ACCA P3 Smart Notes D10

ACCA P3 PROFESSIONAL LEVEL
Business Analysis
SMART Notes Prepared by Darren Sparkes Email: darrensparkesnotes@sky.com

ACCA P3 - Business analysis These notes are not intended to cover the whole of the ACCA P3 syllabus Darren Sparkes, 2010
Contents
Page no.
Paper 3 Examiners Approach..... 3 Extracts from the Examiners report ....4 Examination Technique.....7 Background and examination format..............9 Syllabus Overview...........10 Strategic Planning........11 Mission and Objectives12 Business & Professional Ethics......13 Internal Analysis...14 External Analysis......15 Strategic Options..17 Method of Growth............18 Portfolio Analysis..19 Strategic Choice & Change Management....20 Marketing...21 Organisational Structure..22 International Market Place......23 Business Process Change.....24 Information Technology.............25 Quality.......26 Project Management...27 Role of Finance...28 Review and Control....29 Strategy and People30
ACCA P3 Business Analysis
These notes are not intended to cover the whole of the ACCA P3 syllabus
Darren Sparkes, 2010
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 problemwith 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)
Extracts from the Examiners comments
In general: Candidates were stronger in strategic concepts (strategic position, Porters Diamond) and less comfortable with business process modelling and customer relationship management. Part questions on specific factual areas (competency frameworks and CMMI) were either answered well (because the candidate was familiar with them) or poorly (because the area was not studied or revised). There was some evidence of poor time management, apparently caused by over-answering question 1. Section A - Question 1 In general the first part of the question was answered well, using a wide range of appropriate models and frameworks. However, candidates must be careful in the future to stick to external issues if a PESTEL analysis is specified in the question. some candidates did not restrict themselves to assessing the strategic position. They began to suggest strategic solutions and options which were not required by the question and so no credit was given. This reinforces the need for the candidate to carefully read the question and to answer within its scope. many answers well written and well-structured, so gaining most of the professional marks on offer. Part bCandidates failed to spot glaring errors in the process. Part cIn many cases, candidates provided good answers to a very different question.
Section B Question 2 part aCandidates answered thisrelatively well, using appropriate calculations Question 2 part bcandidates answered this part question very well, not only showing knowledge of the model but were also confident in applying it to a case study scenario Question 3 part basked candidates to analyse these competencies. Some of these were clearly signposted in the scenario. Many candidates failed to identify any relevant competenciesfalling back on generalisations such as good communication skills and hence did not score well on this part of the question. Question 4 part aIn general, this part of the question was answered well by most candidates Question 4 part bThis was not particularly well answered by most candidates. Most candidates seemed to be unfamiliar with the concept of competency frameworks or their potential application. This was despite an article in Student Accountant magazine.
Therefore, to pass P3 learn from the examiners comments: Analyse the requirements verbs and keywords Planning think before you write the answer Application, application, application Theoretical answers score few marks You can only apply what you know learn it! Use and interpret the numbers (they are usually easy calculations so its the interpretation that gets the marks) Time management the marks are your guide
Examination Technique to give the Examiner what he wants PADI Plan, Analyse, Design, Implement
PLAN
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 case there 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
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
ANALYSE
8. ANALYSE THE SCENARIO Make brief notes in your plan under relevant headings from models/tools/theories and requirement Find relevant numbers for calculations
DESIGN
9. THINK BEFORE YOU WRITE Decide which points you are going to put in your answer (trying to put in everything usually leads to going over time) and start with your strongest points Decide how you are going to layout your answer to make life easy for the marker and maximise marks
IMPLEMENT
10. WRITE UP YOUR ANSWER TO MAXIMISE MARKS Layout calculations in a logical and easy to mark format - Add value to calculations by asking SO WHAT? Use as many headings as possible to give the answer structure Work on 2 sentences for 1 mark 1) Make your point, 2) Give evidence from the scenario PEE for 2 marks Point, Evidence, Explain (So what?) Leave a blank line between paragraphs to make your answer easy on the eye Be strict with timings. When time is up on a question, or part of a question, move on. Stick to answering the requirement use your plan to keep you on track REMEMBER THE THREE GOLDEN RULES 1) APPLICATION 2) APPLICATION and 3)APPLICATION
Exercise professional judgement Select relevant data Determine appropriate techniques Apply knowledge and skills
Candidate Requirements
Assess the strategic position of the organisation Evaluate strategic choices available to an organisation Discuss how an organisation might go about its strategic implementation Model and redesign business processes and structures to implement and support the organisations strategy taking account of customer and other major stakeholder requirements Integrate appropriate information technology solutions to support the organisations strategy Apply appropriate quality initiatives to implement and support the organisations strategy Advise on the principles of project management to enable the implementation of aspects of the organisations strategy with the twin objectives of managing risk and ensuring benefits realisation Analyse and evaluate the effectiveness of a companys strategy and the financial consequences of implementing strategic decisions The role of leadership and people management in formulating and implementing business strategy
Paper Background
Objectives of the paper Format of paper
Section A 50%
Compulsory Major case study Usually four parts Case will include numbers
Section B 50%
ACCA P3 Business Analysis Choice of two from three Each question likely to include two parts Will include short scenario May include numbers Darren Sparkes, 2010
Governance and Corporate Social Responsibility
Cultural Web
Syllabus Overview
Mission and objectives
SMART
Purpose, Strategy, Policies, Values
Mendelow's power-interest matrix Product Life Cycle Resource audit
PEST
Stakeholder Analysis External Analysis Corporate Appraisal

