©
Darren Sparkes,
2010 CIMA E3 – Enterprise Strategy
These notes are not intended intended to cover the whole of the E3 syllabus syllabus
1
Email:
[email protected] [email protected] Prepared by Iton Chicheke Notes SMART
Stratey Enterprise !E"E! PAPER E# $ STRATE%IC STRATE%IC CIMA
2010 CIMA E3 – Enterprise Strategy
These notes are not intended intended to cover the whole of the E3 syllabus syllabus
1
Email:
[email protected] [email protected] Prepared by Iton Chicheke Notes SMART
Stratey Enterprise !E"E! PAPER E# $ STRATE%IC STRATE%IC CIMA
© Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended intended to cover the whole of the E3 syllabus syllabus
An i!portant !essage fro! "arren#########$$3 "ealing with the pre%seen case%study !aterial#####& A !essage fro! the E'a!iners###########$( E'a!iners co!!ents )ove!ber **+########$, The scope for nu!bers in the e'a!ination######$$E'a!ination Techni.ue############$#$$#/ 0acground to 2aper###############$$$+ Syllabus verview###############$$$$$$11 Strategic 2lanning#############$$##$#1 Mission and b4ectives#############$$$$$$13 Internal Analysis#################$$1& E'ternal Analysis#################$1( 5illing the 6ap##################$1, Strategic ptions#################1Method of 6rowth################$$$1/ Strategic Choice and I!ple!entation########$$1+ Change Manage!ent and other I!ple!entation Issues$$* "eveloping an IT Strategy#############$ Strateg y#############$ rganisational Structure##############$3 Mareting####################$$& 2rofitable custo!ers or products7$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$( 0usiness and 2rofessional Ethics##########$, The International Maret 2lace###########$$8eview and Control################$/ Page No.
Contents
© Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended intended to cover the whole of the E3 syllabus syllabus
3 "arren Spares 8egards9 :;hether you believe you can or you can
enry 5ord? And re!e!ber#$ I would welco!e feedbac on the notes$ @eep a loo out for relevant articles appearing in your professional !againe or on the Instituteowever9 I would also suggest that it is essential for you to practice at least one full e'a!ination to ti!e before entering the e'a! roo!$ It is only by replicating the ti!e pressure in the e'a! that you can appreciate the i!portance of ti!e planning on the day$ day$ I suggest that you should practice as !any e'a! standard .uestions as possible before the e'a!ination$ Bour practice answers can be a !i'ture of answer plans and full written answers to get through as !any .uestions as possible$ In particular, you must practice the new pilot paper for the new E3 examination. Bour e'a!iner is not interested in the regurgitation of your nowledge but how you A22B that nowledge to the scenarios provided in order to answer the re.uire!ent set$ The e'a!iner feedbac fro! every e'a! sitting confir!s this$ The notes act as a learning and !e!ory aid for the core !odels9 theories and acade!ic tools included in the syllabus$ >owever9 >owever9 in order to pass your e 'a!ination the acade!ic nowledge !ust be co!bined with e'tensive .uestion practice leading up to the e'a!ination$ Than you for re.uesting a copy of !y :SMA8T )otes<$
© Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
& It is essential that you fa!iliarise yourself well with the pre%seen !aterial before entering the e'a! roo!$ However, this must not be to the detriment of your wider studies. Remember, the Section A of the exam only accounts for 50% of the marks. ou will still have to com!lete two Section " #uestions that will be com!letely un$ seen. § § § § § §
