acca p3 – professional level
TRANSCRIPT
ACCA P3 - Business analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20091
ACCA P3 – PROFESSIONAL LEVEL
Business Analysis
SMART Revision notes
Prepared by Darren Sparkes
Email: [email protected]
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20092
Contents Page no.
A message from Darren…………………………3Paper 3 Examiners Approach…………….….... 4Extracts from the Examiners report Dec 08…...5Examination Technique……………….…..……..7Background and examination format..…..........10Syllabus Overview………………………...........11Strategic Planning………………………...….....12Mission and Objectives…………………………13Business & Professional Ethics..………….…...14Internal Analysis……………….……………..…15External Analysis……………..………………....16Strategic Options……………………….……….18Method of Growth………………………............19Portfolio Analysis…………………………….….20Strategic Choice & Change Management…....21Marketing………………………………………...22Organisational Structure…………………….….23International Market Place.…………….……....24Business Process Change…….…..…………..25Information Technology……..…….……..........26Quality………………………………….……......27Project Management………………………...…28Role of Finance………………………………...29Review and Control………………………..…..30Strategy and People……………………………31
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20093
Thank you for requesting a copy of my ‘SMART Revision Notes’.
The notes act as a learning and memory aid for the core models, theories and academic tools included in the syllabus.However, in order to pass your examination the academic knowledge must be combined with extensive question practiceleading up to the examination.
Your examiner is not interested in the regurgitation of your knowledge but how you APPLY that knowledge to thescenarios provided in order to answer the requirement set.
I suggest that you should practice as many exam standard questions as possible before the examination. Your practiceanswers can be a mixture of answer plans and full written answers to get through as many questions as possible.
However, I would also suggest that it is essential for you to practice at least one full examination to time before enteringthe exam room. It is only by replicating the time pressure in the exam that you can appreciate the importance of timeplanning on the day.
Keep a look out for relevant articles appearing in your professional magazine or on the Institute’s website prior to theexamination, particularly if they are written by the examiner.
I would welcome feedback on the notes.
And remember….
‘Whether you believe you can or you can’t, you’re right.’ (Henry Ford)
Regards,
Darren Sparkes
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20094
Approach Required
‘Differentiation is important to individuals seeking to pass a management and
strategy examination.
It is the ability to link strategic and financial analysis;
it is the confidence to use creative thinking in the way you answer a
particular problem…with alternative ways of viewing and solving a problem’
Ralph Bedrock (Paper 3 Assessor)
There is no absolutely correct answer – candidates who provided
coherent justification… awarded appropriate marks
Steve Skidmore (P3 Examiner)
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20095
Extracts from the Examiners comments December 2008In general:
• Performance showed an improvement on the previous sitting
• Answers much more within the context of scenarios than previous sittings
• Financial and quantitative data figured more prominently in answers
• The three optional questions were equally popular
• Q1b was biggest problem for candidates where many answers did not address the question
• Q1a (PESTEL) so popular it lead to some candidates over-answering it, leading to time problems
• As a result, answers to the final optional question often appeared rushed
• Vast majority of papers were well written and well presented
• Hand writing still remains a problem for some – it is no use having great ideas if no-one can read them
Section A - Question 1
Q1a – there were plenty of clues in the case study, most of which featured in candidates answers, with the
exception of legal responsibilities
Some candidates strayed onto internal issues (strengths and weaknesses) which were not given marks
Q1b – The case study is rich in material to support the cultural web approach
• Asked to explain the three strategy lenses – Some candidates very well prepared – showed great
understanding and gained full marks - Others showed very little knowledge and only scored two or three
marks.
• Overall many candidates provided good answers to question 1
• Reference to the case study context was much better than on previous papers
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20096
Section B
Many more candidates than before supporting their argument with financial analysis
Many who used financial data in part a failed to do so in part b
The model answer suggests that MMI should not acquire the company – many candidates approved the
acquisition with justification through IT synergies – credit was given for this approach
Candidates do not always have to agree with the examiner’s analysis to gain the marks on offer!
• Question combined the themes of project management, quality and the systems development life-cycle
• Part a relatively straight forward which candidates either knew or did not
• Consequently, some candidates scored very few marks whilst others gained full marks
• Part b answered relatively well – many candidates giving a wide range of options.
• Part c – often overlap with part b
• Many candidates did not clearly justify their answer
• In some cases not enough points made to get the marks on offer
• Part b – relatively difficult in the time-constrained pressurised environment of the examination
• Well answered – many scoring eight or more out of ten.
• This was very heartening!!!