Porters Generic Strategies The Strategy Clock TOWS Matrix
Porters 5 Forces
Internal Analysis
Core competences
Porters Diamond
Benchmarking
Porters Value Chain CSFS BCG, PSPM, DPM, APD, Mkt attract/SBU strength Ansoffs productmarket matrix
SWOT
Portfolio analysis
Strategic Options
Risk
Withdraw
Acquisition vs organic vs joint development Suitability, Acceptability, Feasibility International Trading Structure
Strategic Choice
Cost/Benefit Change Management
HRM
IT
Implementation
Sources of Finance Quality
Project Management
Marketing
Software Quality
Review and Control

Business Process Change Software Solutions Financial Measures ACCA P3 Business Analysis Investment Appraisal BSC These notes are not intended to cover the whole of the ACCA P3 syllabus Darren Sparkes, 2010 Not for Profit Organisations Non-financial Measures
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Integrates activities
Competitive advantage Relationship with environment
Corporate = Strategic level Business = Tactical level
Position Analysis
Whole organisation
All stakeholders Long-term
Functional = Operational level
Interdependant
Strategy
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 a course of action, including the specification of resources, to achieve a specific objective
Choice
Action
Johnson, Scholes & Whittington
Strategic Lenses
Design
Experience
Alternative
Strategic Planning
Rational Top Down Approach Mission & Objectives Corporate appraisal Strategic options Strategic choice Implementation Advantages Identification of strategic issues Consistency of goals Improve performance/survival Pro-active Recognises environment Optimum use of resources
Ideas
Purpose
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
Respond and fit to environment Utilise scarce resources Provide direction Ensure consistent objectives Monitor progress
Emergent Strategy - Bottom up (Mintzberg) Intended Strategy Unrealised Strategy Deliberate Strategy Realised Strategy
Disadvantages Expensive (time and money) Bureaucracy Stifles creativity Less relevant in a crisis
Emergent strategy
Review
E.G. Hondas entry into the USA, 3M ACCA P3 Business Analysis
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Purpose Strategy
Policies and standards
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
S M A R T
Specific Measurable Attainable Relevant Timebound
Mission
Values the most generalised type of objective which can be thought of as its raison detre.
Objectives Culture
Mission Statement
Published version of the Mission
Stakeholders
Mission and Objectives

Critical Success Factors
"The limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization. They are the few key areas where things must go right for the business to flourish.
The way we do things around here
Mendelows Power Interest Matrix

