2012 Paper P3 QandA Sample Download v1

Questions and Answers

MAIN PAGE

Copyright: Tony Surridge Online Limited, 2012

CONTENTS: SEC A

CONTENTS: SEC B

www.tonysurridge.co.uk

Paper P3: Business Analysis

1


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


ACCA Paper P3: BUSINESS ANALYSIS Questions and Answers Published by Tony Surridge Online Limited in 2012

Copyright © Tony Surridge Online Limited Part of the Tony Surridge +AddVance study materials range

Tony Surridge Online Limited [email protected] www.tonysurridge.co.uk

This E-book is sold subject to the condition that no part of it shall be reproduced, transmitted, or freely distributed, in any form by any means, electronic, photocopying, recording or otherwise, without the prior permission in writing of Tony Surridge Online Limited. This book is not to be used for commercial use. It is sold on the understanding that a private individual has bought it for individual personal use, and prohibits purchase by any company or organisation entity (limited or otherwise) or sole trader or partnership. Such entities must contact [email protected] separately to purchase a multi-user license.

Tony Surridge Online Limited is grateful to the Association of Chartered Certified Accountants (ACCA) and the Chartered Institute of Management Accountants (CIMA) for permission to reproduce past examination questions. The suggested solutions in the exam answer bank have been prepared by Tony Surridge Online Ltd, unless otherwise stated.



2


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


DOWNLOAD SAMPLE Welcome to our download sample of the Tony Surridge +AddVance E-book publication: ACCA Paper P3 – Business Analysis – Practice Questions & Answers Thanks for taking time to review a download extract of this Mnemonics and Charts publication which we have developed specially for the ACCA Paper P3: Business Analysis. We hope you like our electronic study material and recognise that at our affordable prices the complete purchased and downloaded version represents true value for money. This is only a small sample, taken directly from the full version, and as such not all hyperlinks will be active. For illustrative purposes, the active hyperlinks within the table of contents will be shaded pink. All hyperlinks are fully functional only in the full downloaded version when purchased. You may like to learn some details about the full version: (please note these details may vary slightly depending on which updated version you have purchased) Pages Number of ‘Section A’ Case Studies (with answers) Number of ‘Section B’ Questions (with answers) Hundreds of hyperlink connections

1084 34 41

It is important for you to know that each Tony Surridge +AddVance E-book can only be used on the computer it is initially downloaded to. The data cannot be transferred to any portable memory or any other computer or electronic device. This condition is enforced to protect our digital rights. If you wish to use the full version of this +AddVance Exam Study Text on two separate computers (such as a desktop and laptop), then you will need to purchase an additional license.

Good luck with your studies.



3


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Thank you for helping to save our environment. Studying ONLINE protects trees! LEARN ONLINE

“No snowflake in an avalanche ever feels responsible.” Voltaire



4


MAIN PAGE

CONTENTS: SEC A

+AddVance

CONTENTS: SEC B


Main Page

ACCA Paper P3 Business Analysis Questions and Answers

Copyright statement For the ladies only

+AddVance Study Text

Syllabus The structure of the syllabus Intellectual levels Learning hours Guide to exam structure Guide to examination assessment Aim Main capabilities Relational diagram of main capabilities Rationale Detailed syllabus Approach to examining the syllabus

Study Guide A Strategic position B Strategic choices C Strategic action D Business process change E Information technology F Quality issues G Project management H Financial analysis I People

Your Approach to P3 Scenario Questions

Click here

The Ways We Present Our Answers Contents Page of Section A Case Studies: Questions and Answers. Contents Page of Section B Questions and Answers.

Click here Click here Click here



Transfers highlighted in pink are hyperlinked for this sample

5


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


The Ways We Present Our Answers Our Questions and Answers approach We have developed our e-book by using an approach that we believe will enable you to optimise your limited study time in the most efficient and effective way. This comes from years of teaching accountancy and business students in class and listening to their feedback on how the learning system could be streamlined. Our e-book is divided into two sections:  

50-mark case study questions (for Section A of the exam), and 25-mark questions (for Section B of the exam).

Our approach to case study questions (Section A questions) 

Our case study coverage Most of the case studies we use are from past professional exams - mainly ACCA exams. We have added to some of the case studies to incorporate the modern business environment and new exam needs, mainly: -

process change and development electronic business (e-business) swim-lane charts.

We have updated the case-studies to reflect ‘current years’. We have also included our own case studies in order to cover those areas of the syllabus not yet examined by case-study questions. Each case study is presented in the format you would expect to see in the exam and carries a total of 50 marks. Those case study questions we have expanded (see above) will show a total score in excess of 50 marks. We do not change the integrity of the original case-study question - we simply add to it where appropriate. 

Our answer presentation -

Each of our answers will provide: -

An initial overview of the case which you will find as part of the Contents Page.

-

An answer plan for each sub-section question, (a), (b), (c) etc. This will take the form of the answer plan illustrated in the section of this e-book titled: ‘Your Approach to P3 Scenario Questions’ (Click here.). Our answer plans serve two purposes: (i) (ii)

to give an overview of the more detailed answer that follows. to provide exposure of the type of answer-plan you need to develop quickly yourself in the exam.

Please click to the next screen



6


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


-

A detailed answer. Each ‘detailed answer’ is structured to correspond to the answer plan. The detail is not presented in the form of an essay-style answer (which is often difficult to assimilate quickly) but note format that is easy to read and understand.

-

Exam-style essay-type answers. You will, of course, also want to see a full exam-style answer. We provide this in two ways:

-

(i)

We automatically hyperlink you to the relevant part of the ACCA website - where the ACCA provide a free download service of ‘Exam Answers’. You will then be able to read the pertinent answer on your screen or download it to your computer.

(ii)

In the case where we have produced our own case-study questions, or added sections to past exam questions, we provide a full answer within this publication.

Examiners’ comments. We replicate the examiner’s comments for each question, where relevant. Examiners’ comments are available free of charge on the ACCA website. We simply link them to selected questions for your convenience. The comments, for each question, were made by the examiner at that time and may not be the comments of the current examiner.

Our approach to case study questions (Section B questions) Our approach to Section B, 25-mark questions, is very similar to our approach to the Section A questions, which is outlined above. We provide: -

Questions, many of which are past exam questions. Answer-plans for each sub-section of a question. Detailed answers (but in note form). Examiners’ comments - where available.

Caveats -

Where indicated, the copyright of the questions replicated in this e-book belong to either the Association of Chartered Certified Accountants (ACCA) or the Chartered Institute of Management Accountants.

-

Answers to Questions, where indicated, can be downloaded free of charge from the ACCA’s website. The copyright is owned by The Association of Chartered Certified Accountants (ACCA). Tony Surridge Online Limited provides a hyperlink service.

-

Examiners’ comments, where provided, can be downloaded free of charge from the ACCA’s website. The copyright is owned by the Association of Chartered Certified Accountants. Tony Surridge Online Limited simply links examiners’ comments to selected answers.

-

The copyright for all other contents of this e-book is owned by Tony Surridge Online Limited.



7


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Strictly Business Books Case Study: Scenario

ACCA Paper P3 Business Analysis Copyright: Tony Surridge Online Limited, 2012


8


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


STRICTLY BUSINESS BOOKS ANSWER GUIDE



9


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


The ‘current date’ for this scenario is March 2012 ‘Strictly Business Books’ (SBB) is a mail order company that specialises in books on business, particularly related to finance, accountancy, information systems and human resource management. The company is organised on two sites. The company is based in a rural area; the distribution centre is situated near enough to a main road to enable delivery and distribution of inventory, and the administrative centre is in a similar situation just two miles away on the same road. Both sites are a long way from any urban centre. SBB employs 68 staff to perform all the administrative and packing tasks. It has a catalogue of 4,800 titles, of which 80 percent are usually held as inventory. The operations director has set a target of 2,500 titles to form the company’s list, of which 95 per cent would also be held as inventory or available for dispatch within twenty-four hours. This target has been set because of the increasing problems with regards to the ‘guaranteed’ dispatch within 48 hours of an order. This strategy has caused concern with the board of directors who previously had encouraged growth in the number of titles available. Details of titles, inventory and orders are held on a bespoke database called ‘Book Manager’. Financial statistics for the company are given in Table 1. Table 1: Financial information on Strictly Business Books ($’000) 2009 Sales Cost of sales Gross profit Marketing Distribution Administration Net profit Return on sales (%) Net assets Inventory Employees Customer analysis: Sales to retailers Sales to schools and colleges Sales to others