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20097
Therefore, to pass P3 learn from the examinerscomments:
• Analyse the requirements – verbs and keywords• Planning – think before you write the answer• Application, application, application• Theoretical answers score few marks• You can only apply what you know – learn it!• Use and interpret the numbers (they are usually
easy calculations so it’s the interpretation thatgets the marks)
• Time management – the marks are your guide
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20098
Examination Technique to give the Examiner what he wants
1. USE 15 MINUTES READING TIME WISELY Examine section B questions and choose the two on which you can MAXIMISE MARKS (not necessarily
those on your ‘favourite’ topics) If you have some time left then analyse Question 1 requirements and skim read the Q1 scenario to get a feel
for the relevant issues and identify where the information is for each part of the requirements.
2. WORK OUT TIMINGS Q1 = 90 minutes. Planning = 20-25 minutes, Writing answer = 65-70 minutes Section B Questions = 45 minutes each. Planning up to 10 minutes, Writing answer 35 minutes. Break down the time required for each part of the requirements using the marks as a guide. 1.8 minutes per
mark in total, 1.4 minutes per mark after planning. I suggest you start with Question 1 as you know you have 90 minutes to complete it.
START PLANNING IN YOUR ANSWER BOOK
3. ANALYSE THE REQUIREMENTS Identify the verb, or verbs, and make it stand out. The verb tells you what the examiner wants you to do, e.g.
evaluate, recommend, analyse, calculate. Be sure to identify all the verbs in the requirement just in casethere is more than one thing to do, e.g. analyse and discuss, evaluate and recommend.
Identify key words. These tell you what to do it on or about, e.g. evaluate what?, recommend what?
4. ALLOCATE MARKS TO EACH VERB IN THE REQUIREMENT This can now determine how much to write for each verb in the requirement
5. IDENTIFY RELEVANT MODELS, TOOLS, THEORIES FROM YOUR KNOWLEDGE BANK
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 20099
6. DEVELOP HEADINGS AND NUMBERS LAYOUT Put key elements of model in plan as headings, e.g. Porters 5 Forces analysis = 5 headings. Headings will
give your answer a framework and structure. Use requirements to develop headings to show marker that you are answering the question asked
7. DISTRIBUTE MARKS ACROSS HEADINGS This can now determine how much you write under each heading
8. ANALYSE THE SCENARIO Make brief notes in your plan under relevant headings from models/tools/theories and requirement Find relevant numbers for calculations
9. WRITE UP YOUR ANSWER TO MAXIMISE MARKS Layout calculations in a logical and easy to mark format – put them in an appendix in your answer plan Add value to calculations by asking ‘SO WHAT?’ Use as many headings as possible to give the answer structure Short sentences in short paragraphs Work on 2 sentences for each mark – 1 sentence making your point/answering the question + 1 sentence for
application A third sentence giving some ‘SO WHAT?’ could get you another mark Leave a blank line between points/paragraphs to make your answer ‘easy on the eye’ Be strict with timings. When time is up on a question, or part of a question, move on. Stick to answering the requirement – use your plan to keep you on track
REMEMBER THE THREE GOLDEN RULES – 1)APPLICATION 2) APPLICATION and 3)APPLICATION
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200910
Paper Background
Candidate Requirements
Apply knowledgeand skills
Determine appropriatetechniques
Select relevantdata
Exercise professionaljudgement
Objectives of thepaper
Assess the strategic position of the organisation Evaluate strategic choices available to an organisation Discuss how an organisation might go about its strategic implementation Model and redesign business processes and structures to implement and
support the organisation’s strategy taking account of customer and othermajor stakeholder requirements
Integrate appropriate information technology solutions to support theorganisation’s strategy
Apply appropriate quality initiatives to implement and support theorganisation’s strategy
Advise on the principles of project management to enable the implementationof aspects of the organisation’s strategy with the twin objectives of managingrisk and ensuring benefits realisation
Analyse and evaluate the effectiveness of a company’s strategy and thefinancial consequences of implementing strategic decisions
The role of leadership and people management in formulating andimplementing business strategy
Format of paper
Section A 50% Compulsory Major case study Usually four parts Case will include numbers
Section B 50% Choice of two from three Each question likely to include
two parts Will include short scenario May include numbers
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200911
Syllabus Overview
Mission and objectives
Stakeholder Analysis
External Analysis Internal Analysis
CorporateAppraisal
SWOT
StrategicOptions
Strategic Choice
Implementation
Review and Control
Cultural Web SMART
Resource audit
Mendelow's power-interest matrix
Core competences
Porters Value ChainProduct Life CycleBenchmarking
PEST
Porters 5 Forces
Porter’s GenericStrategies
The Strategy ClockAnsoff’s product-
market matrix
Acquisition vs organic vs joint development
Suitability, Acceptability, Feasibility
Change Management
Project Management
Quality
IT
Structure
Marketing
Business Process Change
InternationalTrading
Financial Measures
Investment Appraisal
Withdraw
Purpose, Strategy, Policies, Values
Governance and Corporate Social Responsibility