Co!plete a thorough analysis of the pre%seen !aterial$ As a start point you could conduct a corporate appraisal =S;T? of the organisation in .uestion9 that is9 a full internal and e'ternal analysis =see pages 1& and 1( of these notes?$ This should help you to recognise the !a4or issues affecting the organisation$ 2ay particular attention to any nu!bers and what they !ay tell you about the organisations perfor!ance and position$ Bou should avoid too !uch e!phasis on the research of industry infor!ation$ eave that for your T& T2CIMA e'a!inationD 5ro! your analysis9 identify the related syllabus areas and learnreview the! in light of the position and proble!s of the organisation$ Bou can now conduct so!e scenario planning$ Thin of the different scenarios that could appear in the un%seen !aterial and the re.uire!ents that could be ased by the e'a!iner$ 8e!e!ber that there is liely to be at least four separate re.uire!ents$ 2ractice your approaches to answering the scenarios that you have identified$ 0e warned9 identifying liely re.uire!ents is a dangerous occupation$ It is done here for you to start thining !ore widely about the pre%seen !aterial$ nce in the e'a! roo! you !ust &'(S &) *H+ A'*(A R+-(R+/+)* ) *H+ -(+S*&) and avoid re!licatin an answer to a different re#uirement that you had !re!ared for. 2urchase a revision it fro! one of the big tuition providers that contain a nu!ber of !oc e'a!s =probably around , different un%seen scenario
nce the real e'a!ination pre%seen !aterial has been released by CIMA you should do the following in preparation for the e'a!F
1ealin with the !re$seen material The !ost significant change in the new E3 paper is the addition of :pre%seen< case study !aterial for Section A =scenario co!!on to all three strategic papers?$ This will be available for students to download fro! www$CIMAglobal$co! around , wees prior to the e'a!ination$ The pilot paper pre%seen !aterial has five pages$ nce in the e'a!ination there will be additional :un%seen< case study !aterial and the re.uire!ents$ The pilot paper contains two pages of :un%seen< !aterial$
© Darren Sparkes, 2010 These notes are not intended to cover t he whole of the E3 syllabus CIMA E3 – Enterprise Strategy
P6) CIMA for (Co-examiners be reware poin!s wi"" ne#er paper, an a series of brief answers !o !$is (
$i%$"&' in esirab"e is ar%men! of ep!$ !$a! re*o%nise s$o" +*ania!es mana%emen! a**on!in%' in !$e *on!ex! of s!ra!e%& bsiness in
exam an i!s exam s!ra!e%& #er& *"ear' I! isn! a bsiness bsiness mana%emen! pi""ar, b! i!s !i!"e is +I!s eas& !o %e! *arrie awa& wi!$ a"" !$e moe"s *o#ere in !$e (P6) s&""abs an for%e! w$& i!s !$ere in !$e firs! p"a*e' .$e s&""abs is a! !$e !op of !$e
Approach 8e.uired +/#era"" !$is paper is a ba"an*e !es! of !$e ke& s&""abs areas an *o#ers a nmber of we"" se s!ra!e%i* !oo"s an moe"s' Cania!es s$o" no! fin an& srprises in !$is paper an a we"" prepare *ania!e s$o" $a#e no iffi*"!& in bo!$ emons!ra!ion of s&""abs know"e%e an in !$e app"i*a!ion of !$is !o !$e #arios examina!ion s*enarios'
© Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
, imi!e app"i*a!ion
enera" is*ssion of !$e pro*ess of * ompe!i!or ana"&sis n3s!ifie re*ommena!ions in !erms of w$& !$e& were appropria!e !o !$e s$or! or "on% !erm 4o! answerin% !$e 5es!ion se! Insffi*ien! app"i*a!ion Des*rip!ion ra!$er !$an e#a"a!ion of !$e propose s!ra!e%ies imi!eno app"i*a!ion 7e*ommena!ions wi!$ no"imi!e 3s!ifi*a!ion In*"in% a ran%e of s!ake$o"ers no! in*"e in !$e s*enario informa!ion Some repe!i!ion of poin!s mae be!ween ea*$ s%%es!ion Imba"an*e is*ssions of s%%es!ions imi!eno 3s!ifi*a!ion of re*ommene *orse of a*!ion Par! * a repea! of answer !o par! b § § § § § § § § § § § § § Se*!ion § §
8
§ § 9now"e%e
Mana%emen! 5es!ion #er& poor"& answere as *ania!es $a no *"ear ners!anin% of
9now"e%e Mana%emen! + wi!$ no referen*e !o !$e s*enario informa!ion' /n"& %eneri* benefi!s of know"e%e mana%emen! %i#en wi!$ no referen*e !o !$e s*enario Insffi*ien! ep!$ of is*ssion : se of s$or! form answers s*$ as b""e! poin!s Pro#ision of *a"*"a!ions %oo b! "imi!e *ri!i*a" ana"&sis or is*ssion p"s poor se of !$e s*enario informa!ion 8asi* es*rip!ion of !$e ;i#e ;or*es moe" wi!$ "imi!e app"i*a!ion !o !$e s*enario
Se*!ion A - >es!ion 1
Cost of Capital =debt e.uity ;ACC? Co!pany Galuations "iscounted Cash f low =)2G I88 A88?
