p3 Smart Noes (50 Pages Only)

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ACCA
SMART NOTES
ACCA P6
(ADVANCE TAXATION)
50 Pages only
BUSINESS ANALYSIS
AZIZ UR REHMAN
(ACCA, CPA, CMA)
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ACCA P6 SMART NOTES (50 Pages)

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Contents
CH #:
Chapter Name:
Page no
BUSINESS STRATEGY
Chapter 1
Mission & Mission Statement

Strategy
Levels of strategy
Types of Strategy
Strategic lenses
ENVIRONMENTAL ANALYSIS
Chapter 2
PESTEL
Porter Five Forces
Scenario planning
Forecasting
Porter Diamond
Industrial Analysis
Types of industry
Strategic Groups
Convergence
Sustaining competitive advantage
Hyper competition
Marketing
Market analysis
Customer analysis
Targeting
Marketing mix
E-Marketing
Branding
Customer Relationship management
STRATEGIC CAPABILITY
Chapter 3
Strategic Capability
Resources
Competence
Cost efficiency
CSF & KPIs
Knowledge Management
Organisational Learning
Benchmarking
Value chain Analysis
Value Network
Product Life Cycle
SWOT analysis
TOWS matrix
10
STRATEGIC CHOICE
Chapter 4
Porter Generic Strategies

Strategic Clock
Ansoff Product/Market Matrix
Diversification
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Unrelated
Related
Horizontal
Vertical
Methods of Developments
Organic Growth
Mergers & Acquition
Alliances
Licensing
Franchising
Outsourcing
Demerger
International Expansion
Corporate Parenting
Ways of Adding & Destroying Value
Rationales of Adding Value
BCG Matrix
Ashridge Portfolio Matrix
Evaluation of options (SFA analysis)
ORGANISATIONAL STRUCTURE
Chapter 5
Types of organizational Structure

Entrepreneur
Functional
Product
Geographical
Matrix
Tall & Flat
Centralisation & Decentralization
Mintzberg Building Block & Organiational Configurations
24
BUSINESS PROCESS
Chapter 6
Business Process
Harmon Process Strategy Matrix
Outsourcing
Process Redesign
Process of Process Redesign
Factors to consider Process Redesign (POPIT Model)
27
CHANGE MANAGEMENT
Chapter 7
Types of strategic Change

Context of Change
Cultural Web
Force Field Analysis
Lewin Process Change
Leadership Style for Change Management
Change Agent
Process Change Lifecycle

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ROLE OF IT
Chapter 8
E-Business
Stages of E-Business
Advantages & Disadvantages
IT Risk & Control
Continuity Planning
Disaster Recovery Planning
Market Restructuring
Intranet & Extranet
Supply Chain Management
Upstream SCM
E-Procurement
Components & Benefits
Downstream SCM
How to Improve
Role of IT to improve
Re-Structuring Supply Chain
Software Solution
Establishing business information needs
Using generic software solutions
Evaluating and selecting a generic software solution
Implementation
34
STRATEGY and PEOPLE
Chapter 9
Theories of Leadership
Trait
Behavioural
Transformational
Contingency
Job Design
Scientific Managemet
Job Enrichment
Japanese Managent
Re-engineering
Succession Planning
40
PROJECT MANAGEMENT
Chapter 10
What is Project?
Project Definition
Force Field Analysis
Gap Analysis
Project Selection
Risk Assessment and Management
Pre-Initiation Tasks
Initiation Tasks

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Business Case
Contents of business Case
Reasons for building business Case
Identifying the benefits
Chapter 11
Identifying the cost

Cost benefit analysis
Responsibility for delivering Benefit
Benefit Realization Plan
Benefit dependency Network
Project initiation Document (elements)
Project Planning
Why project go wrong?
Force field analysis
Work breakdown Structure
Project Budget
Network Analysis
Critical Path Analysis
Gantt Chart
Resource Histogram
Project Execution
Project Sponsor
Project manager
Duties
Skills
Project Owner
Project Team
Team Development
Team Roles
Matrix Structure
Controlling the Project
Gateways
Progress Report & Realistic Timescale
Dealing with Slippage (Fast Tracking & Crashing)
Project Change Procedure
Project Completion
Post Project Review
Post Implementation Review
Benefit Realization Review
Finance

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CHAPTER 1
BUSINESS STRATEGY
1
MISSION, GOALS, PLANS AND STANDARDS

Mission:
The reason of existence of an organisation is called mission of the organisation or
The business's basic function in society', is expressed in terms of how it satisfies its stakeholders.
Mission Statement:
Mission statement is a formal document that conveys the mission of the organisation to stakeholders.
Characteristics of mission statements:
Elements of mission
Brief;
Purpose
General;
Values
Statement of purpose;
Strategy
Powerful force for change;
Policies and standards of behavior
Clarify the mission;
Communicates the mission to stakeholders.
Advantages of developing a formal mission statement
Disadvantages of developing a formal mission
Determine direction
statement
Unified strategy
Time consuming
Problem in identifying priorities.
Communication of mission to stakeholders
May only be used for communication and
Basis of competition (high quality or cost reduction)
ignored by top management.
Consistency of Basis of competition
Deter innovation.
Identify key stakeholders
Keep key stakeholders satisfied
help to prevent future misunderstandings
Improves coordination between various departments,
managers and employees.
Role of mission statement in the strategic planning process
Mission statements can play an important role in the strategic planning process, but they are most suitable for
companies which follow the full rational planning model. In such companies, a mission statement can influence the
way a company implements its planned strategy and it can act as a reference document against which future business
plans can be judged.
GOALS AND OBJECTIVES
Goals: The intentions behind decisions or actions' or 'a desired end result.
Objective: Objective is the more specific goals that support the mission of the organisation.
Characteristics of objectives: SMART. Specific, Measurable, Achievable, Relevant, Time-bound.
PAST EXAMS
Bonar Paint June 2007. Question 1.(c):
What are the advantages and disadvantages of developing a formal mission statement to guide Bonar Paints future direction
after the buyout and what role could the mission statement play in the strategic planning process? (15 marks)
Hammond Shoes June 2012 Question 1.(c)
Advise the Hammond family on the importance of mission, values and objectives in defining and communicating the strategy of
Hammond Shoes. (12 marks)
2 WHAT IS STRATEGY OR STRATEGIC PLAN?

Strategy: Long term plan to achieve the objective of the organisation.
Johnson, Scholes and Whittington (JSW) on strategy defined strategy as the direction and scope of an organisation
over the long term, which achieves advantage in a changing environment through its configuration of resources and
competencies with the aim of fulfilling stakeholder expectations.
Characteristics of strategic decisions
Determine the long term direction of the company.
Are concerned with the scope of an organisations activities (i.e. types of products, services and markets).
Aim to match activities to resource capabilities.
Have significant effect on lower-level decisions.
Considers all stakeholders.
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Involve uncertainty about the future, the integration of operations and major change.
Aim to match activities with the firms environment:
Competitive environment (e.g. meeting needs of the market);
Financial environment (e.g. satisfying shareholders expectations);
Social environment (e.g. eco-friendly activities).
LEVELS OF STRATEGY/STRATEGIC PLANNING
CORPORATE STRATEGY
BUSINESS STRATEGIES
The corporate-level strategy is concerned with the overall
Planning at this level often relates to a strategic
purpose and scope of an organization and how value will be
business unit (SBU) A section within a larger
added to the different parts (business units) of the
business which can perform independently is called
organization. It considers:
strategic business unit (SBU).
The firms orientation towards growth (known as
How to achieve competitive advantage in
directional strategy)
particular markets?
Diversification of organisations products and markets
Planning about the utilization of resources to
(known as portfolio strategy)
achieve specific objectives.
Management of strategic business units
(parenting strategy)
FUNCTIONAL (OPERATIONAL) STRATEGIES
Planning at this level relates to the components (departments) of strategic business unit (SBU).
It includes planning about resources, processes and people.
4
POSITIONING VERSUS RESOURCE-BASED VIEWS OF STRATEGY

The positioning-based view states that strategy development is about identifying opportunities in the
environment and developing strategic capability to take advantage of them.
The resource-based view states that Strategies are developed on the unique capabilities of the business, and
opportunities are searched to allow business to exploit these capabilities to achieve competitive advantage.
5 TYPES OF STRATEGY
RATIONAL STRATEGY
EMERGENT STRATEGY
Strategy is the outcome of a formal (rational) planning Emergent strategy is strategy that is not formally
process, in which management go through a formal planned, but develops by emerging different ideas in
procedure for:
response to unforeseen changes in the environment and
Strategic position analysis
unexpected opportunities that arise.
Strategic Choice (Identifying and evaluating strategic For example a business develops a new product. A
salesman visits a customer and finds that the product
options and making strategic choices)
isnt right. So they work out some modifications and
Strategic implementation (Implementing the
after few more rounds the finally get the new product.
strategy)
INCREMENTAL STRATEGY
FREEWHEELING OPPORTUNISM
Incremental strategy is strategy that is developed over Followers of freewheeling opportunists do not like
time by making small incremental changes to existing planning. They prefer to see and capture opportunities
strategies. This type of strategy is only safe within a as they arise. They are of the belief that planning is too
stable business environment, where change is slow and much time consuming.
gradual.
MINTZBERG 5 TYPES OF STRATEGIES: Mintzberg (The Strategy Process) identified the following.
Intended: Result of a deliberate planning process. Deliberate: Intended plans have been put into action.
Unrealised: rejected strategy..
Emergent: Strategies developed through ideas

addition.
Realised: The final realised strategy results from a balance of forces of the other types of strat egies.
Intended
Deliberate strategy
Realised
Strategy
Strategy
Unrealised
Strategy
Emergent
Strategy
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6 THE IMPORTANCE OF CONTEXT

The context of strategy is the organisational setting in which it is developed.
Small businesses tend to have limited resources and strong competition;
Multinationals are more concerned with problems of structure, resource allocation and logistics.
Public sector and not for profit organisations are influenced by ideology, politics, and the influence of a range of
stakeholders. Intangible aspects have become very important for companies dealing in physical products.
7 THE STRATEGY LENSES
Johnson and Scholes have suggested a slightly different approach to understanding strategy development. They have
suggested that there are three different ways of looking at strategy development and, depending on circumstances,
each approach might be appropriate.
STRATEGY AS DESIGN
STRATEGY AS EXPERIENCE
Strategy development can be a logical process which Adapting current experience Strategy as experience
consist of analysis of current position, identification of views strategy as an adaptation and extension of what
option, evaluation of options, selection of best option has worked in the past. It does not look to change the
and the finally the implementation of that option. existing strategy but to adapt it, and build on it and as
Strategy as a design is similar to Rational strategy.
such tends not to be appropriate for major change.
Characteristics:
Therefore, changes are often incremental as an
Top-down process senior managers establish a organisation adapts to new opportunities or threats in
clear course of strategic action as a result of its environment. Strategy as an experience is similar to
analysing and evaluating strategic options.
incremental strategy.
Senior management responsibility senior Characteristics:

management is responsible to develop the strategy Strategy through past expeience
and lower levels of management is responsible to May amend existing strategy by not suitable for
deliver the operational actions.
major change.
Clear objectives
Involvement of all levels of management.
Lack of consultation
No change in Culture (paradigm)
Rules based approach

Risk of Strategic drift
Careful in-depth analysis

Normally develop when problem occur.
Strategy based on organizational strengths &

resources.
STRATEGY AS IDEAS
This approach to strategy emphasises innovation and the need for new ideas. These ideas can emerge from all levels
of an organisation, not just from senior management.
Strategy as ideas is similar to emergent strategy.
Characteristics:
Innovations
Environmental based
High cost strategy
Rapid change
Team work
Suitable for major change.
Ideas in a time of change The ideas lens suggests that strategy can emerge from the way people in an
organisation respond to changing force s in the organisation and the environment.
Context for ideas To be successful at generating ideas there must be a culture and context which encourage
staff to generate ideas and to embrace change.
Drivers for change Rapidly changing environment increase the need of innovative ideas.
PAST EXAMS
National Museum December 2008. Question 1.(c)
Johnson, Scholes and Whittington identify three strategy lenses; design, experience and ideas.
Examine the different insights each of these lenses gives to understanding the process of strategy development at the National
Museum. (10 marks)
Midshire Health
June 2013 Question 1.(b)
Johnson, Scholes and Whittington identify three strategy lenses: design, experience and ideas.
Evaluate the strategic planning project at MidShire Health through each of these three strategy lenses. (10 marks)
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CHAPTER 2
ENVIRONMENTAL ANALYSIS
1 Analysing Macro-Environment (PESTEL Analysis)
The environmental analysis will be carried out using the PESTEL model to consider the political, economic,
social, technological, environmental and legal factors that affect abc ltd.
Political Factors: Govt. policies effects the planning activities of organization.
Govt policies includes Fiscal policy (taxes, borrowing, spending), Monetary policy (interest rates, exchange rates)
and Size and scope of the public sector.
Economical Factors: These operate in both a national and international context. Relevant factors include: Inflation
rates, Growth/fall of GDP, Employment rates, Savings levels, Interest rates, Exchange rates, Tax levels, International
trade, The business cycle Capital markets
Social Factors: It includes both social and cultural factors. E.g. Age distribution, Health of people, Wealth, Taste of
people, People class, Life style changes, Age group, Gender, Attitude of work, Religion.
Culture in society provides a framework for understanding beliefs and values, and creates patterns of human
activity. It influences tastes and lifestyles.
Technological factors: Technological developments affect all aspects of business. New products & services become
available, New methods of production and service provision, New ways of selling (e-commerce); Improved handling
of information in sales and finance, New organisation structures to exploit technology, New media for
communication with customers and within business (eg Internet and email); facilitates bu siness becoming global.
Environmental: Environment is important for logistical reasons, as a source of resources, and because of increasing
regulation. Pressure coming from many quarters: Green pressure groups, Legislation, Employees, Environmental
risk screening, Corporate Social Responsibility.
Possible green issues for businesses to consider: Consumer demand for environmentally friendly products, Greater
regulation by governments and international bodies, Businesses may be charged for the external cost o f their activities,
Scarcity of non-renewable resources, Sustainability of operations. Opportunities to develop new environmentally friendly
products and technologies
Legal: There are laws & Regulations related to every organization and influence their strategic planning.
E.g. Company law, Employment law, Health & safety law, Data protection Act, Crimes law, Legal framework,
Environmental law, Tax law, Accounting or reporting law, marketing law.
PAST EXAMS
National Museum December 2008. Question 1.(A)
Analyse the macro-environment of the National Museum using a PESTEL analysis. (20 marks)
Wetland
June 2010 Question 1.(A)
The new CEO, Sheila Jenkins, recognises that she should understand the strategic position of WET before considering str ategic
options and changes. She wants a concise assessment of the strategic position; covering environment, strategic capability,
stakeholder expectations and organisational mission.
Undertake the assessment, required by Sheila Jenkins, of the strategic position of WET. (25 marks)
Eco Car June 2011. Question 1.(A)
Universal Motors have explicitly recognised the need for analysing the external macro-environment and marketplace (industry)
environment of EcoCar. Analyse the external macro-environment and marketplace (industry) environment of EcoCar. (16 marks)
(b) Universal motors is considering outsourcing the EcoLite model to an overseas manufacturer, whilst retaining in-house
production of Eco and EcoPlus models. Evaluate financial and non-financial case for and against the outsourcing option. (15 marks)
(c) Three weaknesses identified by Universal Motors are (1) lack of control and co-ordination, (2) research & development
succession and learning and (3) the understanding of risk. Analyse how each of these three weaknesses might be addressed at
EcoCar. (15 marks)
GET
December 2011. Question 1.(A)
Using appropriate models analyse GETs current strategic position from both an internal and ex ternal perspective. (20 m)
Moor Farm
Evaluate the strategic position of the estate with specific reference to the expectations of stakeholders, to the external
environmental factors beyond the control of the estate and to the strategic capabilities of the estate itself. (15 marks)
Analysing Competitive Environment (Porter Five Forces Analysis)
Porter's five forces model is a framework for analysing the competitive environment; it includes threat of new entrants;
substitute products; the bargaining power of customers; the bargaining power of suppliers; competitive rivalry.
Porter suggest that competitive forces influence the state of competition in an industry, and collectively determine the profit
potential of the industry as a whole.
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Threat of new entrants (and entry barriers to keep them out): A new entrant into an industry will bring extra
capacity and more competition (and so could, in turn, drive down profits). This threat depends upon entry barriers
which includes: Economies of scale, Product differentiation, Switching costs, Access to distribution, Patent rights,
Access to resources, capital requirement.
The threat from substitute products: A subs titute is produced by a di fferent indus try but satisfies the same need. Threat will be
hi gh if: Our product is expensive, Indirect customer relation, Our product has less beneficial or our product has less
features, switching cost is low.
The bargaining power of customers: Customers want better quality products and services at a lower price.
Satisfying this want might force down the profitability of suppliers in the industry. Power will be high if:
Recession in industry, customer has complete information, Few buyers, Bulk buying by customer, Low brand
loyalty, Low demand, Many substitute products.
The bargaining power of suppliers: Suppliers can exert pressure for higher prices. The ability of suppliers to get
higher prices depends on several factors E.g. Small no. of suppliers, If difficult to change supplier due to contract, If
supplier does not depends upon our business, customer has high switching cost, supplier has differentiated
product.
The rivalry amongst current competitors in the industry: competitive rivalry within an industry will affect the
profitability of the industry as a whole and boost the competition. Rivalry will be high if: Fixed cost of production,
Industry recession, High customer bargaining power, Un-differentiated product or service, Low demand but many
suppliers, Same product or services as competitor.
3 Scenario Planning:
Scenarios are a tool to allow managers to envisage alternative futures in highly uncertain business environments.
Scenario is a detailed and consistent view of how the business environment of an organisation might develop in future.
Scenarios are built with reference to key influences and change drivers in the environment. They inevitably deal with
conditions of high uncertainty, so they are not forecasts: instead, they are internally consistent views of potential
future conditions.
For the scenarios to be most use the influencing factors should be:
Limited to a few significant ones
Largely out of the control of the organisation. Macroeconomic forces are usually outside the control of the
organisation and it can only react to, not influence, them
Scenario construction (Mercer)
Factors which could be used to develop scenarios could
be for example:
Identify drivers of change
Change to the economic climate.
Arrange drivers in a viable framework
Competitor response.
Produce 7-9 mini-scenarios
Conventional supermarket approach.
Group mini-scenarios into 2-3 comprehensive scenarios
Impact of IT developments:
Write up the scenarios
Identify issues arising, and what they mean to the
business
4 Forecasting:
Sound knowledge of the environment requires some element of forecasting. The past is not necessarily a good guide to
the future, but in simple, static conditions time series analysis and regression analysis can be used. Economic
forecasting uses leading indicators to assess future economic conditions.
We will discuss in finance chapter.
PAST EXAMS
AutoFone
June 2008. Question 1.(A)
Using an appropriate model or models, analyse the competitive environment of AutoFones retail shops division. (16 marks)
ABCL
December 2009 Question 1.(A)
Xenon usually analyses an industry using Porters five forces framework.
Using Porters framework, analyse the business analysis certification industry (BACTI) in Erewhon and assess whether it is an
attractive market for ABCL to enter. (20 marks)
Nesta
June 2013. Question 2.(A) [Porter 5 forces & scenarios]
(a) Use Porters five forces to assess attractiveness, to NESTA, of entering discount fixed-price retail market in Eurobia. (15 marks)
(b) Discuss the potential use of scenarios by NESTAs managers as part of their analysis of NESTAs possible entry into the discount
fixed-price retail market in Eurobia. (10 marks)
Eco Car
Universal Motors have explicitly recognised the need for analysing the external macro-environment and marketplace (industry)
environment of EcoCar. Analyse the external macro-environment and marketplace (industry) environment of EcoCar. (16 marks)
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Wetland
June 2010 Question 1.(A)
The new CEO, Sheila Jenkins, recognises that she should understand the strategic position of WET before considering strategic
options and changes. She wants a concise assessment of the strategic position; covering environment, strategic capability,
stakeholder expectations and organisational mission.
GET
Using appropriate models and frameworks, analyse GETs current strategic position from both an internal and external
perspective. (20 marks)
5 Porters Diamond
Porter suggests that some nations industries are more internationally competitive than others and this is
due to the conditions in that country that may help firms to compete. This means that the location of the
company can play a big part in establishing international competitive advantage. Porters Diamond consists
of four main determinants of competitive advantage.
Factor Conditions
Related and Supporting industries
Demand Conditions
Firm Strategy, Structure and Rivalry