2010

2011

2012

2013

(estimate)

(forecast)

13,100 6,500 6,600 550 1,965 2,620 1,465

16,250 8,565 7,685 715 2,600 3,380 990

15,000 8,250 6,750 705 2,550 3,300 195

14,500 8,410 6,090 710 2,610 3,335 - 565

13,000 7,670 5,330 650 2,470 2,915 - 705

11.2 3,000 1,810

6.1 3,350 2,245

1.3 3,200 3,200

NA 3,200 3,150

NA 3,200 3,020

58

63

68

74

74

65% 25% 10%

Much of the business is repeat business and consists of major retailers. Regular customers of SBB are placed on a permanent mailing list, and are sent every updated catalogue. Some customers, such as retailers, schools and colleges are ‘Account Customers’ who have a discount awarded to them. Because of the overhead, SBB keeps the number of Account Customers low. Orders, received via e-mail, post or fax, are normally packed and dispatched within 24 hours, unless the titles are out of stock. In 2009, SBB experimented with taking on-line orders over the Internet. The experiment has been quite successful, with 10 per cent of their business being carried out electronically. The only difference in the operation is that the orders are printed off each day at 15.00 hours and packed later that afternoon. The packers do not notice any difference between orders from the different methods of customer ordering. Currently the company’s website receives 250 – 300 hits per day; SBB would like to see it 1,000+ hits per day. They have bought a good dot com domain name, which increases the hit rate. They have recently installed software which manages ‘cookies’, so they can monitor customers who order on-line. Copyright: Tony Surridge Online Limited, 2012


10


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


There has been an unexpected side effect of this development: SBB have become aware that prospective customers are studying their on-line catalogue to identify titles, and then buying from companies such as Amazon and BOL (Books Online), who are selling the same titles at greatly reduced prices. The prices from Amazon and BOL are lower than SBB themselves have to pay for the books. The directors are contemplating their response to this and their falling financial results. They have identified three options: (i)

Withdraw their presence from the Internet and revert to the traditional mail order practice they have built up.

(ii)

Attempt to compete with the rival companies on price.

(iii)

Buying the rights to as many titles as they can and branch out into publishing, so that the competitors must buy from SBB rather than undercut them.

At a recent board meeting the directors briefly discussed the three options. Following this discussion the chief executive officer (CEO) suggested that, before making any final decisions concerning long-term business plans or strategies, a full analysis of the current situation should be conducted. The newly appointed information technology manager supported this motion, stating ‘The market is changing, now is the appropriate time to take stock of the company’s current position. Following an analysis the board will be better informed to make business plans and identify technology requirements to support the plans.’ The IT manager was given the task of performing the analysis and reporting back to the next board meeting with his results. The board has particularly asked him to concentrate on positioning the business to enable the development of opportunities for e-commerce. Brief historic review of the development of Strictly Business Books’ technological infrastructure 2000 Company was founded. Limited number of titles aimed at a niche market. Fifteen staff supported by paper based systems, electronic typewriters, orders received by post and telephone. 2001 Due to the success of the business more staff employed, introduction of twenty stand-alone personal computers. Functions include, basic office software, desktop publishing, spreadsheets and accounting software. 2002 Due to the increase in business and limitations of the building space on the original site SBB purchased another site in the same locality. The second site housed the management and administrative personnel. 2003 Implementation of an inventory recording system. This was purely a system that recorded the inventory levels of the inventory and produced periodic lists of inventory levels. All inputs to the system were manual. 2004 40 more PC’s were purchased, each site purchased a local area network. 2005 A new IT department was created bringing the existing IT/IS staff formally together. A business analyst headed this department supported by two analyst/programmers and two operations personnel. The original IT staff were recruited from within the company. 2006 A bespoke integrated inventory reordering software package was developed. The package used an Oracle database as its platform. This package included modules that performed the basic inventory control function, produced purchase orders, produced various management reports and integrated with the existing accounts package.



11


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


2008 The PC’s and LAN’s were updated to work in a Windows NT environment. 2009 The company experimented with the Internet, establishing its own site and receiving orders via the Net. The electronic ordering system is not integrated with the inventory management system. No further development has taken place. 2012 Present. The company has encountered problems with maintaining permanent IT staff. The target of ten specialist has rarely been met. Currently the department has eight personnel; five permanent and three contract staff. The company has recently appointed an IT director. Required: (a)

(i)

Construct a strengths, weakness, opportunities, threats (SWOT) analysis for Strictly Business Books using the information given in the scenario. (10 marks)

A

(ii) Select the elements from the SWOT analysis produced in (a) (i) above, which will make most contribution towards the development of an information systems strategy, particularly supporting the early improvement of e-marketing (including e-commerce), within Strictly Business Books. For each element chosen, explain its significance in the formulation of the IS strategy. (10 marks) (b)

A

Figure 1: The Value Chain (From Porter, M., ‘Competitive Advantage’ )

Firm infrastructure Human resource management Technology development Procurement Inbound logistics

Operations

Outbound logistics

Marketing and sales

Service

Primary activities Secondary activities

(i)

For each primary activity in Porter’s Value Chain (Inbound logistics; Operations; Outbound logistics; Marketing and Sales; Service) briefly describe the activity and suggest an appropriate information strategy that could support the activity within Strictly Business Books. ( 8 marks)

(ii) From the point of view of the Board of Directors, discuss the impact of the need to develop a range of new IS systems to support e-commerce on the four support activities in Porter’s Value Chain (Infrastructure; HR management; Technology Development; Procurement). ( 8 marks)



12

A

A


(c)

MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


A general framework for combining the development of business strategy and information systems strategy can be shown as a three stage process: 1. 2. 3.

Position audit Choices Action

Where we are Where do we want to be Going to get there

First stage Second stage Third stage

(i)

Discuss the relationship between the business strategy and the information systems strategy in the second stage, ‘Where we want to be’. Your answer should include different approaches for developing the IS strategy alongside the business strategy. Make reference to Strictly Business Books where appropriate. ( 6 marks)

(ii) During the action stage, ‘Going to get there’, there may be a requirement to review and make changes to the major business processes in Strictly Business Books. Briefly recommend a model that can be used to guide implementation planning and explain why changes may be required. ( 8 marks) (50 marks)

A place for everything, everything in its place. Benjamin Franklin



13

A

A


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Strictly Business Books Case Study: Answer Guide

ACCA Paper P3 Business Analysis Copyright: Tony Surridge Online Limited, 2012


14


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Tutorial note: This model answer is considerably longer and more detailed than would be expected from any candidate in the examination. It should be used as a guide to the form, style and technical standard (but not in length) of answer that candidates should aim to achieve. However, this answer may not include all valid points mentioned by a candidate – credit will be given to candidates mentioning such points.

STRICTLY BUSINESS BOOKS



15

MAIN PAGE


Q

CONTENTS: SEC A

CONTENTS: SEC B


The Plan and Answer : part (a) (i) Ask yourself …. What is being examined here?

Answer plan format

Strengths

Established customer base (although it is eroding)

Reasonably efficient customer ordering system

Appointment of two senior IT managers bodes well The company is using customisation software (‘cookies’)

The company’s warehouse is located close to a main road

Reading the question shows that the company is in a competitive environment

The question requires a conventional SWOT analysis.

Some of the critical success factors for this company relate to information systems

Make sure to bring IT into your review

Weaknesses

The financial statistics reveal problems

The website hit rate is lower than required

The online ordering system is not integrated with the inventory system

Threats

The website could be improved

Vulnerability to customer switching

Sales are falling Gross margin is falling because costs of sales are increasing Other costs are increasing per $1 of sales

Marketing expenditure does not add value Staff retention problems in the IT department

Opportunities

Cost reduction is possible

E-marketing could improve the sales position

Inventory turn is reducing

Planning is everything

An intention to increase staff although sales are falling



16


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Strengths Strengths -

The company has an established customer base although it is eroding. In the most recent year (2011) sales dropped by 7.7% ($1,250/$16,250) and are expected to fall by another 13.3% ($2,00/$15,000) during 2013. Details concerning which customers are being lost and why are essential for this review. The fact that most of the sales are repeat business suggests that the company’s customers are satisfied with the service provided and are reasonably loyal.