+nter!rise Stratey *he sco!e for numbers2calculations in the examination E'pected Galues Costing Absorption !arginal? Gariances including planning variances 2ricing transfer pricing 8atio Analysis © Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
="22 CG2 CA2
These notes are not intended to cover the whole of the E3 syllabus
© Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
/ 1+)* R++3A)* /&1+S, *&&S, *H+&R+S R&/ &(R 4)&+16+ "A)4 5. &
This can now deter!ine how !uch to write for each verb in the re.uire!ent A&'A*+ /AR4S *& +A'H 3+R" ) *H+ R+-(R+/+)* 7. & &
Identify the verb9 or verbs9 and !ae it stand out$ The verb tells you what the e'a!iner wants you to do9 e$g$ evaluate9 reco!!end9 analyse9 calculate$ 0e sure to identify all the verbs in the re.uire!ent 4ust in case there is !ore than one thing to do9 e$g$ analyse and discuss9 evaluate and reco!!end$ Identify ey words$ These tell you what to do it on or about9 e$g$ evaluate what79 reco!!end what7 A)AS+ *H+ R+-(R+/+)*S 8. S*AR* 9A)))6 ) &(R A)S+R "&&4 & & & &
H1 +* !inutes$ 2lanning *%( !inutes9 ;riting answer ,(%-* !inutes Section 0 Huestions &( !inutes each$ 2lanning up to 1* !inutes9 ;riting answer 3( !inutes$ 0rea down the ti!e re.uired for each part of the re.uire!ents using the !ars as a guide$ 1$/ !inutes per !ar in total9 1$& !inutes per !ar after planning$ I suggest you start with Huestion 1 as you now you have +* !inutes to co!plete it$ &R4 &(* */)6S :. & &
E'a!ine section 0 .uestions and choose the two on which you can MAJIMISE MA8@S =not necessarily those on your :favourite< topics? If you have so!e ti!e left then analyse Huestion 1 re.uire!ents and si! read the H1 un%seen !aterial to get a feel for the relevant issues and identify where the infor!ation is for each pa rt of the re.uire!ents$ (S+ :0 /)(*+S R+A1)6 */+ S+ ;.