Factor conditions: These are factors, such as unskilled labour, material, natural environment, skilled labour,
transport infrastructure that are necessary for firms to compete in a given industry.
Demand conditions: Demand conditions are concerned with the level of demand by consumers for a particular
product or service in a company's home market. Customer satisfaction in its home market may help when
anticipating and satisfying buyer requirements in comparable overseas markets.
Related and supporting industries: Related and supporting industries within a country are those which help to
underpin the performance of organisations in a particular industry.
Firm strategy, structure and rivalry
The final component of the 'diamond' model concerns firm strategy, structure and rivalry. Porter identified that
significant rivalry in a given market encourages competitors to continually develop their own products and services in
order to maintain competitive advantage.
PAST EXAMS
Joe Swift Transport
June 2010. Question 2.(B)
Porters Diamond can be used to explore the competitive advantage of nations and could be a useful model for Joe Swift to use in
his analysis of countries that he might move his company to.
Examine using Porters Diamond (or an appropriate alternative model/framework) the factors which could influence Swifts
decision to move a large part of its logistics business to Ecuria.
(10 marks)
MachineShop
December 2013 Question 1.(C)
Dave Deen has heard about Porters diamond and wants an explanation of the principles, relevance and application of this
model. Explain the principles of Porters diamond and use it to assess the relative attractiveness of Ceeland and Arboria i n
providing an environment in which MachineShops growth ambitions could be achi eved.
(10 marks)
6 Industrial Analysis
Industry: An industry is a group of firms producing the same product or products that are close substitutes for one
another. Sector may be used in a similar way in public and not-for-profit services.
The intensity of competition will vary between industries according to the nature of what is being traded.
Primary industries: (involved in agriculture, forestry and extraction of minerals including oil)
Competitive forces tend to be stronger in primary industries because of undifferentiated products, Large number
of producers, High level of fixed and unavailability of alternative products.
Secondary industries: (processing materials by manufacture into final finished products)
Profits will tend to be greater than primary industries due to differentiated product, less number of producers.
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Tertiary industries (Industries engaged in the provision of services)

In some tertiary industries high degrees of differentiation allow high profitability. Examples include accounting and
business services, football and entertainment and some retailing.
Other tertiary industries feature intense competition and low profitability, eg logistics and parcel delivery, office
cleaning, call Centre services.
Strategic groups
A strategic group is a number of entities that operate in the same industry and that have similar strategies or that are
competing in their markets in a similar way.
When there are many competitors in the industry, it can simplify the analysis to put them into strategic groups of
entities with similar resources and similar strategies. For the purpose of competitor analysis, all the entities in the
same strategic group can then be treated as if they are a single competitor. Instead of analysing each competi tor
individually, they can be analysed collectively, in groups.
Strategic space
When these groupings are analysed, a strategic space might become apparent.
A strategic space is a gap in the market that is not currently filled by any strategic group. The existence of strategic
space might provide an opportunity for a company to make a strategic initiative, and attempt to fill the space that no
other rivals occupy.
CONVERGENCE:
Convergence occurs when two or more industries or markets that were separate pr eviously now converge to
become parts of a larger single industry or market
Convergence in substitutes: Where one technology can replace another. E.g mobile and landline phones
Convergence in complements: Two technologies which are complementary to each other work better together
Demand-led convergence: With demand-led convergence, the pressure for industry convergence comes from
customers. Customers begin to think of two or more products as interchangeable or closely complementary.
Supply-led convergence: With supply-led convergence suppliers see a link between different industries and decide
to bridge the gap between the industries. The convergence of the entertainment, voice communication and data
communication industries, is probably supply-led, because suppliers became aware of the technological
possibilities before consumers became aware of the convenience.
SUSTAINING COMPETITIVE ADVANTAGE
Once competitive advantage is achieved then it needs to be preserved over time?
Sustaining Price-Based Strategies
Sustaining Differentiation
Price based strategy can be sustained as follows:
Differentiation based strategy can be sustained as follows:
Continually drive down costs;
Attempts at imitation can be blocked, e.g. licensing;
Substantial financial resources;
Some resources are immobile (intangible, e.g. in case of
Winning Price Wars
brands);
Concentrating on price conscious market.
Lock-in: Lock-in is achieved in a market place when a companys product or service becomes the industry standard,
e.g. Microsoft has achieved this position in the market for PC operating systems.
Dominance in the market (in terms of market share). First mover advantage (early in the product life cycle);
Hyper competition
Hyper competition is a condition of constant competitive change. It is created by frequent, boldly aggressive
competitive moves. E.g. Repositioning on the strategy clock, Try to get first mover advantage, find new distribution
ways, Rapid technological improvement. This state makes it impossible for a firm to create lasting competitive
advantage.
7
Marketing and Marketing Process
The management process which identifies, anticipates and supplies customer requirements efficiently and profitably
7.1
MARKET ANALYSIS
Market analysis helps to make appropriate marketing strategy. It includes: Appraisal and analysis of present situation
Definition of future targets, Evaluation of possible marketing strategies.
Purpose of analysis: Identify gaps in market where customer needs are not being met and identify opportunities to
increase sales, no of products etc.
7.2
CUSTOMER ANALYSIS
It consists of segmentation, motivation and unmet needs.
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MARKET SEGMENTATION A market segment is a group of customers who have similar needs that are different from
customer needs in other parts of the market.
Identifying target Segment (biggest, most profitable existing and potential customers whose needs are unmet.)
Consumer segmentation bases: Geographic variables, Demographic variables (age, gender, income, education),
Psychographic variables (personality, life-style, values and attitudes), cost conscious or quality conscious etc.
Motivation: Concerns with customers preference.
Unmet needs of customer:
7.3
TARGETING
Targeting involves selecting the best market segments.
The attractiveness of a market segment depends on it being:
Measurable: The ability to forecast the sales or market potential of the segment.
Accessible: The ability of the firm to make and distribute a product.
Stable: Likelihood that the segment will persist for sufficient time to enable a return on investment.
Substantial: The profits available will give an adequate return on capital employed.
Defensible: There should be barriers to entry to allow the firm some measure of dominance.
7.4
THE MARKETING MIX (Developed for every targeted segment)
The marketing mix is a term used to describe a collection of tools that can be used to construct a detailed marketing
strategy. It is a set of controllable marketing variables that a firm uses to influence a target market.
The marketing mix comprises: Product; Price; Promotion; Place.
For services you will need to add: People, Processes and Physical evidence.
PRODUCT
Marketing issues relevant to products are Brand name, Packaging, Features, Options, Quality, Warranty and
Augmented Service, Sample products, Online courses, Product updates
PRICE
Price must set by taking a number of factors into consideration: Economic influences; Competitors prices; Brand;
Quality; Discounts; Payment terms; Delivery options; Product life cycle. 4Cs Cost; Customers (what are they willing to
pay?); Competitor, Corporate objectives
Pricing methods
Penetration pricing a low price is set to gain market share.
Perceived quality (or prestige) pricing a high price is set to reflect/create an image of high quality.
Periodic discounting this is a temporary reduction in prices for a limited period such as a 'Holiday Sale'.
Price discrimination different prices are set for the same product in different markets, e.g. peak/off peak rate.
Going rate pricing prices are set to match competitors.
Price skimming high prices are set when a product is new and reduced later.
Negotiated pricing the price is established through bargaining between the seller and the customer.
Loss leaders one product may be sold at a loss to attract customers to buy other profitable products.
Bundle pricing two or more products, usually complementary, are packaged together and sold for one price.
Cost plus pricing the cost per unit is calculated and then a mark-up added.
PROMOTION
Promotion is all about communication, thus informing customers about the product and convincing them to buy it.
Push Technique: Ensuring products/services are available to consumers by encouraging intermediaries.
Pull Technique: Persuading the ultimate consumers to buy
Types of promotion:
There are four main types of promotion ('the communication mix'):
a) Advertising: It includes television, magazines, newspapers, internet, billboards by the side of roads.
b) Sales promotion (e.g buy one get one free)
c) Personal Selling: Personal selling is when a salesman goes around spending time with potential customers trying
to persuade them to buy.
d) Public Relations: Public relations usually means good mentions in the press. Sometimes there are charitable
activities where a local firm has made some sort of donation or lent some sort of equipment.
PLACE (DISTRIBUTION)
How the product will be sold or distributed: e.g. transport decision, Direct distribution or distribution through a retailer,
online sales etc.
Where the products will be sold or distributed: Intensively (in every big supermarket), selectively (only in pharmacies)
or exclusively (only in one particular shop in town).
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THE EXTENDED MARKETING MIX (Additional 3Ps for marketing of services)

People
Employees are particularly important in service marketing. Front-line staff must be selected, trained and motivated
with particular attention to customer care and public relations.
In some services, the physical presence of people performing the service is a vital aspect of customer satisfaction. The
staff involved are performing or producing a service, selling the service and also liaising with the customer to promote
the service, gather information and respond to customer needs.
Staff must have well: Appearance/behavior, Attitude/professionalism, Knowledge/skills, Commitment.
Processes (by which marketing tasks are achieved)
Efficient processes can become a marketing advantage in their own right. For example, automated telephone booking
and ticketing systems for cinemas. Factors include: Procedures/policies; Information/accessibility; Capacity/volume;
Automation/mechanisation; Speed/timing; Queuing.
Physical evidence
Services are intangible: they have no physical substance. The customer has no evidence of ownership and so may find
it harder to perceive, evaluate and compare the qualities of service provision.
This could be addressed through physical representation such as tickets and programs relating to entertainment, or by
incorporating evidence into the design and specification of the service environment such as decor, colour scheme,
noise levels, background music, fragrance, furnishings, uniforms, paperwork; labeling, tickets, logos.
PAST EXAMS
The Management Press
December 2010. Question 2.(b)
(b) Evaluate how e-business might help TMP exploit each of the ve elements of the marketin g mix (price, product, promotion,
place and physical evidence) identied by the marketing director. (20 marks)
ISD
December 2011
(a) Identify and discuss the factors that need to be taken into consideration when pricing the e-learning product. (15 marks)
8
E-MARKETING
Identifying and meeting customer needs by using digital technologies.
DIFFERENCE BETWEEN TRADITIONAL AND E-MARKETING 6 Is:
The 6 Is summarises the main differences between the new media and traditional media
Interactivity
Interactivity is a significant feature of the new media, allowing a long-term dialogue to develop between the
customer and the supplier. In the context of the web site, this is likely to be through e-mails, providing the
customer with information and special offers for their areas of specific interest. To initiate this dialogue the web
site must capture information such as e-mail address, name, age, gender and areas of interest.
Intelligence
Intelligence has also been a key feature of the new media allowing the relatively cheap collection of marketing
research data about customers requirements. This is routinely available from web logs and these logs need to be
viewed and analysed using appropriate software. This type of analysis is rarely available in the traditional media.
Individualisation
Another characteristic of electronic media is that they allow marketing messages to be tailored to specific market
segments, whereas with traditional media a single message is sent to all market segments.
Independence of location
Independence of location allows a company to move into geographical areas that would have been unreachable
before. The Internet effectively provides a world wide market that is open 24 hours per day, seven days per week.
It is difficult to think of any traditional media which would have permitted this global reach so cheaply.
Integration
Integration of all marketing activities under one umbrella using new technology makes marketing more valuable
and cost effective. The Web`s interactive nature can be exploited gathering customer information, obtaining
customer feedback, using existing knowledge about the customer and using it.
Industry restructuring
Industry restructuring looks at redesigning business processes, finding new market segments and expanding
marketing boundaries.
Reintermediation new intermediaries created through re-intermediation. Reintermediation is particularly
common in the travel industry, where on-line reintermediaries are replacing traditional travel agents.
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Disintermediation is there an option for selling direct? While disintermediation gives a company the
opportunity to sell direct and increase profitability on products, it can also threaten distribution arrangements
with existing partners.
PAST EXAMS
Cronin Auto Retail

June 2011
(a) Evaluate how the principles of interactivity, intelligence, individualisation and independence of location might be appl ied in
the e-marketing of the products and services of CAR.
(16 marks)
Accounting Education Consortium
June 2008
(a) Explain, in the context of AEC, how the marketing characteristics of electronic media (such as the Internet) differ from those
of traditional marketing media such as advertising and direct mail. (10 marks)
(b) Evaluate how the marketing manager might use electronic marketing (including the Internet) to vary the marketing mix at
AEC. (15 marks)
(Total = 25 marks)
9
Branding
Definition: A brand is a name, term, sign, symbol, design or a combination of there, which is used to identify the
goods or services of one seller or group of seller and to differentiate them from those of competitors.
E-Branding Strategies
Carry out exactly the same branding on website as on other places.
Offer slightly amended product but still connected to original brand
Form a partnership with existing brand.
Create an entirely new brand.
10
CUSTOMER RELATIONSHIP MANAGEMENT
CRM is an approach to building and sustaining long-term business with customers.
E-CRM is the use of digital communications technology to maximise sales to existing customers and encourage con
tinued usage of online services.
CRM Stages: (The customer lifecycle)
1) Customer selection - defining what type of customer 3) Customer retention keeping existing customers.
is being targeted.
Emphasis on understanding customer needs better to
Who are we targeting?
ensure better customer satisfaction.
Use offers to reward extended website usage.