-

The company appears to have an efficient customer-ordering and dispatch system, even though there are obvious gaps and disconnects between the two sites. The fact that the company has recently appointed both a new IT manager and IT director bodes well in this respect. The appointments indicate that management recognise the importance of upgrading the customer ordering process to streamline the two systems and remove such inefficiencies between the two sites.

Established customer base (although it is eroding) Reasonably efficient customer ordering system

-

Appointment of two senior IT managers bodes well The company isusing customisation software (‘cookies’) The company’s warehouse is located close to a main road

-

The company has software allowing customisation (‘cookies’) . Cookies allow the company to (1) personalise its website for an individual customer, (2) use an online operating and ordering system and (3) track visits to the website. This will be extremely useful for market research purposes.

-

The fact that the company’s warehouse is located close to a main road (delivery infrastructure) is also a strong point in the company’s favour.

Weaknesses

The financial statistics reveal weaknesses

Weaknesses

-

The company’s financial statistics reveal problems.

Sales are falling Gross margin is falling because costs of sales are increasing Other costs are increasing per $1 of sales

-

Sales are falling (already mentioned) and costs are increasing.

-

In 2009 the gross profit was 50.4%, by 2011 it had fallen to 45%. It is estimated that the gross profit for 2013 will drop further to 41%. This reveals that the company’s cost of sales are increasing, presumably because of rising purchase costs.

-

The other costs – marketing, distribution and administration – are also increasing per $1 of sales.



17


MAIN PAGE

Marketing expenditure does not add value Inventory turn is reducing

An intention to increase staff although sales are falling The website hit rate is lower than required

The online ordering system is not system integrated with the inventory system

Staff retention problems in the IT department

Cost reduction is possible

CONTENTS: SEC B


-

It is worrying that the company intends to spend marginally more on marketing during the current year (2012) although sales are estimated to fall.

-

Inventory turn was 50 days in 2009 [(1,810 x 365)/13,100] but had stretched to 78 days by 2011 and the forecast position for 2013 is 85 days. A reducing inventory turn indicates the possibility of slow-moving stock, dormant stock or even obsolescence. The fact that stock outs are fairly common merely emphasises that dormant and slow-moving stock items might be the problem.

-

Another worrying feature is that management intend to increase staff even though sales are forecast to fall.

-

The company’s website attracts fewer visitors than is wanted. The drawing power (‘magnetism’) of the web might suggest content and content management problems. These problems might be resolved by the new high-powered IT management team. At the moment the company lacks competitive advantage due to not having competence in the critical success factors required for online selling.

-

The web-based ordering system is not integrated with the inventory management causing gaps and disconnects which cause operating inefficiencies. The point has been raised above.

-

There are staff retention problems in the IT area. These type of people must be looked upon as part of the ‘primary internal market’ and as such provide the company with essential deep skills and competitive edge. The root causes of staff dissatisfaction must be identified and dealt with quickly.

Opportunities

Opportunities

The website could be improved

CONTENTS: SEC A

-

The company has the opportunity to better utilise its website. Effective application of cookies, and electronic cataloguing should help attract and retain customers.

-

We see that the company is probably suffering from high rising costs of books for resale and should therefore consider ways in which web-enabled e-procurement might be used to address this problem. For example, SBB might find that electronic B2B marketplaces can be used for competitive effect.



18


E-marketing could improve the sales position


Opportunities might exist to reduce costs. We have already considered waste caused by gaps and disconnects and there may be opportunities to redesign processes to reduce costs caused by these weaknesses in the operating work flows.

-

The company’s marketing is not effective at this time. E-marketing could be used with much more effect. For example, a bespoke customer relationship management system designed to improve market and product positioning through online market research would not only enable the company to improve its competitive stance but also help to reduce its internal administration costs.

Threats

Vulnerability to customer switching

Q

CONTENTS: SEC B

CONTENTS: SEC A

-

Threats

increases

MAIN PAGE

-

The company is vulnerable to customers switching to other online providers. Online retailers, who form the major part of SBB’s customer base, are now able to switch very quickly in order to obtain lower prices. They would be involved in such tactics as web surfing, spot buying and reverse-auctioning. Web-technology and online selling SBB’s exposure to this significant risk.

The Plan and Answer : part (a) (ii) The question requires you to interpret the implications of the SWOT analysis

Ask yourself …. What is being examined here?

Answer plan format

Integration of online ordering and the inventory management system

Suggestions as to how SBB might improve its competitive position are important here

Make sure to bring IT into your answer. Your answer should draw from the SWOT analysis Use of eprocurement to reduce the price of books and obtain benefits


Use of emarketing to build the customer base


IT staff recruitment and retention

19


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


We have just seen that SBB suffers from its lack of competence in the important fields of online marketing and selling. The early introduction of e-marketing (which encompasses e-commerce) will be a significant element of SBB’s IS strategy. The following implications of the SWOT analysis are particularly relevant in this context. Integration of online ordering and the inventory management system

Use of eprocurement to reduce the price of books and obtain benefits

Use of emarketing to build the customer base

IT staff recruitment and retention

Integration of the web-based ordering system with the inventory management system As SBB incorporates improved web-enabling technologies into its operations it will be essential that these online activities are integrated into the day to day workflows of the company – rather than being treated as a ‘technological add-on’. A coherent IS strategy must therefore provide for the integration of an effective customer relationship management system with the company’s back-office systems, particularly linking customer orders with inventory files and processing systems.

Use of e-procurement to reduce the prices of resale books and obtain other benefits Research shows that many organisations have made considerable steps in achieving competitive advantage through investing in web-enabled e-procurement systems. Eprocurement relates to the use of IT to improve all activities involved with obtaining items from a supplier; this includes purchasing, also inbound logistics such as transportation, goods-in and warehousing before the item is used or sold. The benefits of E-procurement and associated digital workflows are reduced costs, decreased order cycle time, along with improved service, greater customer responsiveness, improved supplier relationships and better collaboration with suppliers. Use of e-marketing to build the customer base E-marketing can be used to identify customers’ needs and wants; anticipating the demand for digital services and therefore the allocation of appropriate resources; and satisfying customers through the electronic channel. E-marketing can be used to attract customers (‘magnet’), retain customers (‘sticky’) and encourage them to extend their purchases (‘elastic’). Obviously, SBB needs to improve its website hit-rate and better customise its services.

IT staff recruitment and retention The company’s failure to retain permanent IT staff is a major obstacle to the implementation of a consistent and coherent on-going IS strategy. Emphasis should be placed on recruiting only those applicants who are likely to behave, acquire skills and show attitudinal commitment in line with the requirements of SBB. Competency frameworks can be used to specify the skills and qualities required of potential employees. Reward systems need to be designed in line with competency and results. The new IT management will be held responsible for achieving these goals. Due regard should given to Harmon’s ‘Strategy-process Matrix’. There might be scope to reduce the human resources problem by outsourcing non-critical activities.



20


Q

MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


The Plan and Answer: part (b) (i) Ask yourself …. What is being examined here?

Answer plan format

Inbound logistics

Primary activities

The question specifically requires suggestions as to how SBB’s information systems can be improved.

This question examines your knowledge of the primary activities (lower half) of Porter’s Value Chain

Consider work flows activities

Operations

Outbound logistics

Marketing and sales

Service

The primary activities in the lower half of the value chain, show in sequence the activities performed by the organisation in converting raw material inputs to finished products and them selling and delivering them to customers. These are grouped into five generic categories of activities.

Inbound logistics Inbound logistics

-

These are the activities concerned with receiving, storing and handling raw material (purchases) inputs.

-

An appropriate process redesign at SBB would be the implementation of an Inventory Control module linked to an integrated accounting package. This would remove an obvious gap and disconnect within the work flow. Such a system would include the use of a bar-code reading system and database management system. A full enterprise management system (ERM) would accomplish this goal as well as achieving other important benefits. Operations

Operations

-

Operations are concerned with the transformation of resources into finished goods or services.

