acca p3 smart notes d10

8/6/2019 ACCA P3 Smart Notes D10

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ACCA P3 - Business analysis These notes are not intended to cover the whole of the ACCA P3 syllabus Darren Sparkes, 2010

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ACCA P3 PROFESSIONAL LEVEL

Business Analysis

SMART Notes

Prepared by Darren Sparkes

Email: [email protected]


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ACCA P3 Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus Darren Sparkes, 2010

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Contents Page no.Paper 3 Examiners Approach..... 3Extracts from the Examiners report ....4Examination Technique.....7Background and examination format..............9Syllabus Overview...........10Strategic Planning........11Mission and Objectives12Business & Professional Ethics......13Internal Analysis...14

External Analysis......15Strategic Options..17Method of Growth............18Portfolio Analysis..19Strategic Choice & Change Management....20Marketing...21Organisational Structure..22International Market Place......23Business Process Change.....24

Information Technology.............25Quality.......26Project Management...27Role of Finance...28Review and Control....29Strategy and People30


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Approach Required

Differentiation is important to individuals seeking to pass a management andstrategy examination.

It is the ability to link strategic and financial analysis;

it is the confidence to use creative thinking in the way you answer aparticular problemwith alternative ways of viewing and solving a problemRalph Bedrock (Paper 3 Assessor)

There is no absolutely correct answer candidates who providedcoherent justification awarded appropriate marks

Steve Skidmore (P3 Examiner)


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Extracts from the Examiners commentsIn general: Candidates were stronger in strategic concepts (strategic position, Porters Diamond) and less comfortable

with business process modelling and customer relationship management. Part questions on specific factual areas (competency frameworks and CMMI) were either answered well

(because the candidate was familiar with them) or poorly (because the area was not studied or revised). There was some evidence of poor time management, apparently caused by over-answering question 1.

Section A - Question 1 In general the first part of the question was answered well, using a wide range of appropriate models and

frameworks. However, candidates must be careful in the future to stick to external issues if a PESTEL analysis is

specified in the question. some candidates did not restrict themselves to assessing the strategic position. They began to suggest

strategic solutions and options which were not required by the question and so no credit was given. Thisreinforces the need for the candidate to carefully read the question and to answer within its scope.

many answers well written and well-structured, so gaining most of the professional marks on offer. Part bCandidates failed to spot glaring errors in the process. Part cIn many cases, candidates provided good answers to a very different question.


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Section B Question 2 part aCandidates answered thisrelatively well, using appropriate calculations

Question 2 part bcandidates answered this part question very well, not only showing knowledge of themodel but were also confident in applying it to a case study scenario Question 3 part basked candidates to analyse these competencies. Some of these were clearly signposted

in the scenario. Many candidates failed to identify any relevant competenciesfalling back on generalisationssuch as good communication skills and hence did not score well on this part of the question.

Question 4 part aIn general, this part of the question was answered well by most candidates Question 4 part bThis was not particularly well answered by most candidates. Most candidates seemed to

be unfamiliar with the concept of competency frameworks or their potential application. This was despite anarticle in Student Accountant magazine.


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Therefore, to pass P3 learn from the examiners

comments:

Analyse the requirements verbs and keywords Planning think before you write the answer

Application, application, application Theoretical answers score few marks You can only apply what you know learn it! Use and interpret the numbers (they are usually

easy calculations so its the interpretation thatgets the marks) Time management the marks are your guide


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Examination Technique to give the Examiner what he wants

PADI Plan, Analyse, Design, ImplementPLAN1. USE 15 MINUTES READING TIME WISELY

Examine section B questions and choose the two on which you can MAXIMISE MARKS (not necessarilythose on your favourite topics)

If you have some time left then analyse Question 1 requirements and skim read the Q1 scenario to get a feelfor the relevant issues and identify where the information is for each part of the requirements.

2. WORK OUT TIMINGS

Q1 = 90 minutes. Planning = 20-25 minutes, Writing answer = 65-70 minutes Section B Questions = 45 minutes each. Planning up to 10 minutes, Writing answer 35 minutes. Break down the time required for each part of the requirements using the marks as a guide. 1.8 minutes per

mark in total, 1.4 minutes per mark after planning. I suggest you start with Question 1 as you know you have 90 minutes to complete it.

START PLANNING IN YOUR ANSWER BOOK

3. ANALYSE THE REQUIREMENTS Identify the verb, or verbs, and make it stand out. The verb tells you what the examiner wants you to do, e.g.

evaluate, recommend, analyse, calculate. Be sure to identify all the verbs in the requirement just in casethere is more than one thing to do, e.g. analyse and discuss, evaluate and recommend. Identify key words. These tell you what to do it on or about, e.g. evaluate what?, recommend what?