Low Interest High
Cultural Web cultural paradigm Routines & Rituals Stories & Myths Symbols Power structure Organisation structure Control systems
Low
A
Minimal Effort Give Direction
B
Keep Informed Education / Communication
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
Power
C
High Keep Satisfied Intervention
D
Key Players Participation Keep Close
If results in these areas are not adequate, the organization's efforts for the period will be less than desired."
Efficiency
Economy
Effectiveness ACCA P3 Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus Darren Sparkes, 2010
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Equal opportunities
Corporate Governance
Strategic impact: SCRAPI Short-termism Control the business Risk assessment Acquisitions & Mergers Power of governance bodies Increasing shareholder power
C O P P I T
Competence Objectivity Professional due care Politeness Integrity Technical Standards
Consumer health and safety Bribes Safety in the workplace Sustainability Environment
Issues
Fair Trade Honesty in Advertising
Professional Ethics
Self control, not self interest
Corporate Social Responsibility
Johnson, Scholes & Whittington Ethical Stances

Short-term shareholder interest Long-term shareholder interest Multiple stakeholder obligation Shaper of society Views on Business Ethics
Save time and money on investigations Attract customers and employees
Business and Professional Ethics

Long-term Self-Interest / Stakeholder view
Firms should acknowledge their social responsibilities.
The business of business is business (Shareholder View Friedman)

Management to concentrate on maximising profits and shareholder wealth. Businesses have no duty to society. Societal benefits will arise as a result of commercial success.
Avoid paying damages and fines
Benefits to Business SALSA

Strategic Alliances
Lower Risk
Potential problems
No universal acceptance of morals & ethics
Conflict of CSR with shareholder wealth

Competitive disadvantage Disclosure of business information Reduced revenues Increased costs Diverts funds from shareholders Distracts management Darren Sparkes, 2010
Deciding what is ethical ACCA P3 Business Analysis
Bad publicity from monitoring and enforcement
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Same as competitor / easy to copy Resources
Different to competitor / difficult to copy
Manpower Management Money Make-up Manufacturing Material Markets
S
Valuable Rare Cant be copied Not substitutable Give access to wide range of markets
Strategic Assets Architecture
A R I
Reputation
Basic Threshold
Unique Core
Ms
Competences
Strategic Capability Resource audit
Core Competences the activities or processes that critically underpin competitive advantage.
Innovative Ability
Knowledge Management Tacit
Internal Analysis (Strengths & Weaknesses)
Porters Value Chain

identify activities within the firm which add value to customers and those that do not
Uncover Knowledge Discover Knowledge Capture Knowledge Share Knowledge Distribute Knowledge Lever Knowledge Maintain Knowledge
Product Life-cycle Introduction: high risk, little

competition, low volume, high advertising = losses + negative cash Growth: increased competition, growing volumes, EOS, high advertising = losses to profits + negative to 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
Primary Activities
Inbound Logistics Operations Outbound logistics Marketing and sales Service
Benchmarking
1. 2. 3. 4. 5. 6. 7. Select processes to be benchmark Assign responsibilities Choose type of benchmarking Choose partner Interaction Collect data Implement changes
Support/secondary activities
Procurement HRM Technology development Firm infrastructure
Explicit 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
Uses
Streamline linkages Eliminate non-value added activities Business Process Re-engineering Benchmark key processes
Competitive Internal
Balance the portfolio Problems:
Functional/Activity
No common shape Unpredictable BEST IN PRACTICE Self-fulfilling prophecy Product orientated These notes are not intended to cover the whole of the ACCA P3 syllabus
Value Networks
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Economic Globalisation Economic cycle Interest rates Inflation Employment levels Exchange rates
Social & Demographic Income distribution Education levels Population size Age profile Lifestyle changes Fashions and tastes Consumerism
Technological Internet Government spending on RnD Communications Speed/rate of change Processes and methods of production
Ecological Globalisation Pollution Energy usage Disposal of waste Sustainability of resources
Political Taxation Government policy Foreign trade regulations Protectionism Globalisation
PESTEL analysis (External, Environmental analysis)
External Analysis (Opportunities and Threats)

Porters 5 Forces (Competitive, Industry analysis)

Legal Health And Safety Employment Consumer protection Monopoly legislation Industry watch dogs
Threat from New Market Entrants

Barriers to Entry: Economies of Scale Other cost advantages Capital requirements Access to distribution channels Patents, Government policy Reaction of existing firms
Threat from Substitute Technologies