-

A Sales Order Processing module, incorporated to link in as part of a sophisticated customer relationship system (CRM) would not only be used to automatically link orders being received and the despatch of the books required, but would provide many other competitive advantages, such as managing the e-mail list, data mining for customer patterns, personalisation, providing online customer services, etc. all of which will enhance the customers shopping experience.



21


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Outbound logistics Outbound logistics

-

Outbound logistics are concerned with storing, distributing and delivering products (finished goods) to the customers.

-

Outbound logistics for SBB involves the distribution of books to customers. An online order tracking service would be a relevant add-in to the CRM.

Marketing and sales Marketing and sales

-

These activities handle communications with the customer.

-

A strong CRM system would provide SBB with (1) accurate customer selection and high-value customer targeting, (2) customer acquisition by improving the customer’s buying experience, (3) customer retention by using electronic techniques to keep its customers, and (4) customer extension by getting customers to increase their depth of buying or range of books.

Service Service

-

Service covers all of the activities which occur after the point of sale.

-

Still a further part of the CRM would be a customer tracking system, that records the details and status (pending, resolved, etc.) of customer service queries.

Each of these five primary categories will be vital to the competitive advantage of SBB.

Q

The Plan and Answer : part (b) (ii) Ask yourself …. What is being examined here?

Answer plan format

Procurement

Now you are examined on the secondary activities (upper half) of Porter’s Value Chain

Again the question specifically requires suggestions as to how SBB’s information systems can be improved.

Work flows activities are important here as well

Technology development


Human resource management

Firm infrastructure


22


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Support activities involved in competing in an industry can be divided into the four generic categories also shown in Figure 1 (in the question). Each category of support activity is divisible into a number of distinct value activities that are specific to a given industry. Procurement Procurement -

This refers to the function of purchasing inputs used in the company’s value chain, not to the purchased inputs themselves.

-

We have seen that SBB might be able to employ e-procurement. As part of this strategy the company’s website could be used to facilitate an extranet link with supply-chain partners thus participating in an electronic supply-chain value system. Companies have used such strategies to form virtual supply-chains, as is the case of Amazon which is competing against SBB.

Technology development Technology development

-

This relates to the other activities. All the value activities embody technology, be it know-how, or technology involved in the work flow streams. The improvement of SBB’s e-marketing position will require significant technological expertise in areas such as website content design and management and system security. It is probable that some outsourcing will be required.

Human resource management Human resource management

-

HRM consists of activities involved in the recruiting, selecting, training, development and compensation of all the personnel employed in the company. HRM supports both individual primary and support activities (e.g. recruitment of sales managers) and the entire value chain (e.g. labour negotiations).

-

Although not ‘big bang’ the change in processes will be significant and may begin to transform the company’s cultural paradigm. Most people working in the company will be affected, but none so much as in the IT areas. Effective HRM will be particularly important in the IT department.

Firm infrastructure Firm infrastructure

-

Firm infrastructure consists of a number of different activities including general management, planning, finance, accounting, legal and quality management. Infrastructure, unlike other support activities, usually supports the entire chain and not individual activities.

-

Efforts to improve the e-marketing of SBB will require a new infrastructure to support it. An ERM system for example, provides an infrastructure of systems that produces the communications, integrations and reports required for an effective e-marketing strategy.



23


Q

MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


The Plan and Answer : part (c) (i) The question is looking at the relationship between business strategy and information system strategy.


Answer plan format

You are required to briefly discuss different approaches for developing IS strategy

Your answer can be based on the three main approaches for developing IS strategy with business strategy also in mind The businessalignment approach

The business impacting approach

The valuechain analysis approach

Where we want to be The businessalignment approach

The business impacting approach

The valuechain analysis approach

The business-alignment approach -

An essential part of any IS strategy is consideration of how IS strategy supports change. Competitive advantages comes not from technology (IT) or from systems (IS), but from how the information is collected, stored, analysed and applied.

-

In the business-alignment approach, a top-down approach is used to review how information systems can be used to directly support a business strategy. Alignment models focus on aligning the information system’s plans and priorities with organisational strategy and business goals.

-

Linking information systems to business objectives and critical success factors (CSF) is one approach for using the alignment approach

The business-impacting approach -

In the business-impacting approach, a bottom-up approach is used to determine whether there are new opportunities from deploying information systems that may impact positively on business strategy. New hardware and software technologies are monitored by the IS manager and other managers to evaluate whether they can achieve competitive advantage.

Value chain analysis -

We saw previously that Value Chain Analysis is another method that can be used for the impact approach. For example, this might identify the need for SBB to use e-procurement which it can use as part of an effort to reduce costs and increase efficiency as part of a business strategy. This technique has merit in that it not only considers internal use of IS, but also how they can be used to integrate with external organisations such as suppliers, perhaps through innovative methods such as marketplace exchanges.



24

MAIN PAGE


Q

CONTENTS: SEC A

CONTENTS: SEC B


The Plan and Answer : part (c) (ii)

Flexibility is essential

The question is mainly concerned with changes that can occur while the strategy is running.

There is scope here to mention different frameworks: Seven-S, Porter’ ‘5-Forces’ and PESTEL

Answer plan format

The SevenS model

The Seven-S model is a useful framework for planning what is required.

The question is concerns the implementation of an information systems strategy.


Competitive pressures may call for change

Technologic al change may lead to a rethink

The PESTEL model will help

Business and information systems strategies must remain complementary

Going to get there The Seven-S model may be an appropriate framework The SevenS model

-

McKinsey’s Seven-S model might prove an appropriate framework for planning the implementation of the IS strategy. The model focuses on strategy, structure, systems, staff, style, skills and shared values which combines the rational and hard elements of change with the emotional and soft aspects. It is an excellent diagnostic tool, but would also guide the type of organisational change called for in SBB.

Flexibility is essential Flexibility is essential

Competitive pressures may call for change

-

Although the plans to be implemented are basically hard by nature, they have been agreed on the basis of ex-ante knowledge. Such knowledge, by implication is based on assumptions, often guesswork. For this reason, the plans need to be designed for flexibility, possibly incorporating contingency (or ‘soft’) plans.

Competitive pressures may call for change in the original plans -

SBB faces all Porter’s Five Threats, particularly so with substitutes (e-book readers are now coming on stream in the market place), the power of buyers (large retail chains), the power of suppliers (the suppliers of books to SBB) and rivalry within the market. The possible adverse force of new entrants also cannot be overlooked. SBB will have to make allowances in its plans for possible moves by competitors.



25


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Technological change may also lead to a rethink Technological change may lead to a rethink

- Technological change is often quick and usually dynamic in its impact, particularly so in the information systems fields. Such change may force SBB to rethink its IS strategy, or at least part of it. The example of technology surrounding electronic-books (e-books) has already been mentioned above.

The PESTEL model will help to monitor the macro-environment The PESTEL model will help

- SBB will need to continually monitor its macro-environment, and the PESTEL model will be useful in this context. In general terms, PESTEL analysis aids (1) environmental monitoring, (2) future position monitoring, (3) the formulation of strategic change plans, and (4) the evaluation of strategic change proposals. - The use of this model should enable the management of SBB to identify and respond to change, particularly technological change, proactively.

Business and information systems strategies must remain complementary

Business strategy and information systems strategy must remain complementary - When changes are made to one or both of the business and information systems strategies, it is important to ensure that they remain complimentary. For example, a change in SBB’s business strategy (perhaps to focus more on mail order only) would require a significant change in the company’s IS strategy.

Some terminology used in this answer is explained on the following screens.



26


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Terminology and concepts used in this case study (Not part of the answer) E-Procurement Electronic procurement (e-procurement) is ‘the electronic integration and management of all procurement activities including purchase request, authorisation, ordering, delivery and payment between a purchaser and a supplier’. (D Chaffey, ‘E-Business and E-Commerce Management’ [Prentice Hall]) Turban, Lee and King ‘Electronic Commerce: A Managerial Perspective’ (Prentice Hall) summarise the benefits of e-procurement as follows:       

Reduced purchasing cycle time and cost. Enhanced budgetary control (achieved through rules to limit spending and improved reporting facilities). Elimination of administrative errors (correcting errors is traditionally a major part of a buyer’s workload). Increased buyers’ productivity (enabling them to concentrate on strategic purchasing issues). Lowering prices through product standardisation and consolidation of buys. Improving information management (better access to prices from alternative suppliers and summaries of spending). Improving the payment process (this does not often occur currently since payment is not always integrated into e-procurement).