4. ALLOCATE MARKS TO EACH VERB IN THE REQUIREMENT This can now determine how much to write for each verb in the requirement

5. IDENTIFY RELEVANT MODELS, TOOLS, THEORIES FROM YOUR KNOWLEDGE BANK


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6. DEVELOP HEADINGS AND NUMBERS LAYOUT Put key elements of model in plan as headings, e.g. Porters 5 Forces analysis = 5 headings. Headings will

give your answer a framework and structure. Use requirements to develop headings to show marker that you are answering the question asked

7. DISTRIBUTE MARKS ACROSS HEADINGS This can now determine how much you write under each heading

ANALYSE8. ANALYSE THE SCENARIO

Make brief notes in your plan under relevant headings from models/tools/theories and requirement Find relevant numbers for calculations

DESIGN9. THINK BEFORE YOU WRITE

Decide which points you are going to put in your answer (trying to put in everything usually leads to goingover time) and start with your strongest points

Decide how you are going to layout your answer to make life easy for the marker and maximise marks

IMPLEMENT10. WRITE UP YOUR ANSWER TO MAXIMISE MARKS

Layout calculations in a logical and easy to mark format - Add value to calculations by asking SO WHAT? Use as many headings as possible to give the answer structure Work on 2 sentences for 1 mark 1) Make your point, 2) Give evidence from the scenario PEE for 2 marks Point, Evidence, Explain (So what?) Leave a blank line between paragraphs to make your answer easy on the eye Be strict with timings. When time is up on a question, or part of a question, move on. Stick to answering the requirement use your plan to keep you on track REMEMBER THE THREE GOLDEN RULES 1) APPLICATION 2) APPLICATION and 3)APPLICATION


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Paper Background

Candidate Requirements

Apply knowledgeand skills

Determine appropriatetechniques

Select relevantdata

Exercise professional judgement

Objectives of thepaper

Assess the strategic position of the organisation Evaluate strategic choices available to an organisation Discuss how an organisation might go about its strategic implementation Model and redesign business processes and structures to implement and

support the organisations strategy taking account of customer and other major stakeholder requirements

Integrate appropriate information technology solutions to support theorganisations strategy

Apply appropriate quality initiatives to implement and support theorganisations strategy

Advise on the principles of project management to enable the implementationof aspects of the organisations strategy with the twin objectives of managingrisk and ensuring benefits realisation

Analyse and evaluate the effectiveness of a companys strategy and thefinancial consequences of implementing strategic decisions

The role of leadership and people management in formulating andimplementing business strategy

Format of paper

Section A 50% Compulsory Major case study Usually four parts Case will include numbers

Section B 50% Choice of two from three Each question likely to include

two parts Will include short scenario May include numbers


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S llabus OverviewMission and objectives

Stakeholder Analysis

External Analysis Internal Analysis

CorporateAppraisal

SWOT

StrategicO tions

Strategic Choice

Implementation

Review and Control

Cultural Web SMART

Resource audit

Mendelow's power-interest matrix

Core competences

Porters Value Chain

Product Life Cycle

Benchmarking

PEST

Porters 5 Forces

Porters GenericStrategies

The Strategy ClockAnsoffs product-

market matrix

Acquisition vs organic vs joint development

Suitability, Acceptability, Feasibility

Change ManagementProject Management

Quality

IT

Structure

Marketing

Business Process Change

InternationalTrading

Financial Measures

Investment Appraisal

Withdraw

Purpose, Strategy, Policies, Values

Governance and Corporate Social Responsibilit

Cost/Benefit

Risk

Non-financial Measures

Not for Profit Organisations

Porters Diamond

CSFS

TOWS Matrix

Portfolio analysisBCG, PSPM, DPM, APD,Mkt attract/SBU strength

Software Solutions

HRM

Software QualitySources of Finance

BSC


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Alternative

StrategicPlanning

Strategy a course of action, includingthe specification of resources, to

achieve a specific objective

Long-term

Wholeorganisation

Integrates activities

All stakeholders

Competitive advantage

Relationship with environment

Corporate =Strategic level

Business = Tacticallevel

Functional = Operational level

Purpose

Respond and fit to environment Utilise scarce resources Provide direction Ensure consistent objectives Monitor progress