9A)
E'a!ination Techni.ue to give the E'a!iners what they want 2A"I – 2lan9 Analyse9 "esign9 I!ple!ent
© Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
+ R+/+/"+R *H+ *HR++ 6&1+) R(+S < ;=A99'A*&) := A99'A*&) and 8=A99'A*&) & & & & & & &
ayout calculations in a logical and easy to !ar for!at % Add value to calculations by asing :S ;>AT7< Kse as !any headings as possible to give the answer structure Short sentences in short paragraphs % 2aragraphs of 3& sentences !a'i!u! % ooing for !ars for each paragraph 9++ for : marks < 2oint9 Evidence9 E'plain =So what7? eave a blan line between paragraphs to !ae your answer :easy on the eye< 0e strict with ti!ings$ ;hen ti!e is up on a .uestion9 or part of a .uestion9 !ove on$ Stic to answering the re.uire!ent – use your plan to eep you on trac
/9+/+)* ;0. R*+ (9 &(R A)S+R *& /A>/S+ /AR4S & &
"ecide which points you are going to put in your answer =trying to put in everything usually leads to going over ti!e? and start with your strongest points "ecide how you are going to layout your answer to !ae life easy for the !arer and !a'i!ise !ars
1+S6) ?. *H)4 "+&R+ &( R*+ & &
Mae brief notes in your plan under relevant headings fro! !odelstoolstheories and re.uire!ent 5ind relevant nu!bers for calculations
A )A S+ @. A)AS+ *H+ S'+)AR& &
This can now deter!ine how !uch you write under each heading . 1S*R"(*+ /AR4S A'R&SS H+A1)6S & &
will give your answer a fra!ewor and structure$ Kse re.uire!ents to develop headings to show !arer that you are answering the .uestion ased B. 1+3+&9 H+A1)6S A)1 )(/"+RS A&(*
&
Evaluate the @ey e'ternal factors affecting an organisation
&
Evaluate the i!pact of infor!ation syste!s on an organisation Advise on i!portant ele!ents in the change process
&
&
Evaluate tools and !ethods for successfully i!ple!enting a change progra!!e
&
8eco!!end change !anage!ent processes in support of strategic infor!ation
&
Evaluate the process of strategy develop!ent
&
Evaluate tools and techni.ues used in strategy for!ulation Evaluate tools and process of strategy i!ple!entation
&
E'ercise professional 4udge!ent Select relevant "eter!ine appropriate techni.ues
'andidate Re#uirements Apply nowledge and sills
Aims of the !a!er
"ackround ormat of !a!er &
Interacting with the Co!petitive Environ!ent
*L
&
Change Manage!ent
*L
&
Evaluation of Strategic 2osition and Strategic ptions
3*L
&
I!ple!entation of strategic plans and perfor!ance evaluation
3*L
Study eihtin
Section A 50% &
Co!pulsory
&
Ksually four parts
&
Choice of two fro! three
&
;ill include short scenario
un%seen
Section " 50%
CIMA E3 – Enterprise Strategy
1* &
Each .uestion up to three parts &
Case will include nu!bers &
Ma4or case study9 pre%seen and data
These notes are not intended to cover the whole of the E3 syllabus
Syllabus &verview 3 E
Mission and ob4ectives 2urpose9Strategy9Standards9Galues Mendelow power%interest !atri' 2EST
Staeholder Analysis 8esource audit M
E'ternal Analysis Internal Analysis Core co!petences =SA8I? 2orters ( 5orces
Corporate Appraisal S;3T Co!petitor Analysis =283SAC? Galue Chain 0ench!aring 2C 0C6 8esource 0ased vs 2ositioning ;ithdraw
Strategic ptions
Ansoff
Cost0enefit
Strategic Choice nge Manage!ent >8M IT Culture
I!ple!entation Structure International Trading Huality Mareting Ethics
8eview and Control CS5
©@2I
11 !aret !atri'
These notes are not intended to cover the whole of the E3 syllabus
Integrates activities Co!petitive advantage 8elationship with environ!ent ;hole organisation All staeholders 0usiness Tactical level ong%ter!
Strate0y DStratey is the direction and sco!e of an oranisation over the lon termE which achieves advantae for the oranisation throuh itFs confiuration of resources within a chanin environment, to meet the needs of markets and to fulfil stakeholder ex!ectations.F
Alternative
reewheelin &!!ortunism & & & &
'
>ands on !anage!ent E'ploit co!placent players 8elies on leaders vision )o for!ula for success Tae advantage of !aret opportunities Stoc !aret proble!s
Rational D*o! 1ownF A!!roach Mission N 3b4ectives Corporate appraisal Strategic options Strategic choice I!ple!entation 8eview
Intended Strategy
"eliberate Strategy 8ealised Strategy Knrealised Strategy E!ergent
Strategic Analysis
Choice
Strat I!ple!e +merent Stratey $ D"ottom u!F G/intHber0=
strategy +.6. HondaFs entry into the (SA, 8/
& &
ncrementalism Gindblom= 0uilding bloc approach 0uild strategy through incre!ental steps not radical
' Accepts uncertainty of future ' 0uilds co!!it!ent
Ideas often co!pro!ised
Strategic 2lanning
&
8espond and fit to environ!ent
&
2rovide direction
&
Monitor progress
9ur!ose Advanta0es
' ' ' ' '
Identification of strategic issues Consistency of goals I!prove perfor!ancesurvival 2ro%active 8ecognises
'
pti!u! use of resources
1isadvanta0es E'pensive =ti!e and !oney?