Can same features be produced cheaper? Can new features be provided for same cost? Level of danger may be influenced by barriers to entry and/or power of buyers
Competitive Rivalry
Greatest where: Competitors of similar size Slow market growth rate High fixed cost industry Lack of differentiation
Power of Buyers
Power 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
Power of Suppliers
Power greatest where: Few suppliers Few substitutes High switching costs Threat from forward integration Customer not significant to supplier Supplier has differentiated product
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Firm structure, strategy, rivalry
Factor conditions
Porters Diamond
National Competitive Advantage
Demand conditions
Related and supporting industries
Corporate Appraisal
Internal + External Analysis = Corporate Appraisal = Position Appraisal= SWOT Analysis
Strengths Weaknesses
INTERNAL
Internal Analysis
Factors specific to the organisation
Threats
External Analysis
Factors open to all in the industry
Opportunities
EXTERNAL
TOWS
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High
Hybrid
Differentiation
Focused Differentiation
PESTEL
Porters Five Forces
To beat the five forces Porters Generic Strategies
Benefit
Low Price
Strategic Clock
Fail
Fail
Strategically develop organisation in line with environment challenges Market Facing Positioning view
Overall Cost Leadership

(better margin, potential price cuts, entry barrier, reduce supplier power)
Low
No Frills
Fail
Differentiation
(Premium price, better margin, barrier, reduce buyer power)
Low
Price
High
Focus (Niche)
(Cost or Differentiation, focus on market needs, develop core competencies)
Method (see next page)

Limitations
Definition of market Ignores factors such as competitors Suggests strategies in isolation
Resource Based View
Advantage
Beware of Stuck in the Middle Uses
Analyse rivals Suggest own strategy SBU level strategy
Strategic Options
Direction
competitive products,
Horizontal diversification
complementary products, by-products
Do nothing / Withdraw Ansoffs Matrix Products, existing and new (PEN) Markets, existing and new (MEN)
Limitations Unclear definition of industry Defines advantage in terms of position not

resources Lack of empirical evidence Ignores middle ground Restricts firm to position in present industry Requires perfect information
Vertical Integration
Advantages Economies of combined ops Economies of control and coordination Avoiding the market Tap into technology Disadvantages Increased operational gearing Reduced flexibility to change partners Capital investment needs Disadvantages No additional benefit to shareholders through synergies No operating advantages
Market Penetration (cost reductions,

price reductions, advertising, minor product modifications) Product Development (exploit existing customers, RnD, buy-in and badge, JVs, Licensing) Market Development (new markets such as foreign markets, new segments such as adult to child or industrial to consumer) Diversification (related = vertical integration or unrelated = conglomerate
Conglomerates
Advantages Flexibility Quick growth Access to capital Portfolio effect Avoidance of antimonopoly legislation
Risks Product Market Operations and management Financial

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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 Systems o People o Culture Synergies do not materialise Reputation of target
Advantages
No premium for assets People development Staged investment Established culture Introduction of new technology and systems easier Possibility of grants
Disadvantages
Slow Increases number of competitors Overcoming barriers to entry No opportunity for synergies Higher risk
Acquisition Possible synergies

Market Economies of scale Shared activities Surplus assets Vertical integration Skills transfer Dilution of risk Reduced power of buyers/suppliers Tax advantages
Acquisition versus Organic growth
Organic Growth Divestment

Quick Higher price due to strategic value
Method of Growth?
Withdrawal
Demerger
Gives shareholders an exit route Management can focus on core areas Two companies can develop separate identities
Joint Venture
Separate business entity with equity form two or more businesses
Joint Development Methods Licensing

Giving the right to exploit brand, recipe, process etc for a share of the profits 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
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? Darren Sparkes, 2010
Strategic Alliance
Long-term agreement to share knowledge, competences, technology for mutual benefit
Franchising
Giving the right to exploit a business method/model in return for a capital sum plus a share of the profits. Franchisor usually provides support e.g. marketing, training, technical ACCA P3 Business Analysis
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Problems: Definition of axes Definition of market No account of complimentary goods Assumes high market share = advantage
Directional Policy Matrix