(A diagram showing members of a typical value network is shown on the next screen.)

Enterprise Resource Management (ERM) Enterprise Resource Management systems (ERMs) have evolved from process re-engineering projects. ERMs integrate (or attempt to integrate) all data and processes of an organisation into a single unified system. A typical ERM system will use multiple components of computer software and hardware to achieve the integration. A key ingredient of most ERM systems is the use of a single, unified database to store data for the various system modules. ERM systems typically attempt to cover all the basic functions of an organisation, regardless of the organisation's business or mission. Examples of modules in an ERM which formerly would have been stand-alone applications include:

Enterprise Resource Management (ERM) A workflow is a depiction of a sequence of operations, declared as work of a person, work of a simple or complex mechanism, work of a group of persons, work of an organization of staff, or machines. Workflow may be seen as any concept of real work, segregated in workshare, work split or whatever types of ordering. The flow being described often refers to a document that is being transferred from one step to another. A workflow is a model to represent real work for further assessment, e.g., for describing a reliably repeatable sequence of operations. More conceptually, a workflow is a pattern of activity enabled by a systematic organization of resources, defined roles, energy and information flows, into a work process that can be documented and learned. Workflows are designed to achieve processing intents of some sort, such as physical transformation, service provision, or information processing. Workflow concepts are closely related to other concepts used to describe organizational structure, such as silos, functions, teams, projects, policies and hierarchies. The term workflow is used in computer programming to capture and develop human to machine interaction. Workflow software aims to provide end users with an easier way to orchestrate or describe complex processing of data in a visual form, much like flow charts but without the need to understand computers or programming. In terms of e-business, Workflow Management (WFM) is the ‘automation of a business process, in whole or part during which documents, information or tasks are passed from participant to another for action, according to a set of procedural rules’. (The Workflow Management Coalition) Copyright: Tony Surridge Online Limited, 2012


27


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Members of the value network of an organisation (Adapted from Deise et al, Chaffey) The diagram shows some of the partners that characterise a value network.  Supply-side partners (upstream supply chain) such as suppliers, business to business (B2B) exchanges, wholesalers and distributors.  Partners that fulfil primary or core value chain activities. The number of core value chain activities that will have been outsourced to third parties will vary with different companies. (In the virtual organisation all core activities may be outsourced.)  Sell-side partners (downstream supply chain) such as B2B exchanges, wholesalers, distributors and customers.  Value chain integrators or partners who supply services that mediate the internal and external value chain. These companies typically provide the electronic infrastructure for a firm and include strategic outsourcing partners, system integrators, ISP/WAN providers and ASP providers. Inbound logistics

Manufacturing

Product warehousing

Value chain integrators

Upstream value chain partners

Downstream value chain partners Fulfilment

Suppliers Core value chain activities

Sell-side intermediaries

Buy-side intermediaries

Value chain integrators

Finance Includes IS partners, for example:  Strategic outsourcer  System integrator  Internet service provider (ISP)  Wide area network (WAN) provider  Application service provider (ASP)

Human resources

Admin

The value network emphasises:  The electronic interconnections between partners and the organisation and directly between partners that potentially enables real-time information exchange between partners.  The dynamic nature of the network. The network can be modified according to market conditions or in response to customer demands.  Different types of links can be formed between different types of partners. For example, EDI links may be established with key suppliers, while e-mail links may suffice for less significant suppliers.

An ASP is a provider of business applications such as e-mail, workflow or any business application on a server remote from the user. A service often offered by ISPs. www.tonysurridge.co.uk Copyright: Tony Surridge Online Limited, 2012

28


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Gaps and disconnects Harmon refers to different specific approaches that organisations employ when they redesign processes as process redesign patterns. He cites one common pattern as what he terms the ‘gaps and disconnects’ pattern. The pattern assumes that inefficiencies arise because of handoffs between departments or functional groups. (P. Harmon, ‘Business Process Change’ [Morgan Kaufmann]) Booch, Grady, Rumbaugh and Jacobsen point out that many of the major problems one finds in any process result from a failure of communication between business silos. Marketing fails to hand the new product specifications to manufacturing in time. Manufacturing makes changes in the product that will save production costs, but prove unpopular with customers and Sales feels it has been blindsided. Rummler and Brache also put a lot of emphasis on aligning the goals and measures managers use when they evaluate activity outcomes. They found as many disconnects in the management process as in the processes themselves. The gaps and disconnects approach puts a lot of emphasis on carefully analysing how the existing process is done before beginning to look ways to improve it. (Booch, Grady, Rumbaugh, and Jacobsen, ‘ The Unified Modeling Language Users Guide’ [Addison-Wesley])

Silo This is a term of derision that suggests that each department on an organisation chart is a silo and that it stands alone, not interacting with any of the other departmental silos. (It is a metaphor drawn from the large [standalone] grain silos that one sees throughout the U.S. Midwest.)

Reverse auctions – sometimes used in e-procurement The reverse, downward or Dutch auction is initiated by the buyer and are more common on B2B (electronic) marketplaces. For these auctions the buyer sets the rules and the timing. Hence, the buyer places a request for tender or quotation and many suppliers compete, deceasing the price, with the supplier whom the buyer selects getting the contract. This will not necessarily be the lowest price since other factors such as quality and capability to deliver will be taken into account. Companies may use reverse auctions to: - rationalise suppliers in a particular spending category; - source new components in an area they are unfamiliar with. The reverse auction can be compared with the conventional forward, upward or English auction. These are the types of auctions available on consumer sites such as eBay. For these auctions, the seller sets the rules and timing, and then invites potential bidders. Increasing bids are placed within a certain time limit and the highest bid will succeed provided the reserve (minimum) price is exceeded. (Chaffey)

Customer Relationship Management (CRM) The interactive nature of the web combined with e-mail communications provides an ideal environment in which to develop customer relationships, and databases provide a foundation for storing information about the relationship and providing information to strengthen it by improved, personalised services. (Chaffey) The mnemonic ‘WE DO E-CRM’ on the next screen describes the management opportunities offered by eCRM.



29


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


What is e-CRM?

CRM is Customer Relationship Management. The online approach to CRM is often known as ‘e-CRM’ or ‘electronic customer relationship management’. We can say that e-CRM involves the following management opportunities:

W

Web site used for customer development from generating leads through to conversion to an online or offline sale using e-mail and web-based information to encourage purchase.

E

E-mail marketing to support upselling and cross-selling.

D O

Data warehousing/mining systems to improve segmentation and targeting.

E C

Online service quality to ensure that first-time buyers have a great customer experience that encourages them to buy again.

E-mail list quality (coverage of e-mail addresses and integration of customer profile information from various databases to enable targeting).

Customer service facilities (such as Frequently Asked Questions, Call-back and Chat that help achieve conversion to sale.

support)

R

Referral to the ‘Next-best product’ automated online system based on personalisation or mass customisation.

M

Multichannel customer experience as customers use different media as part of their buying process and customer lifecycle.

Memory jog: remember:


WE DO e-CRM.


30


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Content management Content is the design, text and graphical information which forms a web page. Good content is the key to attracting customers to a web site and retaining their interest or achieving repeat visits. A Content Management System (CMS) is software used to manage creation, editing and review of web-based content.

Virtual supply-chain A Virtual Organisation can operate without a physical identity (this is an online business, e.g. Amazon.com). Brick and mortar companies can also dovetail concepts of the virtual organisation into the business. For example, Many brick and mortar companies also have websites that enable e-commerce. This may include outsourcing many of the business functions like marketing, operations management and new product development. This also includes collaborating with suppliers and competitors in certain situations. The virtual organisation can be a temporary network of independent companies--suppliers, customers, competitors, linked by information technology to share skills, costs, and access to one another's markets. It will have no hierarchy nor vertical integration. Also known as a cooperative agreement between two or more businesses entities to combine their resources in order to achieve a shared goal. By bringing in additional partners, unlimited skills and resources can be pooled. Partnerships are usually temporary and are dissolved once a common goal is achieved. They do not have corporate offices and usually have no bricks or mortar tied to them. A virtual supply-chain network is based on a number of virtual organisations operating together in the supplychain. The significant thing is that virtual organisations operate without clearly defined physical boundaries between different organisations or functions.