Advantages Identification of

strategic issues Consistency of goals Improve

performance/survival Pro-active Recognises

environment Optimum use of

resources

Disadvantages Expensive (time

and money) Bureaucracy Stifles creativity Less relevant in

a crisis

Rational Top Down Approach

Mission & Objectives

Corporate appraisal

Strategic options

Strategic choice

Implementation

Review

Emergent Strategy - Bottom up (Mintzberg)

IntendedStrategy

UnrealisedStrate

DeliberateStrategy

RealisedStrategy

Emergentstrategy

E.G. Hondas entry into the USA, 3M

Incrementalism (Lindblom) Building block approach Build strategy through incremental steps not radical

shifts Accepts uncertainty of future Builds commitment May be too slow Ideas often compromised

Freewheeling Opportunism Market Driven reactive Hands on management Exploit complacent players Relies on leaders vision No formula for success Take advantage of market

opportunities Stock market problems

Inter-dependant

PositionAnalysis

Choice Actio

Johnson,Scholes &

WhittingtonStrategicLenses

Ideas

Design Experience


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Mission andObjectives

Mission the most generalised type

of objective which can bethought of as its raison detre.

Purpose

Strategy

Policies andstandards

Values

Advantages Resolve stakeholder conflict Set direction Help formulate strategy Communicates values to

employees Marketing to customers

Criticisms Meaningless terms used Written retrospectively? Not communicated to

employees

Ignored by managers

Objectives

S SpecificM MeasurableA Attainable

R RelevantT Timebound

Critical SuccessFactors

"The limited number of areasin which results, if they are

satisfactory, will ensuresuccessful competitive performance for the

organization.

They are the few key areaswhere things must go right for

the business to flourish.

If results in these areas arenot adequate, the

organization's efforts for the period will be less than

desired."

Stakeholders

Mendelows Power Interest Matrix Interest

Low

Power

High

LowA

Minimal Effort

Give Direction

BKeep Informed

Education /Communication

CKeep Satisfied

Intervention

DKey Players

Participation KeepClose

Not for Profit Organisations

Features of objective setting Multiple and contradictory objectives Participation in objective setting Providers of funding different to beneficiaries of service Priorities may change frequently Value for money a requirement not an objective Increased role of personal objectives

Efficiency

Effectiveness

Economy

Mission Statement Published version of the

Mission

CultureThe way we do things around here

Cultural Web cultural paradigm

Routines & Rituals Stories & Myths Symbols Power structure Organisation structure Control systems

High


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Business andProfessional

Ethics

Professional EthicsSelf control, not self interest

C CompetenceO ObjectivityP Professional due careP Politeness I Integrity

T Technical Standards

Corporate SocialResponsibility

Issues

Environment

Sustainability

Safety in the workplace

Consumer health and safety

Equal opportunities

Fair Trade

Honesty in Advertisin

Views on Business Ethics

The business of business is business

(Shareholder View -Friedman)

Management to concentrate onmaximising profits andshareholder wealth.

Businesses have no duty tosociety.

Societal benefits will arise as aresult of commercial success.

Conflict of CSR with shareholder weal Reduced revenues Increased costs Diverts funds from shareholders Distracts management

Long-term Self-Interest /Stakeholder view

Firms should acknowledge their socialres onsibilities.Benefits to Business

SALSA

Avoid paying damages and fines

S trategic Alliances

Lower Risk

Attractcustomers and

employees

S ave time andmoney on

investigations

Potential roblems

Competitive disadvantage

Deciding what is ethical Bad publicity from monitoring and enforcement

Disclosure of business information

No universal acceptance of morals & ethics

Johnson, Scholes & Whittington Ethical Stances

Short-termshareholder

interest

Long-termshareholder

interest

Multiplestakeholder

obligation

Shaper of society

Corporate GovernanceStrategic impact: SCRAPI

Short-termism Control the business Risk assessment Acquisitions & Mergers Power of governance bodies Increasing shareholder power

Bribes


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Internal Analysis(Strengths & Weaknesses)

Strategic Capability Resource audit

Ms

Manpower Management Money Make-up Manufacturing Material Markets

Core Competences the activities or

processes that criticallyunderpin competitive

advantage.

