ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANT PROFESSIONAL - 3 BUSINESS ANALYSIS

PART A: STRATEGIC POSITION CHAPTER 1: BUSINESS STRATEGY

ACCA P3: Business Analysis

CONTENTS

What is Strategy? Levels of Strategy in an Organization Elements of Strategic Management The Importance of Context The Strategy Lenses

1. WHAT IS STRATEGY?
Strategy

The direction and scope of an organization over the long term, which achieves advantages in a changing environment through its configuration of competences and resources with the aim of fulfilling stakeholder expectations

Johnson, Scholes, and Whittington (JS&W) defines 6 general areas for strategy:
1. 2. 3. 4. 5. 6.

JS&W describe important characteristic of strategic decision

1. 2. 3. 4. 5.

Long-term direction Scope of an organizations activities Advantage in competition Adapt to changing environment Exploit unique resources and special competences Affected by stakeholders values and expectations

Complex High degree of uncertainty Extensive impact on operational decision-making Integrated approach Lead to change

Strategies are developed in order to achieve desired outcomws. These are inherent in the organizations mission/defining purpose. Mission guides strategic decisions & provides values & a sense of direction

Ashridge College Model of Mission:

1. 2. 3. 4.

Purpose defines why does the organization exists Values the beliefs & moral principles that underlie the organizations cuture Strategy provides the commercial logic for the company Policies and Standard of Behavior provides guidance on how the organizations business should be conducted

1. WHAT IS STRATEGY?

Mission Statement:

Goals, Objectives and Targets

Formal documents that state the organizations mission to promote support for strategy and purpose, adherence to core values and adoption of policies and standard of behavior

A structure of goals and objectives derives from mission and support it.

Goals can be related in several ways:

The importance of mission:

Values are acknowledged as integral elements of consumers buying decisions People are motivated by many things other than money There is an empirical relationship between strong corporate values and profitability

Hierarchically Functionality Logistically In wider organizational senses

SMART Goals

The mission can effect strategic planning process:

Specific, Measurable, Achievable, Realistic, Time-Related

Inspires and informs planning Screening Affects the implementation of a planned strategy

Function of Objectives

PRIME Planning, Responsibility, Integration, Motivation, Evaluation

2. LEVELS OF STRATEGY IN AN ORGANISATION

Corporate Strategy Business Strategy Operational/Functional Strategy The general direction of the whole organisation How the organization/its Strategic Business Unit tackle particular markets
Specific strategies for different department of the business Concerned with how the component parts of an organization deliver effectively the corporate and business level strategy in terms of resources, process, and people

Aspects of Corporate Strategy

Characteristic Scope of Activities Expectation of Stakeholders Resources Comment
Impact upon the whole organisations Prioritise the stakeholders expectation Allocating/obtaining corporate resources now and in future

Operational Strategy in individual business functions

Functional Area Marketing Production Finance HR IT R&D Comment
Product & services, pricing, promotion, distribution marketing and corporate strategies are interrelated Factory location, manufacturing techniques, outsourcing, etc Funding strategy and using the fund effectively Secure personnel of the right skills in the right quantity at the right time Item of expenditure, administrative support, and tool for competitive strength

New products and techniques

3. ELEMENTS OF STRATEGIC MANAGEMENT

Environment Capability Stakeholders expectations

Environment
Opportunities Threats Complexity

Capability
Resources & competences Strengths Weaknesses

Stakeholders Expectations
Purpose of strategy Power/Interest Governance Change

Strategic Position/Analysis

Business Level Corporate Level International evaluation

Strategic Choice

Strategy into action (implementation

Structuring
Processes Relationship Organisation structure

Enabling
Management of resources

Change
Management of change

4. THE IMPORTANCE OF CONTEXT

Small Business
Characteristic
Limited range of products in a limited markets Limited planning resources; ownership interest among managers Significant pressure from competitors Limited financial resources

Multinationals
Effect on Strategic Processes
Few problems in scope Strategy based on values and experiences

Characteristic
Diverse products, processes and markets Significant resources Multiple markets, operations, and facilities

Effect on Strategic Processes

Problems of relationships, structure, and control Allocation and coordination of resources Great importance of logistics of manufacturing and supply

Exploitation of competences & resources Importance in choice of competitive strategy & knowledge of market & competition Constant attention to building relationship with providers of funds

The Public Sector

Not-for-Profit Organisations

Importance of underlying values and purposes Diverse source of funds that may have to be competed for Centralised decision-making (due to potential for conflict between stakeholders and need for transparency of governance)

Influence of ideology on strategy External influence and even control, especially by government Political constraints on funding and strategic choice Requirement to provide a universal service Competition for resource inputs within a political arena for noncommercial organisations Need to demonstrate best value in outputs Need to demonstrate improvement in social outcomes

5. THE STRATEGY LENSES

New ideas / innovation

Strategy as Design

Ideas

A rational, top-down process rational managers, clear objectives. Strategy is exclusively managements responsibility and the organizations plans is to implement managements plants.

Strategy as Experience

Design

Experience

An adaption of what was worked in the past based on experience, assumptions, and decisions to satisfice rather than optimize. Strategies develop in incremental and adaptive ways, and emerge from the lower levels of the organization.

Conformity Analysis & Control

Strategy as Ideas

Strategy based on innovation, diversity of ideas, informal interaction and experimentation. Manager create the context and conditions for new ideas to emerge but must prevent strategic drift. Organisational culture must support innovation.

References
ASSOCIATION OF CHARTERED CERTIFIED ACCOUNTANT

BPP Learning Media, September 2012