Primary Internal Market Workers in the primary internal market include those with important and scarce skills which are specific to a particular organisation; an organisation would be anxious to retain such workers and develop their potential, and it would be such employees who would form the focus of application of the full range of HR activities (Bratton & Gold, 2003). There are now wide variations in recruitment and selection practices, reflecting an organisation’s strategy and its philosophy towards the management of people. Employees seen as part of the primary internal market become the focus for the ‘bundle’ of human resources (HR) practices (Cooke, 2000) intended to bring about increased motivation, an increased acceptance of responsibility, deepened skills and greater commitment, providing the organisation with a competitive edge. Such employees become part of the an organisation’s core workforce, recruitment and selection representing the entry point activities. Seen in this way, emphasis may be placed on admitting only those applicants who are likely to behave, acquire skills and show ‘attitudinal commitment’ (Guest, 1989) in line with the requirements of an organisation’s strategy. Many organisations have developed competence frameworks and used them to specify the skills and qualities required of potential employees (Roberts, 1997). Such frameworks have allowed organisations to adopt a range of sophisticated recruitment and selection techniques in order to identify and admit the ‘right’ people. Approaches to the recruitment and selection of employees forming the secondary internal market could be subject to less screening at the point of entry, attention being paid mainly to the possession of the required skills. Such employees might be recruited and selected by cheaper methods but still, perhaps, with a connection to organisational strategy via the specification of competencies. Copyright: Tony Surridge Online Limited, 2012


31


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


ACCA Paper P3 Business Analysis

Section B: Specimen questions



32


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Ashkol Furniture Supplies: Question - 1 of 1 Salim Brommer is the Marketing Director of Ashkol Furniture Supplies, a medium-sized company which specializes in manufacturing office furniture. The company makes its products in India, so benefiting from relatively low labour costs. However it has recently experienced intense competition from suppliers who have even lower cost bases. Salim has decided that his company will benefit if he focuses on those customers who can provide higher profit margins. He has decided to target domestic customers in Europe. Increasingly private households, particularly those with computers, are converting spare rooms into office-style areas. Additionally there has been a noticeable trend towards working from home. This saves employers incurring the costs of office provision, and also employees save on travel and can also work at times convenient to themselves. However Ashkol has no experience of dealing with these types of customer. The company now needs to develop a suitable marketing strategy to succeed in this new area and maintain a sustainable competitive advantage. Required: (a) Using a suitable model of your choice develop a marketing approach which Salim might use to enter this new market. (12 marks) (b) Discuss how strategies can be used to create and sustain competitive advantage.



A

(8 marks) (20 marks)

A

33

MAIN PAGE


CONTENTS: SEC A

CONTENTS: SEC B


Ashkol Furniture Supplies: Answer - 1 of 4

Q

The Plan and Answer : part (a)


Planning is everything

Answer plan format

Remember, marketing involves: - segmentation (targeting) - buyer behaviour analysis - positioning the marketing mix - repositioning the marketing mix as time goes on

The product

Salim needs to develop an appropriate marketing mix for entry into Europe

Needs to be focused

The mix is integrated and each element mutually reinforces the others Example: high quality demands a high price (customer perception)

The examiner said

‘There are a number of approaches which can be used in answering this question. Candidates might focus on aspects such as market and environmental analysis or on segmentation, targeting and positioning. Marks will be awarded as to how appropriate their approach is to improving the situation for Ashkol. However it is expected that most candidates will apply the marketing mix model, the most commonly used to this scenario’.

The marketing mix

The mix comprises four elements – name them: p, p, p, p

The question requires a suitable model – The ‘Marketing Mix’ model would seem appropriate here

The question is examining your knowledge of marketing

Quality may have a high priority here The style of furniture needs to match household furniture Domestic houses require compact furniture Design and installation services would support the product This will be an expensive facility: cost-benefit analysis will be important


Place

Price

Promotion

A European presence would require a good distribution network

Price will be used as a competitive tool

Showrooms will be part of the promotional element in the mix

Stock must be made available locally Customers will want to see examples of products, layout and workmanship before buying Ashtok will need showrooms in major centres These will be centres for supply and marketing

The price must not be so low that purchasers question the quality Householders will not be able to offset the purchase against tax (as in the case of corporate purchases) Ashtok should take care not to price itself out of the market

Advertisements in furnishing or household style magazines could attract new customer groups Mailing lists might be appropriate There would be advantages of promoting the company’s products on the world wide web

Perhaps have a competitive price for the furniture but charge a premium for design and installation work


34


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Ashkol Furniture Supplies: Answer - 2 of 4 (a) It would appear that Salim needs to develop an appropriate marketing mix to facilitate the entry into this new European market segment. This mix usually comprises four elements – product, place, price and promotion. These need to be integrated together, to mutually reinforce the impact of a marketing offensive and not in isolation where one aspect may counteract the influence of another. For example the development of a luxury brand image (promotion) will be harmed if a price strategy concentrates on a low or a ‘penetration’ price. The product needs to be focused on a domestic/household market. A utilitarian office approach may not fit in well with the prevailing household image. Quality may have a higher priority here. The style of the furniture will also need to match the furniture in the rest of a household – there may need to be a choice between classical and modern styles. Furthermore size may be more critical. Houses are frequently smaller than offices so the furniture may need to be more compact. It may be advantageous not only to supply the finished products but the company could add value by providing both design and installation services. This, of course, will require a stronger European presence. This could be achieved by having a good distribution network (place). Although the products are manufactured in India because of the lower costs, the customer will be looking for a presence locally. Stock must be available locally so as to avoid delays in order processing. This will provide reassurance. Furthermore potential customers will wish to see examples of the products, layout and workmanship before they commit themselves to purchase. Ashkol will need to have a number of showrooms in major centres where business is expected. Not only will these be depots for supply but they will also act as centres for marketing. This will be an expensive facility, offsetting the cheaper labour costs. The company will have to ensure that these new markets can generate sufficient revenue to compensate for these increased costs. These showrooms will be part of the promotion element of the mix but they will have to be complemented by other media activities. Advertisements in furnishing or household style magazines could attract new customer groups. It may also be possible to buy mailing lists of people who work from home. Directors of small companies and self-employed individuals frequently receive direct mail from financial institutions about banking services and also offers from IT suppliers. Why not information about office furniture and other services? The company should also be aware of the benefits of promotion by using the world-wide web. Price also needs to be considered as a competitive tool in this new venture. The price must not be so low that prospective purchasers question the quality of the product. However it must also be remembered that in certain circumstances this furniture cannot be offset against tax as a cost as it can in a bona fide company transaction. Therefore the company needs to be careful not to price itself out of the market. They have to be aware of what competitors are offering. It may be sensible to have competitive prices for the furniture but charge a premium for the design and installation work. [ The Examiner said: ‘There are no precise solutions as to how the marketing mix is to be determined. Candidates may propose different approaches. These will be accepted, assuming that there is an inherent logic in their application and that they are not inconsistent with a candidate's premises and the objectives of the company’]



35

MAIN PAGE


CONTENTS: SEC A

CONTENTS: SEC B


Ashkol Furniture Supplies: Answer - 3 of 4

Q

The Plan and Answer : part (b) The question is about competitive strategy


Answer plan format

Think Porter: switching costs, etc.

Remember, aspects in the marketing mix are used competitively

This is only an 8 mark question – so don’t write a book!