Cost/Benefit
Risk
Non-financial Measures
Not for Profit Organisations
Porters Diamond
CSF’S
TOWS Matrix
Portfolio analysisBCG, PSPM, DPM, APD,Mkt attract/SBU strength
Software Solutions
HRM
Software Quality
Sources of Finance
BSC
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200912
Alternative
StrategicPlanning
Strategy‘… a course of action, includingthe specification of resources, to
achieve a specific objective
Long-term
Wholeorganisation
Integrates activities
All stakeholders
Competitive advantage
Relationship with environment
Corporate =Strategic level
Business = Tacticallevel
Functional = Operational level
Purpose
Respond and fit to environment
Utilise scarce resources Provide direction Ensure consistent objectives Monitor progress
Advantages
Identification ofstrategic issues
Consistency of goals Improve
performance/survival Pro-active Recognises
environment Optimum use of
resources
Disadvantages× Expensive (time
and money)× Bureaucracy× Stifles creativity× Less relevant in
a crisis
Rational ‘Top Down’ Approach
Mission & Objectives
Corporate appraisal
Strategic options
Strategic choice
Implementation
Review
Emergent Strategy - ‘Bottom up’ (Mintzberg)
IntendedStrategy
UnrealisedStrategy
DeliberateStrategy
RealisedStrategy
Emergentstrategy
E.G. Honda’s entry into the USA, 3M
Incrementalism (Lindblom) Building block approach Build strategy through incremental steps not radical
shifts Accepts uncertainty of future Builds commitment× May be too slow× Ideas often compromised
Freewheeling Opportunism Market Driven – reactive Hands on management Exploit complacent players Relies on leaders vision No formula for success Take advantage of market
opportunities× Stock market problems
Inter-dependant
PositionAnalysis
Choice Action
Johnson,Scholes &
WhittingtonStrategicLenses
Ideas
Design Experience
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200913
Mission andObjectives
Mission‘… the most generalised type
of objective which can bethought of as its raison d’etre.’
Purpose
Strategy
Policies andstandards
Values
Advantages Resolve stakeholder conflict Set direction Help formulate strategy Communicates values to
employees Marketing to customers
Criticisms Meaningless terms used Written retrospectively? Not communicated to
employees Ignored by managers
Objectives
S Specific
M Measurable
A Attainable
R Relevant
T Timebound
Critical SuccessFactors
"The limited number of areasin which results, if they are
satisfactory, will ensuresuccessful competitive
performance for theorganization.
They are the few key areaswhere things must go right for
the business to flourish.
If results in these areas arenot adequate, the
organization's efforts for theperiod will be less than
desired."
Stakeholders
Mendelow’s Power – Interest Matrix
InterestLow
Power
High
LowA
Minimal Effort
Give Direction
BKeep Informed
Education /Communication
CKeep Satisfied
Intervention
DKey Players
Participation – KeepClose
Not for Profit Organisations
Features of objective setting Multiple and contradictory objectives Participation in objective setting Providers of funding different to beneficiaries of service Priorities may change frequently Value for money a requirement not an objective Increased role of personal objectives
Efficiency
Effectiveness
Economy
Mission StatementPublished version of the
Mission
Culture‘The way we do things around here’
Cultural Web– cultural paradigm
Routines & Rituals Stories & Myths Symbols Power structure Organisation structure Control systems
High
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200914
Business andProfessional
Ethics
Professional Ethics‘Self control, not self interest’
C Competence
O Objectivity
P Professional due care
P Politeness
I Integrity
T Technical Standards
Corporate SocialResponsibility
Issues
Environment
Sustainability
Safety in the workplace
Consumer health and safety
Equal opportunities
Fair Trade
Honesty in Advertising
Views on Business Ethics
‘The business ofbusiness is business’(Shareholder View -
Friedman)
Management to concentrate onmaximising profits andshareholder wealth.
Businesses have no duty tosociety.
Societal benefits will arise as aresult of commercial success.
Conflict of CSR with shareholder wealth Reduced revenues Increased costs Diverts funds from shareholders Distracts management
Long-term Self-Interest /Stakeholder view
Firms should acknowledge their socialresponsibilities.Benefits to Business
Avoid future Government policy
Attract ethicalinvestor funds
Reduced risk
Competitiveadvantage
Recruitment
Innovation &ideas from
close links tocommunity
Reputationand branding Small company
advantage in thesupply chain
Potential problems
Competitive disadvantage
Deciding what is ethical Bad publicity from monitoring and enforcement
Disclosure of business information
No universal acceptance ofmorals & ethics
Johnson, Scholes & Whittington – Ethical Stances
Short-termshareholderinterest
Long-termshareholderinterest
Multiplestakeholderobligation
Shaper ofsociety
Corporate Governance Divorce of ownership and control Separate roles of CEO and Chairperson Audit Committee / Remuneration Committee Directors re-election at least every 3 years Non-exec Directors
o Independento Role on audit / remuneration
committeeso Corporate conscienceo Mentors to inexperienced execso Strategic value through expertise
Bribes
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200915
Internal Analysis(Strengths & Weaknesses)
Strategic Capability– Resource audit
9 M’s
Manpower Management Money Make-up Machinery Methods Material Markets Management Info
Core Competences‘…the activities or
processes that criticallyunderpin competitive
advantage.’