Unattractive
Business Sector Prospects Average Phased withdrawal Proceed with care Proceed with care Growth Growth Attractive
BCG Matrix
High High Market growth Low Relative market share Low Weak Withdrawal Double or quit
STAR Build then Hold Losses to profits, negative to positive cash CASH COW Hold then Harvest Profits and positive cash
PROBLEM CHILD Build or Divest Losses, negative cash DOG Harvest then Divest Profits to losses, positive to negative cash
Companys Competitiv Avge e capabilities Strong
Phased withdrawal
Try harder
Cash Generation Leader
Leader
Public Sector Portfolio Matrix

High High Public need & Funding effective ness Low Public sector Star Political hot box Value for money Low
Portfolio Analysis
Market Attractiveness/SBU Strength matrix
Business strength/Competitive position
Golden Fleece
Back drawer issues discontinue
Strong Enhance Lead Diversify Re-invest Avoid me too Differentiate Re-invest Segment focus Seek advantage
Average Hold leadership Leverage strengths Use EOS Segment between growth and harvest Harvest through sale of business
Weak Maintain leadership In attractive segments Harvest Price-up Cut costs Line pruning Divest/Liquidate
Low High Ballast
Opportunities to add value Heartland Edge of Heartland
High
High
Long-term Industry attractiveness
Med
Ability to Add value Low Low Alien Territory Value trap
Ashridge Portfolio Display Corporate Parents
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Suitability
Is the proposed strategy suitable for the present situation and circumstances of the organisation? i.e. Is it suitable given the SWOT analysis?
Acceptability
Will the proposed strategy meet the objectives of the organisation and, therefore, be acceptable to the major stakeholders?
Feasibility
Has the organisation got, or can it get, the necessary resources to carry out the strategy?
Risk `
Strategic Choice (SAF) Strategic Drift

Strategy Environment
Cost/Benefit
Types of Change
Transformation Incremental Speed of Change Big Bang Revolution Reconstruction Evolution Extent of change Realignment Adaptation
Lewins Force Field Analysis
Job Factors Personal Factors
Driving Forces
Restraining Forces Social Factors
Change Management
Strengthen
Weaken
Organisational Factors
Unfreeze
Power
Change
Refreeze
Supporting Mechanisms
Time Scope Preservation
Change Kaleidoscope
Readiness Capacity
Diversity
Capability
Participation Education & communication Facilitation & support Negotiation Manipulation Coercion
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Implementation Issues
Customer needs Target Markets
Coordinated marketing
Profitability
Marketing Strategy
Analyse environment and competitors PEST / Porters five forces
Kotlers Four Pillars A I D A Marketing identify, anticipate and satisfy customer requirements
Production Product Sales
Market Segmentation and Target Market

division of the market into homogenous groups of potential customers who may be treated similarly for marketing purposes Geographic Demographic o Age o Gender o Income o Family life-cycle Social class Psychological Education Hobbies Undifferentiated Differentiated Concentrated
Awareness Interest Desire Action Communications Mix: Advertising Sales promotion Public relations Personal selling
Physical Evidence Processes People
Firms orientation
Marketing
Promotion 7 Ps Marketing Mix 4Ps Price

set of controllable marketing variables used to produce desired response in the target market
Place
Distribution channels Market coverage Outlet locations Warehousing
Marketing Research
systematic gathering, recording and analysing of data about problems relating to the marketing of goods and services
Price levels Discounts Allowances Payment terms Delivery options
Product qualities Features, options, range, warranty, branding, packaging
Field Research (Primary data) Interviews, focus groups, questionnaires, experiments, Test marketing
Desk research (secondary data) Internal Accounts, Sales reports, Customer complaints External CSO reports, Business monitors, Trade journals, newspapers
Product
Product Life Cycle Product to meet needs
Product mix
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Implementation Issues Divisional Entrepreneurial

Fast decisions Responsive to market Congruence No career structure No autonomy Single product & market
Functional
Economies of scale Specialists with some autonomy Career structures Frees up entrepreneur Slow decisions (bureaucratic) Functional silos Few products & markets
Centralised vs Decentralised S T O P T I E S
Strategy Technology Objectives People
Multiple products & markets Autonomy for SBU managers Training of SBU managers Frees up senior managers Focus on specific products/markets Loss of congruence? Duplication of effort Isolation of SBU managers
Matrix
Breakdown of silos Shared knowledge Skill development Innovation and creativity Dual command Dilution of functional authority Time consuming meetings
Types of Structure
Outsourcing
Network Organisation
Virtual Organisation
Planning and control