0ureaucracy
Stifles creativity a crisis
Strategy
Strategic Choice
Analysis © Darren Sparkes, 2010 These notes are not intended to cover the whole of the E3 syllabus CIMA E3 – Enterprise Strategy
1 I!ple!entation environ!ent ess relevant in
May be too slow shifts Ensure consistent ob4ectives Ktilise scarce resources &
& &
Maret "riven – reactive =Oohnson N Scholes? 5unctional perational level Corporate Strategic level OS;
2osition
2urpose
Galues
/ission Statement :# the !ost generalised type of ob4ective which can be thought of as its raison d
standards Advanta0es & & & &
Set direction >elp for!ulate strategy Co!!unicates values to e!ployees Mareting to custo!ers
Strategy
& & & &
'r iticisms Meaningless ter!s used ;ritten retrospectively7
)ot co!!unicated to e!ployees Ignored by !anagers
S Specific / Measurable A Attainable R 8elevant 2olicies and
&bIectives
/ission and
%R+
1eterminantsE nnovation Resource utilisation +'cellence =Huality of service? %'
ResultsE inancial perfor!ance 'o!petitiveness =0rignall et al?
le'ibility
Stakeholders ow Interest >igh
1 @ey 2layers – @eep Close 2ar ticipation
' @eep Satisfied Intervention
" @eep Infor!ed Education Co!!unication
A Mini!al Eff or t 6ive "irection ow >igh
/endelowFs 9ower < nterest /atrix
2ower
'ritical Success %actors "The limited number of areas in which results, if they are successful competitive performance for t he organization. They are the few key areas where things must go right f or the business to flourish. If results in these areas are organization's efforts for t he period will be less t han desired."
)ot for 9rofit &ranisations Ef fe ctiveness =3utputs? Efficiency =2rocess?
Econo!y
eatures of obIective settin &
2articipation in ob4ective setting
&
2riorities !ay change fre.uently
&
Increased role of personal ob4ectives
=Inputs? © Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
13 not adeuate, the &
Galue for !oney a re.uire!ent not an ob4ective
2roviders of funding different to beneficiaries of service &
Multiple and contradictory ob4ectives satisfactory, will ensure Ti!ebound
* &
8esolve staeholder conflict
& & & & & & &
Strategy Structure Syste!s Staff Style Shared values Sills
'om!etences Threshold 8 Core7
'ore 'om!etences :#the activities or processes that critically underpin co!petitive advantage$< SAR
& & & & &
Galuable 8are Can
3alue )etworks #identify activities within the fir! which contribute to co!petitive advantage and those which do not$
9rimary Activities & & & & &
Inbound ogistics perations utbound logistics Mareting and sales Service
& & & &
2rocure!ent >8M Technology develop!ent 5ir! infrastructure
(ses & & & &
Strea!line linages Eli!inate non%value added activities 0usiness 2rocess 8e%engineering 0ench!ar ey processes
9orterFs 3alue 'hain ? /Fs &
& &
Manpower Money Mae%up
&
Methods Materials
&
Manage!ent infor!ation
&
Architecture Reputation nnovation /c4insey S
Resources
nternal Analysis GStrenths J eaknesses= Resource Audit2
9roduct ,ife$cycle StaesE
&
&
advertising losses P negative cash growing volu!es9 ES9 high advertising losses to profits P negative to positive cash /aturityE steady repeat sales9 high volu!es9 ES9 low level advertising profits P positive cash 1eclineE falling volu!es9 falling prices profits to losses P positive to negative cash9 divest "alance the !ortfolio
9roblemsE & & & &
)o co!!on shape Knpredictable Self%fulfilling prophecy 2roduct orientated – ignores !aret
9roblemsE "efinition of a'es "efinition of !aret )o account of co!pli!entary goods Assu!es high !aret share & & & &