StrategicAssets
Architecture
Reputation
InnovativeAbility
Valuable Rare Can’t be copied Not substitutable Give access to wide
range of markets
…identify activities within the firm whichadd value to customers and those thatdo not
Primary Activities Inbound Logistics Operations Outbound logistics Marketing and sales Service
Support/secondary activities Procurement HRM Technology development Firm infrastructure
Uses Streamline linkages Eliminate non-value added activities Business Process Re-engineering Benchmark key processes
Basic
Benchmarking
1. Select processes to bebenchmark
2. Assign responsibilities3. Choose type of benchmarking4. Choose partner5. Interaction6. Collect data7. Implement changes
Competitive
Process/Activity
Internal
BEST IN PRACTICE
Porter’s Value Chain
Unique
CoreThreshold
Same ascompetitor / easy
to copy
Different tocompetitor /
difficult to copy
Resources
Competences
Value Networks
Knowledge Management
Explicit
Tacit
Uncover Knowledge Discover Knowledge Capture Knowledge Share Knowledge Distribute Knowledge Lever Knowledge Maintain Knowledge
Knowledge Workers Roving role Temporary roles Selection based on skill & competences Input into own development Separate & relevant incentive schemes Remote locations Flexible working
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200916
External Analysis(Opportunities and Threats)
PESTEL analysis(External, Environmental analysis)
Political Taxation Government policy Foreign trade
regulations Protectionism Globalisation
Economic Globalisation Economic cycle Interest rates Inflation Employment levels Exchange rates
Social & Demographic
Income distribution Education levels Population size Age profile Lifestyle changes Fashions and tastes Consumerism
Technological Internet Government
spending on RnD Communications Speed/rate of
change Processes and
methods ofproduction
Porter’s 5 Forces(Competitive,
Industry analysis)
Competitive RivalryGreatest where: Competitors of similar size Slow market growth rate High fixed cost industry Lack of differentiation
Threat from New Market EntrantsBarriers to Entry: Economies of Scale Other cost advantages Capital requirements Access to distribution channels Patents, Government policy Reaction of existing firms
Power of BuyersPower greatest where: Few buyers High number of suppliers available Cost is high proportion of buyers total cost Low switching costs Buyers have low profits Buyers have full information Little product differentiation
Threat from SubstituteTechnologies
Can same features be producedcheaper?
Can new features be provided for samecost?
Level of danger may be influenced bybarriers to entry and/or power of buyers
Power of SuppliersPower greatest where: Few suppliers Few substitutes High switching costs Threat from forward integration Customer not significant to supplier Supplier has differentiated product
Legal Health And Safety Employment Consumer protection Monopoly legislation Industry watch dogs
Ecological Globalisation Pollution Energy usage Disposal of waste Sustainability of
resources
External Analysis(Opportunities and Threats)
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200917
Internal + External Analysis= Corporate Appraisal = Position
Appraisal= SWOT Analysis
Strengths Weaknesses
Threats
INTERNAL
EXTERNALOpportunities
Product Life-cycleStages: Introduction: high risk, little competition, low volume, high advertising = losses + negative cash
Growth: increased competition, growing volumes, EOS, high advertising = losses to profits + negativeto positive cash
Maturity: steady repeat sales, high volumes, EOS, low level advertising = profits + positive cash
Decline: falling volumes, falling prices = profits to losses + positive to negative cash, divest
Balance the portfolio
External Analysis(Opportunities and Threats)
Porter’sDiamond
‘NationalCompetitiveAdvantage’
Firm structure, strategy, rivalry
Demandconditions
Factorconditions
Related and supporting industries
Problems: No common shape Unpredictable Self-fulfilling
prophecy Product orientated –
ignores market
External AnalysisFactors open to all in the industry
Internal AnalysisFactors specific to the organisation
Corporate Appraisal
TOWS
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200918
Strategic Options
What Basis?
Positioning view
Strategically developorganisation in linewith environment
PESTEL
Porters FiveForces
To beat the fiveforces
Porter’s Generic Strategies
Overall Cost Leadership(better margin, potential price cuts, entrybarrier, reduce supplier power)
Differentiation(Premium price, better margin, barrier,reduce buyer power)
Focus (Niche)(Cost or Differentiation, focus on marketneeds, develop core competencies)
Beware of ‘Stuck in the Middle’
Uses Analyse rivals Suggest own strategy SBU level strategy
Limitations Unclear definition of industry
Defines advantage in terms of position notresources
Lack of empirical evidence
Ignores middle ground
Restricts firm to position in presentindustry
Requires perfect information
What Direction?