The importance of competitive strategy

A strategy of lowcost provider

Differentiation strategy

A company should not relax its vigilance

Importance of low cost supplies – by buying in bulk

Important to maintain lead in marketing

Competitors are always active

Regular deliveries to avoid heavy stock-holding costs

An emphasis on strong brand

Control of labour costs

Promotion of a strong corporate image

Continuing innovation

Simplification of the production process

The need for technological superiority

Keeping overhead costs low

Done by enhancing the research capability and designing unique products

The need for low distribution costs

Market research is vital to understand customer needs


Switching costs

Strong brand

Important to build prohibitive switching costs into products/services

A strong brand can tie customers more closely to the supplier

These costs include: financial links, supply of materials and the supply of specialist services For Ashtok such services include design and installation services


Patents and trademarks can also protect competitive advantage However, companies who rely on the law for protection can become reactive, hanging on to what they have These firms would be advised to seek ‘new’ strengths either in manufacturing or marketing

36


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Ashkol Furniture Supplies (continued): Answer - 4 of 4 (b) A company, which has acquired a competitive advantage, should not relax its vigilance. In business nothing is permanent and competitors will soon retaliate. There are a number of methods by which a company can attempt to maintain its position. If the company’s strength is built on being a low-cost producer it must attempt to continue to get low cost supplies by buying in bulk, ensuring regular deliveries to avoid heavy stock-holding costs. It must control its labour costs and continue to innovate so as to maintain production advantages by simplifying the production process. It must keep overheads low and ensure low distribution costs. However if a company's competitive position is derived from its ability to differentiate its products or services it must ensure that it maintains its lead in marketing by emphasizing a strong brand identity, a strong corporate image and by having technological superiority. This can be done by enhancing its research capability and in designing unique products. It is also critical to be aware of customer needs and so marketing research is an important input. Companies can also maintain their advantage if they can develop and build prohibitive switching costs into their products/services. These costs which tie a customer to a supplier can include financial links, the supply of materials and the supply of specialist services (in the case of Ashkol it could be the provision of design and installation services). As mentioned earlier the development of a strong brand name can tie consumers more closely to the supplier. Patents and trademark legislation can also protect the competitive advantage of certain companies although there are sometimes difficulties in certain markets where intellectual property rights are not always fully protected. However companies who rely mainly on the law to protect a competitive advantage run the risk that they may become reactive, hanging on to what they have. These firms would be well advised to continue to seek ‘new’ strengths either in marketing or manufacturing rather than rely on the protection of ‘old’ strengths.

Examiner’s Report You might find it useful to know what the Examiner reported about the quality of answers for this question

This was the most disappointing section of the paper, possibly because the opportunity to get high marks was neglected. Too many candidates failed to see the marketing orientation of this question, despite it being written clearly in the text. Porter’s diamond and his generic strategies were popular and of those who used the marketing mix, many often only recited the 4 Ps without any application or justification at all. Marketing has been highlighted as a topic area and I would expect candidates to be able to apply the basic marketing models. This was not rocket science but rudimentary marketing knowledge. Part (b) was misunderstood. As mentioned earlier it was intended that the answer should encompass strategies for obtaining and maintaining a competitive advantage. While this was generally understood by most candidates, a significant number did read the question as one to justify the use of the rational strategic model. In order not to disadvantage candidates who made this judgement, the pass mark was favourably adjusted.



37


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Contents Page of Section A Case Studies: Questions and Answers - 1 of 7

Title of Case Study 1

arCreative Company June 1995 (Adapted)

Question Screen

Answer Screen

Full answer screen

Examiner’s Comments Screen

36

40

878

na

57

62

885

na

78

85

894

99

103

108

895

na

123

128

901

na

Mission Statement Risks associated with acquisition strategy Rules for diversification

2

ARD Company Strategic position review Evaluation of proposed strategies Acceptance testing Role of marketing management

3

AutoFone June 2008 (Adapted) Competitive analysis Justification of proposed strategy New entrants and competitive strategy

4

Bethesda Heights Memorial Hospital June 2002 Power exerted by a stakeholder group Strategic review Assessing strategic options Ethical implications

5

Blue Sky Analysis June 00 Strategic position review Cultural problems and minimising conflict Improving the way a subsidiary functions Causes for project failure




38


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B




Bonar Paint June 2003

Question Screen

Answer Screen

Full answer screen


144

150

909

161

162

167

910

177

178

183

911

n/a

199

205

920

215

Strategic assessment for buyout Assessing a strategy of reducing both product range and customer base Identifying factors of change involved in the implementation of a strategy Advantages and disadvantages of a mission statement

7

Churchill Ice Cream June 2006 Strategic position audit Evaluating proposed strategic goals Changes required to the company’s existing marketing mix Reasons why the company has failed internationally

8

Lionel Cartwright December 2001 Rational strategy versus the emergent approach Strategy performance appraisal linked to critical success factors Models appropriate for assessing market entry strategy Advantages and disadvantages of (i) internal growth, (ii) acquisition and (iii) franchising

9

Datum Paper Products (DPP) December 2005 Synergy fit between two companies Building a shared culture between two companies Advantages and disadvantages of a greenfield option Likely sources of integration problems after integration




39


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B




Elite Plastic Packaging (EPP) December 2004

Question Screen

Answer Screen

Full answer screen


218

224

921

232

234

239

922

na

254

260

929

274

276

281

935

na

Advantages and disadvantages of different market entry strategies Evaluating the style of strategic management within a group Implications of a move into a global operation

11

Films R Us Porter’s Five Forces analysis Development and implementation of an internet ordering system Assessing critical success factors Characteristics of an effectively designed website Advantages and disadvantages of an internet ordering system for the company’s customers

12

greenTech June 2009 Strategic position review Evaluation of three strategic proposals Identifying deficiencies in an Internet-based process Analysing the relationship between process design and strategic planning

13

The Institute of Information Systems Architects (IISA) Pilot Paper - 2009

(Pilot)

Analysing the macro-environment Principles of strategic alliances Evaluation of a current process Define two options to improve the current process




40


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Contents Page of Section A Case Studies: Questions and Answers - 4 of 7 Question Screen

Answer Screen

Full answer screen


MediaZ Company

303

308

936

na

Analysing a strategic planning system SWOT analysis Recommend and justify strategies New product decision (decisiontree)

MediaZ Company contains a question concerning ‘Decision-tree analysis’ which was added to the syllabus for June 2011


15

Meridian Travel and Holidays (MTH) June 1997

326

330

946

na

344

349

956

na

363

369

963

na

383

388

969

na

Current position review Suggest ways of improving the existing business A micro-environmental appraisal of three strategic options Select and justify your preferred option

16

Midas-Golda Investment Co Value-chain analysis Knowledge management strategy Evaluating a newly implemented system

17

MRVP SWOT analysis The use of the TOWS model Cost-benefit analysis of two strategic options Identifying weaknesses in an existing process Impact of e-trading from a consumer prospective

18

MAS Conglomerate December 1997 Evaluation of growth strategies Evaluation of a proposed acquisition Critical areas which need to be assessed for new market entry

MAS Conglomerate requires financial analysis and discussion concerning financial strategy. This focuses on the requirements and emphasis of the syllabus for June 2011




41


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Contents Page of Section A Case Studies: Questions and Answers - 5 of 7 Title of Case Study 19

National Museum December 2008

Question Screen

Outline answer Screen

Full answer screen


404

411

980

431

433

439

981

PESTEL analysis Organisational cultural issues The three strategic lenses of design, experience and ideas

20

Network Management Systems (NMS) Pilot Paper - 2011

na (Pilot)

PESTEL analysis Analysing the company’s existing industry and market place Analysis of financial position Cost-benefit analysis of purchasing a new machine

21

Oceania National Airlines (ONA) December 2007

452

458

982

470

372

480

983

na

Strengths and weaknesses analysis Features and analysis of a ‘no frills’ low-cost strategy Identifying and evaluating other strategic options for the company

22

Pacific Pumps December 1999 Current strategic position review Recommendations for strategic change Factors involved in a strategy of cost leadership Problems of managing overseas’ subsidiaries Limiting factor analysis

23

Polymat Industrial Tapes Limited (PIT) December 2003 Evaluating the strategic performance of three product groups Assessing the main strategic options open to the company Changing cultures Creating an effective New Product Development system


Pacific Pumps has been extended to cover questions relating to limiting factor analysis which was added to the syllabus for June 2011

496

502

994

512



42


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B



Rightmark Co

Question Screen



513

518

na

529

535

546

554

560

na

Development of a business strategy in general SWOT analysis Main facilities of a groupware system

25

Shirtmaster Group December 2006 Strategic position and performance analysis Advantages and disadvantages of using strategic alliances The costs and benefits of units within a company operating independently of one another Models used for change of leadership style

26

Strictly Business Books SWOT analysis Value-chain analysis Relationship between business strategy and information systems strategy

27

Toys-4-U June 1999 (Adapted) Stakeholder analysis Advising on future strategy Types of information required for decision on new market entry Deliberate planning versus emergent strategy Accepting/declining a contract