advantage
"enchmarkin 9ortfolio Analysis Internal
Co! 3$ &$ ($ ,$ -$
Choose partner "eter!ine !easures Collect data earn and i!prove I!ple!ent changes
1$
"eter!ine processes to be
$
Choose type of bench!aring
ow
>arvest then "ivest 2rofits to losses9 positive to negative cash >old then >arvest 2rofits and positive cash
'ASH '& 9R&"+/ 'H1 osses9 negative S*AR 0uild then >old osses to profits9 negative to positive cash Relative market
>igh
"alance t
"'6 /atr ix >igh
share
ow
0uild or "ivest osses9 negative cash
2r Co!petitive
2rocessActivity ) 9RA'*'+ © Darren "+S* Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
1& "alance the !ortfolio
bench!ar &
6rowthE increased co!petition9 &
ntroductionE high ris9 little co!petition9 low volu!e9 high
9osition Audit 0asic 8 Kni.ue7 /odel
Marets &
Machinery &
Manage!ent
+conomic 6lobalisation Econo!ic cycle Interest rates Inflation E!ploy!ent levels E'change rates
& & & & & &
& & & & & & &
Social J 1emora!hic Inco!e distribution Education levels 2opulation sie Age profile ifestyle changes 5ashions and tastes Consu!eris! *echnolo0ical
& & & & & &
Internet 6overn!ent spending on 8n" Co!!unications Speedrate of change 2rocesses and !ethods of production Transportation
9 R
2rediction of 8eaction 8esources
S A
Strategy Assu!ptions
+xternal Analysis G&!!ortunities and *hreats=
9+S* analysis G+xternal, +nvironmental analysis=
& & & & &
& &
9olitical and eal Ta'ation 6overn!ent policy 5oreign trade regulations Monopoly legislation Environ!ental legislation E!ploy!ent legislation Consu!er protection 2rotectionis!
'om!etitor Analysis 'om!etitive Rivalry 6reatest whereE Co!petitors of si!ilar sie Slow !aret growth rate >igh fi'ed cost industry ac of differentiation & & & &
9orterFs 5 %orces G'om!etitive, ndustry analysis= *hreat from )ew /arket +ntrants "arriers to +ntryE Econo!ies of Scale ther cost advantages Capital re.uire!ents Access to distribution channels 2atents9 6overn!ent policy 8eaction of e'isting fir!s & & & & & &
*hreat from Substitute &
Can sa!e features be produced
&
Can new features be provided for sa!e
&
evel of danger !ay be influenced by
9ower of "uyers 9ower reatest whereE 5ew buyers >igh nu!ber of suppliers available Cost is high proportion of buyers total cost & & &
& & &
0uyers have low profits 0uyers have full infor!ation ittle product differentiation
9ower of Su!!liers 9ower reatest whereE 5ew suppliers 5ew substitutes >igh switching costs Threat fro! forward integration Custo!er not significant to supplier Supplier has differentiated product & & & & & &
Threats
EJ pportunities ;eanesses
8)A Strengths
I)TE nternal K +xternal Analysis L 'or!orate A!!raisal L 9osition
EJTE8)A © Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
1( A!!raisalL S&* Analysis barriers to entry andor power of buyers cost7
*echnoloies cheaper7 &
Co!petences '
&
/arket rowth
illin *he 6a! 6a! Analysis Target b4ective e$g$ 8I Efficiency 2enetration )ew products or new !arets
"iversification
6A9 5uture 2lans Current operations
1$ "efine the scope of the scenario $ Identify the !a4or staeholders 3$ Identify basic trends &$ Identify ey uncertainties ($ Construct initial scenario the!es ,$ Chec for consistency and plausibility -$ "evelop learning scenarios /$ Identify research needs +$ "evelop .uantitative !odels 1*$ Evolve towards decision scenarios
Scenario 9lannin
Ti!e ü 5ocuses !anage!ent on future possibilities ü Encourages creative thining ü Encourages co!!unication and participation ü Identifies sources of uncertainty ü Identifies !ost i!portant variables û