What is their value?
Ensure ongoing service quality right by focusing on
Where do we reach them?
tangibles, reliability, responsiveness, assurance and
empathy.
2) Customer acquisition forming relationships with 4) Customer extension (or customer development)
new customers.
increasing the range of products bought by the
Need to target the right segments.
customer.
Try to minimise acquisition costs. Methods include "Re-sell" similar products to previous sales
traditional off-line techniques (e.g. advertising, "Cross-sell" closely related products
direct mail) and online techniques (e.g. search engine "Up-sell" more expensive products
marketing, online PR, online partnerships, interactive
adverts, opt-in e-mail and viral marketing)
Service quality is key here.
Choice of distribution channel also very important
PAST EXAMS
Chemical Transport
June 2013
(b) Requesting and tracking information could be the first part of a comprehensive customer relationship management (CRM)
system. Evaluate how CT could use a CRM system to acquire and retain customers. (10 marks)
CHAPTER 3
1
Strategic capability reflects the ability of an entity to use and exploit the resources and competences required by an
organisation to survive and prosper. OR
The adequacy and suitability of resources and competences of an organisation to survive and prosper.
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Capability
Resources (Tangible and intangible)
Threshold Resources
Unique Resources
RESOURCES: (Asset, skill or item of knowledge that

is controlled by the entity.)
Threshold resources (meet customers minimum
requirements and are needed for survival)
Unique resources: (Underpin competitive
advantage and are difficult for competitors to
imitate or obtain.)
Resources and Competences includes: 9M
Money, Management, Manpower, Material,
Machinery
Make-up (Structure. Patents. Goodwill. Brands.),
Management information, Market (position, share;
Image, reputation and brand loyalty), Methods
Competence
Threshold Competence
Core Competence
COMPETENCES: (ability to utilize its resources effectively)

Threshold competencies (meet customers minimum
requirements and are needed for survival)
Core Competences: (Underpin competitive advantage
and are difficult for competitors to imitate or obtain.)
Remember:
If competitive advantage is to be based on core competence and
strategic capabilities, the capabilities must have four key
qualities:
Offer value to buyers contribute to customer needs
Rare can create competitive advantage by itself
Robust (difficult to imitate) linking of processes and
activities in ways that cannot be copied
Non substitutable substitute products and competences
are a key threat
Cost Efficiency
Cost Efficiency is fundamental to strategic capability for both public and private sector organisations. It is regarded as a
threshold competence (vital for mere survival) and is achieved in four main ways:
a) Economies of Scale reducing costs per unit
b) Control of the cost of incoming supplies transport costs; supplier relationships
c) Careful design of products and processes minimising direct and indirect costs
d) Exploitation of experience effects learning curve effects; outsourcing
PAST EXAMS
Wetland Trust
(a) The new CEO, Sheila Jenkins, recognises that she should understand the strategic position of WET before considering
strategic options and changes. She wants a concise assessment of the strategic position; covering environment, strategic
capability, stakeholder expectations and organisational mission.
(b) Problems with the current membership renewal process include:
The low response to payment requests
The despatch of renewal reminders for people who have already paid
The failure to send renewal invoices to some members
Analyse faults in the current membership renewal process that cause the problems identified above.
Suggest solutions that would remedy these faults. (15 marks)
(c) Sheila Jenkins sees customers as both prospective and existing members, volunteers and donors of WET. She also wishes
to gain increased revenue from each member and donor.
Evaluate how email and website technology might facilitate the acquisition and retention of WETs customers and support WET's
aim to gain increased revenues from members and donors. (10 marks)
Moor Farm
December 2012 Question 2.(A)
Evaluate the strategic position of the estate with specific reference to the expectations of stakeholders, to the external
environmental factors beyond the control of the estate and to the strategic capabilities of the estate itself. (15 marks)
Exam Focus: Please solve capability analysis by using strength and weaknesses analysis.
E.g. I have assessed the strategic capability of WET ltd. by identifying the strengths and weaknesses of the
organisation. Strengths: Internal Positive Points. Weaknesses: internal Negative Points
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2
CSF & KPIS
CRITICAL SUCCESS FACTORS (CSFs)
The factors critical for the success of an organisation i.e. things that must go right OR
Those product features that are particularly valued by a group of customers
Examples of critical success factors:
Profitability
Market share
Growth
Innovation
Productivity
Quality of product Customer satisfaction

KEY PERFORMANCE INDICATORS (KPIs):
KPIs can be used to measure the critical success factors by using;
Quantitative Measures (e.g. ROCE)
Qualitative Measures (e.g. Market Share)
Relative or Absolute (e.g. complaints per customer or no of complaints)
Value for Money (e.g. value generated vs cost incurred used by not for profit organisations)
Be careful: A critical success factor is not a key performance indicator (KPI).
Critical success factors are elements that are vital for a strategy to be successful. KPIs are measures
that quantify objectives and enable the measurement of strategic performance.
PAST EXAMS
GET
December 2011. Question 1.(C)
(c) Critical Success Factors (CSFs) and Key Performance Indicators (KPIs) are important business concepts in the context of
franchising rail services.
Explain and discuss these concepts in the context of GET and the rail i ndustry. (10 marks)
3
KNOWLEDGE MANAGEMENT AND ORGANISATIONAL LEARNING
KNOWLEDGE
Data: Raw facts and figures.
Information: Processed data which is useful is called information.
Knowledge:
Johnson, Scholes and Whittington define organisational knowledge as the collective and shared experience
accumulated through systems, routines and activities of sharing across an organisation.
Managing organisational knowledge is important because as organisations get larger, it becomes more difficult to
share what people know. The organisation increasingly does not know what it knows and so it makes unnecessary
mistakes, duplicates activity and misses opportunities as a result of this. Furthermore, it is also increasingly likely that
organisations, will have to achieve competitive advantage through accumulated experience (their knowledge).
Knowledge management itself has been facilitated by the increasing functionality of computerised information
systems.
Explicit knowledge is knowledge that the company knows that it has. This includes facts, transactions and events that
can be clearly stated and stored in management information systems.
Tacit knowledge is personal knowledge and expertise held by people within the organisation that has not been
formally documented.
Knowledge management is the process of discovering, Recording, Sharing, Levering (using knowledge acquired for one
purpose for another purpose) and Maintaining knowledge to ensure that the knowledge is up to date..
ORGANISATIONAL LEARNING
A learning organisation actively creates, captures, transfers, and mobilises knowledge to enable it to adapt to a
changing environment.
Capturing individual learning is the first step to making it useful to an organisation. There are many methods for
capturing knowledge and experience, such as publications, activity reports, lessons learned, interviews, and
presentations. Capturing includes organising knowledge in ways that people can find it; multiple structures
facilitate searches regardless of users perspective (e.g., who, what, when, where, why, and how). Capturing also
includes storage in databases, or libraries to insure that knowledge will be available when and as needed.
Transferring knowledge requires that it be accessible to everyone when and where they need it. In a digital world,
this involves browser -activated search engines to find what one is looking for. A way to retrieve content is also
needed, which requires a communication and network infrastructure.
Mobilising knowledge involves integrating and using relevant knowledge from many, often diverse, sources to
solve a problem or address an issue.
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Further Explanation:
Strategic drift will take place when changes in an organisations environment take place at a greater rate than the rate
of strategic change within the organisation itself. In such circumstances, the organisation begins to be increasingly
misaligned with the environment it is operating in. The challenge is to try to ensure that misalignment does not occur
in the first place, but if it does, to tackle it quickly.
The likelihood of strategic drift suggests that the strategy development process in an organisation needs to encourage
people to have the capacity and willingness to challenge and change their core assumptions and ways of doing things.
This is one of the commonly claimed principles of a learning organisation.
Traditionally, organisations have been organised and structured around order and control. This is unsuitable for the
dynamic environment. We must become able not only to transform our institutions, in response to changing
situations and requirements; we must invent and develop institutions which are learning systems, that is to say,
systems capable of bringing about their own continuing transformation. (Donald Schon)
A learning organisation is one which is capable of continual regeneration based on the knowledge, experience and
skills of individuals working in an organisational culture which encourages mutual questioning and challenge. It
emphasises the potential capability of an organisation to regenerate from within.
The learning organisation is an ideal towards which organisations should evolve in order to respond to contemporary
pressures. It is characterised by a view that both collective and individual learning is key to organisational success.
Advocates of the learning organisation suggest that the collective knowledge of all the individuals within an
organization greatly exceeds what the organisation knows in its formal documentation, filing and information
systems. They suggest that it is the responsibility of management to encourage processes which reveal the knowledge
of individuals and encourage the sharing of this knowledge. Hence the learning organisation is closely connected with
the principles of knowledge management. As a result of free-flowing knowledge, individuals within an organisation
become more sensitive to the changes happening around them and this helps them contribute t o identifying
opportunities and threats in the external environment and also to them developing strategies to tackle these threats
or to exploit the opportunities.
Questioning and challenging the taken-for-granted is essential if an organisation is to avoid strategic drift. It helps
build an organisation which does not take success for granted and reinvents itself using internal capabilities to
build a new business model.
4
BENCHMARKING
Benchmarking involves gathering data to allow current performance to be identified and evaluated against
best practice or past performance.
Types of benchmarking
There are various types of benchmarking such as:
Internal
competitive/Industry
activity (comparing with other organisations not necessarily the competitor)
generic (if process is unique then this process will be compared against conceptually similar process)
Benefits
Drawbacks
Improve performance
Dont always identify reasons for poor/good performance.
Improve competitive position
Demotivation for staff if they consider it a weakness identifying activity.
Continuous improvement
May ignore innovation
Facilitate organizational learning
Focus on doing things right rather than doing the right thing
Does not identify the reasons why performance is at a particular level, it
just states whether good or bad.
PAST EXAMS
The EA Group
December 2012
(c) Discuss the principles, together with the advantages and the disadvantages, of benchmarking in the context of Steeltown
Information Technology. (10 marks)
5
ANALYSING PORTER'S VALUE CHAIN
Porter's value chain groups the various activities of an organisation into value activities in order to illustrate how the
organisation creates value.
Primary activities are the activities involved in making the product, selling it, and providing the customer with the
product and after-sales service and assistance.
Support activities provide purchased inputs, human resources, technology and infrastructural functions to support
the primary activities.
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If the organisation is successful, it will create a margin. This margin is the excess that the customer is prepared to
pay over the cost to the firm of obtaining resource inputs and providing value activities. It represents the value
created by the value activities themselves and the linkages between them.
`
Primary activities:
Inbound logistics are activities concerned with receiving,
storing and distributing inputs to the product or service
including materials handling, stock, control, transport, etc.
Operations transform these inputs into the final product
or service: machining, packaging, assembly, testing, etc.
Outbound logistics collect, store and distribute the
product to customers, for example warehousing,
materials handling, distribution, etc.
Marketing and sales provide the means whereby
consumers/users are made aware of the product or
service and are able to purchase it. This includes sales
administration, advertising and selling.
Service (After-sales-service) includes those activities that
enhance or maintain the value of a service, such as
installation, repair, training and spares.
Support activities:
Procurement. The processes that occur in many parts
of the organisation for acquiring the various resource
inputs to the primary activities.
Technology development. All value activities have a
technology, even if it is just know -how. Technologies
may be concerned directly with a product (e.g. R&D,
product design) or with processes (e.g. process
development) or with a particular resource (e.g. raw
materials improvements).
Human resource management. This supports all
primary activities. It is concerned with those activities
involved in recruiting, managing, training, developing
and rewarding people within the organisation.
Infrastructure. The formal systems of planning,
finance, quality control, information management, and
the structures and routines..
MARGIN is the excess which the customer is prepared to pay for the product (or service) over the cost to the
organisation of obtaining resource inputs and adding value.
PAST EXAMS
Perfect Shopper
Describe the primary activities of the value chain of Perfect Shopper. (5 marks)
Independent Living
December 2009. Question 2.(A,B)
(a) Analyse the primary activities of the value chain for the product range at IL. (10 marks)
(b) Evaluate what changes IL might consider to the primary activities in the value chain to improve their competitiveness, whilst
continuing to meet their charitable objectives. (15 marks)
Jayne Cox Direct
June 2012. Question 4.(A,B)
(a) Analyse the existing value chain, using it to highlight areas of weakness at Jayne Cox Direct. (12M)
(b) Evaluate how technology could be used in both the upstream and the downstream supply chain to address the problems
identified at Jayne Cox Direct. (13 marks)
6
VALUE SYSTEM / VALUE NETWORK
A single organisation rarely undertakes in-house all of the value activities from design through to delivery of the final
product or service to the final consumer. so any one organisation is part of a wider value network.
The value network is the set of inter-organisational links and relationships that are necessary to create a product or
service. So an organisation needs to be clear about what activities it ought to undertake itself and which it should not
and, perhaps, should outsource.
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Linkages Porter suggests that value-adding activities occur in sequence in supplier, firm and customer value
chains. By analysing and understanding these linkages between value chains, a firm can add more value by
stealing a value-adding activity from another value chain.
7
ANALYSING PRODUCTS: THE PRODUCT LIFE CYCLE
Product life cycle: The product life cycle is an attempt to recognise distinct stages in a product's life. Profitability
and sales of a product be expected to change over time. The product life cycle varies from product to product
depending upon type and characteristics of the product. Some products may have long life cycles but others may
short.
Figure : Product life cycle
Features
Introduction
Growth
Many new entrants
and mergers/
takeovers. Fight for
market share
Competition
Few players
Demand
Usually higher income Increasing market

buyers
Penetration
Technology
Nonstandard
Narrow range of
technologies applied
Product
Differences in choice, Improvement in the
Characteristics Inconsistent quality
design and quality
Decline
Shakeout leaves, only a few Heavy discounting

large players
and price wars
Growth rate falls, Well
informed, demanding &
repeated buyers.
Falling demand
All competitors have

knowledge of market
All competitors have

knowledge of market
Standardisation of products
with only small
differentiations
Overcapacity begins to
develop long production
runs
Less emphasis on product

differentiation
Short production runs

High incidence of
with specialized
Mass production
overcapacity
distributors
Difficulties of the product life cycle concept
Only indicates where the product/market is now not where it will be.
Nice theory, not much use in application cannot be used for forecasting, because it is not known how long
each phase will last.
All different shapes life cycle patterns are very variable.
Does not cater for products which fail during development/introduction.
Does not cater for products which seem to be mature forever.
Production
Processes
Maturity
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PAST EXAMS
Rock Bottom
(a) Analyse the reasons for Rock Bottoms success or failure in each of the three phases identified in the scenario. Evaluate how
Rick Heins leadership style contributed to the success or failure of each phase. (18 marks)
8
CORPORATE APPRAISAL (SWOT ANALYSIS)
Current position of an organization can be evaluated by using SWOT analysis which consists of strengths,
weaknesses, opportunities and threats.
Internal appraisal should identify
External appraisal should identify
Brand
Regional presence
Safety r ecord
Patent
Location
Management team
Functionality of website
Employees motivation/ demonization
marketing expenditure Ordering process
manufacturing capacity Expertise
Cost
Core competenc es
Financial position
liquidity
All points of PESTEL, Porter Five forces,

Porter Diamond,
If Positive
If Negative
Favorable
Unfavorable
Strengths
Weaknesses
Opportunities
Threats
PAST EXAMS
Oceana National Airline
(a) Using the information provided in the scenario, evaluate the strengths and weaknesses of ONA and their impact on its
performance. Please note that opportunities and threats are NOT required in your evaluation. (20 marks)
Green TechJune 2009. Question 1.(A)
(a) Evaluate the current strategic position of greenTech using a SWOT analysis. (12 marks)
GET
(a) Using appropriate models and frameworks, analyse GETs current strategic position from both an internal and external
perspective. (20 marks)
ReInk Co
(a) Undertakes a SWOT analysis of ReInk Co. (20 marks)
9
TOWS MATRIX
The TOWS matrix is a positioning approach to strategy which builds upon the SWOT analysis and categories
strategic options under the following headings.
SO strategies use strengths to overcome opportunities.
ST strategies use strengths to counter or avoid threats.
WO strategies address weaknesses so as to be able to exploit opportunities.
WT strategies are defensive, aiming to avoid threats and the impact of weaknesses.
PAST EXAMS
Hammond Shoes
June 2012. Question 1.(B) [Q42 BPP Kit]
(b) Using an appropriate framework (or frameworks) examine the alternative strategic options that Hammond Shoes could
consider to secure its future position. (20 marks)
Relnk CO.
June 2014. Question 1.(C)
(c) And, in the light of your analysis above, recommends possible strategic options for each quadrant of a TOWS matrix of ReInk
Co. (12 marks)
CHAPTER 4
STRATEGIC CHOICE
1
Gap Analysis
Gap analysis: A comparison between an entity's forecasted future position (if the business continues with current
activity) and the desired future position as set out in strategic objectives.
If there is a gap, the business needs to select new strategy that will ensure the strategic objectives are met.
2
Porter's Generic Competitive Strategies: How To Compete?
Porter believes there are three generic competitive strategies: cost leadership, differentiation and focus.
Cost leadership: Producing at the lowest cost in the industry as a whole.
Differentiation: Provision of a product perceived as unique within the industry.
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Focus: Focus on one or more particular segments or niches of the market, and does not try to serve the entire
market with a single product.
A cost-focus strategy: aim to be a cost leader for a particular market segment.
A differentiation-focus strategy: pursue differentiation for a chosen market segment.
Cost Leadership
Differentiation
Focus
How
(examples)
Benefits
Threats
Suitability
economies of scale
use of learning effects
large production runs
using cheaper labour and
materials
moving to cheaper premises
high volumes
creates a barrier to entry
win price wars
reduced power of substitutes
no fallback position if
leadership is lost
larger (possibly from
overseas) rivals may enter
the market
strong currency makes
imports cheaper
Large organisations with
economies of scale
branding
quality & design
innovation
knowledge management
control over suppliers
support
builds brand loyalty and
repeat purchases
higher margins
reduction in power of customer
find a segment where the

cost leader or
differentiators have little or
no presence and build
business here
reduction in product range
develops brand loyalty
little competition
often a first step towards
the other generic strategies
low volumes
if successful, it attracts cost
leaders and
differentiators
few barriers to entry
Not Suitable in recession

