Business Processes

• Every business has unique characteristics embedded in its core processes that help it achieve its goals and create competitive advantage.

• Strategic business processes, such as new product design or high sensitivity customer care, provide unique and durable business advantages to organisations.

• Looking at the business in terms of activities and processes opens up scope for challenging the ways in which things are done, and coming up with improvements, or sometimes more radical changes.

Harmon’s process-strategy

matrix

According to Harmon, BPR should be

focused on those activities which are:

– of high strategic importance

– likely to be complex and dynamic

These are normally the processes that

provide competitive advantage and overall

company success.

Business Process Redesign

Software Solutions

BPR will often mean there is a need for new

software in order for the change to work

effectively and efficiently.

The key decision here is whether to buy in a

“ready made”/generic software package or

to pay for a bespoke system

Chapter 10:

Information Technology

Strategic Context

IT can form an important part in the entire strategic

planning process. For example

• it can help provide new technological developments

which open up growth opportunities

• It can help a business cope with it‟s competitive

environment and market position

• Strategic choice can be made easier through the use of

IT

• IT can help in strategy implementation

• IT can help review performance and monitor controls

McFarlan’s Grid

E-business

The stages of e-business:

1. Web presence

2. E-commerce

3. Integrated e-commerce

4. E-business

Supply Chain Management

The transformation of product from node to

node includes activities such as:

• production planning

• purchasing

• materials management

• distribution

• customer service

• forecasting

Push vs Pull SCM

• Push = supplier-led.

• Pull = customer/ market led. Consumers have a direct voice in the functioning of the supply chain. This is what e-commerce facilitates and this was very rare prior to the development of e-commerce. Many businesses have developed this further into upstream SCM

Impact of successful

downstream SCM

• Customers become more reluctant to

switch

• Disintermediation

• Continual updates

• Cheaper communication

• Consumer/ user groups

• Better information on consumers

• Customers can start to customise products

E-marketing

E-marketing: the 7Ps

E-marketing involves extending the original 4Ps of

marketing (product, price, promotion and place) to

incorporate the following:

– people/participants

– processes

– physical evidence

6Is: Benefits over Traditional

Marketing Methods

Customer Relationship Management

(CRM)

There are 4 stages in the customer life cycle:

• Selection

• Acquisition

• Retention

• Extension

IT can play a pivotal role in improving all aspects of

CRM

Chapter 11:

Quality

Benefits of Improving Quality

• It is a differentiator

• Reduced internal failure costs

• Reduced external failure costs

• Potentially requires less capital investment

However there may be an increase in:

• Prevention costs

• Appraisal costs

Quality Control vs Quality

Management

• Quality control = reactive (old way to do

things)

• Quality management = proactive (the

modern way to improve quality)

Total Quality Management

• Everyone‟s involved

• Customer focused

• Internal and external buyer/supplier

relationships established

• Try to get it right first time

• Use a “kaizen” system

The ‘V-model’

Capability Maturity Model

Integration (CMMI)

The Six Sigma Approach

• This is an extension of the TQM approach.

• It is a data-driven approach – it uses a wide

range of statistical calculations and techniques to

examine and analyse quality problems

• It aims to reduce the variation in process output

so that there are no more than 3.4 defects per

million opportunities

DMAIC

• Define

• Measure

• Analyse

• Improve

• Control

Chapter 12:

Project Management

Project Management

Project features and constraints

Project Risk Management

Project Planning

Project Initiation

The Project Plan

Project Completion

Managing and Leading Projects

Project Constraints

• Cost

• Time

• Scope

Project Risk Management

Risk management comprises:

• risk assessment (identifying and

analysing risk) – assessing the loss

probability and magnitude for each item

• risk control (taking steps to reduce

risk, provide contingency and monitor

improvements).

How to manage risk

• Ignore it

• Insure against it

• Transfer it

• Mitigate it

Contents of a project plan

Assessing Project Quality

• Define

• Measure

• Analyse

• Design

• Verify

Chapter 13:

Finance & Strategy

Different Organisational Types

• Listed Companies

• Non-listed businesses

• Not for Profit organisations

Funding Sources

What to consider

• Cost

• Gearing

• Control

• Security

• Cash flow

• Availability

• Exit routes

Funding of NFPs

• Strategic funding

• Self-generated income

• Developmental funding

• Cost minimisation

• Project returns

Working Capital Management

Investment Appraisal Ratios

Chapter 14:

Strategy and People

Objectives of HRM

• Identifying the kinds of talent needed

• Recruiting an adequate supply

• Developing people‟s potential by training,

development and education.

• Retaining as high a proportion as possible

• Motivating the talented personnel

• Improving the performance and productivity

of the most talented.

• Creating an organisational culture in which

talent is nurtured and can flourish

Leadership

An effective leader will need

• Vision

• Communication

• Passion and motivation

• Flexibility

Appraisal Systems

A good appraisal system should have:

• Relevance

• Fairness

• Serious intent

• Cooperation

• Efficiency

Facilitating change

Project and strategic change need staff

support. In order for these changes to be

effective they may need:

• new output measures

• new skills and competences required

• changes to roles and job descriptions

• changes to responsibilities

Reward Systems

When designing a reward system we

should consider:

• Organisational objectives

• CSFs and KPIs

• Desired behaviour

• Competitor systems

• Legislation

• Constraints

Human Resources and Strategy

HRM is becoming increasingly important to businesses:

• people are seen as a major source of competitive advantage,

• training and development is seen as an investment, not a cost

• learning is seen as essential

• employees expect to learn and change and retrain as necessary

as strategy demands

• Staff development is seen as a key management role

• changes outside the organisation are reflected in changes to

training and development needs

• human resource implications are considered as part of strategic

planning.

Chapter 15:

Managing Change

Reasons for Strategic Change

There are many ways in which a business‟ strategy might change. But these fall into two general categories:

• planned/intended strategic changes

• emergent strategic changes

In either case, the change process will have to be managed and led well by senior management.

TransformationIncr.

Big Bang

Realignment

Extent of Change

Spe

ed

of C

ha

ng

e

Evolution

Reconstruction

Adaptation

Revolution

Types of Strategic Change

Barriers to Change

The Change Process

Lewin suggested that successful change is

achieved in three stages:

– Unfreezing existing behaviour

– Making the change

– Refreezing the new behaviour

Contextual Features

Leadership Styles