Tasks Ideology Environment Size
Decentralisation
Advantages: Frees senior management Better local decisions Better motivation Flexibility Training/career path
Direct supervision Planning processes Performance management Internal market Culture Self-control
Organisational Structure
Managing Business Units
External Relationships
Mintzbergs Structural Configurations

Strategic Apex Middle Line Operating core Technostructure Support Staff
Reduced cost Skill shortages Flexibility Focus on core business Loss of control Supplier dependency Confidentiality Loss of in-house skills
Strategic Planning co.s
Synergy Manager
Simple structure = entrepreneurial Machine bureaucracy = functional Professional bureaucracy = decentralised Divisional form Adhocracy = matrix
Disadvantages: Loss of control Loss of congruence Duplication of effort Extra costs of control
Financial Control co.s
Portfolio Manager
Strategic Control co.s
Parental Developer Darren Sparkes, 2010
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Country specific costs Economies of scale Cost advantages
Political Influences
Acquire resources Expand sales Diversify sources of sales & supply
Political
Legal Economic
Convergence of Markets
Reasons for growth in international business
Social/cultural
Trend to Global products
Objectives of international growth
General risks
Technological
Competitive Forces
Exporting
Low capital outlay Low risk Can learn about market May not meet customer needs Perceived lack of commitment High distribution costs
The International Market Place

Methods of International Expansion
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
Global
Perceives foreign markets as similar to domestic market Products & marketing mix constant Standardisation to save time and money Supply-driven policy
Multi-Domestic
See overseas market as distinctive Customised products and marketing mix Increased overseas sales volumes BUT Fewer EOS giving higher costs, so volumes not turned into profits
Hybrid
Standardise wherever possible, e.g. RnD, Branding Market convergence may allow standardised product BUT Demand-driven Customised marketing mix where necessary = GLOCAL
Foreign Direct Investment

Closer to market Retain profits More control Reduced operational conflicts High financial risk Staffing decision Integration difficulties STAFFING Overcomes lack of host skills, unified culture, Transfers competencies Resentment by host, single cultural view Multi-cultural view, inexpensive Limits career mobility, isolates HQ from subsidiaries
Efficient use of HR, builds strong culture and management network Subject to National immigration policies, expensive Darren Sparkes, 2010
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Transition Implementation Issues

Low High Process Complexity Dynamics Low Strategic Importance High
Development
Process Re-engineering
Complex but not core competence - Outsource Static / commodity Outsource/Automate Minimum resources
Complex & dynamic High strategic value for advantage - Process Improvement Static but valuable - automate for efficiency
Redesign
Process Redesign
Analysing
Process Improvement
Planning Improving Processes
Harmons Process-Strategy Matrix
Gaps & disconnects Failures in communication Value -added analysis Eliminate non-value added activities
Business Process Change

Interviews Questionnaires Observation Documenting tools Workshops Protocol Analysis Prototyping
Simplification Eliminate duplicated activities
Process Measures
Feedback control systems
Software Solutions Systems Development Life Cycle Action Establish business needs Design & Select Software
TARA Review Targets
Staff training Installation File conversion Testing
Weighting and Scoring Quality of Support User Friendliness Ability to meet needs Compatibility/Integration Costs Supplier factors
Input-Process-Output
Actuals
Implementation
Software System Project
Review
Generic Solutions Speed Cost Risk Support Unique needs Supplier power Compatibility/Integration No advantage These notes are not intended to cover the whole of the ACCA P3 syllabus
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Value chain Generic strategies
Barriers Technophobia Security Set-up costs Running costs Limited opportunities Limited resource Disinterested customers
E-business
Integrated E-commerce Porters Five Forces E-commerce
Strategic Context
WebPresence Push vs Pull
Customer Relationship Management Customer Life Cycle 6 Is Integration Industry structure Independent locations Individualisation Intelligence Interactivity Downstream (Customers)
Information Technology
Supply Chain Management
Upstream (Suppliers) Risks
Push = Supplier led Pull = Customer led
E-sourcing E-procurement
Selection
E-purchasing
E-marketing
Acquisition
E-branding
Retention -Recency -Frequency -Monetary value 7Ps 4Ps People Processes Physical evidence
Switching costs Disintermediation Re-intermediation Updates Communication User community Tracking preferences Customisation
E-payment
Technology Organisational No cost savings
Extension
25
Internal External Appraisal Costs (PAF) Failure
Commitment Communication Quality Standards Competence
Quality Certification
Preventative
6 Cs
Customers Continuous improvement
Proactive Quality Assurance Reactive Quality Control
Fitness for Use