S trategicAssets

Architecture

Reputation

InnovativeAbility

Valuable Rare Cant be copied Not substitutable Give access to wide

range of markets

identify activities within the firm which

add value to customers and those thatdo not

Primary Activities Inbound Logistics Operations Outbound logistics Marketing and sales Service

Support/secondary activities Procurement HRM Technology development Firm infrastructure

Uses Streamline linkages Eliminate non-value added activities Business Process Re-engineering Benchmark key processes

Basic

Benchmarking

1. Select processes to bebenchmark

2. Assign responsibilities3. Choose type of benchmarking4. Choose partner 5. Interaction6. Collect data7. Implement changes

Competitive

Functional/Activity

Internal

BEST IN PRACTICE

Porters Value Chain

Unique

Core Threshold

Same ascompetitor / easy

to copy

Different tocompetitor /

difficult to copy

Resources

Competences

Value Networks

Knowledge Management

Explicit

Tacit

Uncover Knowledge Discover Knowledge Capture Knowledge Share Knowledge Distribute Knowledge Lever Knowledge Maintain Knowledge

Knowledge Workers Roving role Temporary roles Selection based on skill & competences Input into own development Separate & relevant incentive schemes Remote locations

Flexible working

Product Life-cycle Introduction : high risk, little

competition, low volume, highadvertising = losses + negativecash

Growth : increasedcompetition, growing volumes,EOS, high advertising = losses to

profits + negative to positive cash Maturity : steady repeat sales,

high volumes, EOS, low leveladvertising = profits + positivecash

Decline : falling volumes, fallingprices = profits to losses +positive to negative cash, divestBalance the portfolio

Problems: No common shape Unpredictable Self-fulfilling prophecy Product orientated

S

A

R

I


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External Analysis(Opportunities and Threats)

PESTEL analysis(External, Environmental analysis)

Political Taxation Government policy Foreign trade

regulations Protectionism Globalisation

Economic Globalisation Economic cycle Interest rates Inflation Employment levels Exchange rates

Social & Demographic Income distribution Education levels Population size Age profile Lifestyle changes Fashions and tastes Consumerism

Technological Internet Government

spending on RnD Communications Speed/rate of

change Processes and

methods of production

Porters 5 Forces(Competitive,

Industry analysis)

Competitive RivalryGreatest where: Competitors of similar size Slow market growth rate High fixed cost industry Lack of differentiation

Threat from New Market EntrantsBarriers to Entry: Economies of Scale Other cost advantages Capital requirements Access to distribution channels Patents, Government policy Reaction of existing firms

Power of BuyersPower greatest where: Few buyers High number of suppliers available Cost is high proportion of buyers total cost Low switching costs Buyers have low profits Buyers have full information Little product differentiation

Threat from SubstituteTechnologies

Can same features be producedcheaper?

Can new features be provided for samecost?

Level of danger may be influenced bybarriers to entry and/or power of buyers

Power of SuppliersPower greatest where: Few suppliers Few substitutes High switching costs Threat from forward integration Customer not significant to supplier Supplier has differentiated product

Legal Health And Safety Employment Consumer protection Monopoly legislation Industry watch dogs

Ecological Globalisation Pollution Energy usage Disposal of waste Sustainability of

resources



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Internal + External Analysis= Corporate Appraisal = Position

Appraisal= SWOT AnalysisStrengths Weaknesses

Threats

INTERNAL

EXTERNALOpportunities


PortersDiamond

NationalCompetitiveAdvantage

Firm structure, strategy, rivalry

Demandconditions

Factor conditions

Related and supporting industries

External Analysis Factors open to all in the industry

Internal Analysis Factors specific to the organisation

Corporate Appraisal

TOWS


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Strategic Options

Advantage

Positioning view

Strategically developorganisation in line

with environment

PESTEL

Porters FiveForces

To beat the fiveforces

Porters Generic Strategies

Overall Cost Leadership(better margin, potential price cuts, entrybarrier, reduce supplier power)

Differentiation (Premium price, better margin, barrier,reduce buyer power)

Focus (Niche) (Cost or Differentiation, focus on marketneeds, develop core competencies)

Beware of Stuck in the Middle

Uses Analyse rivals Suggest own strategy SBU level strategy

Limitations Unclear definition of industry Defines advantage in terms of position not

resources Lack of empirical evidence Ignores middle ground

Restricts firm to position in presentindustry Requires perfect information

Direction

Ansoffs MatrixProducts, existing and new (PEN)Markets, existing and new (MEN)

Market Penetration (cost reductions,price reductions, advertising, minor productmodifications)

Product Development (exploitexisting customers, RnD, buy-in and badge,JVs, Licensing)

Market Development (new marketssuch as foreign markets, new segments suchas adult to child or industrial to consumer)