Ansoff’s MatrixProducts, existing and new (PEN)Markets, existing and new (MEN)
Market Penetration (cost reductions,
price reductions, advertising, minor productmodifications)
Product Development (exploitexisting customers, RnD, buy-in and badge,JV’s, Licensing)
Market Development (new marketssuch as foreign markets, new segments suchas adult to child or industrial to consumer)
Diversification (related = vertical
integration or unrelated = conglomerate
Do nothing/ Withdraw
Risks Product Market Operations and
management Financial
Vertical IntegrationAdvantages Economies of combined
ops Economies of control and
coordination Avoiding the market Tap into technology
ConglomeratesAdvantages Flexibility Quick growth Access to capital Portfolio effect Avoidance of anti-
monopoly legislation
Disadvantages Increased operational
gearing Reduced flexibility to
change partners Capital investment needs
Disadvantages
No additional benefit toshareholders throughsynergies
No operating advantages
Horizontal diversification – competitive products,complementary products, by-products
Limitations Definition of market Ignores factors such as competitors Suggests strategies in isolation
Method of Growth? (See next page)
Low
Low High
Benefit
Price
High
Fail
Fail
FocusedDifferentiation
DifferentiationHybrid
Low Price
No Frills Fail
StrategicClock
Market Facing
Resource Based View
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200919
Method ofGrowth?
Acquisition versusOrganic growth
Acquisition
Advantages Quick Lower risk Overcomes barriers to entry Same number of competitors Can block a competitor Possible synergies Possible under-valuation of
target
Disadvantages Purchase premium Integration issues
o Systemso Peopleo Culture
Synergies do notmaterialise
Reputation of target
OrganicGrowth
Advantages No premium for assets People development Staged investment Established culture Introduction of new
technology and systemseasier
Possibility of grants
Disadvantages Slow Increases number of
competitors Overcoming barriers to
entry No opportunity for
synergies Higher risk
Porter’s 3 Tests forAcquisitions
The attractiveness test The cost of entry test The better off test
Possible synergies Market Economies of scale Shared activities Surplus assets Vertical integration Skills transfer Dilution of risk Reduced power of
buyers/suppliers Tax advantages
Joint DevelopmentMethods
Joint VentureSeparate business entitywith equity form two ormore businesses
Strategic AllianceLong-term agreement toshare knowledge,competences, technologyfor mutual benefit
LicensingGiving the right toexploit brand, recipe,process etc for ashare of the profits
FranchisingGiving the right to exploit a businessmethod/model in return for a capital sumplus a share of the profits. Franchisorusually provides support e.g. marketing,training, technical
Quick growth Access to competences Less financial risk/outlay Overcome product, market,
operational risk× May lose competences× Train future competitors× Brand infection× Operational and contractual
disputes× Ownership of assets× Sharing of profits
Withdrawal
Divestment Quick Higher price due to
strategic value
Demerger Gives shareholders
an exit route Management can
focus on core areas Two companies can
develop separateidentities
Management Buyout(MBO)
Consider On-going involvement of
holding company Why is holding company
selling? Loss of Holding company
help, e.g. technical support,finance services
Quality of management team Price Personal risk, e.g. home at
risk?
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200920
Business SectorProspects
High
Low
LowOpportunities to add value
BCG Matrix
High
Low
High LowRelative market
share
PROBLEM CHILDBuild or Divest
Losses, negative cash
CASH COWHold then Harvest
Profits and positive cash
DOGHarvest then Divest
Profits to losses, positiveto negative cash
Problems: Definition of axes Definition of market No account of complimentary goods Assumes high market share = advantage
PortfolioAnalysis
STARBuild then Hold
Losses to profits, negativeto positive cash
Directional Policy Matrix
Weak
Unattractive Attractive
Phasedwithdrawal
Proceed withcare
Phasedwithdrawal
Proceed withcare
Growth
Withdrawal
CashGeneration
Growth
Leader
Double or quit
Try harder
Leader
Average
Avge
Strong
Company’sCompetitivecapabilities
Public Sector Portfolio Matrix
Publicneed &Fundingeffective
ness
High
Low
High LowValue for money
Political hot box
Golden Fleece Back drawer issues –discontinue
Public sector Star
Market Attractiveness/SBU Strength matrix
High
Strong Weak
Business strength/Competitive position
Hold leadershipLeveragestrengthsUse EOS
Avoid ‘me too’Differentiate
Re-invest
Segmentbetween growth
and harvest
Enhance LeadDiversifyRe-invest
Segment focusSeek
advantage
Harvest throughsale of business
MaintainleadershipIn attractivesegments
HarvestPrice-upCut costs
Line pruning
Divest/Liquidate
Average
Med
Low
Long-termIndustry
attractiveness
Alien Territory
Ballast
Edge ofHeartland
Heartland
Ability toAdd value
High
Ashridge Portfolio Display – Corporate Parents
Marketgrowth
Value trap
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200921
`
StrategicChoice
SuitabilityIs the proposed strategy suitable for thepresent situation and circumstances of theorganisation?i.e. Is it suitable given the SWOTanalysis?