Easily copied in long run
constantly innovate
needs much higher marketing
than cost leadership
fewer barriers to entry
smaller volumes
Innovative companies with
large marketing budgets
Small business, strong market

knowledge and a risk taking
attitude (often new starts)
3
The Strategy Clock: (How To Compete?)
This approach is based on the assumption that competitive advantage is achieved if a firm supplies customers want
better than its competitors. Customer wants consist of combination of cost & quality.
Better means a more suitable product or service, or could mean a cheaper one of adequate quality.
4
ANSOFF'S MATRIX: (Product/Market Strategies)
Ansoff drew up a matrix describing how a combination of a business's activities in current and new markets, with
existing and new products, can lead to four different competitive strategies for growth.
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DIVERSIFICATION
CONCENTRIC/ RELATED DIVERSIFICATION:
It means that the new product -market area is related in some way to the entitys existing products and markets.
Horizontal integration
Horizontal integration is development into activities which are competitive with or directly complementary to a
companys present activities. There are three cases:
Competitive products: Taking over a competitor can have obvious benefits, leading eventually towards
achieving a monopoly. Apart from active competition, a competitor may offer advantages such as completing
geographical coverage.
Complementary products: For example, a manufacturer of household vacuum cleaners moving into
commercial cleaners. A full product range can be presented to the market and there may well be benefits
from having many of the components common between the different ranges.
By-products: For example, a butter manufacturer discovering increased demand for skimmed milk. Genera lly,
income from by-products is a windfall to be counted, at least initially, as a bonus.
Advantages
Disadvantages
Increased synergies
Lack of knowledge of new customers and market.
Offer defence against substitute
Need of new strategic capabilities
Extend companys product portfolio.
Extra cost to achieve synergies.
Reduce risk of depending on one type of product. Difficulty in managing diversified business.
Vertical Integration
Vertical integration occurs when a company becomes its own supplier (backward) or distributor forward).
Backward integration: taking over responsibility for upstream processes eg a clothing retailer producing or
designing its own clothes.
Forward integration: taking over responsibility for downstream processes eg an electrical goods retailer
setting up its own installation, servicing and repairs service.
Advantages
Disadvantages
Economies of combined operations.
Vertical integration increases fixed cost and business risk.
Economies of internal control.
Reduced flexibility to change partners.
Information stays confidential.
Need for additional capital.
Enhanced ability to differentiate.
Differing managerial requirements.
Creation of barriers to entry.
5.2
CONGLOMERATE/UNRELATED DIVERSIFICATION
Diversifying into completely unrelated businesses.
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Not clear where added value comes from except if an ailing business is turned round.
Often leads to loss of shareholder value.
ADVANTAGES
DISADVANTAGES
Increased flexibility
No synergies
Increased profitability
No additional benefit for shareholders
Ability to grow quickly
No advantage over small firms
Better access to capital markets
Lack of management focus
Avoidance of anti-monopoly legislation
Diversification of risk
6
6.1
METHODS OF DEVELOPMENT
ORGANIC GROWTH
Internal development also known as organic growth is achieved through an organisation developing its own
internal resources.
Advantages
Disadvantages
Best understanding of market &product
It may intensify competition.
It can be financed easily.
It is too slow.
It is less risky.
The firm does not gain access to the knowledge and
Economies of scale
systems of an established operator so it can be more
Easier to plan
risky
There may be barriers to entry in new market
No cultural clashes or control issues
Provides career development opportunities for Narrow scope
managers.
It could be cheaper as compared to acquisition
6.2
MERGERS AND ACQUISITIONS
Acquisition one where one organisation (such as EMS) takes ownership of another existing organisation..
Merger two original legal entities cease to exist and a third is created, Usually by mutual agreement.
Advantages
Disadvantages
Quick access to new product/markets;
Difficulties of rationalisation and integration of
Acquires knowledge, expertise and goodwill;
activities and cultures.
Cheaper development if target is in difficulty or May pay excessive price if bid is contested.
undervalued;
Cost of acquisition which also include goodwill.
Prevents targets being taken over by a rival;
Access to funds which require for acquisition.
May realise cost advantages resulting from targets Incompatibility: problems of assimilating employees
experience effects;
and different operating systems
Overcomes legal entry barriers;
Cultural Mismatch.
Synergies.
6.3
ALLIANCES
A cooperative business activity, formed by two or more separate organisations for strategic purposes, that allocates
ownership, operational responsibilities, financial risks, and rewards to each member.
Joint ventures (newly created organisations jointly owned by the parents);
Consortia (two or more organisations in a joint venture arrangement);
Franchising (Franchise holder undertakes specific activities, the franchiser is responsible for the brand and marketing);
Licensing (common in science-based industries where the right to manufacture a patented product is granted for a fee);
Co-production (e-commerce companies moving towards customerisation where the customer designs the
product/service online).
Benefits Of Alliances
Drawbacks of Alliances
They share development costs of a particular Core competence: Each organisation should be able
technology.
to focus on its core competence. Alliances may not
The regulatory environment prohibits take-over (e.g.
enable it to create new competences.
most major airlines are in strategic alliances because Strategic priorities: If a key aspect of strategic
in most countries there are limits to the level of
delivery is handed over to a partner, the firm loses
control an outsider can have over an airline).
flexibility. A core competence may not be enough to
Complementary markets or technology.
provide a comprehensive customer benefit.
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Licensing agreements
Licensing: Under licensing arrangements, one company gives another the right to use a process or a trade name. For
example, if you license a company in the UK to make beer, tell them the recipe, allow them to bottle it, and market it,
you greatly improve the efficiency of the operation. For the licensor (thats a company granting the license), this is a
relatively low risk way of growth. They earn the money primarily from royalties and dont have to undertake any great
risk in setting up production and distribution facilities overseas.
6.5
Franchising
Franchising: The purchase of the right to exploit a business brand in return for a capital sum and a share of profits or
turnover.
The main points of franchising are as follow:
The franchisee pays the franchisor an initial capital sum and thereafter the franchisee pays the franchisor a share of
profits or royalties.
The franchisor provides marketing, research and development, advice and support.
The franchisor normally provides the goods for resale.
The franchisor imposes strict rules and control to protect its brand and reputation.
The franchisee buys into a successful formula, so risk is much lower.
The franchisor gains capital as the number of franchisees grows.
The franchisors head office can stay small as there is considerable delegation/decentralisation to the franchisees.
Benefits for Franchiser:
Drawbacks for Franchiser:
Rapid expansion and increasing market share
A franchisee is largely independent and makes decisions
with relatively little equity capital.
about operation for personal benefit. In addition, the
The franchisee provides local knowledge and
quality of product, customer satisfaction and goodwill is
unit supervision, limiting the range of
under his control. The franchiser will seek to maintain
management skills needed.
some control but it may not be sufficient to control
The franchiser has limited capital in any one
operations at local level.
unit and therefore has low financial risk.
There can be a clash between local needs or opportunities
Economies of scale are quickly available to the
and the strategy of the franchiser.
franchiser as the network increases.
The franchiser may seek to update/amend the
Franchisee has strong incentives.
products/services on offer, while some franchisees may be
slow to accept change or may find it necessary to write off
existing inventory holdings.
The most successful franchisees may break away and set
up as independents, thereby becoming competitors.
PAST EXAMS
Rock Bottom
June 2009.
(A: General) Analyse the reasons for Rock Bottoms success or failure in each of the three phases identified in the
scenario. Evaluate how Rick Heins leadership style contributed to the success or failure of each phase. (18 marks)
(B: Franchising) Rick Hein considered franchising the Rock Bottom brand at two points in its history 1988 and 2007.
Explain the key factors that would have made franchising Rock Bottom feasible in 1988, but would have made it unlikely
to be successful in 2007. (7 marks) (Total = 25 marks)
6.6
Outsourcing
Already have knowledge from earlier studies. Knowledge of advantages and disadvantages are required.
6.7
DEMERGER
The splitting of one company into two or more separate companies.
7
INTERNATIONAL EXPANSION
Exporting is an extension of home sales, using foreign intermediaries.
Overseas branches arise when turnover is large enough. It requires greater investment.
Overseas production exploits cheap labour and reduces exporting costs.
Insiderisation full functional organisations being set up overseas. This reduces exchange rate and political risk but
economies of scale may be lost and there may be problems of co-ordination. The company is a multinational.
The global company takes a world view while recognising total differences: It integrates learning, skills and
competences to achieve global efficiencies while retaining local responsiveness.
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Reasons for International Expansion

Competition: (may be lower in foreign market.)
Chance: (to increase sales.)
Life cycle: (may be extended due to growth in sales in
foreign market.)
Competition: (may be lower in foreign market.)
Reduce dependence: (on a single domestic market.)
Economies of scale:
Finance:
Favourable currency exchange rates
Tax benefit
Profit margins may be higher abroad.
Seasonal fluctuations may be leveled out.
International activities spread risk.
Business Analysis
Reasons for Avoiding International Expansion

Profits may be affected by factors outside the firms
control (e.g. unfavourable currency exchange rates)
May reduce economies of scale.
Extending the product life cycle is not always cost
effective. It may be better to develop new products
for the domestic market.
The opportunity costs of investing abroad funds
and resources may be better utilised at home.
Foreign tax rates and additional duties cost.
PAST EXAMS
MachineShop
December 2013. Question 1.(B)
(b) MachineShop is considering the acquisition of FRG. They have asked you, as a business analyst, to write a report
which advises them on this potential acquisition.
Write a report, using the criteria of suitability, acceptability and feasibility, which evaluates the potential acquisition of
FRG, concluding with whether you would recommend MachineShop to acquire FRG. (18 marks)
Professional marks will be awarded in part (b) for the structure of the report, the clarity of the analysis and the soundness
of the conclusion or recommendation. (4 marks)
Joe Swift Tr ansport
June 2010.
(a) Assess, using both financial and non-financial measures, the attractiveness, from Swifts perspective, of EVM as an
acquisition target. (15 marks)
MMI
December 08
(a) In the contex t of MMIs corporate-level strategy, explain the rationale for MMI acquiring First Leisure and Boatland
and assess the subsequent performance of the two companies. (15 marks)
(b) Assess the extent to which the proposed a cquisition of InfoTech represents an appropriate addition to the MMI
portfolio. (10 marks) (Total = 25 marks)
Graffoff
December 2012
(a) Evaluate the franchising option being considered by Graffoff, highlighting the advantages and disadvantag es of this
approach from Emiles perspective. (10 marks)
(b) Johnson, Scholes and Whittington have identified franchising as a form of strategic alliance.
Evaluate how other forms of strategic alliance might be appropriate approaches to strategy development at Graffoff. (7 m)
(c) A consultant has suggested that Graffoff should be able to completely fund its proposed organic expansion (at a cost
of $500,000) through internally generated sources of finance.
Evaluate this claim. (8 marks)
(Total = 25 marks)
Country Car Club
June 2008
(b) Analyse the advantages that 3C will gain from the decision to outsource the purchase and maintenance of their own
vehicles. (10 marks)
June 2014
(a) Evaluate the potential benefits to the city authority and its IT employees, of outsourcing I T to Pro-Tech Public. (12 m)
(b) The role of the business analyst is currently being redesigned.
Analyse what new or enhanced competencies the business analysts will require to undertake their proposed new role in
the city authority. (7 marks)
(c) Identify the main stakeholders that would be affected by the planned changes at the city authority. (6 marks)
GET
December 2011
(b) GETs proposed strategy is firstly to acquire SOFR and then the franchise to run the rail network of Raziacstan. You
have been asked to provide an independent assessment of this proposed strategy.
Write a report evaluating GETs proposed strategy. (16 marks)
Professional marks will be awarded in part (b) for appropriate structure, style and fluency of the report. (4 marks)
ABCL
December 2009
(b) Write the requested short report evaluating Ecoba Ltd and analysing whether it was the most appropriate and
attractive of the three possible acquisition targets for ABCL. (16 marks)
Professional marks will be awarded in part (b) for clarity and format of your report. (4 marks)
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8
Corporate parenting
Corporate parenting looks at the relationship between head office and individual strategic business units (SBUs).
Ways of adding value:
Destroying value
Corporate parent can add value and give SBUs advantages Sometimes corporate parents are criticised for
that they would not otherwise have.
destroying value such that SBUs would fare better on
Providing resources which the SBUs dont have. such as their own. It can happen in following ways.
investment and expertise.
The high administrative cost of the centre may
Providing access to central services such as IT and HR
exceed the benefits provided to SBUs.
which may be more efficient and cheap.
Added bureaucracy resulting from organisational
Providing access to markets, suppliers and sources of finance
structure may slow decision making and limit the
By improving performance through performance
organisations flexibility and speed of response to
evaluation and taking corrective action.
customers and environmental changes.
Sharing expertise, knowledge and training across SBUs. May increase complexity, this can prevent clarity and
Facilitating cooperation and collaboration between SBUs.
make it difficult to understand the strategic direction
Rationales for adding value (Different roles adopted by good corporate parents)
Portfolio managers:
Parental developers:
Portfolio managers are corporate parents effectively
use their own central competences to add value to
acting as agents for financial markets and shareholders
the businesses by applying specific skills required by
to enhance the value from individual businesses more
business units for a particular purpose, such as financial
effectively than the financial markets could
management or research and development
identify and acquire under valued businesses and
need to have a clear understanding of value adding
improve them.
capabilities of the parent and the needs of the business
keep the costs of the centre low by minimising the
units in order to identify how these can be used to add
provision of central services and allowing business
value to business units
units autonomy whilst using targets and incentives
need to ensure that they are able to add value to all
to encourage high performance
businesses or be prepared to divest those to which they
may manage a large number of businesses, which
can offer no advantages.
may be unrelated
Synergy manager
enhance value by sharing resources and activity, such as distribution systems offices or brand names
may however bring substantial costs as managing integration across businesses can be expensive
may have difficulty in bringing synergy as cultures and systems in different business units may not be compatible
may need to be very hands-on and intervene at the business unit level to ensure that synergy is actually achieved
The Ashridge portfolio display
The Ashridge portfolio display, or parenting matrix, focuses on the benefits that corporate parents can bring to business
units and whether they are likely to add or destroy value.
This model indicates which types of companies
should be divested and why. Businesses that may
be candidates for disinvestment are
a) alien businesses the parent can do good to
these organizations and they would achieve
more in another group
b) value trap businesses despite potential a lack
of fit leads to a high possibility of a loss of value
c) ballast businesses may do better as the
parent has little to offer
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Heartland business units: These are where there is a high degree of match and the parent company has the
capabilities and experience to add value by providing the support required by the business unit. These businesses
should be central to future strategy.
Ballast businesses: These are those where the parent understands the business well but there are limited
opportunities to offer help, sometimes because the business has been owned for a long time and has no further
support needs. These businesses would do better if left alone or indeed divested
Value trap businesses: These are those where there appear to be many parenting opportunities but there is a poor fit
with the critical success factors of the business. There appears to be good potential but in practice because of the
lack of fit with the strategy there is a high possibility of destruction of value.
Alien businesses: These are those where there is a complete mismatch. These should not remain part of the portfolio.
Edge of heartland business units: These are those where there is a good fit in some areas where the parent can bring
particular skills that add value to the business unit, but not in others, where the parent may destroy value.
If parent develops sufficient understanding of the business to avoid this, then the business may move into heartland.
The Boston Consulting Group (BCG) growth share matrix
Portfolio analysis is applicable to products, market segments and SBUs. The two by two matrix classifies businesses,
divisions or products according to the present market share and the future growth of that market.
Rate of market growth as high or low depends
on the conditions in the market.
Relati ve market share is assessed as a ratio: it
is market share compared with the market share
of the largest competi tor.
Four major strategies can be pursued with
respect to products, market segments and,
indeed, SBUs:
Build: Sacrifice short term earnings and profits
in order to increase market share.
Hol d: Seeks to maintain the current position.
Harvest: Seeks short-term earning and profits at
the expense of long-term develop ment.
Di vest: Divestment reduces negative cash flow
and releases resources for use elsewhere.
Cash Movement:
Cash generated by cash cow is invested on:
Problem child so that it can convert into star
Star so that it can convert into cash cow
A cash cow has a high relative market share in a low growth market and should be generating substantial cash inflows.
The period of high growth in the market has ended (the product life cycle is in the maturity or decline stage), and
consequently the market is less attractive to new entrants and existing competitors. Cash cow products tend to
generate cash in excess of what is needed to sustain their market positions. Profits support the growth of other
company products. The firms strategy is oriented towards maintaining the products strong position in the market.
Strategy: hol d or harvest if weak.
A star has a high relative market share in a high growth market. This type of product may be in a later stage of its
product life cycle. A star may be only cash neutral despite its strong position, as large amounts of cash may need to be
spent to defend an organisations position against competitors. Competitors will be attracted to the market by the high
growth rates. Failure to support a star sufficiently strongly may lead to the product losing its leading market share
position, slipping eastwards in the matrix and becoming a problem child. A star, however, represents the best future
prospects for an organisation. Market share can be maintained or increased through price reductions, product
modifications, and/or greater distribution. As industry growth slows, stars become cash cows.
Strategy: buil d.
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A problem child (sometimes called question mark) is characterized by a low market share in a high growth market.
Substantial net cash input is required to maintain or increase market share. The company must decide whether to do
nothing but cash continues to be absorbed or market more intensively or get out of this market. The questions are
whether this product can compete successfully with adequate support and what that support will cost.
Strategy: buil d or harvest.
The dog product has a low relative market share in a low growth market. Such a product tends to have a negative cash
flow that is likely to continue. It is unlikely that a dog can wrest market share from competitors. Competitors, who
have the advantage of having larger market shares, are likely to fiercely resist any attempts to reduce their share of a
low growth or static market. An organisation with such a product can attempt to appeal to a specialised market, delete
the product or harvest profits by cutting back support services to a minimum.
Strategy: di vest or hol d.
PAST EXAMS
Academic Re cycling Company
June 2013 [Q36 BPP Kit]
(a) Assuming the role of an external consultant, prepare a report for Richard evaluating the perfor mance of three product
groups and their contribution to overall company results. Use appropriate models to s upport your analysis. (25 m)
(b) Assess the main strategic options open to PIT and recommend a preferred strategy. (15 marks)
(c) Explain how PIT might change from a technology driven culture to a marketing led one. (10 marks) (Total = 50 m)
Shoal Plc
December 2010 [Q40 BPP Kit]
(a) In the context of Shoal plcs corporate-level strategy, assess the contribution and performance of ShoalFish, ShoalPro
and ShoalFarm. Your assessment should include an analysis of the position of each company in Shoal plc portfol io. (15)
Portfolio managers, synergy managers and parental developers are three corporate rationales for adding value.
(c) Explain each of these separate rationales for adding value and their relevance to understanding the overall corporate
rationale of Shoal plc. (10 marks)
The EA Group
December 2012
(a) Analyse the performance of each of the four companies described in the scenario and assess each companys potential
future contribution to the EA Group portfolio of businesses. (24 marks)
Professional marks will be awarded in part (a) for the clarity and structure of the answer. (4 marks)
9
EVALUATION OF STRATEGIC OPTIONS (SFA analysis)
If a business has a lot of alternative corporate strategies which could fill the gap, it needs to:
Evaluate each strategy, then Choose the best one.
The suitability, feasibility, acceptability technique can be used to evaluate an option.
Suitability: Suitability looks at the fit of a proposed strategy with the current strategic position of the organisation.
Suitability may be increased if it will increase strength & opportunities while reduce weaknesses and threats e.g.
Synergies, more geographical coverage, access to expertise & experience & products of acquire company.
Feasibility: Feasibility involves assessing whether an entity has sufficient resources and competencies to implement a
strategy successfully.
Acceptability: The acceptability of a strategy depends on expected performance outcomes and the extent to which
these are acceptable to stakeholders. Acceptability can be evaluated by considering return, risk and shareholder
reactions.
Return: ROCE, ROI, GP margin, NP margin, and other non financial returns
Risk:
Liquidity (current ratio & quick ratio), gearing, interest cover and other non financial risks.
Stakeholder Reaction: if given in question
CHAPTER 5
ORGANISATIONAL STRUCTURE
1
Organisational Configuration
An organisation's configuration consists of the structures, processes, and relationships through which it operates.
a) Structure has its conventional meaning of organisation structure.
b) Processes drive and support people: they define how strategies are made and controlled; and how the
organisation's people interact and implement strategy.
c) Relationships are the connections between pe ople within the organisation and between those inside it and those
on the outside.
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2
Organisation Structures
An organisation's formal structure reveals:
a) Who is responsible for what?
b) who communicates with whom?
c) Upper levels of the structure provides the skills and knowledge the organisation requires.
Types of Organisational Structure:
Entrepreneurial structure: The owner manages the business himself and makes all the major decisions.
Functional Structure: In a functional structure, people are organised according to the type of work that they do.
Product/Divisional organisation structure: Organisation structured in accordance with product lines or divisions or
departments. Each division has its own management structure and within each division there are functional
departments for the specific division.
Geographical organisation structure : Organisation is structured according to geographic area. Some authority is
related to head office but day to day operations are handled on regional basis.
Matrix organisation structure: Matrix structure is basically a combination of two of the types of organisation
structures which are described earlier.(i.e. functional, divisional, geographical or product). Employees from different
departments were collected to form a group to achieve a particular task. It consist of multidisciplinary teams
Type
Advantages
Disadvantages
Entrepreneuri Quick decisions making
Cannot expand beyond a certain size
al
Goal congruence
Cannot easily cope with diversification.
Flexible/adaptable to change
Lack of career structure for lower level
Good control.
employees
May be too centralized.
Owner has limited expertise and resources.
Functional
Economies of scale.
Empire building.
Standardisation.
Slower Decision making.
Specialists more comfortable.
Conflicts between functions.
Career opportunities.
Cannot cope with diversification.
Product/
Enables growth.
Potential loss of control.
Divisional
Clear responsibility for products/divisions.
Lack of goal congruence.
Training of general managers.
Duplication.
Easily adapted for further diversification.
Specialists may feel isolated.
Top mngmt free to focus on strategic matters Allocation of central costs can be a problem.
Geographical
Matrix
Enable geographical Growth.