Capability Maturity Model Integration (CMMI)
TQM
Get it right first time
99.99966%
Level 1 Performed process Level 2 Managed process Level 3 Defined process Level 4 Quantitatively Mangd Level 5 Optimising process
Quality
Six Sigma Quality Software
Key Requirements Problem Solving Process (DMAIC) 3.4 defects in 1 million
Team Roles
6 Cs
Master Black belt
The V Model
Test Plans
Define Measure Analyse Improve
6 Sigma Champion Implementation Leader Black Belt
Requirement spec Functional spec System Design Unit Design
A C S S I s C C T C s Coding s s
Acceptance testing System testing Integration testing Unit testing
Green Belt Control
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Technological Operational Economic Social Tolerate / Accept Treat / Reduce Transfer / Insure Terminate / Avoid Risk Quality Project Initiation Document
Resources
Purpose Scope Deliverables Costs Time Objectives Stakeholders Org structure Time
Critical Path Analysis
SWOT Feasibility Project Appraisal
Time Sponsor Manager Team
Stakeholders
Initiation
Quality Resources Evaluation Dissemination Exit Sustainability
Work Breakdown Structure
Tie up loose ends Compare PID to Outcome Formally terminate project Ensure Completed
Project Management (IPECC)

Monitor And Control
Planning
Execution Completion
Put plan into action
Final report & audit
Project Leader TARA
Evaluate performance
Smooth handover Corrective Action Adjust Plan Complexity Risk Cost Frequency
Project Initiation Document
Fast Track Crashing Motivation
Motivation Planning Co-ordination Communication Problem solving Change Mgt Budgeting Meetings
Increase resource These notes are not intended to cover the whole of the ACCA P3 syllabus
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Competitive Strategy
Strategic funding Self generated income Developmental funding Cost minimisation Apportion overheads to projects
Management R&D Support Services
Cost Gearing Control Security Cash flow Availability Exit routes
Core Funding Investment Strategy Financial Strategy
Core Costs Considerations
Retained earnings Ordinary shares
Not for Profit Organisations Strategy

ROCE Payback Traditional Methods
Equity
Financing Decisions
Alternatives
Pref shares
Grants
Debt
Role of Finance
Investment Appraisal Ratios
Discounted cash flow techniques NPV IRR Asset turnover ROCE Receivables Payables Inventory Revenue/employee Profitability
Debentures Loans HP/Leasing Overdraft Trade Creditors
ROCE Gross/Net Margin ROE
Efficiency Current ratio Quick ratio
Liquidity Inter-firm comparison Limitations Accounting policies Bias by large/small firms Unrepresentative avge Industry classifications Financial periods Limitations Only comparative Inflation Definitions Accounting policies Availability of info Historical
Gearing Dividend cover Interest cover EPS PE ratio
Investor ratios
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Problem: no account taken of invested capital used to generate profits Examples Gross margin Net margin Cost % sales Profit
Return On Investment (ROI)

PBIT X 100 = % CE
Residual Income (RI)

PBIT (CE x imputed interest rate) RI
Profit Related Measures

Relative Measure % Absolute Measure s
Benefits
Longer-term measures More difficult to manipulate Measures determinants and results Promotes goal congruence Includes stakeholders
Review and Control

The Balanced Scorecard
Financial Perspective
Problems:
Sub-optimal investment decisions Deplete capital assets too early
Problems:
Absolute measure poor for performance comparisons
Joint issues when used in isolation