AcceptabilityWill the proposed strategy meetthe objectives of the organisationand, therefore, be acceptable tothe major stakeholders?
FeasibilityHas the organisation got, or can it get,the necessary resources to carry out thestrategy?
Strategic Drift
Risk Cost/Benefit
Strategy Environment
Types of Change
Incremental
Big Bang
Transformation RealignmentExtent of change
Adaptation
Revolution Reconstruction
Evolution
Speedof
Change
Lewin’s ForceField Analysis
Driving Forces Restraining Forces
Job Factors
PersonalFactors
OrganisationalFactors
Strengthen Weaken
Unfreeze Change Refreeze
SocialFactors
ChangeManagement
Time
Scope
PreservationDiversity Capability
Capacity
Readiness
Power
ChangeKaleidoscope
Participation Education & communication Facilitation & support Negotiation Manipulation Coercion
SupportingMechanisms
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200922
Marketing
Firm’s orientation
Productto meetneeds
ProductionSales
Marketing…identify, anticipate and satisfy
customer requirements
MarketingStrategy
Kotler’s FourPillars
Target Markets
Customer needs
Coordinated marketing
Profitability Analyse environmentand competitors – PEST
/ Porter’s five forces
Market Segmentation andTarget Market
…division of the market intohomogenous groups of potentialcustomers who may be treatedsimilarly for marketing purposes
Geographic Demographic
o Ageo Gendero Incomeo Family life-cycle
Social class Psychological Education Hobbies
Undifferentiated
Differentiated
Concentrated
Marketing Research…systematic gathering,
recording and analysing of dataabout problems relating to the
marketing of goods and services
Desk research(secondary data)
InternalAccounts, Salesreports, Customercomplaints
ExternalCSO reports,Businessmonitors, Tradejournals,newspapers
Field Research(Primary data)
Interviews, focus groups,questionnaires,
experiments, Testmarketing
Marketing Mix – 4P’s…set of controllable
marketing variables used toproduce desired response in
the target market
Product
Productmix
Product Life Cycle
Product qualitiesFeatures, options,range, warranty,branding, packaging
Place
Distributionchannels
Market coverage Outlet locations Warehousing
Promotion
Communications Mix:AdvertisingSales promotionPublic relationsPersonal selling
Price
Price levels Discounts Allowances Payment terms Delivery options
A Awareness
I Interest
D Desire
A Action Product
Implementation Issues
7 P’s
PhysicalEvidence
Processes
People
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200923
OrganisationalStructure
Centralised vs Decentralised
S Strategy
T Technology
O Objectives
P People
T Tasks
I Ideology
E Environment
S Size
Entrepreneurial Fast decisions Responsive to market Congruence× No career structure× No autonomy× Single product & market
Functional Economies of scale Specialists with some autonomy Career structures Frees up entrepreneur× Slow decisions (bureaucratic)× Functional silo’s× Few products & markets
Divisional Multiple products &
markets Autonomy for SBU
managers Training of SBU managers Frees up senior managers Focus on specific
products/markets× Loss of congruence?× Duplication of effort× Isolation of SBU
managers
Implementation Issues
Matrix Breakdown of silo’s Shared knowledge Skill development Innovation and creativity× Dual command× Dilution of functional
authority× Time consuming meetings
Mintzberg’sStructural
Strategic Apex
Middle Line
Operating core
Techno-structure
SupportStaff
Simple structure =entrepreneurial
Machine bureaucracy= functional
Professionalbureaucracy =decentralised
Divisional form
Adhocracy = matrix
Planning and control
Direct supervision
Planning processes
Performancemanagement
Internal market
Culture
Self-control
StrategicPlanning co.s
FinancialControl co.s
StrategicControl co.s
ManagingBusiness
Units
ParentalDeveloper
SynergyManager
PortfolioManager
Types of Structure
ExternalRelationships
Outsourcing
NetworkOrganisation
VirtualOrganisation
Reduced cost Skill shortages Flexibility Focus on core business× Loss of control× Supplier dependency× Confidentiality× Loss of in-house skills
Decentralisation
Advantages: Frees senior
management Better local decisions Better motivation Flexibility Training/career path
Disadvantages: Loss of control Loss of congruence Duplication of effort Extra costs of control
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200924
The InternationalMarket Place
Reasons for growth ininternational business
Convergence of Markets
Cost advantagesEconomiesof scale
Countryspecific costs
PoliticalInfluences
Trend to Globalproducts
Objectives ofinternational
growth
Expand sales
Acquireresources
Diversifysources of
sales &supply
Generalrisks
PoliticalLegal
Economic
Social/cultural
Technological
Exporting Low capital outlay Low risk Can learn about market× May not meet customer needs× Perceived lack of commitment× High distribution costs
