Download - ACCA-P3
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Business Analysis (BA)
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Chapter 1:
The Nature of Strategic Business Analysis
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The Strategic Planning Process
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Levels of Strategic Planning
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Johnson, Scholes and Whittington
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Johnson and Scholes Lenses
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Business Analysis
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Chapter 2:
The Environment and Competitive Forces
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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
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Porter’s Diamond
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Convergence in Industries
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Porter’s 5 Forces Model
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The Product Life Cycle
Sales
£
Time
Introduction Growth Maturity Decline
The four stages of a products life
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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
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Strategic Group Positioning
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Chapter 3:
Marketing and the value of goods and services
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Customers and Markets
•There are 3 strategic questions that are
used to analyse customers:
– segmentation
– motivation
– unmet needs
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Market Segmentation
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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
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Marketing Mix Strategies
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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.”
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Value Chain Analysis
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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
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Chapter 4:
Internal resources and competencies
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Capabilities
Resources Basic Unique
Threshold Core
Same as Competitor
Easy to Copy
Different and
Difficult to Copy
Competencies
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Resource Audit (M’s model)
An organisations resources can be organised into the following categories:
• Men
• Money
• Markets
• Materials
• Management
• Make-up
• Manufacturing/Machinery
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Sustaining Competitive
Advantage
The capabilities needed to sustain
competitive advantage are:
• Value of strategic capabilities
• Rarity of strategic capabilities
• Robustness of strategic capabilities
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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
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SWOT Analysis
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Chapter 5:
Stakeholders, ethics and culture
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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).
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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.
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Impact of Corporate Governance
• Greater shareholder power
• Greater pressure
• Greater scrutiny
• Greater need for risk assessments
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Stakeholder Mapping
Minimal
Effort (A)
Keep
Informed (B)
Keep
Satisfied (C)
Key
Players (D)
Level of Interest
Power
High
High
Low
Low
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Ethics
Ethical issues arise at three levels:
• Macro level
• Corporate level
• Individual level
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Ethical Stances
„The extent to which an organisation will
exceed its minimum obligations to
stakeholders.‟
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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.
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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.
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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.
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Chapter 6:
Strategic Choice I
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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.
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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.
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Boston Consulting Group Matrix
Relative Market Share
% r
ate
ma
rke
t g
row
th
+1 -1
<10%
>10%
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Chapter 7:
Strategic Choice II
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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).
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Directions for Growth - Ansoff
Existing
Existing
New
New
Products
Ma
rkets
Market
penetration
DiversificationMarket
development
Product
development
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Diversification
CORE ACTIVITY
FORWARD VERTICAL INTEGRATION
BACKWARD VERTICAL INTEGRATION
HORIZONTAL
DIVERSIFICATION
UNRELATED
DIVERSIFICATION
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Implementing growth
Organic Growth
• Internal development
• Easier to control?
• Can be risky if not enough skills or
experience
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Implementing growth
Mergers & Acquisitions
Assess by synergy
Transfer of Skills Sharing activities
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Implementing growth
Joint Development
Joint Venture
Franchise
Licence Agency
Strategic
Alliance
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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.
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The Strategy Clock
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Strategies for hyper-competition
• Reposition on the strategic clock
• Competing successfully
• Fight and overcome competitors‟
strategies
• Overcome previous barriers to entry
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Strategy Evaluation
Key words
Acceptability
FeasibilitySuitability
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Chapter 8:
Organisational Structure
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The boss
Everyone else
Entrepreneurial structure
Organisational structure
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Organisational structure
Functional Structure
Board
Production Sales R&D Finance HR
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Organisational structure
Divisional Structure
Division 1 Division 2 Division 3
Board
Central functions
eg finance, HR
Production Sales R&D
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Organisational structure
Matrix Structure
Production
Manager
Purchasing
Manager
Manager
Customer B
Manager
Customer A
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Virtual Organisations
An example:
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Chapter 9:
Business Process Change
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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.
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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.
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Business Process Redesign
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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
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Chapter 10:
Information Technology
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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
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McFarlan’s Grid
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E-business
The stages of e-business:
1. Web presence
2. E-commerce
3. Integrated e-commerce
4. E-business
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Supply Chain Management
The transformation of product from node to
node includes activities such as:
• production planning
• purchasing
• materials management
• distribution
• customer service
• forecasting
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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
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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
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E-marketing
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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
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6Is: Benefits over Traditional
Marketing Methods
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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
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Chapter 11:
Quality
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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
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Quality Control vs Quality
Management
• Quality control = reactive (old way to do
things)
• Quality management = proactive (the
modern way to improve quality)
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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
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The ‘V-model’
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Capability Maturity Model
Integration (CMMI)
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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
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DMAIC
• Define
• Measure
• Analyse
• Improve
• Control
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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
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Project Constraints
• Cost
• Time
• Scope
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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).
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How to manage risk
• Ignore it
• Insure against it
• Transfer it
• Mitigate it
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Contents of a project plan
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Assessing Project Quality
• Define
• Measure
• Analyse
• Design
• Verify
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Chapter 13:
Finance & Strategy
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Different Organisational Types
• Listed Companies
• Non-listed businesses
• Not for Profit organisations
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Funding Sources
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What to consider
• Cost
• Gearing
• Control
• Security
• Cash flow
• Availability
• Exit routes
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Funding of NFPs
• Strategic funding
• Self-generated income
• Developmental funding
• Cost minimisation
• Project returns
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Working Capital Management
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Investment Appraisal Ratios
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Chapter 14:
Strategy and People
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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
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Leadership
An effective leader will need
• Vision
• Communication
• Passion and motivation
• Flexibility
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Appraisal Systems
A good appraisal system should have:
• Relevance
• Fairness
• Serious intent
• Cooperation
• Efficiency
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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
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Reward Systems
When designing a reward system we
should consider:
• Organisational objectives
• CSFs and KPIs
• Desired behaviour
• Competitor systems
• Legislation
• Constraints
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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.
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Chapter 15:
Managing Change
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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.
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TransformationIncr.
Big Bang
Realignment
Extent of Change
Spe
ed
of C
ha
ng
e
Evolution
Reconstruction
Adaptation
Revolution
Types of Strategic Change
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Barriers to Change
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The Change Process
Lewin suggested that successful change is
achieved in three stages:
– Unfreezing existing behaviour
– Making the change
– Refreezing the new behaviour
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Contextual Features
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Leadership Styles