Internal Business Perspective Backwards looking measures Short-termist decisions Open to easy manipulation of discretionary costs and capital employed
Potential Drawbacks
Measures conflict with each other Requires cultural change Overload paralysis by analysis Time and cost No obvious relationship with shareholder wealth
Customer Perspective Learning & Growth Perspective
1. 2. 3. 4. 5.
Identify CSFs Identify competences required for CSFs Develop KPIs for competences Measure competence Take action continuous improvement
Conclusion Financial measures should not be used in isolation to measure performance but should be combined with non-financial measures.
29
Current & future HR needs Trait Style Contingency Situational
Exploitative autocratic Benevolent authoritative Participative Democratic
HR Gap
Labour supply
Charismatic Transformational Transactional
Current HR position
Communication Teamwork Delegation Motivation Trust
Classical Likert's Management Styles Performance Potential Training
HR Planning
Strategic and coherent approach
Leadership Recruitment
Learning organisation
Purpose
Knowledge Management
Workplace Learning
Strategy and People

Job design Reward Management
Assessment & Appraisal

Barriers
Competency Frameworks
TARA
Performance Measurement
Motivation
Scientific Mgt Job enrichment Japanese Mgt BPR Teamwork Succession planning Categories Levels Design Issues Techniques Strategic alignment
Confrontation Judgement Chat Bureaucracy Event Unfinished business
Analyse behaviour Recruitment Training needs Manage performance Benchmarking
Considerations: Fair & consistent Motivation Reward performance Recognise job factors Control salary costs
Employee ranking Rating scales Checklists Critical incident method Free reporting Performance contract BARS Appraisal interviews
30

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ACCA P3 PROFESSIONAL LEVEL

SMART Notes Prepared by Darren Sparkes Email: darrensparkesnotes@sky.com

ACCA P3 Business Analysis

Darren Sparkes, 2010

ACCA P3 Business Analysis

Darren Sparkes, 2010

Extracts from the Examiners comments

ACCA P3 Business Analysis

Darren Sparkes, 2010

ACCA P3 Business Analysis

Darren Sparkes, 2010

ACCA P3 Business Analysis

Darren Sparkes, 2010

ACCA P3 Business Analysis

Darren Sparkes, 2010

ACCA P3 Business Analysis

Darren Sparkes, 2010

Governance and Corporate Social Responsibility

Purpose, Strategy, Policies, Values

Mendelow's power-interest matrix Product Life Cycle Resource audit

Stakeholder Analysis External Analysis Corporate Appraisal

Cost/Benefit Change Management

Review and Control

Competitive advantage Relationship with environment

Corporate = Strategic level Business = Tactical level

All stakeholders Long-term

Functional = Operational level

Johnson, Scholes & Whittington

E.G. Hondas entry into the USA, 3M ACCA P3 Business Analysis

Darren Sparkes, 2010

Policies and standards

Specific Measurable Attainable Relevant Timebound

Mission and Objectives

The way we do things around here

Mendelows Power Interest Matrix

Not for Profit Organisations

Competence Objectivity Professional due care Politeness Integrity Technical Standards

Fair Trade Honesty in Advertising

Corporate Social Responsibility

Johnson, Scholes & Whittington Ethical Stances

Save time and money on investigations Attract customers and employees

Business and Professional Ethics

The business of business is business (Shareholder View Friedman)

Avoid paying damages and fines

Benefits to Business SALSA

No universal acceptance of morals & ethics

Conflict of CSR with shareholder wealth

Deciding what is ethical ACCA P3 Business Analysis

Bad publicity from monitoring and enforcement

Same as competitor / easy to copy Resources

Different to competitor / difficult to copy

Manpower Management Money Make-up Manufacturing Material Markets

Strategic Assets Architecture

Strategic Capability Resource audit

Knowledge Management Tacit

Internal Analysis (Strengths & Weaknesses)

Porters Value Chain

Product Life-cycle Introduction: high risk, little

Explicit Knowledge Workers

Balance the portfolio Problems:

Darren Sparkes, 2010

Ecological Globalisation Pollution Energy usage Disposal of waste Sustainability of resources

Political Taxation Government policy Foreign trade regulations Protectionism Globalisation