Diversification (related = verticalintegration or unrelated = conglomerate

Do nothing / Withdraw

Risks Product Market Operations and

management Financial

Vertical IntegrationAdvantages

Economies of combinedops Economies of control and

coordination Avoiding the market Tap into technologyConglomeratesAdvantages Flexibility Quick growth Access to capital Portfolio effect Avoidance of anti-

monopoly legislation

Disadvantages Increased operational

gearing Reduced flexibility to

change partners Capital investment needs

Disadvantages No additional benefit to

shareholders throughsynergies

No operating advantages

Horizontal diversification competitive products,complementary products, by-products

Limitations Definition of market Ignores factors such as competitors Suggests strategies in isolation

Method (see next page)

Low

Low High

Benefit

Price

High

Fail

Fail

FocusedDifferentiation

DifferentiationHybrid

Low Price

No Frills Fail

StrategicClock

Market Facing

Resource Based View


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Method of Growth?

Acquisition versusOrganic growth

Acquisition

Advantages Quick Lower risk Overcomes barriers to entry Same number of competitors Can block a competitor Possible synergies Possible under-valuation of

target

Disadvantages Purchase premium Integration issues

o Systemso Peopleo Culture

Synergies do not

materialise Reputation of target

OrganicGrowth

Advantages No premium for assets People development Staged investment Established culture Introduction of new

technology and systems

easier Possibility of grants

Disadvantages Slow Increases number of

competitors Overcoming barriers to

entry No opportunity for

synergies Higher risk

Possible synergies Market Economies of scale Shared activities Surplus assets Vertical integration Skills transfer Dilution of risk Reduced power of

buyers/suppliers Tax advantages

Joint DevelopmentMethods

Joint VentureSeparate business entitywith equity form two or more businesses

Strategic AllianceLong-term agreement toshare knowledge,competences, technologyfor mutual benefit

LicensingGiving the right toexploit brand, recipe,process etc for ashare of the rofits

FranchisingGiving the right to exploit a businessmethod/model in return for a capital sumplus a share of the profits. Franchisor usually provides support e.g. marketing,

training, technical

Quick growth Access to competences Less financial risk/outlay Overcome product, market,

operational risk May lose competences Train future competitors Brand infection Operational and contractual

disputes Ownership of assets Sharing of profits

Withdrawal

Divestment Quick Higher price due to

strategic value

Demerger Gives shareholders

an exit route Management can

focus on core areas Two companies can

develop separateidentities

Management Buyout(MBO)

Consider On-going involvement of

holding company Why is holding company

selling? Loss of Holding company

help, e.g. technical support,finance services

Quality of management team Price Personal risk, e.g. home at

risk?


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Business Sector Prospects

High

Low

LowOpportunities to add value

BCG Matrix

High

Low

High LowRelative market

share

PROBLEM CHILDBuild or Divest

Losses, negative cash

CASH COWHold then Harvest

Profits and positive cash

DOGHarvest then Divest

Profits to losses, positiveto negative cash

Problems: Definition of axes Definition of market No account of complimentary goods Assumes high market share = advantage

PortfolioAnalysis

STARBuild then Hold

Losses to profits, negativeto ositive cash

Directional Policy Matrix

Weak

Unattractive Attractive

Phasedwithdrawal

Proceed withcare

Phasedwithdrawal

Proceed withcare

Growth

Withdrawal

CashGeneration

Growth

Leader

Double or quit

Try harder

Leader

Average

Avge

Strong

CompanysCompetitiv

e

Public Sector Portfolio Matrix

Publicneed &Fundingeffective

ness

High

Low

High LowValue for money

Political hot box

Golden Fleece Back drawer issues discontinue

Public sector Star

Market Attractiveness/SBU Strength matrix

High

Strong Weak

Business strength/Competitive position

Hold leadershipLeveragestrengthsUse EOS

Avoid me tooDifferentiate

Re-invest

Segmentbetween growth

and harvest

Enhance LeadDiversifyRe-invest

Segment focusSeek

advantage

Harvest throughsale of business

MaintainleadershipIn attractivese ments

HarvestPrice-upCut costs

Line pruning

Divest/Liquidate

Average

Med

Low

Long-termIndustry

attractiveness

Alien Territory

Ballast

Edge of Heartland

Heartland

Ability toAdd value

High

Ashridge Portfolio Display Corporate Parents

Marketgrowth

Value trap


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`

StrategicChoice (SAF)

SuitabilityIs the proposed strategy suitable for thepresent situation and circumstances of theorganisation?i.e. Is it suitable given the SWOTanalysis?