Clear responsibility for area.
Top mngmt free to focus on strategic matters
Greater flexibility in work and decision making

Improved communication and co-ordination
Co-ordinating the activities of employees
from different functions can promote

creativity and innovation.
Potential loss of control

Lack of goal congruence
Allocation of central cost can be a problem.
Risk of conflict between functional managers
and product/ project/area managers.
Employees might not know who they are
responsible to.
Slower decision making due to added complexity
Tall and Flat Business

Span of control The number of subordinates who report to a manager (i.e. Manager has 6 subor dinates, span of control is 6.)
If a manager has a large number of subordinates reporting directly to him, the span of control is wide and
If a manager has few number of subordinates reporting directly to him, the span of control is narrow.
Scalar chain : The scalar chain refers to the number of levels in the management hierarchy.
Tall organisation is one which, in relation to its size, has a large number of levels of management hierarchy.
This implies a narrow span of control and large scalar chain.

Flat organisation is one which, in relation to its size, has a small number of hierarchical levels.
This implies a wide span of control and small scalar chain.
Tall Organisation
25
Flat Organisation
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Advantages
Better control due to Narrow span of control.
Defined career ladder (employee loyalty)
Specialisation (technical excellence)
Disadvantages
Close control fosters rigidity, blocks initiative
Increased administration and overhead costs
Lengthens communication & decision making
Strategic apex distanced from the customers
ACCA P3
Business Analysis
Advantages
Strategic apex close to operating core
Strategic apex close to customers
Savings on managerial costs
Disadvantages
Loss of managerial control
Loss of middle management interface
If delayered, loss of middle management knowledge
Centralisation and Decentralisation:

Centralisation: The degree to which decision making is concentrated at upper levels of organisation.
Decentralisation: The degrees to which lower-level employees provide input or actually make decision.
Advantages of Centralisation
Advantages of Decentralisation
Decisions easier to control and coordinate
Avoids overburdening senior managers with detail
Senior managers have access to big picture
Improves motivation of subordinates given
Senior managers can balance demands of different
responsibility
functions
More awareness of local/front-line issues
Better decisions from senior managers
Quick decision-making (less reference upwards)
expertise/skills
Facilitates development/succession of junior managers
May reduce overheads (fewer managerial salaries)
More distinct areas of accountability for control
Crisis decisions cab be taken speedily (no reference)
Supported by communications technology
Policies can be standardised organisation wide
More flexible in the face of customer demand
Mintzbergs Building Blocks & Organisaitonal Configuration:
Mintzberg argues that the nature of the organisation structure varies with differences in processes and internal and
external relationships. He suggested that there are five elements or building blocks in an organisation. The way in
which an entity is organised most effectively depends on which of these elements is dominant.
Building Blocks:
Strategic apex. This is the top management in the organisation.
Operating core. This represents the basic work of the organisation, and the individuals who carry out this work.
Middle line. These are managers and management structure between the strategic apex and the operating core.
Support staff. These are the people who provide support for the operating core, such as secretarial staff, cleaning
staff, repair and maintenance staff and IT staff.
Technostructure. These are staff without direct line management responsibilities, but who seek to standardise the
way the organization works. They produce procedures and systems manuals that others are expected to follow.
Mintzbergs six organisational configurations:
Mintzberg identified six different organisational configurations, each having a different mix of the five building blocks.
He suggested that the most suitable organisational configuration would depend on the type and complexity of the
work done by the entity.
Simple structure:
This is found in an entrepreneurial company. The strategic apex exercises direct control over the operating core, and
there is no middle line. There is also little or no support staff or techno-structure. The strategic apex might be an
owner director of the company. This type of structure is very flexible, and can react quickly to changes in the
environment, because the strategic apex controls the operating core directly.
Machine bureaucracy:
In a machine bureaucracy, the techno-structure is the dominant element in the organisation. The entity is controlled
and regulated by a bureaucracy and the emphasis is on control through regulation. It is difficult for an entity with this
type of organisation to react quickly to environmental change. This structure is therefore more suitable for entities
that operate in a stable business environment.
Professional bureaucracy:
In this type of structure, the operating core is the dominant element. Mintzberg gave the name professional
bureaucracy to this type of structure because it is often found in entities where the operating core consists of highly skilled professional individuals (such as investment bankers in a bank, programmers in a software firm, doctors in a
hospital, accountants and lawyers in a professional practice, and so on).
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Divisionalised form
In this type of structure, the middle line is the dominant element. There is a large group of powerful executive
managers, and the organisation structure is a divisionalised structure, each led by a divisional manager. In some
divisionalised structures, divisional managers are very powerful, and are able to restrict the influence of the strategic
apex on decision-making.
Adhocracy:
Mintzberg identified a type of organisation that he called an adhocracy. This is an organisation with a complex and
disordered structure, making extensive use of teamwork and project-based work. This type of organisation will be
found in a complex and dynamic business environment, where innovation is essential for success. These organisations
might establish working relationships with external consultancies and experts. The support staff element can
therefore be very important.
Missionary organizations:
In this type of organisation, all the members share a common set of beliefs and values. There is usually an
unwillingness to compromise or accept change. This type of organisation is only appropriate for small entities that
operate in simple and fairly static business environments.
PAST EXAMS
8 Hats
June 2011
(b) Discuss the principles, benefits and problems of introducing a matrix management structure at 8-Hats. (10 m)
The Management Press December 2010
(b) Using appropriate organisation configuration stereotypes identified by Henry Mintzberg, explain how an
understanding of organisation configuration could have helped predict the failure of Ann Lis proposed formalisation
of structure, controls and processes at Frigate Ltd. (10 marks)
CHAPTER 6
BUSINESS PROCESS
1
Business Process
Process: An arrangement of resources that transforms inputs into outputs that satisfy customer needs whether those
customers are internal or external.
Process follows strategy: Organizations need to design their processes which dont contradict with their strategy
instead processes should support in implementation of strategy. This demonstrates how process follows strategy.
Process leads strategy: However, processes can also lead strategy. Existing processes, goals and measures may not be
aligned with strategy because some part of the strategy is operationally unfeasible. In this case, the processes would
be modified to make them workable, and the strategy would also be modified to accept this.
2
Harmons Process-Strategy Matrix
Harmons process-strategy matrix charts processes using their complexity on one axis, and their strategic importance
on the other.
Strategic Importance
Low
High
High
Complex and dynamic processes but not

Complex, dynamic, high value processes
Process
part of companys core competences:
which generate competitive advantages;
complexity
hard to automate, so outsource
careful process improvement, focusing on
&
Examples: Tax advice, advertising,
people, their skills and their interactions
Dynamics
staff counseling
Examples: product development
Low
Simple, commodity-like processed:
Simple but important automate to improve
automate with off-the-shelf systems
efficiency.
(generic software) or outsource
Examples: sales order processing
Examples: payroll accounting, credit card
approval, receivables ledger.
Complexity and dynamism: A dynamic process is one that frequently changes.
Strategic Importance: Process which is essential or core or provide competitive advantage, or high value added
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Low strategic importance, low complexity: These are simple stable processes which add little business value. They
should be automated in the most efficient way possible.
Low strategic importance, high complexity: These processes are complex and dynamic, but not part of the
organisations core competences. They are too complex to automate, so outsourcing is the best option.
High strategic importance, low complexity: These are simple but important processes that should be automated to
improve efficiency and reduce cost.
High strategic importance, high complexity: These are complex, dynamic and high value processes which generate
competitive advantage. They involve human judgement and expertise that cannot be automated.
Outsourcing
Outsourcing enables organisations to benefit from their suppliers' scale economies and expertise.
Practical considerations relating to outsourcing are cost/benefit analysis; increase efficiency & effectiveness due to
supplier expertise; effect of loss of control (particularly over quality); effect of giving up a competence.
Advantages
Disadvantages
Reduction in staffing costs
Staff morale
Internal conflicts may be resolved
problems finding a single supplier who can manage
Allows the organisation to focus on its own core
complex processes in full
Firms may be unwilling to outsource whole processes
activities/competencies
Technological opportunities
loss of control (particularly over quality)
Quicker and time saving
Firms may be tied to inflexible, long term contracts.
Easier to budget costs
Giving up a threshold competence
Reduced capital requirements
Confidentiality issues
Reduced overhead costs
Over-dependency on supplier
Can increase effectiveness where the supplier
deploys higher levels of expertise
Off-shoring Offshoring is a form of outsourcing which involves an external party in a different country providing an
organisation with a particular process.
PAST EXAMS
Icompute
December 2011.
iCompute is currently re-considering three high level processes:
(i) Advice on legal issues (currently outsourced)
(ii) Software support (currently outsourced)
(iii) Time recording (in-house, bespoke software development)
Evaluate, using an appropriate model, suitability of iComputes current approach to each of these high level
processes. (12 m)
Country Car Club
June 2008
(a) The Business Architecture Committee (BAC) has been asked to make recommendations on the sourcing of
activities (in-house or outsourced). The BAC has also been asked to identify technological implications or
opportunities for the activities that they recommend should remain in-house.
Suggest and justify recommendations to the BAC for each of the following major process areas:
(i) Attendance of repair staff at breakdowns
(ii) Membership renewal
(iii) Vehicle insurance services
(iv) Membership queries
(v) Vehicle history checks (15 marks)
Chemical Transport
June 2013
(a) Three significant business process areas have been identified in the scenario: (1) payroll, (2) legal advice and (3)
an enhanced web service allowing wholesalers to request and track deliveries.
Use Harmons process-strategy matrix to analyse the characteristics of each of the three process areas defined
above and suggest how each should be sourced and implemented at CT. (15 marks)
Lowland Bank
December 2009
(b) The bank has identified three further desirable process initiatives (see above).
(i) Explain, using Harmons process-strategy matrix, how the complexity and strategic importance of process
initiatives can be classified. (4 marks)
(ii) Recommend and justify a solution option for each of the three process initiatives. (9 marks)
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Process Redesign Options

Process Re-engineering
Opportunities & Threats

means a total rethink
Process has large
problems that must be
addressed
Process design
Process Improvement
Process is stable
Small Sub-Processes
Medium sized processes
Value Chain, Core Process
Process improvement deals with small changes in small sub-processes, but essentially the overall process is stable.
Process redesign considers large problems that must be addressed, for example the bottlenecks discussed earlier.
It will tend to require changes to middle-sized processes.
Process re-engineering. Fundamental rethink and radical redesign starting from a zero in business processes to
achieve dramatic improvements
Other Option:
Simplification: Here its recognized that as time passes most processes gather elements of duplication and
redundancy. Although the process may be well thought out at the start, it can grow in a rather disorg anised way so
that considerable inefficiencies can be created.
Value-added analysis: Remove all non-value adding activities.
Analysis of gaps and disconnects: Check flows of information and products between departments. Poor
communication between the various functions in the business is liable to result in non-value added activity.
Business Process Re-Design Methodologies or Process of Process Re-Design
Identify goals
1
Planning a process redesign effort Define scope
Identify personnel
Develop plan and schedule
Analysis of an existing process
Document workflow
2
Identify problems
Devise a general plan for the redesign
Design a new or improved process Explore alternatives and choose best redesign to achieve goals
3
Development of resources for an Make products better, easier to manufacture and maintain
improved process
Redesign managerial and supervisory jobs and develop measurement
4
system to monitor new process
Redesign jobs, work environment and incentive systems develop
training hire new employees if necessary
Managing the implementation of Integrate and test
5
the new process
Train employees, arrange management
Maintain process and modify as needed
Factors to consider for Process Redesign: POPIT model (four view model)
The POPIT (or four view) model provides details of the key aspects that should be considered when undertaking a
business process change. These elements must all be considered, planned and coordinated if business changes (such
as process redesigns) are to be successful. A failure in one area will often restrict the success in other areas.
It consists of People, Organization, Processes and IT.
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People:
Staff needs to have the right skills and motivation to
carry out the tasks. They need to understand tasks and
their roles within the organisation. Staff needs to be
developed to support business changes and resistance
to change has to be managed and overcome. This will
involve understanding and sometimes shifting the
organisational culture
Organisation:
Success must be organised Job roles need to be clearly
defined and understood, lines of command and
communication need to be effective, the organisational
structure needs to support the organisational strategy,
there needs to be flexibility in changing environments
and bureaucracy needs to be kept to a minimum.
Organisational support will be an important link
between the other elements of the business system
Business Analysis
Processes:
These must be well defined, efficient, documented and
understood. Those of high strategic importance and
complexity
should
have
undergone
process
improvement. Opportunities for improvement in other
areas must have been explored in order to maximise
efficiency and support the organisational strategy
IT:
IT needs to support the changes that are taking place
within the system. It needs to provide the relevant
information at the point that it is needed. IT can replace
some manual tasks and improve the efficiency of others.
IT may facilitate organisational changes, process changes
and staff development and it therefore binds all of the
other elements together. IT must be exploited in order
to maximise business benefits.
Exam focus: The model can be examined in a number of ways:

Identifying weaknesses in systems. Or Identifying opportunities for system improvements. Or
Identifying areas that are not working well together. Or what points needs to be Ensured so that all aspects of
business change are considered when making process redesigns.
Control Process:
Control processes determine how organisations perform. Traditional accounting measures are inadequate for
assessing overall progress; as financial reporting is heavily retrospective in focus so other matters must be considered.
The balanced scorecard covers most of the angles with its four perspectives.
Customer perspective
Internal business perspective
How do customers see us? This perspective
What business processes must we excel at to achieve
concentrates on customers concern with price, quality,
financial and customer objectives? Measures could be
performance and service. Measures could be percentage core competences, skills, productivity and cost, etc.
of on-time deliveries and customer rejection rates
Innovation and learning perspective
Financial perspective
Can we continue to improve and create value? This
How do we create value for shareholders?This is the
perspective is forward looking and concentrates on
traditional reporting perspective, but must not be
what the company must do to satisfy future needs.
overlooked. Market share and sales growth are
Measures could be time-to-market for new
included here. Modern measures like value-added and
products and percentage of revenue from them.
shareholder value analysis should be included
CHAPTER 7
CHANGE MANAGEMENT
1
Strategic Change
Change is ever present in our society and a fact of organizational life. Change is necessary if an organization wishes to
prosper in an uncertain, complex and volatile environment. A change may be required to Achieve and maintain
competitive advantage; adapt to change in regulations; adapt new technology; meet demand and ensure supply etc.
Situation analysis for change:
In any event the management of change starts with an understanding of three main considerations:
(a)
The type of strategic change required
(b)
The wider context of the change
(c)
Forces facilitating and blocking change
2
Types of Strategic Change:
Velocity (or Nature) of Change: It may be incremental change (step wise small changes in existing policies over time)
or Big Bang (involves a major rapid change to existing methods, processes. Such an approach is usually required in
times of crisis when rapid responses are required.)
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Mass (or Scope) of Change: It is extent of changes. It can be realignment (where the change can be accomplished
within existing paradigm) or Transformational Change (where a change is required in cultural paradigm)
Nature of change Scope of Change
Type of Change
Incremental
+ Realignment
Incremental
+ Transformation
Big Bang
+ Realignment
Big Bang
+ Transformation
Adaptation does not require a new paradigm (fundamental change in

culture) and proceeds step by step.
Evolution is an incremental process that leads to a new paradigm.
Reconstruction can also be undertaken with an existing paradigm but
requires extensive and rapid action.
Revolution is rapid and wide ranging responses to extreme pressures for
change.
3
Context of Change
The context of change is provided by the organisational setting; this has many aspects and can therefore be very
complex. However, this complexity can be approached in a manageable way by considering it under eight general
headings proposed by Balogun and Hope Hailey, which we will analyse below.
Time is there time for longer term strategic development or does the firm have to react quickly to a crisis?
Scope how much of the organisation will be affected? Is the change best described as realignment or
transformation?
Preservation which aspects of working, culture, competences and people need to be retained?
Diversity the need to recognise that different departments (e.g. marketing and R&D) may have different subcultures.
Capability whether abilities exist to cope with the change. These can be on an individual, managerial or
organisational level.
Capacity are resources (e.g. money, managerial time) available to invest in the change process?
Readiness are staff aware of the need for change and are they ready for that change?
Power how much authority and autonomy do change agents have to make proposed changes?
PAST EXAMS
Institute of Analytical Accountants
June 2011
(a) The IAA would like to consider a number of re-design options, ranging from very simple improvements to radical solutions.
Identify a range of re-design options the IAA could consider for improving their question handling process. Evaluate the benefits
of each option. (15 marks)
Pharmacy Systems International
June 2008
(a) The proposal to develop and sell a software package for the retail industry represents a major change in strategy for PSI.
Analyse the nature, scope and type of this proposed strategic change for PSI. (10 marks)
(b) The success of any attempt at managing change will be dependent on the context in which that change takes place.
Identify and analyse, using an appropriate model, the internal contextual features that could influence the success or failure of the
chief executives proposed strategic change for PSI. (15 marks)
Polymat Paints
December 2012
(b) Time, scope, capability and readiness for change are four contextual factors that affect strategic change. Evaluate the potential
influence of these four factors at Steeltown Info Technology on any strategic change proposed by the EA Group. (12 mark)
Shoal Plc
December 2010
(b) (i) Identify and analyse, using an appropriate model, the contextual factors that will influence how strategic change should be
managed at Captain Haddock. (13 marks)
Professional marks will be awarded in part (b)(i) for the identification and justification of an appropriate model. (2 marks)
Once the acquisition is complete, Shoal plc wish to quickly turnaround Captain Haddock and return it to profitability.
(ii) Identify and analyse the main elements of strategic change required to achieve this goal. (8 marks)
Professional marks will be awarded in part (b)(ii) for the cogency of the analysis and for th e overall relevance of the answer to the
case study scenario. (2 marks)
4
Cultural Web
Culture is set of values, beliefs, behaviours, and taken-for-granted assumptions.
The cultural web illustrates the combination of assumptions that make up the paradigm, together with the physical
manifestation of culture. It helps to understand the culture of the organization. The paradigm The basic assumptions
and beliefs that an organisations decision-makers hold in common and take for granted.
Stories
31
The stories concern past events and people talked

about inside and outside the company.
Who' and what' is talked about most in these stories
can illustrate the behaviour the organization
encourages, and the sorts of things it values.
What stories do people tell about the organisation?