28

Universal Roofing Systems June 2005 Ways by which the company has provided a superior level of service Strategic performance evaluation Implementation and change required to achieve the company’s proposed growth strategy


578

585

na

Toys-4-U contains a question concerning ‘Accepting or declining a special contract’ which was added to the syllabus for June 2011

602

608

Only Strictly Business Books is hyperlinked for this free sample

620



43


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B



World-Wide Agricultural Machinery Company plc (WWAMC) December 2002

Question Screen



622

627

639

642

647

na

661

667

681

682

689

704

706

711

725

726

732

745

Review of current strategic position Evaluation of proposed strategies Factors required for a successful merger of companies Discussion of ethical problems presented in the scenario

30

Zaitack Corporation SWOT analysis Development of a new system/process Development of information systems

31

ABC Learning plc December 2009 Porter’s five forces framework Appraisal of acquisition targets Stakeholder analysis and change management

32

WEtland Trust (WET) June 2010 Assessment of strategic position covering: environment, strategic capability, stakeholder expectations and organisational mission Process problems and redesign options Use of website to facilitate acquisition and retention of customers

33

Shoal plc December 2010 Strategic position analysis Management change – contextual factors Turnover strategy Corporate rational for adding value: portfolio, synergy and parental

34

EcoCar Company June 2011 Analysis: macro-environment and market place (industry) Case for and against outsourcing Addressing three specified weaknesses



44

MAIN PAGE


CONTENTS: SEC A

CONTENTS: SEC B


Contents Page of Section B: Questions and Answers - 1 of 6

Title of Question 1

Airtite

Question Screen

Answer Screen


662

663

667

668

669

na

673

674

677

Environmental analysis Building and use of scenarios

2

The Environment Management Society (EMS) Pilot Paper June 2011 Principles of internal development Principles of acquisition Principles of strategic alliances

3

Ashkol Furniture Supplies Developing a marketing approach Creating and sustaining competitive advantage

4

Asia Invest December 2004

678

679

683

684

685

688

689

690

693

694

695

700

Environmental analysis Using quality to gain competitive advantage

5

Marlow Fashion Group

Only Ashkol Supplies is hyperlinked for this free sample

Strengths and weaknesses analysis Using benchmarking to improve strategic position

6

Casa del Mediterraneo Critical success factors and associated competences Elements of a marketing plan

7

Lawson Engineering December 2005 Assessment of a company’s intangible resources and related competences Advantages and disadvantages of using a balanced scorecard




45


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Contents Page of Section B: Questions and Answers - 2 of 6 Title of Question 8

Supaserve December 2005

Question Screen

Answer Screen


701

702

706

707

708

710

711

712

na

715

717

726

727

728

na

Bases for segmenting a new market Strategic impact of new customer delivery system linked to a differentiation strategy

9

Lakeside Business School Reconciling the views of different stakeholders Advantages and disadvantages of using a balanced scorecard approach

10

Fashion Retailer Strategic uses of information systems to provide a competitive edge Key issues associated with outsourcing an IT system

11

Perfect Shopper Franchise Group December 2007 Primary activities of the value chain Re-structuring a company’s upstream supply chain Re-structuring a company’s downstream supply chain

12

Business process change in a supermarket store Business automation Business rationalisation Business process re-engineering Evaluating the use of Lewin’s 3Step model




46


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B



Clothing Company December 2007

Question Screen

Answer Screen


732

734

741

742

743

746

747

748

na

754

755

759

760

761

na

Problems encountered during a website re-design project Analysis of how project management could have improved both the process and outcomes of the project

14

Chief of Police Use of change management models Discussion on suitable style of managing change

15

User Resistance to Change Problems of user resistance to process redesign Strategy for overcoming resistance Measuring the success of a process change implementation Reasons why an implemented version of a system differs from its initial requirements

16

Rameses International December 2002 Reasons why selected strategies may not be successful Issues concerning implementation

17

Focus Bank December 2004 Advantages and disadvantages out outsourcing Competitive advantages gained from a better understanding of the organisation’s core competences The role of critical success factors and performance indicators in determining an organisation’s information requirements




47


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B



Kenshire County Council

Question Screen

Answer Screen


764

765

na

770

772

781

782

783

na

787

789

na

794

795

na

Appraisal of process development proposals Principles of outsourcing Advantages of outsourcing Disadvantages of outsourcing

19

Pharmacy Systems International June 2008 Nature, scope and type of proposed strategic change Internal contextual features of a proposed strategic change

20

AMC Software Systems Pilot Paper 2010 Capability Maturity Model Organisational learning

21

DRB Electronic Services Pilot Paper June 2011 Primary activities of value chain Re-structure of upstream supply chain Re-structure of downstream supply chain

22

ABC Supermarkets The Business Re-engineering approach Virtual supply chain Advantages and risks of generic software




48


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B



IT used for competitive advantage

Question Screen

Answer Screen


800

801

na

804

806

Na (Pilot)

812

814

821

822

824

832

834

835

842

5 Forces and Information Systems Strategy How IS can provide competitive advantages

24

CoolFreeze Pilot Paper June 2011 Explanation and evaluation of spreadsheet additive forecasting model Analysis of corporate performance

25

Country Car Club June 2008 Suggest and justify recommendations for different process areas Advantages from outsourcing the purchase and maintenance of own vehicles

26

Accounting Education Consortium (AEC) June 2008 The difference between electronic media (such as the Internet) and traditional marketing media How electronic marketing may be used to vary the marketing mix

27

MMI December 2008 Justification for acquisition and subsequent performance analysis Strategic fit between merged companies




49

MAIN PAGE


CONTENTS: SEC A

CONTENTS: SEC B


Contents Page of Section B: Questions and Answers - 6 of 7

Title of Question 28

ASW Software House December 2008

Question Screen

Answer Screen


929

931

943

944

946

953

954

957

963

964

966

971

972

974

980

981

984

989

990

992

999

Testing the quality of software Addressing the slippage problem in a project

29

Rock Bottom June 2009 Reasons for success and failure in three phases of a company’s development Franchising strategy

30

OneEnergy June 2009 Performance appraisal using financial data Evaluation of a software packagee

31

IL (Independent Living) Charity December 2009 Primary activities on the value chain Using the value chain to increase competitiveness

32

Lowlands Bank December 2009 Elements of good project management Harmon’s process-strategy matrix Process initiatives

33

Joe Swift Transport June 2010 Analysing an acquisition target using financial and non-financial measures Porter’s Diamond model

34

Pro Tech-Public June 2010 Evaluating outsourcing of IT Competencies required of a business analyst Principles and advantages of CMMI




50


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B



Judy Sodhi June 2010

Question Screen

Answer Screen


1000

1002

1009

1010

1011

1017

1018

1020

1027

1028

1030

1037

1038

1040

1050

1051

1053

1059

1060

1061

1067

Performance appraisal and performance measurement Competency framework

36

TMP (The Management Press) December 2010 Drivers and potential barriers for the adaptation of e-business E-business and five elements of the marketing mix

37

Frigate Limited December 2010 Using the cultural web for understanding organisational culture Mintzberg’s organisation configuration stereotypes

38

The Institute of Administrative Accountants (IAA) December 2010 Evaluate the benefits of adopting an electronic process Benefits realisation

39

8-Hats Promotions June 2011 Evaluate and investment: payback, IRR and intangible benefits Matrix management

40

The Institute of Analytical Accountants (IAA) June 2011 Identify a range of redesign options Advantages of using a software package solution

41

Cronin Auto Retail (CAR) June 2011 Evaluate how the principles of interactivity, intelligence, individualisation and independence of location might be applied in e-marketing Principles of e-procurement



51


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


THE END SCREEN

Thank you for using our e-book and from us all at tonysurridge.co.uk

Good luck in your exams! Wherever you are ….



52


MAIN PAGE

CONTENTS: SEC A

CONTENTS: SEC B


Sorry... But that link will not work in this free sample copy. The Tony Surridge +AddVance full Questions and Answers e-publication consists of: -

Total number of screens Section A: Questions and Answers Section B: Questions and Mnemonics

1084 34 41

To buy the full Questions and Answers version, complete with all links, for your ACCA P3 studies, please go to www.TonySurridge.co.uk

“Dedicated to the Accountancy and Finance Profession”



53

2012 Paper P3 QandA Sample Download v1

Recommend Documents