AcceptabilityWill the proposed strategy meetthe objectives of the organisationand, therefore, be acceptable tothe ma or stakeholders?

FeasibilityHas the organisation got, or can it get,the necessary resources to carry out thestrategy?

Strategic Drift

Risk Cost/Benefit

Strategy Environment

Types of Change

Incremental

Big Bang

Transformation RealignmentExtent of change

Adaptation

Revolution Reconstruction

Evolution

Speedof

Change

Lewins ForceField Analysis

Driving Forces Restraining Forces

Job Factors

PersonalFactors

Organisation

Factors

Strengthen Weaken

Unfreeze Change Refreeze

SocialFactors

ChangeManagement

Time

Scope

PreservationDiversity Capability

Capacity

Readiness

Power

ChangeKaleidoscope

Participation Education & communication Facilitation & support Negotiation Manipulation Coercion

SupportinMechanism


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Marketing

Firms orientation

Productto meetneeds

ProductionSales

Marketingidentify, anticipate and satisfy

customer requirements

MarketingStrategy

Kotlers Four Pillars

Target Markets

Customer needs

Coordinated marketing

Profitability Analyse environmentand competitors PEST

/ Porters five forces

Market Segmentation andTarget Market

division of the market intohomogenous groups of potentialcustomers who may be treatedsimilarly for marketing purposes

Geographic Demographic

o Ageo Gender o Incomeo Family life-cycle

Social class Psychological Education Hobbies

Undifferentiated

Differentiated

Concentrated

Marketing Researchsystematic gathering,

recording and analysing of dataabout problems relating to the

marketing of goods and services

Desk researchsecondar data

InternalAccounts, Salesreports, Customer com laints

ExternalCSO reports,Businessmonitors, Trade

journals,news a ers

Field Research(Primary data)

Interviews, focus groups,questionnaires,

experiments, Testmarketing

Marketing Mix 4Psset of controllable

marketing variables used toproduce desired response inthe target market

Product

Productmix

Product Life Cycle

Product qualitiesFeatures, options,range, warranty,branding, packaging

Place

Distributionchannels

Market coverage Outlet locations Warehousing

Promotion

Communications Mix:AdvertisingSales promotionPublic relations

Personal selling

Price

Price levels Discounts Allowances Payment terms Delivery options

A AwarenessI Interest

D DesireA Action Product

Implementation Issues

7 Ps

PhysicalEvidence

Processes

People


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OrganisationalStructure

Centralised vs Decentralised

S StrategyT TechnologyO ObjectivesP People

T TasksI Ideology

E EnvironmentS Size

Entrepreneurial Fast decisions Responsive to market Congruence No career structure No autonomy Single product & market

Functional Economies of scale Specialists with some autonomy Career structures Frees up entrepreneur Slow decisions (bureaucratic) Functional silos Few products & markets

Divisional Multiple products &

markets Autonomy for SBU

managers Training of SBU managers Frees up senior managers Focus on specific

products/markets Loss of congruence? Duplication of effort Isolation of SBU

managers


Matrix Breakdown of silos Shared knowledge Skill development Innovation and creativity Dual command Dilution of functional

authority Time consuming meetings

MintzbergsStructural

Strategic Apex

Middle Line

Operating core

Techno-structure

SupportStaff

Simple structure =entrepreneurial

Machine bureaucracy= functional

Professionalbureaucracy =decentralised

Divisional form Adhocracy = matrix

Planning and control

Direct supervision Planning processes Performance

management Internal market Culture Self-control

StrategicPlanning co.s

FinancialControl co.s

StrategicControl co.s

ManagingBusiness

Units

ParentalDeveloper

SynergyManager

PortfolioManager

T es of Structure

ExternalRelationships

Outsourcing

NetworkOrganisation

VirtualOrganisation

Reduced cost Skill shortages Flexibility Focus on core business Loss of control Supplier dependency Confidentiality Loss of in-house skills

Decentralisation

Advantages: Frees senior

management Better local decisions Better motivation Flexibility Training/career path

Disadvantages: Loss of control Loss of congruence Duplication of effort Extra costs of control


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The InternationalMarket Place

Reasons for growth in

international businessConvergence of Markets

Cost advantagesEconomiesof scale

Countrys ecific costs

PoliticalInfluences

Trend to Globalproducts

Objectives of international

rowth

Expand sales

Acquireresources

Diversifysources of

sales &supply

Generalrisks

PoliticalLegal

Economic

Social/cultural

Technological

Exporting Low capital outlay Low risk Can learn about market May not meet customer needs