Costly
û
Kses resources on scenarios that will not
û
Tendency for !anagers to get carried
û
8is of self%fulfilling prophecy © Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
1, away !aterialise û ften inaccurate
These notes are not intended to cover the whole of the E3 syllabus
2orters 5ive 5orces >arness core co!petences to give sustainable co!petitive advantage
& & & &
Strategic Assets Architecture 8eputation Innovative ability
2EST 9orterFs 6eneric Strateies &
&verall 'ost ,eadershi! =better !argin9 potential price cuts9 entry barrier9 reduce supplier power? =2re!iu! price9 better !argin9 barrier9 reduce buyer power?
&
ocus G)iche= =Cost or "ifferentiation9 focus on !aret needs9 develop core co!petencies?
"eware of DStuck in the /iddleF (ses & & &
Analyse rivals Suggest own strategy S0K level strategy
imitations & &
& & &
&
Knclear definition of industry "efines advantage in ter!s of position not ac of e!pirical evidence Ignores !iddle ground 8estricts fir! to position in present industry 8e.uires perfect infor!ation
Strategically develop organisation in line with environ!ent 2ositioning view =outside%in? 8esource 0ased Strategy
/ethod of 6rowthM
=See next !ae=
hat "asisM i!itations & & &
"efinition of !aret Ignores factors such as co!petitors Suggests strategies in isolation
Strateic &!tions hat 1irectionM
Horiontal diversification –
co!petitive products9 co!ple!entary products9 by%products
1o nothin 2 ithdraw
AnsoffFs /atr ix oducts9 e'isting and new =2E)?
/arket 9enetration =cost reductions9 !odifications? 9roduct 1evelo!ment =e'ploit e'isting custo!ers9 8n"9 buy%in and badge9 /arket 1evelo!ment =new !arets
OG
such as foreign !arets9 new seg!ents such as adult to child or industrial to consu!er? 1iversification =related vertical integration or unrelated conglo!erate?
2r
&
&
&
&
3ertical nteration Advantaes &
Econo!ies of co!bined
&
Econo!ies of control and
1isadvantaes &
&
&
Increased operational gearing &
Avoiding the !aret Tap into technology
&
8educed fle'ibility to
change partners coordination Capital invest!ent needs
'onlomerates Advantaes 5le'ibility
1isadvantaes )o additional through benefit to shareholders
&
&
& &
Access capital 2ortfolioto effect &
)o operating advantages
!onopoly legislation
Risks Maret !anage!ent 5inancial © Darren Sparkes, 2010 & &
CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
1&
Avoidance of anti% synergies &
perations and &
Huic growth &
2roduct price reductions9 advertising9 !inor product ops
Marets9 e'isting and new =ME)? 2r resources
=Inside%out? &
1ifferentiation To beat the f ive forces
Ac#uisition
1isadvantaes & &
&
&
2urchase pre!iu! Integration issues o Syste!s o
2eople
o
Culture
Synergies do not !aterialise 8eputation of target
Advanta0es & & & & & &
Huic ower ris verco!es barriers to entry Sa!e nu!ber of co!petitors 2ossible synergies 2ossible under%valuation of target
&ranic 6rowth
1isadvantaes & & &
& &
Slow Increases nu!ber of co!petitors verco!ing barriers to entry )o opportunity for synergies >igher ris
Advanta0es & & & & & &
)o pre!iu! for assets 2eople develop!ent Staged invest!ent Established culture Introduction of new technology and syste!s easier 2ossibility of grants
9orterFs 8 *ests for Ac#uisitions & &
The attractiveness test The cost of entry test
/ethod of 6rowthM Ac#uisition versus
'
1ivestment Huic
'
>igher price due to strategic value
9ossible syneries &
&
& & & &