What do these stories say about the values of org.?
What reputation is communicated among customers
and other stakeholders?
What do employees talk about when they think of
the history of the organisation?
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Symbols
Power
structures
Organisati
onal
structures
Control
systems
Rituals
and
routi nes
ACCA P3
Business Analysis
The visual representations of an organisation

including logos, premises, and dress can illustrate the
nature of that organisation. Also, verbal
representations like language and titles can symbolise
the nature of an organisation.
Who has the real power in the organisation? This
may be one or t wo key senior executives, a whole
group of executives, or even a depart ment. The key is
that these people have the greatest amount of
influence on decisions, operations, and the strategic
direction of an organisation.
This includes both the formal structure defined by the
organization chart, and the unwritten lines of power
and influence that indicate whose contributions are
most valued. Structure is likely to reflect power.
What language and jargon is used? Is it well

known and usable by all?
What aspects of strategy are highlighted in
publicity?
Are there any status symbols?
Who has the real power in the organisation?
How strongly held are the beliefs of the people
with power?
How is power used or abused?
What are the main b lockages to change?
These concern the ways the organisation is

controlled. They include financial systems, quality
systems, and rewards (including the way they are
measured and distributed within the organisation.)
Looking at the areas which are controlled most
closely can indicate what is seen as most important to
an organisation, and where most attention is focused.
The daily behaviour and actions of people signal
what is considered acceptable in an organisation.
This determines what is expected to happen in given
situations, and what is valued by management.
What process has the strongest controls?

What process has the weakest controls?
Is emphasis on rewarding good work or penalising
poor work?
Is the structure formal o r informal? Flat or hierarchical?

What are the formal lines of authority?
Are there any informal lines of authority?
Do structures encourage cooperation & collaboration?
What do employees expect when they come to

work?
What do customers expect when they walk in?
What would be immed iately obvious if it changed?
What behaviour do the routines encourage?
PAST EXAMS
Icompute
December 2011.
(a) Analyse the culture of iCompute, and assess the implications of your analysis for the companys future performance. (13
marks)
Frigate
December 2010
The cultural web allows the business analyst to explore the way things are done around here.
(a) Analyse Frigate Ltd using cultural web or any other appropriate framework for understanding organisational culture. (15 m)
(b) Using appropriate organisation configuration stereotypes identified by Henry Mintzberg, explain how an understanding of
organisation configuration could have helped predict the failure of Ann Lis proposed formalisation of structure, controls and
processes at Frigate Ltd. (10 marks) (Total = 25 marks)
Mi dshire Health
June 2013
(ii) Exp lain how an understanding of organisational culture and organisational configuration would have helped the CEO anticipate
problems encountered in introducing a strategic planning system, and an associated information system, at MidShire (18 m)
The National Museum
(b) The failure of the Director Generals strategy has been explained by one of the trustees as a failure to understand our
organisational culture; the way we do things around here.
Assess the underlying organisational cultural issues that would explain the failure of the Director Generals strategy at the
National Museum. (20 marks)
5
Force field analysis:
Forcefield analysis consists of the identification of the factors that promote and hinder change. Promoting forces
should be exploited and the effect of hindering forces reduced.
Resistance
Overcoming
Wrong perception
Training
New technology
User involvement
New system
Education
Breaking of social groups
Long term contract
Habits
Promotion
External influence
Secure Recruitment
Reduce Power and benefits
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6
Lewin's change process
The process of change comprises three stages.
Unfreezing create the initial motivation to change by convincing staff of the undesirability of the present situation.
Change process mainly concerned with identifying what the new behaviour or norm should be. This stage will often
involve new information being communicated and new attitudes, culture and concepts being adopted.
Refreezing or stabilising the change implying reinforcement of the new pattern of work or behaviour by rewards
(praise, etc)
7
Leadership Styles for Change Management
Participation aims to involve employees, usually by allowing some input into decision making. This could easily result
in employees enjoying raised levels of autonomy, by allowing them to design their own jobs, pay structures, etc.
Education and communication used as a background factor to reinforce another approach. This strategy relies upon
the hopeful belief that communication about the benefits of change to employees will result in their acceptance of the
need to exercise the changes necessary.
Power/coercion involves the compulsory approach by management to implement change. This method finds its
roots from the formal authority that management possesses, together with legislative support.
Facilitation and support employees may need to be counselled to help them overcome their fears and anxieties
about change. Management may find it necessary to develop individual awareness of the need for change.
Manipulation and cooptation involves covert attempts to sidestep potential resistance. The information that is
disseminated is selective and distorted to only emphasise the benefits of the change. Cooptation involves giving key
people access to the decision making process.
Negotiation is often practised in unionised companies. Simply, the process of negotiation is exercised, enabling
several parties with opposing interests to bargain. This bargaining leads to a situation of compromise and agreement.
8
Change Agent
A change agent is an individual or group that helps to bring about strategic change in an organisation.
JSW examine change agency by considering three distinct groups:
Strategic leaders
Middle management
Outsiders
Five approaches to strategic leadership:
Providers of advice;
Bringing a fresh point of
Strategic analysis and design focus
translation of strategy at
view, such as a new chief
Human assets development focus
local level;
executive or the use of
implementation and
consultants
Expertise as source of competitive advantage focus
control
Control by procedures and performance monitoring
Change as continuous process emphasis on
communication and monitoring
9
The business change lifecycle
The overall change process can be split into five steps defined by the business change lifecycle:
Alignment determining the type of
change required.
Definition creating a project to achieve
this alignment.
Design determining the detail changes
required.
Implementation putting the design into
action and managing its success.
Realisation assessing the success of the
alignment.
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CHAPTER 8
ROLE OF IT
1
Role IT in business strategy
IT plays an important role in all stages of strategic development for example;
In strategic analysis it helps to increase strengths & opportunities and reduce weaknesses & threats.
this in turn could lead to new strategic choices, for example, support new competitive strategies
Finally, IT can play a role it putting strategy into action. For example, we have already seen in the previous chapter
how IT can play a vital role in process redesign efforts
2
E-Business
E-business: the transformation of key business processes through the use of internet technologies.
E-business, is the automation of business processes of all types through electronic means. This may be restricted to
email or may extend to a fully-featured website or an e-marketplace.
E-commerce: is a subset of e-business. The most generic description of e-commerce is trading on the internet, buying
and selling products and services online.
Categories of E-Business
B2B (business to business). For example, a supermarket B2C (business to consumer). Selling over the internet
IS automatically placing orders into suppliers IS.
books, flights, music, etc.
C2B (consumer to business). Some internet sites display C2C (consumer to consumer). Auction sites, such as
a selection of suppliers offerings from which the user ebay, putting consumers in touch with each other.
can choose. A model that largely depends on internet.
Amazon does the same by offering second-hand books.
Stages of E-Business
The stages of e-business can be described as:
a) Web presence
Static or dynamic web-pages but no transactions are carried out. Would show information about the organisation,
products, contact details, FAQs (Frequently Asked Questions). Faster updates are possible than with paper-based
information and could be cheaper than paper-based catalogues.
How to make website interactive?: Search, online forms, questionnaires, subscription email lists, links to other sites,
downloadable files, contact us, site map, Online community, Feedback, Online booking, Weather feed, Search engine
optimisation
b) E-commerce:
Buying and selling transactions using e-commerce. Might cut out middlemen, but there is probably no fundamental
change in the nature of the business.
c) Integrated e-commerce.
For example, information can be gathered about each customer's buying habits. This can allow the organisation to
target customers very precisely and to begin to predict demand
d) E-business E-business is now fundamental to the business strategy and may well determine the business strategy.
Advantages and Disadvantages of E-Business
Advantages
Cost reduction - e.g. lower overheads, cheaper procurement
Increased revenue and profit- e.g. online sales, better CRM
Better information for control - e.g. monitoring website sales
Increased visibility
Enhanced customer service - e.g. via extranets
Improved marketing - e.g. e-mailing customers with special offers
Market penetration e.g. even small suppliers can gain a global presence via the internet
Enhance the company's competitive advantage
Disadvantages
Set-up costs
Running cost
Security concerns
Technophobia
Limited IT resources in house.
May lack skills to design and maintain a
web site, in which case it has to rely on
outsourcing
PAST EXAMS
Rock Bottom
December 2010. Question 2.(a) [Q4 BK)
(a) Determine the main drivers for the adoption of e-business at TMP and identify potential barriers to its adoption. (5 marks)
Institute of Administrative Accountants
December 2010 [Q31 BPP Kit]
(a) Evaluate the perceived benefits and costs of adopting e-assessment at the IAA. (15 marks)
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3
IT Risks and Controls
Dissatisfied employees might deliberately modify or Accidental mistakes could be made on input to system
Inadequate security of the hardware or data.
destroy information in the system.
Faults in the hardware system.
A hacker or industrial spy might break into system.
Viruses or malicious software could be introduced.
4
IT Controls
a) Security control: (Prevention of unauthorized access, modification or destruction of stored data.
b) Integrity control: (ensure that data are accurate, complete etc)
c) Personal controls: (Recruitment, training and supervision to ensure the competency of persons involved in IT.)
d) Logical access controls: (use password, user name and access should be provided only to authorised persons.)
e) Physical Control: (security guards, door lock or ID card entry system, use safes, CCTV cameras, alarms)
f) Operational controls
g) Data input controls
5
Continuity Planning and Disaster recovery planning:
Continuity planning
Continuity planning is focused on ensuring the survival of an organisation and its operations in the face of short term
adversity. Many internal weaknesses and external threats exist which if materialised could have a severe impact on an
organisation's ability to achieve its long term objectives and ultimate survival. Events including natural disasters (eg fire
and floods) and computer network failures (eg supply chain interruption) are likely to be highly detrimental to an
organisation's operations.
Continuity planning is concerned with having in place courses of action directed towards combating and preventing
the significant risks an organisation faces. Given the extensive use of computers in modern business, a strong focus of
continuity planning is devoted to protecting IT assets (disaster recovery).
Most large organisations today produce business continuity plans which detail key parts of an organisation's
operations to assist with operational recovery in the event of a risk materialising. Plans often include details about key
personnel, customer and supplier contacts and related information about the entity's data back-ups.
Disaster recovery
Disaster recovery is part of continuity planning. It is predominantly concerned with the processes and procedures
that an organisation uses to allow its IT systems to continue in operation in the event of a disaster occurring. In the
event of critical functions being interrupted, a company's disaster recovery processes are directed at restoring the
organisations operations within an acceptable time frame.
PAST EXAMS
BeauCo
(a) Analyse the adequacy of BeauCos internal control processes. (You should give particular consideration to the IT controls and
payroll processes in place at the company and suggest practical recommendations on how these could be improved.) (16 mark)
(b) The board of BeauCo would like to gain a better understanding of the terms continuity planning and disaster recov ery.
Acting as an IT consultant advise the board why both continuity planning and disaster recovery activities are likely to be
significant to BeauCo.
(9 marks) (Total = 25 marks)
6
MARKET PLACE CHANNEL STRUCTURES
Channel structures are the means by which a manufacturer or selling organisation delivers products and services to its
customers..
DISINTERMEDIATION
Disintermediation is the removal of intermediaries in a supply chain that formerly linked a company to it s customers.
Instead of traditional distribution channels, with intermediaries such as a distributor, wholesaler, broker or agent,
companies may now deal with every customer directly via the internet.
REINTERMEDIATION Reintermediation is the establishment of new intermediary in supply chain.
COUNTERMEDIATION Countermediation is where established firms create their own new intermediaries to
compete with established intermediaries.
7
INTRANETS AND EXTRANETS
An Intranet is an in-house version of the Internet,
owned and run by a single organisation. It allows its
employees to share the entitys own internal
information (files) and software through the network.
35
The benefits of an intranet are:
better communications within an entity

easier access for employees to databases (internal
information) and software
access to external information through the internet
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An extranet is an intranet that also provides access to the network for some external entities, such as key suppliers
or customers. Examples of the use of extranets include:
A direct link between the stores/purchasing system of a company and its suppliers would enable the ordering
and delivery processes and procedures to be speeded up and carried out more efficiently.
Just in Time (JIT) systems that provide connections between production, stores and suppliers.
A customer network that enables a company to keep a con stant flow of information on customer activity to
salespeople.
8
SUPPLY CHAIN MANAGEMENT (SCM)
8.1
WHAT IS SUPPLY CHAIN MANAGEMENT (SCM)?
A supply chain encompasses all activities and information flows necessary for the transformation of goods from the
origin of the raw material to when the product is finally consumed or discarded.
Push Model of supply chain
With a push model, a company markets its goods and services to potential customers, and tries to persuade customers
about the merits of its products compared with those of competitors.
Pull Model of supply chain
With a pull model, a company tries to sell its products to its own customers by encouraging the customers at the end
of the supply chain to demand their products.
Push-Pull Model of the Supply Chain
In a push-pull system, the initial stages of the supply chain generally follow a push strategy while the remaining stages
move to a pull strategy. The interface between the two stages is typically called the push -pull boundary.
8.2
IMPACT OF E-COMMERCE ON THE VALUE CHAIN
Value chain analysis can be used to assess the impact of IS/IT and identify processes within the value chain where it
can be used to add value.
Inbound logistics covers receiving, storing and handling raw material inputs. The use of IT includes inventory
control and systems such as Material Requirements Planning (MRP), Enterprise Resource Planning (ERP) and JIT.
Operations are concerned with the transformation of the raw material inputs into finished goods or services. IT
can be used to automate and improve tasks; examples include robots, process control, and machine tool control,
Computer Aided Manufacturing (CAM), Computer Integrated Manufacturing (CIM) and Enterprise Resource
Planning (ERP).
Outbound logistics is concerned with the storing, distributing and delivering the finished goods to the customers.
IT makes it possible to follow the progress of goods from pickup to delivery.
Marketing and sales are responsible for communication with the customers. Supermarkets use EPOS system
information on inventory to aid speedy ordering and replenishment.
Service covers all of the activities that occur after the point of sale eg, installation, repair and maintenance.
Customer databases allow organisations to sell after-sales services.
9
UPSTREAM SCM
Upstream activities in the supply chain are those that relate to suppliers and the obtaining and storing of raw material.
How to Re-structure or improve Upstream SCM:
Reduce dependence on single supplier: identify a wider range of suppliers, it will remove the risks of sourcing all
the products from a single supplier and other suppliers may have better systems in place
Outsourcing re-branding and packaging to suppliers,
Contract terms (use short term or long term contracts whichever is more beneficial)
Forecasting of delivery dates: Identify suppliers who are able to provide information about delivery dates prior
to purchase and provide internet-based order tracking systems
Streamlining shipping process: single contracted logistics company which will collect the goods from the supplier
and transport them directly. greater visibility of the progress of the order from de spatch to arrival
Independent marketplace: B2B electronic marketplaces, greater supplier choice with reduced costs. opportunity
for aggregation for smaller organization to work together.
Improve communication.
9.1
E-PROCUREMENT
Procurement relates to organisational purchasing and involves locating items of the right price; that are available at
the right time, of the right quality, in the right quantity and from the right source. E-procurement looks at the
potential opportunities that can be gained from automating aspects of the procurement process.
Procurement activities include:
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a) Identifying the need to purchase a quantity of an item