Perceived lack of commitment High distribution costs

Joint Venture &Franchising

Access to local resources Reduced national sentiment Shared capital input Access to competences and

knowledge Shared profits Lose competences

Train competitor Operational disputes

Foreign Direct Investment Closer to market Retain profits More control Reduced operational conflicts High financial risk Staffing decision Integration difficulties

Methods of International Expansion

Global Multi-Domestic Hybrid

Perceives foreign markets assimilar to domestic market

Products & marketing mixconstant

Standardisation to save time andmoney

Supply-driven policy

See overseas market as distinctive Customised products and

marketing mix Increased overseas sales volumesBUT Fewer EOS giving higher costs, so

volumes not turned into profits

Standardise wherever possible,e.g. RnD, Branding

Market convergence may allowstandardised product

BUT Demand-driven Customised marketing mix

where necessary = GLOCAL

STAFFING

Overcomes lack of host skills,unified culture, Transferscompetencies

Resentment by host, singlecultural view

Multi-cultural view, inexpensive Limits career mobility, isolates HQ

from subsidiaries

Efficient use of HR, builds strongculture and managementnetwork

Subject to National immigrationpolicies, expensive

CompetitiveForces


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Improving Processes Harmons

Process-StrategyMatrix

Planning

Redesign

Development

Analysing

BusinessProcess Change

Process Improvement

ProcessMeasures


High

Low

Low HighStrategic

Importance

Complex & dynamicHigh strategic value for

advantage- Process Improvement

Static / commodity- Outsource/Automate- Minimum resources

Static but valuable- automate for efficiency

Complex but not corecompetence- Outsource

ProcessComplexityDynamics

Process Redesign

Process Re-engineering

Transition

Feedback control systems

TARA

Input-Process-Output

Action Target

Actuals

Review

Software Solutions Systems Development Life

Cycle

Review

Implementation

Design& SelectSoftware

Establish business needs

Interviews Questionnaires Observation Documenting tools Workshops Protocol Analysis Prototyping

Quality of Support User Friendliness Ability to meet needs Compatibility/Integration Costs S upplier factors

S taff training Installation File conversion Testing

Generic Solutions Speed Cost Risk Support Unique needs

Supplier power Compatibility/Integration No advantage

Software System Project

Weighting and Scoring

Simplification Eliminate duplicated

activities

Value -addedanalysis

Eliminate non-valueadded activities

Gaps &disconnects

Failures incommunication


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InformationTechnology

Supply ChainManagement

Value chain

StrategicContext Web-

Presence

E-commerce

IntegratedE-commerce

E-business

Barriers Technophobia Security Set-up costs Running costs Limited

opportunities Limited resource Disinterested

customers

Push vs Pull

Push = Supplier led

Pull = Customer led

Upstream(Suppliers)

E-procurement

E-sourcing

E-purchasing

E-payment

Risks

Downstream(Customers)

Technology Organisational No cost savings

Switching costs Disintermediation Re-intermediation Updates Communication User community Tracking

preferences Customisation

E-marketing

7Ps 4Ps People Processes Physical evidence

6 Is Integration Industry structure Independent

locations Individualisation Intelligence Interactivity

Customer RelationshipManagement

Acquisition

Selection

Customer LifeCycle

Retention

Extension

E-branding

-Recency-Frequency-Monetaryvalue


Generic strategies

Porters Five Forces


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3.4 defects in1 million

TQMGet it rightfirst time

Commitment Communication

Continuousimprovement

Competence

6 CsCustomers

Costs(PAF)

Quality

Fitness for Use

Quality Control

Quality Assurance

Proactive

Reactive

Appraisal

Failure

Preventative

Internal

External

QualityStandards

QualityCertification

SixSigma

KeyRequirements

6 CsTeam Roles

Green Belt

ImplementationLeader

Master Black belt

Black Belt

6 SigmaChampion

Problem SolvingProcess(DMAIC)

Control

Improve

Analyse

Measure

Define

QualitySoftware

The V Model

Acceptance testing

System testing

Integration testing

Unit testing

Coding

Unit Design

System Design

Functional spec

Requirement spec

Capability

MaturityModelIntegration

(CMMI)

Level 1Performed process

Level 2Managed process

Level 3Defined process

Level 4Quantitatively Mangd

Level 5Optimising process


99.99966%

T

I

S

A

Test Plans


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Project

Management(IPECC)