Joint Venture &Franchising
Access to local resources Reduced national sentiment Shared capital input Access to competences and
knowledge× Shared profits× Lose competences× Train competitor× Operational disputes
Foreign Direct Investment Closer to market Retain profits More control Reduced operational conflicts× High financial risk× Staffing decision× Integration difficulties
Methods of International Expansion
Global Multi-Domestic Hybrid
Perceives foreign markets assimilar to domestic market
Products & marketing mixconstant
Standardisation to save time andmoney
Supply-driven policy
See overseas market as distinctive Customised products and
marketing mix Increased overseas sales volumesBUT Fewer EOS giving higher costs, so
volumes not turned into profits
Standardise wherever possible,e.g. RnD, Branding
Market convergence may allowstandardised product
BUT Demand-driven Customised marketing mix
where necessary = GLOCAL
STAFFING
Overcomes lack of host skills,unified culture, Transferscompetencies
× Resentment by host, singlecultural view
Multi-cultural view, inexpensive× Limits career mobility, isolates HQ
from subsidiaries
Efficient use of HR, builds strongculture and managementnetwork
× Subject to National immigrationpolicies, expensive
CompetitiveForces
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200925
Improving ProcessesHarmon’s
Process-StrategyMatrix
Planning
Redesign
Development
Analysing
BusinessProcess Change
Process Improvement
ProcessMeasures
Implementation Issues
High
Low
Low HighStrategic
Importance
Complex & dynamicHigh strategic value for
advantage- Process Improvement
Static / commodity- Outsource/Automate- Minimum resources
Static but valuable- automate for efficiency
Complex but not corecompetence- Outsource
ProcessComplexityDynamics
Process Redesign
Process Re-engineering
Transition
Feedback control systems
TARA
Input-Process-Output
Action Targets
Actuals
Review
Software Solutions –Systems Development Life
Cycle
Review
Implementation
Design
Analysis
Feasibility Technical Operational Economic Social
Interviews Questionnaires Observation Documenting tools Workshops Protocol Analysis Prototyping
Quality of Support User Friendliness Ability to meet needs Compatibility/Integration Costs Supplier factors
Staff training Installation File conversion Testing
Generic Solutions Speed Cost Risk Support× Unique needs× Supplier power× Compatibility/Integration× No advantage
Software System Project
Weighting and Scoring
Simplification –Eliminate duplicated
activities
Value -addedanalysis –
Eliminate non-valueadded activities
Gaps &disconnects –
Failures incommunication
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200926
InformationTechnology
Supply ChainManagement
Value chain
StrategicContext Web-
Presence
Generic strategies
Porters Five Forces
Support –No strategic value
Factory –See strategic valueof info system nowbut expect value to
decrease in thefuture
Turnaround –Expect info system
to becomestrategically
important in thefuture
Strategic –Depend on info
system forcompetitiveadvantage
Strategic impact of future systems
HighLow
Low
Strategicimpact ofcurrentsystems H
igh
E-commerce
IntegratedE-commerce
E-business
Barriers Technophobia Security Set-up costs Running costs Limited
opportunities Limited resource Disinterested
customers
Push vs Pull
Upstream(Suppliers)
E-procurement
E-sourcing
E-purchasing
E-payment
Risks
Downstream(Customers)
Technology Organisational No cost savings
Switching costs Disintermediation Re-intermediation Updates Communication User community Tracking
preferences Customisation
E-marketing
7P’s 4P’s People Processes Physical evidence
6 I’s Integration Industry structure Independent
locations Individualisation Intelligence Interactivity
CustomerRelationshipManagement
Acquisition
Selection
Customer LifeCycle
Retention
Extension
E-branding
-Recency-Frequency-Monetaryvalue
Implementation IssuesMcFarlan's Strategic Grid
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200927
3.4 defects in1 million
TQM‘Get it rightfirst time’
Commitment Communication
Continuousimprovement
Competence
6 C’s
Customers
Costs(PAF)
Quality
‘Fitness forUse’
Quality Control
Quality Assurance
Proactive
Reactive
Appraisal
Failure
Preventative
Internal
External
QualityStandards
QualityCertification
SixSigma
KeyRequirements
6 C’sTeam Roles
Green Belt
ImplementationLeader
Master Black belt
Black Belt
6 SigmaChampion
Problem SolvingProcess(DMAIC)
Control
Improve
Analyse
Measure
Define
QualitySoftware
The ‘V’’ Model
Acceptance testing
System testing
Integration testing
Unit testing
Coding
Unit Design
System Design
Functional spec
Requirement spec
CapabilityMaturityModel
Integration(CMMI)
Level 1Performed process
Level 2Managed process
Level 3Defined process
Level 4Quantitatively Mangd
Level 5Optimising process
Implementation Issues