(initiating a materials requisition)
b) Identifying one or more possible suppliers
c) Negotiating price & other contract details with suppliers
Business Analysis
d) Placing the purchase order with the chosen supplier

e) Receiving, checking, recording and storing the goods
received.
f) Paying the supplier.
Components of E-Procurement
E-sourcing: E-sourcing is the use of electronic methods for finding new suppliers and negotiating terms for
purchase agreements. The internet (emails) can be used to identify potential new suppliers, and to find out more
about the business of potential suppliers by visiting their websites.
E-purchasing: Process of making purchase orders electronically. The process of making a purchase might involve:
Sending requests to suppliers for quotations for the supply of goods or services.
Receiving quotations/tenders from potential suppliers
Placing the order electronically.
E-payment: E-payment is the use of electronic methods for payment, such as electronic invoicing and self -billing.
Many companies also arrange to pay suppliers by sending electronic payment instructions to their bank. In t he UK,
electronic payments are made through BACS (the Bankers Automated Clearing Services).
Benefits of E-Procurement
Benefits
Risks
savings in labour and procurement costs
become over reliant on the technology
better inventory control
there may be staff resistance
better control over suppliers (may even be able to influence cost savings may fail to materialize
their design and production)
prices may become out of date or uncompetitive
PAST EXAMS
Cronin Auto Retail
June 2011 [Q15 BPP Kit]
(b) Explain the principles of e-procurement and evaluate its potential application to CAR.
(9 marks)
Perfect Shopper
December 2007
(b) Explain how Perfect Shopper might re-structure its upstream supply chain to address the problems identified in the scenario.
(10 marks)
DRB
Pilot Paper
(b) Explain how DRB might re-structure its upstream supply chain to achieve the growth required by DRB and to tackle the
problems that Dilip Masood has identified. (10 marks)
10
DOWNSTREAM SCM
Downstream activities in the supply chain are those that relate to customer and consumer and selling of finish goods.
How to Re-structure or improve Downstream SCM:
Improve functionality of buy-side web site: shows product availability, and allows customers to order and pay for
products securely through the website.
Join an independent marketplace as a supplier:
Introduce on line marketing and online sales
Inventory model, business should use demand driven supply chain model; which will reduce high storage and
holding cost of high levels of inventory.
Outbound logistics arrangements: single contract will afford economies of scale,
Shop ordering and delivery system: flexible ordering system, in which customer can make orders and deliveries
can be made as required.
Redeploy sales representatives: reduce the size of its sales team, or else it could redeploy some of them on
projects to improve the branding and marketing of the business
IT systems, EPoS tills and sales information,
Role of E-Business to improve relationship with its customers
The following are the main ways in which e-business can affect an organisations relationship with its customers.
Tie-in/switching costs. A good e-business arrange Continual updates products, prices, news.
ment can make customers reluctant to switch sup Easy, fast, cheap, two-way communication.
plier due to extra switching cost.
Tracking customer internet activity and buyer habits.
E-commerce can lead to disintermediation.
Clicks on website can be recorded & analysed.
The process of re-intermediation is also found.
Customer preferences can be acted on.
Counter-mediation is where established firms Customers can specify precisely the features they
create their own new intermediaries to compete.
might want in their product.
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PAST EXAMS
Jayne Cox Direct
June 2012. Question 4.(A,B)
(b) Evaluate how technology could be used in both the upstream and the downstream supply chain to address the problems
identified at Jayne Cox Direct. (13 marks)
Perfect Shopper (12/07)
December 2007
(b) Explain how Perfect Shopper might re-structure its upstream supply chain to address problems identifi ed in scenario. (10 m)
(c) Explain how Perfect Shopper might re-structure its downstream supply chain to address the problems identified in the
scenario. (10 marks)
11
RESTRUCTURING THE SUPPLY CHAIN
VERTICAL INTEGRATION is a style of ownership and control with companies united through a hierarchy and
sharing a common owner.
VERTICAL DISINTEGRATION is a specific organisational form of production. This means that the production
process is in the hands of several separate companies. A good example of this is to be found in the film industry.
VIRTUAL INTEGRATION a virtually integrated company is one in which core business functions take place in
external organisations. They are so tightly organised that it is often difficult to determine where one legal entity
starts and the other one finishes.
12
SOFTWARE SOLUTIONS
12.1
Establishing business information needs
Various methods are available for establishing business information needs, including the following:
Technique
Suitability
Interviewing
Standard technique for most scenarios
Written questions
Where people are not available for interview
Questionnaires
Where the user population is too large to interview
Generally unsuitable due to superficial nature of questions and lack of interaction.
Observation
Particularly useful if carried out before interviewing
Document analysis of existing
Good source of design and analysis material.
processes
Workshops
Useful for resolving conflicts and for new processes where high uncertainty exists.
Protocol analysis a mixture of
Ensures all aspects of the process are considered and none taken for granted by
interview and observation
users.
Prototyping
Where requirements are unclear
Helps users reassess their desired functionality
12.2
Using generic software solutions
There are various ways to produce a software solution.
Purchase a standard (generic) software package and:
use this without any modification
make suitable amendments to customise this for the organisations specific requirements
add company specific modules as necessary.
Pay for a bespoke system to be developed using existing hardware.
Advantages of generic solutions
Disadvantages of generic solutions
Speed of implementation (time saving)
They do not fit precisely the needs of
Software quality. Already used by large no customers means faults
the organisation
The organisation is dependent upon an
have already been identified and corrected.
Try before you buy
outside supplier for the maintenance
Predicted maintenance costs
of the software.
Different packages used by the

Access to expertise of software provider.
organisation may have incompatible
Initial cost Cheaper to buy than bespoke solutions
data structures.
Available almost immediately.
Using the same packages as rival

Bugs should have been discovered by the vendors before sale.
organizations removes the opportunity
Good packages are likely to come with good training programs and
of using IS for competitive advantage.
excellent documentation and on-screen help facilities.
Availability of updated version on regular basis
Different packages will be available for different operating systems
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Evaluating and selecting a generic software solution
Evaluation: In evaluating different options, both the

software and the supplier need to be assessed. Key
factors are thus:
Evaluation of different options
Devel op B usiness case Case (A business case should be
developed which set out the financial case for undertaking

the project. This evaluation provides management with the
opportunity to fully assess the merits and costs involved.)
Functional requirements
Non-functional requirements (legal comp liance, user
friendly and audit requirements.)
Technical requirements (hardware support)
Supplier stability requirements (Length of time in
business, Financial stability, Third party references)
Supplier cit izenship requirements
Initial imp lementation requirements (Installation stage of
a new package must be carried out successfully)
Cost constraints
Time constraints
Control
Design requirements
Update
12.4
Business Analysis
Selection:
a) Obtaining potential suppliers (Identify potential
suppliers, Invitation to tender)
b) First pass selection (short list few suppliers from list
tenders)
c) Second pass selection (Objective reassessment of
suppliers claims using specific test scenarios.
Suppliers may perform against a script or client staff
may use demonstration packages, Visits to reference
sites to see package in operation, Financial
investigation of suppliers)
d) Implementation:
Implementation
Implementing software solutions involves three key elements: data migration, training and changeover.
Data migration: (transferring data
Training:
Changeover techniques:
from the old system to the new)
Issues needs to be considered are:
(introducing new system to the
Stages in data migration include:
Who needs to be trained and why. business operations)
Planning
On or off the job training.
Parallel running (old and new
Data mapping
Who will provide the training.
system run side by side)
Manual input
Short term or ongoing training.
Direct changeover (old system
Testing the solution
Line management involvement?
immediately finished and new
Implementing the solution
Methods of training
takes over)
External courses
Phased (old system finished and
Internal courses
new takes over by through
Computer based training
different stages)
PAST EXAMS
Flexipipe
June 2012
(a) Critically evaluate the decision made by the CEO to use a software package approach to automating the production process
at Flexipipe, and explain why this approach was unlikely to succeed. (12 marks)
(b) The CEO recommends that the company now adopts a formal process for procuring, evaluating and implementing software
packages which they can use in the future when a software package approach appears to be more appropriate.
Analyse how a formal process for software package procurement, evaluation and implementation would have addressed the
problems experienced at Flexipipe in the production process project. (13 marks) (Total = 25 marks)
OneEnergy plc
June 2009
(b) Examine four ways in which OneEnergy failed to follow a proper evaluation procedure in the selection of the RitePay
software package. Include in your examination a discussion of the implication of each failing. (12 marks)
Institute of Analytical Accountants June 2011
(b) Eventually, the IAA decided not to develop a bespoke solution but to use an established software package to implement its
multiple choice question management and examination requirements. The selected package, chosen from a shortlist of three,
includes the delivery of tests, question analysis, student invoicing and student records. It is already used by several significant
examination boards in the country.
Explain the advantages of fulfilling users requirements using a software package solution and discuss the implications of this
solution for process re-design at IAA. (10 marks)
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CHAPTER 9
STRATEGY and PEOPLE

1
Strategic leadership
Trait theories: Trait theories are based on the idea that some people are inherently suited to positions of leadership
because they possess appropriate personal qualities.
Behavioural theories:
Blake and Mouton's Managerial Grid
Blake and Mouton observed two basic dimensions of
leadership: concern for production (or task
performance) and concern for people.
a) 1.1 impoverished: the manager is lazy, showing
little interest in either staff or work.
b) 1.9 country club: the manager is attentive to staff
needs and has developed satisfying
relationships. However, there is little attention paid
to achieving results.
c) 9.1 task oriented: almost total concentration on
achieving results. People's needs are virtually
ignored.
d) 5.5 middle of the road: adequate performance
through balancing (or
switching between) the necessity to get out work
with team morale.
e) 9.9 team: high work accomplishment through
'leading' committed people who identify
themselves
with the organisational aims.
Theory X and Theory Y

McGrego r suggested that managers tended to behave in two different way with people at work: Theory X and Theory Y.
(a) Theory X suggests that most people dislike work and responsibility, and will avoid both if possible. Because of this, most
people must be coerced, controlled, directed and/or threatened with punishment to get them to make an adequate effort.
Managers who operate according to these assumptions will tend to supervise closely, apply detailed rules and controls, and
use 'carrot and stick' motivators.
(b) Theory Y suggests that physical and mental effort in work is as natural as play or rest. The ordinary person does not
inherently dislike work: according to the conditions it may be a source of satisfaction or dissatisfaction. The potentialities of
the average person are rarely fully used at work.
People can be motivated to seek challenge and responsibility in their job, if their goals can be integrated with those of the
organisation. A manager with this sort of attitude to his staff is likely to be a consultative, facilitating leader, using positive
feedback, challenge and responsibility as motivators
Transformational theories
Transactional leaders who focus on managing through systems and processes. These leaders are likely to be more
effective in securing improvement in stable situations.
Transformational leaders who provide a vision, inspire people to achieve it by instilling pride and gaining respect and
trust. These leaders appear to be particularly effective in times of change and uncertainty
Transactional leadership
Transformational leadership
Clarify goals & objectives and the focus is on short
term
Focus on control, and Solving problems
Maintain status quo
Plan, organise and control
Guard and defend existing culture
Positional power exercised
Suitability
This is best suited to static, predictable environments.
40
Establish long ter m vision

Create a climate of trust
Make people solve their own problems by empower ment
Train, coach, counsel and mentor people
Change culture
Power comes from relationships and influencing people
Suitability
This is best suited to environments here change is inevitable and
may be unpredictable.
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Contingency theories
These theories suggests that no one style is likely to be entirely appropriate for all circumstances.
Adair's action-centred, model sees the leadership process depends upon three main variables, These are task needs,
the individual needs of group members, and the needs of the group as a whole. The total situation dictates the
relative priority that must be given to each of the three sets of needs. Effective leadership is identifying and acting on
that priority to create a balance between the needs.
2
Job design
Process of combining tasks and responsibilities to form complete jobs and the relationship of jobs in the organisation.
Scientific Management
Management should be based on 'well-recognised, clearly defined and based on fixed rules, instead of depending on
more or less hazy ideas.' This approach states that there is always one best way to do a job.
Principles of Scientific Management
a) The development of a true science of work. Every single subject, large and small, should be gathered and recorded
by management.
b) Selection and progressive development of workers: workers should be carefully trained and given jobs to which
they are best suited.
c) Combine science and trained men. The application of techniques to decide what should be done and how, using
workers who are both properly trained and willing to maximise output, should result in maximum productivity.
d) Co-operation between management and workers: 'the relations between employers and men form without
question the most important part of this art.'
Job enrichment
Job rotation shifting from one type of job towards another within an organization.
Job enlargement extension of burden of same horizontal job without increase in authority.
Job enrichment: Job enrichment is extension to authority, responsibility and control over the way the job is
accomplished. Its main objective is to increase job satisfaction.
Principles of Job Enlargement:
Hackman and Oldham suggest that five core characteristics are required in enriched jobs if they are to
produce positive outcomes:
a) The job requires the use of a range of skills and talents.
b) Task identity (sometimes called closure): the job includes all the tasks needed to complete an identifiable product
or process.
c) Task significance: the job has an impact on other people's lives or work.
d) Autonomy: workers have a degree of discretion in scheduling and organising their work.
e) Feedback: workers are provided with information on the results of their performance.
The Japanese model
Flexibility of manufacturing means producing range of products by keeping set-up cost low. The principal features is to
recruit multi-skilled workers and range of machinery and equipment available to each of them.
Quality methods: development of the total quality approach in which production workers responsible for the quality
of their own output.
Minimisation of waste: production is pulled through the factory by demand, not pushed by production schedule.
The just-in-time strategy is a further example.
Re-engineering
Fundamental rethink and radical redesign starting from a zero in business processes t o achieve dramatic improvements
3
Staff development
Human resource development (HRD) can be viewed as an investment in stra tegi c capability, since it i mproves both skills and commi tment.
Investment in people is a kin to inves ting in any other type of asset people become human capital . This can be ei ther top -down (dri ven
by mana gement) or bottom-up (empowered employees recognise thei r own s kills gaps).
Competencies, in the sense used here, are 'the required outcomes expected from the performance of a task in a work
role, expressed as performance standards with criteria'.
Application of competencies
Recruitment. Managing performance. Benchmark for rewards and promotion Training and development.
4
Succession planning
Succession planning is undertaken in order to ensure continuity in the organisation's leadership. It involves the
systematic identification, assessment and development of managerial talent at all levels.
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Features of successful succession planning

a) The plan should focus on future requirements, particularly in terms of strategy and culture.
b) The plan should be driven by top management. Line management also have important contributions to make. It is
important that it is not seen as a HR responsibility.
c) Management development is as important as assessment and selection.
d) Assessment should be objective and preferably involve more than one assessor for each manager assessed.
e) Succession planning will work best if it aims to identify and develop a leadership.
CHAPTER 10
PROJECT MANAGEMENT
What is a Project?
Project: A project is 'an activity that has a beginning and an end and is carried out to meet established goals within
project constraints'.
Project Management: management of project within project constraints
Project Constraints: These include cost, time (schedule) and scope (quality).
Stages in Project Life cycle
Project management problems
Normally every project has at least the following five stages: Need for team building
Project Definition
Identified difficulties
Planning
Unexpected problems
Execution
No client benefit before completion
Control
Management of specialist input
Completion
Wide range of stakeholders
1
Project Definition
Process of project definition is the preparation of answers to a series of questions.
What opportunities and threats does the project present?
What are its objectives?
What are its potential benefits, costs and risks?
What is its overall implementation difficulty?
Who are the key stakeholders?
Force field Analysis: identify the factors in favour of Pre-initiating tasks
project and that which will prevent it.
a) Determination of project constraints.
Gap analysis: the difference between desired future
Costs: initial budget for the project and need
results and likely future results. Project are selected which
to prove that benefits of the project exceed
can reduce this gap.
costs.
Project selection: projects are evaluated by using the
Scope: Series of tasks to be performed and
criteria suitability, acceptability and feasibility and best
level of quality for each task. (means quality &
project is selected.
quantity)
Assessment and management of risks
Time: overall time constraint for project
Consequences of Risk:
completion and time budget e.g. man hours
Benefits are delayed or reduced
available.
Timeframes are extended
b) Identification of the project sponsor
Expenses are increased and Output quality (fitness for c) Selection of the project manager
purpose) is reduced.
Initiating tasks
Risk assessment Risks can be assessed on the basis Initiating tasks are carried out by the project manager.
of likelihood that they will occur, and the impact that a) Identify of project stakeholders & their interests
they could have on the project.
b) Prepare business case
Risk management plan
c) Prepare project initiation document (or project
Explaining how these risks will be managed in order to
charter)
ensure project success.
d) Drafting an initial statement of project scope
Likelihood
e) Holding a project initiation meeting ('kick-off'
Low
High
meeting)
Impact Low
Accept
Reduce
High
Transfer
Avoid
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Business Case
A business case is a key document which summarise of why the project is needed, what it will achieve and how it will
proceed. Before a business case is approved, it should be evaluated to ensure that a project has value, that it will be
properly managed, and that a firm has the capabilities required to deliver the benefits expected from the project.
Reasons for building Business Case:
Contents of Business Case:
to obtain funding for the project
Introduction
Investment appraisal
to compete with other projects
Management summary
Impact assessment
to improve planning
Description of current situation Risk assessment
to improve project management
Project Scope
Recommendations
Project timetable (starting date Appendices and supporting
and finish data)
information
Options considered
Analysis of costs and benefits
Few contents business case are explained below:
Identifying the benefits
Observable benefits
The realisation of observable benefits, such as increased staff morale, can only be determined by judgement or
experience by someone who is qualified to make such an assessment. Staff morale could perhaps be assessed via an
independent survey carried out both before and after the community centre is up and running, but the results of this
and any benefit obtained can only be assessed once the project is complete and the building has been in place for
some time.
However, such observable benefits should not be included in the business case because It is not clear whether they
would bring about improvement in staff morale and motivation or not.
Measurable benefits relate to an area of performance that could be (or already is being) measured, but it is not
possible to quantify how much performance will increase as a result of the change. E.g Process improvement.
Quantifiable benefits are those where the level of benefit that will result from the change can be reliably forecast
based on the evidence in place. Quantifiable benefits differ from measurable benefits because it is possible to quantify
the degree of improvement before the change is actually made.
Financial benefits are quantified benefits that have had a financial formula (such as cost or price) applied
to them to produce a financial value for the benefits.
Identifying the costs
Many costs will be incurred as part of a project, these will be both capital and operational. Care should be
taken to ensure all costs are fully identified within the business case. Project costs might be: Capital investment costs,
Development costs,
centrally allocated costs/infrastructure costs,
External consultancy costs,
Resource costs,
Quality costs, Flexibility costs, Disruption costs
Evaluation of the costs and benefits
There are four key methods that are used for investment appraisal, they are ARR, Payback period, NPV and IRR.
Approach
Decision of criteria
Advantages
Limitations
Accounting
Rate of
Return
(ARR)
Pay back
Period (PP)
Acceptable projects
achieve target ARR
Select project with highest
ARR
Acceptable projects have
PP shorter than target PP
Select project with
shortest PP
Net Present
Value
(NPV)
43
Consistent with ROCE