Initiation

ProjectInitiation

Document

ProjectAppraisalFeasibility

Stakeholders

Quality

Time

Risk

Technological Operational Economic S ocial

Resources

Put plan into action

Tolerate / Accept Treat / Reduce Transfer / Insure Terminate / Avoid

Purpose Scope Deliverables Costs Time Objectives Stakeholders Org structure

Sponsor Manager Team

SWOT

Project Leader

P lanning

Quality Resources Evaluation Dissemination Exit Sustainability

CriticalPath

Analysis

Time

WorkBreakdownStructure

Execution

Motivation Planning Co-ordination Communication Problem solving Change Mgt Budgeting Meetings

Monitor And

ControlTARA

ProjectInitiation

Document

Frequency

Complexity Risk Cost

CorrectiveAction

Adjust Plan

MotivationCrashing

Fast Track

Increaseresource

Com letion

EnsureCompleted

Final report & audit

Smoothhandover

Tie up looseends

Compare PIDto Outcome

Formally terminateproject

Evaluate performance



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Role of Finance

Strategy

FinancialStrategy

CompetitiveStrategy

InvestmentStrategy

Not for ProfitOrganisations

Core FundingCore Costs

Management R&D Support Services

FinancingDecisions

Cost Gearing Control Security Cash flow Availability Exit routes

Considerations

Alternatives

Equity

Debt

Retained earnings Ordinary shares

Debentures Loans HP/Leasing Overdraft Trade Creditors

Pref shares

Grants

Ratios

Gearing

Liquidity

Efficiency

Profitability

ROCE Gross/Net Margin ROE

Asset turnover ROCE Receivables Payables

Inventory Revenue/employee Current ratio Quick ratio

Dividend cover Interest cover EPS PE ratio

Investor ratios

Limitations Only comparative Inflation Definitions Accounting policies Availability of info Historical

Inter-firm comparisonLimitations Accounting policies Bias by large/small firms Unrepresentative avge Industry classifications Financial periods

InvestmentAppraisal

TraditionalMethods

Discounted cashflow techniques

ROCE

Payback

NPVIRR

Strategic funding Self generated income Developmental funding Cost minimisation Apportion overheads to projects


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Review and Control

Profit Related Measures

Examples Gross margin Net margin Cost % sales

Profit

Problem:no account taken of investedcapital used to generateprofits

Return OnInvestment

ROI

ResidualIncome (RI)

PBIT X 100 = %

CE

Relative Measure %

PBIT(CE x imputed interest rate)

RI

Absolute Measure s

Problems: Sub-optimal

investmentdecisions

Deplete capitalassets too early

Problems: Absolute measure

poor for performance

comparisons

Joint issues when used in isolation Backwards looking measures Short-termist decisions Open to easy manipulation of discretionary costs and

capital employed

ConclusionFinancial measures should not be used in

isolation to measure performance but shouldbe combined with non-financial measures.

The Balanced Scorecard

Financial Perspective

Internal BusinessPerspective

Learning & GrowthPers ective

Customer Perspective

1. Identify CSFs2. Identify competences required for CSFs3. Develop KPIs for competences4. Measure competence5. Take action continuous improvement

Benefits Longer-term

measures More difficult to

manipulate Measures

determinants andresults

Promotes goalcongruence

Includesstakeholders

PotentialDrawbacks

Measures conflictwith each other

Requires culturalchange

Overload paralysis byanalysis

Time and cost No obvious

relationship withshareholder wealth


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HR Gap

Current HRposition

Current & futureHR needs

Labour supply

Strategy andPeople

Strategic andcoherentapproach

HR Planning

RewardManagement

Job design

WorkplaceLearning

CompetencyFrameworks

Assessment& Appraisal

Leadership

Classical

Purpose

Barriers

Likert'sManagement

Styles

Trait Style Contingency Situational

Charismatic Transformational Transactional

Exploitative autocratic Benevolent authoritative Participative Democratic

Communication Teamwork Delegation Motivation Trust

P erformance P otential Training

Confrontation Judgement Chat Bureaucracy Event Unfinished

business

PerformanceMeasurement

Employee ranking Rating scales Checklists Critical incident method Free reporting Performance contract BARS Appraisal interviews

Categories Levels Design Issues Techniques Strategic alignment

Considerations: Fair & consistent Motivation Reward performance Recognise job factors

Control salary costs

Scientific Mgt Job enrichment Japanese Mgt BPR Teamwork Succession

planning

TARA

Analyse behaviour Recruitment Training needs Manage

performance Benchmarking

Learningorganisation

KnowledgeManagement


Recruitment

Motivation

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