99.99966%
T
I
S
A
Test Plans
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200928
ProjectManagement
(IPECC)
Initiation
ProjectInitiation
Document
ProjectAppraisalFeasibility
Stakeholders
Quality
Time
Risk
Technological Operational Economic Social
Resources
Put plan into action
Tolerate / Accept Treat / Reduce Transfer / Insure Terminate / Avoid
Purpose Scope Deliverables Costs Time Objectives Stakeholders Org structure
Sponsor Manager Team
SWOT
Project Leader
Planning
Quality Resources Evaluation Dissemination Exit Sustainability
CriticalPath
Analysis
Time
Project Evaluation & Review Technique (PERT)
WorkBreakdownStructure
CostBreakdownStructure
Execution
Motivation Planning Co-ordination Communication Problem solving Change Mgt Budgeting Meetings
MonitorAnd
Control
TARA
ProjectInitiation
Document
Frequency
Complexity Risk Cost
CorrectiveAction
Adjust Plan
Motivation
Crashing
Fast Track
Increaseresource
Completion
EnsureCompleted
Final report & audit
Smoothhandover
Tie up looseends
Compare PIDto Outcome
Formally terminateproject
Evaluate performance
Implementation Issues
Gantt Chart
Statements ofWork
ProductBreakdownStructure
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200929
Role of Finance
Strategy
FinancialStrategy
CompetitiveStrategy
InvestmentStrategy
Not for ProfitOrganisations
Objectives
Spend fundseffectively
Raisemaximum
funds
Core Costs
Management R&D Support Services
FinancingDecisions
Cost Gearing Control Security Cash flow Availability Exit routes
Considerations
Alternatives
Equity
Debt
Retained earnings Ordinary shares
Debentures Loans HP/Leasing Overdraft Trade Creditors
Pref shares
Grants
Ratios
Gearing
Liquidity
Efficiency
Profitability
ROCE Gross/Net Margin ROE
Asset turnover ROCE Receivables Payables Inventory Revenue/employee
Current ratio Quick ratio
Dividend cover Interest cover EPS PE ratio
Investor ratios
Limitations Only comparative Inflation Definitions Accounting policies Availability of info Historical
Inter-firm comparisonLimitations Accounting policies Bias by large/small firms Unrepresentative avge Industry classifications Financial periods
InvestmentAppraisal
TraditionalMethods
Discounted cashflow techniques
ROCEPayback
NPVIRR
Economy Efficiency Effectiveness
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200930
Review and Control
Profit Related Measures
Examples Gross margin Net margin Cost % sales Profit
Problem:no account taken of investedcapital used to generateprofits
Return OnInvestment
(ROI)
ResidualIncome (RI)
PBIT X 100 = %CE
Relative Measure %
PBIT(CE x imputed interest rate)
RI
Absolute Measure £’s
Problems: Sub-optimal
investmentdecisions
Deplete capitalassets too early
Problems: Absolute measure
poor forperformancecomparisons
Joint issues when used in isolation Backwards looking measures Short-termist decisions Open to easy manipulation of discretionary costs and
capital employed
ConclusionFinancial measures should not be used in
isolation to measure performance but shouldbe combined with non-financial measures.
The Balanced Scorecard
Financial Perspective
Internal BusinessPerspective
Learning & GrowthPerspective
CustomerPerspective
1. Identify CSF’s2. Identify competences required for CSF’s3. Develop KPI’s for competences4. Measure competence5. Take action – continuous improvement
Benefits Longer-term
measures More difficult to
manipulate Measures
determinants andresults
Promotes goalcongruence
Includesstakeholders
PotentialDrawbacks
× Measures conflictwith each other
× Requires culturalchange
× Overload –‘paralysis byanalysis’
× Time and cost× No obvious
relationship withshareholder wealth
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 200931
Strategy andPeople
Strategic andcoherentapproach
HR Planning
HR Gap
Current HRposition
Current & futureHR needs
Labour supply
RewardManagement
Job design
WorkplaceLearning
CompetencyFrameworks
Assessment& Appraisal
Leadership
Classical
Purpose
Barriers
Likert'sManagement
Styles
Trait Style Contingency Situational
Charismatic Transformational Transactional
Exploitative autocratic Benevolent authoritative Participative Democratic
Communication Teamwork Delegation Motivation Trust
Performance Potential Training
Confrontation Judgement Chat Bureaucracy Event Unfinished
business
PerformanceMeasurement
Employee ranking Rating scales Checklists Critical incident method Free reporting Performance contract BARS Appraisal interviews
Categories Levels Design Issues Techniques Strategic alignment
Considerations: Fair & consistent Motivation Reward performance Recognise job factors Control salary costs
Scientific Mgt Job enrichment Japanese Mgt BPR Teamwork Succession
planning
TARA
Analyse behaviour Recruitment Training needs Manage
performance Benchmarking
Learningorganisation
KnowledgeManagement
Implementation Issues
Recruitment
Motivation