Result expressed as a percentage
Acceptable projects return

a positive NPV

NVP
Ignores time factor

Based on profits not cash
Difficult if comparing
investments of
different size
Quick and easy to calculate
Ignores cash flows after pay
Easily understood
back date
Ignores many risks

Emphasises importance of liquidity
Not linked to promoting
increases in organisational
and shareholder wealth
Consider all costs and benefits
Allows for timing of costs and
benefits
Aligns with business objective of
increasing wealth
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Internal
Rate of
Return
(IRR)
Acceptable projects have

IRR greater than cost of
capital
ACCA P3
Consider all costs and benefits
Allows for timing of costs and
benefits

IRR
Business Analysis
Does not relate directly to

shareholder wealth
Ignores scale of investment
Can be unreliable it cashflows
are unconventional
Responsibilities for delivering the benefits

A benefit owner is an individual or group who will gain advantage from a business benefit and who will work with the
project team to ensure that benefit is realised.
Benefits map: A benefits map is a useful tool which assists the benefit owner in understanding how to realise the
intended benefit from a project. A benefits map can be linked back to the organisation's objectives to illustrate how
the intended benefits will help the entity. For example reducing the marker fees may be part of the IIA's plan to
improve profitability. The benefits map should also help to indicate any new processes that will be needed in order to
achieve the project's expected benefits.
However, the benefit owners cannot be considered to be solely responsible for realising the benefit, since the changes
necessary to deliver the benefit may need to be undertaken by others outside their sphere of control or influence
people who do this are known as change owners.
A change owner is an individual or group who will ensure that an identified change is successfully achieved.
The benefits realisation plan
A benefits realisation plan should be included as part of the business plan to demonstrate how the
identified benefits will be measured, taken forward and achieved.
Full descriptions of each benefit and change with responsibilities for delivery defined and agreed
Measures, and where possible expected values, for each benefit
Agreed ownership of all the changes to achieve benefit
Criteria to be used to assess whether each change has been successfully carried out
Complete and documented benefits dependency network identifying all the benefit and change relationships
A benefits dependency network
A benefits dependency framework is aimed at ensuring that the business drivers and investment objectives are achieve
d by ensuring there are appropriate business changes in areas such as work methods, structure, culture etc.
The network should be established in the following order:
a) Identify business drivers
The key drivers of any project will be the business strategy and the organisational objectives. Before starting a project,
it is important that these drivers are understood and discussed. This is known as driver analysis.
b) Establish investment objectives
Objectives should also be personalised to the investment. These will be more detailed and operatio nal than the overall
project drivers. However, each should be directly linked to one or more of the project drivers. The list should be short
(with between three and six targets) and precise. Ideally, each objective should follow a SMART (specific, measure able,
achievable, relevant, time bounded) criteria.
c) Identify business benefits
d) Identify required business changes
e) Associate further enabling changes (changes required to make business changes)
1.2
Project initiation document (or project charter)
The business case explains the need for work on the project to start, the charter gives authorisation for work to be
done and resources used.
Elements of project initiation document.
Project title
Outline schedule of work
Details of the project sponsor and project
Outline of project scope and work sequence
Project purpose and objectives
Budget information
Authorisation by the main stakeholders
Further details of roles and responsibilities
Project start date and expected finish date
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Project Planning
Why projects go wrong:

Unproven technology
Changing client specifications
Politics at all levels
lack of management support
Poor project management
Poor leadership by technical experts
Poor planning
Poor control
Force field Analysis:
Identify the factors in favour of project and that
which will prevent it.
Work breakdown structure
A work break down structure breaks a work down
into its component points in the form of a
hierarchical chart
The project budget
The project budget plans the allocation of
resources to the project and forms a basis for their
control. Budgeting may be top-down or bottom-up
Network analysis or Critical Path Analysis
It is used to plan the sequence of tasks of project
and to determine the critical path.
Project evaluation and review technique (PERT) is
a modified form of network analysis designed to
account for uncertainty
Gantt charts
A Gantt chart shows the consumption of resources over time.
Resource histogram
A resource histogram shows a view of project data in which
resource requirements, usage, and availability are shown
against a time scale.
3
Project Execution
The project sponsor provides and is accountable for the resources invested into the project and is responsible for the
achievement of the project's business objectives.
The project manager takes responsibility for ensuring the desired result is achieved on time and within budget.
The Project Board (project steering committee) is the body to which the project manager is accountable for achieving
the project objectives. It represents the interests of the project sponsor.
Project champion. Sometimes a project champion is appointed. This is a senior manager whose role is to represent the
project to the rest of the organisation, communicating its vision and objectives and securing commitment to them.
Project owner. The project owner is the person for whom the project is being carried out and as such they are
interested in the end result being achieved and their needs being met.
Project manager
The project manager takes responsibility for ensuring the desired result is achieved on time and within budget.
Duties of the project manager
Skills required of the project manager
Planning
Leadership and team building
Obtaining resources
Organisational ability
Teambuilding
Understanding of the way that groups interact
Communication
Written and spoken communication skills
Co-ordinating project activities
Interpersonal/negotiation skills
Monitoring and control
Technical knowledge of the issues involved
Problem resolution
Problem solving
Quality control
Change control/change management
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Leadership style
As in other forms of management, different project managers have different styles of leadership. There is no single
best leadership style, as individuals react differently to different styles on different occasions. The key is adopting a
style that suits both the leader and the team and that is appropriate to the current situation.
The project team
A group or team differs from a random collection of
people in that its members perceive themselves to be a
group. They have:
A sense of identity
Loyalty to the group
Purpose and leadership
Development of the team Tuckman
Forming. The team is still a collection of individuals.
Aims, norms and personalities are probably unclear and
no leader is likely to have emerged.
Storming. There may be open conflict as objectives and
norms are set and revised. Trust increases.
Norming. The team settles down and creates norms for
output, worksharing and individual needs.
Performing. The team is sufficiently integrated to
perform its task.
Roles of team member

Specialist or technical expert brings specialist
knowledge and advice to the team.
Representative as part of the core team, the
member represents their home department and as
part of the project team communicates the project
teams views and decisions when back in their home
department.
Monitor will monitor their progress against the plan
appropriately and regularly
Change manager as changes are identified, will
ensure that the full implications have been assessed
before the changes are agreed and implemented.
Problem solver will be faced with many problems
during any project and will be required to solve them
by drawing on the resources of the project team and
their home department and through the use of
problem-solving techniques.
Matrix Structure
Most suitable structure to perform project is matrix structure in which consist of multi-skilled persons.
4
Controlling the Project
Gateways
A gateway is a project review point at which certain criteria must be met before for the project can pass through the
gateway and proceed to the next stage.
Gateways should be incorporated into formal monitoring of projects in order to ensure that the project has remained
on track, and any problems can be identified and rectified before they get out of hand.
Gateways are particularly helpful for identifying scope creep (uncontrolled changes in the scope of a project.)
Progress reports & Realistic timescale
A progress report shows the current status of the project, usually in relation to the planned status. The report should
monitor progress towards key milestones. A milestone is a significant event (major target) in the life of the project.
Dealing with slippage
When a project has slipped behind schedule there are a range of options open to the project manager.
Do nothing
Add resources
Work smarter
Replan (If the assumptions that the original plan was based on have been proved invalid, a more realistic plan
should be devised.)
Reschedule (A complete replan may not be necessary it may be possible to recover some time by changing the
phasing of certain deliverables.)
Introduce incentives to enhance individual performance
Briefings and motivation
Change the specification (negociate a change in number of activities or level of quality required in each activities.
Options for major slippage & Project cant be delayed:
Fast-tracking :Performing activities in parallel which were previously scheduled in sequence. fast-tracking can
accelerate a project, it also involves the risk of increased costs.
Crashing: Crashing involves assigning additional resources to the critical path. For example, if one person was
working on a twelve day activity on the critical path, and it was essential to reduce the path length to eight
days, a second person could be added to work on the activity.
46
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ACCA P3
Business Analysis
Project change procedure

Changes will cost time and money and should not be undertaken lightly. When considering a change an investigation
should be conducted to discover:
a) The consequences of not implementing the proposed change.
b) The impact of the change on time, cost and quality.
c) The expected costs and benefits of the change.
d) The risks associated with the change, and with the status-quo.
5
Project completion
The completion report summarises the planned and actual results of the project, and includes client sign-off.
Post Project Review
A post-project review is a formal review of the project that examines the lessons that may be learned and used for the
benefit of future projects. They help the organisation to avoid making the same mistakes twice.
Post-project reviews are carried out after the project has been completed and aims to measure the success of the
project by considering:
if the project was completed on time and within budget
Whether the project was successfully managed, or if problems and bottlenecks were encountered
if these problems could arise on future projects; and
how well the team performed, both individually and as a group
The whole team should be involved in the post project review and the overall findings should be formalised into a
report called post project review report which should include the following.
A summary of the findings highlighting any area where the process, structures and tools used to manage the
project were unsatisfactory
A cost-benefit review which compares the forecasted costs and benefits to actual costs incurred and benefits
achieved
Recommendations as to how the project management process could be improved
Post-implementation reviews
Post-implementation reviews are assessments of the completed working solution.
The post-implementation review focuses more specifically on the product that was produced by the project. It is
carried out for three main reasons.
To determine how well the project met its objectives, delivered the expected benefits and addressed the
requirements that were originally defined.
To consider the working business solution to see if further improvements could be made to optimise the benefit
delivered.
To identify lessons that can be learned and fed back into the product production process. This could involve
improving processes such as research and development and operational processes as well as making changes to
who is involved in certain processes and the timings at which individual processes are carried out.
Benefits realisation review
The benefits realisation review involves returning to the business case for the project and determining whether or not
the costs were accurate and also if benefits identified at the outset were actually delivered by the project. This revie w
can only be carried out, therefore, once the product produced by the project has been delivered.
It is likely that this review will take place at a later date than the post-implementation review due to the long-term
nature of many benefits. In reality, the benefits realisation review may actually be a series of reviews where the longterm costs and benefits identified in the business case are monitored.
PAST EXAMS
Clothing Co.
December 2007
Most project management methods have an initiation or definition stage which includes the production of a
document that serves as an agreement between the sponsors and deliverers of the project. This may be called a
project initiation document or a project charter. Defining the business case is also an important part of the initiation
or definition stage of the project.
(a) Explain how a business case and a project initiation document would have helped prevent some of the problems
that emerged during the conduct of the website re-design project. (15 marks)
(b) Analyse how effective project management could have further improved both the process and the outcomes of
the website re-design project. (10 marks) (Total = 25 marks)
47
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ACCA P3
Business Analysis
Tillo Community Centre

June 2012
(a) The local authority has commissioned the independent Project Audit Agency (PAA) to look into how the project
had been commissioned and managed. The PAA believes that a formal terms of reference or project initiation
document would have resolved or clarified some of the problems and issues encountered in the project. It also feels
that there are important lessons to be learnt by both the local authority and the construction company.
Analyse how a formal terms of reference (project initiation document) would have helped address problems
encountered in the project to construct the community centre and lead to improved project management in future
projects. (13 marks)
(b) The PAA also believes that the four sets of benefits identified in the original business case (rental savings, energy
savings, increased income and better staff morale) should have been justified more explicitly.
Draft an analysis for the PAA that formally categorises and critically evaluates each of the four sets of proposed
benefits defined in the original business case. (12 marks) (Total = 25 marks)
Lowlands Bank
December 2009
(a) The branch rationalisation was a successful project.
Identify and analyse the elements of good project management that helped make the branch rationalisation project
successful. (12 marks)
HomeDeliver
December 2011
(a) Explain the purpose of each of the following: a post-project review, a post implementation review and a benefits
realisation review. (6 marks)
(b) Evaluate the problems and the lessons that should be learned from a post -project review and a postimplementation review of the electronic ordering system at HomeDeliver. (12 marks)
(c) HomeDeliver does not have a benefits management process and so a benefits realisation review is inappropriate.
However, it does feel that it would be useful to retrospectively define the benefits to HomeDeliver of the new
electronic ordering system.
Identify and discuss the potential benefits to HomeDeliver of the new electronic ordering system. (7 marks) (Total
= 25 marks)
ASW
June 2010
(a) Evaluate the alternative strategies available to ASWs project manager to address the slippage problem in the
CaetInsure project. (10 marks)
(b) As a result of your evaluation, recommend and justify your preferred solution to the slippage problem in the
CaetInsure project. (6 marks)
(c) Explain what is meant by a post-project review and demonstrate how carrying out such a review could be of
benefit to ASW. (9 marks)
(Total = 25 marks)
Institute of Administrative Accountants December 2010
(b) Explain why establishing a business case, managing benefits and undertaking benefits realisation are essential
requirements despite the claimed self-evident justification of adopting e-assessment at the IAA. (10 marks)
MidShire health
June 2013
(a) (i) Identify and analyse mistakes made by the CEO in the project manag ement process (initiation, conduct and
termination) in his attempt to introduce strategic planning, and an associated information system, at MidShire
Health. (18 marks)
CHAPTER 11
FINANCE
Use BPP book to Revise areas of finance
Integrated Reporting
PAST EXAMS
Alpha Software
(a) Discuss what is meant by 'integrated reporting', highlighting how it differs from traditional performance
reporting. (10 marks)
(b) How may integrated reporting help Alpha Software to communicate its strategy and improve the companys
strategic performance? Your answer should make reference to the concerns raised by the finance director. (10 M)
(c) Advise on the likely implications of introducing integrated reporting which Alpha should consider before
deciding to proceed with its adoption. (5 marks) (Total = 25 marks)
48
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ACCA P3
Business Analysis
Financial Analysis
PAST EXAMS
8 Hats
June 2011
(a) Barry Blunt has criticised the investment appraisal approach used at 8-Hats to evaluate internal jobs. He has
made specific comments on payback, discount rate, IRR, intangible benefits and benefits realisation.
Critically evaluate Barrys comments on the investment appraisal approach used at 8-Hats to evaluate internal jobs.
(15 marks)
ISD
December 2011 regression
(b) Figures 1 and 2 provide important, independent, statistical data:
Evaluate the potential of each set of statistical data for use in the pricing decision for the e-learning product,
particularly highlighting any limitations in using such data. (10 marks)
One Energy plc
June 2009
(a) W&P concluded in their report that there were clear signs that the company (RiteSoftware) was in difficulty and
this should have led to further investigation.
Assess, using the financial information available, the validity of W&Ps conclusion. (13 marks)
Hammond Shoes
December 2012
(a) Analyse the financial position of Hammond Shoes and evaluate the proposed investment of $37.5 million in
upgrading its production facilities. (14 marks)
World Engines
December 2012 Decision trees and expected values
(a) Develop a decision tree from the information given in the scenario and discuss its implications and shortcomings.
Ignore the time value of money in your analysis. (9 marks)
(b) The divisional director suggests that the procurement decision could have been taken on the evidence of the
decision tree.
Discuss what other factors (not considered by the decision tree analysis) should also be taken into consideration
when deciding which option to select. (6 marks)
(c) WE executives are concerned about the risk of Topaz, as a relatively new company, going out of business. They
have also expressed concern about the loss of the evaluation team in a fatal accident and they believe that this
should lead to a review of the risks associated with employee travel.
Discuss how each of the above risks (supplier business failure and employee travel) might be avoided or mitigated.
(10 marks) (Total = 25 marks)
49

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ACCA P6 SMART NOTES (50 Pages)

Mission & Mission Statement

Porter Generic Strategies

Compiled By: Aziz Ur Rehman

NCS |School of accountancy Peshawar (0331-9114878)

Types of organizational Structure

Types of strategic Change

Compiled By: Aziz Ur Rehman

NCS |School of accountancy Peshawar (0331-9114878)

STRATEGY and PEOPLE

Compiled By: Aziz Ur Rehman

NCS |School of accountancy Peshawar (0331-9114878)

Identifying the benefits

Identifying the cost

Compiled By: Aziz Ur Rehman

NCS |School of accountancy Peshawar (0331-9114878)

MISSION, GOALS, PLANS AND STANDARDS

2 WHAT IS STRATEGY OR STRATEGIC PLAN?

NCS |School of accountancy Peshawar

POSITIONING VERSUS RESOURCE-BASED VIEWS OF STRATEGY

Emergent: Strategies developed through ideas

NCS |School of accountancy Peshawar

6 THE IMPORTANCE OF CONTEXT

Senior management responsibility senior Characteristics:

Rules based approach

Careful in-depth analysis

Strategy based on organizational strengths &

NCS |School of accountancy Peshawar

Analysing Competitive Environment (Porter Five Forces Analysis)

NCS |School of accountancy Peshawar

NCS |School of accountancy Peshawar

Related and Supporting industries

Firm Strategy, Structure and Rivalry

NCS |School of accountancy Peshawar

Tertiary industries (Industries engaged in the provision of services)

NCS |School of accountancy Peshawar

NCS |School of accountancy Peshawar

THE EXTENDED MARKETING MIX (Additional 3Ps for marketing of services)

NCS |School of accountancy Peshawar

Cronin Auto Retail

Use offers to reward extended website usage.

NCS |School of accountancy Peshawar

RESOURCES: (Asset, skill or item of knowledge that

COMPETENCES: (ability to utilize its resources effectively)

NCS |School of accountancy Peshawar

Quality of product Customer satisfaction

NCS |School of accountancy Peshawar

NCS |School of accountancy Peshawar

NCS |School of accountancy Peshawar

Figure : Product life cycle

Usually higher income Increasing market

Shakeout leaves, only a few Heavy discounting

All competitors have

All competitors have

Less emphasis on product

Short production runs

NCS |School of accountancy Peshawar

All points of PESTEL, Porter Five forces,

NCS |School of accountancy Peshawar

find a segment where the

Not Suitable in recession