Econo!ies of scale Surplus assets Gertical integration Sills transfer "ilution of ris 8educed power of buyerssuppliers Ta' advantages
ithdrawal 1emerer '
'
6ives shareholders
Manage!ent can focus on core areas develop separate identities
Noint 3enture Separate business entity with e.uity for! two or !ore businesses Noint 1evelo!ment /ethods /anaement "uyout
Consider n%going involve!ent of holding co!pany ;hy is holding co!pany selling7 oss of >olding co!pany help9 e$g$ technical support9 finance services Huality of !anage!ent tea! 2rice 2ersonal ris9 e$g$ ho!e at ris7 & &
& & & &
Strateic Alliance ong%ter! agree!ent to share nowledge9 co!petences9 technology for !utual benefit ' Huic growth ' Access to co!petences ' ess financial risoutlay ' verco!e product9 !aret9 operational ris
May lose co!petences Train future co!petitors 0r and i nf ect ion perational and contractual disputes wnership of assets Sharing of profits
icensin e'ploit brand9 recipe9 share of the profits
%ranchisin0 !ethod!odel in return for a capital su! usually provides support e$g$ !areting9 ©training9 Darren technical Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
1/ plus a share of the profits$ 5ranchisor 6iving the right to e'ploit a business process etc for a 6iving the right to
'
Two co!panies can an e'it route & &
Shared activities &
Maret
&ranic rowth
Acce!tability ;ill the proposed strategy !eet the ob4ectives of the organisation and9 therefore9 be acceptable to the !a4or staeholders7
Suitability Is the proposed strategy suitable for the present situation and circu!stances of the organisation7 i$e$ Is it suitable given the S;T analysis7
%easibility the necessary resources to carry out the
Cost0enefit
8is
Strate0ic +valuation J 'hoice
6ame *heory & & &
Concerned with the interrelationships between the co!petitive !oves of a set of co!petitors Can be a useful tool to analyse and understand different scenarios 8elies on two ey principlesF % Strategists tae a rational9 infor!ed view of potential co!petitor actions % If a co!petitors strategy allows the! to do!inate us then the priority is to eli!inate that strategy
5or e'a!ple9 taing co!petitor reaction into account9 a co!pany !ay not be any better off by !aing a particular strategic !ove as it !ay be cancelled out by the co!petitor$ This !ay leave both co!panies worse off than they were before$
Real &!tions Q:#the net present value rule is not sufficient$ To !ae intelligent invest!ent choices9 !anagers need to consider the value of eeping their options open$< ="i'it and 2indyc9 1++(? Q#all business decisions are real options#they confer the right but not the obligation to tae so!e initiative in the future$ =ewent9 1++&? 8eal options capture the value of !anagerial fle'ibility to adapt decisions in response to une'pected !aret develop!ents$
/c4inseyFs 7
for Real &!tions
1$ Kse standard )2G approach to produce valuation of invest!ent $ Kse scenario planning to deter!ine the potential futures Model the uncertainties in the pro4ect with event trees &
3$ Identify the decision options at ey stages of the pro4ect Convert event tree into decision tree &
&$ Galue the portfolio of options using the 0lac N Scholes portfolio approach © Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
1+ strategy7 >as the organisation got9 or can it get9
stae !rocess
Knfreee
Change
8efreee
8ole Tas Oob 5actors & & & & & &
Cultural ;eb Stories 8ituals Sy!bols 2ower structure rganisation structure Control syste!s Strengthen ;eaen
2ersonal 5actors
2ower 2erson Social 5actors "riving 5orces 8estraining 5orces =resistance?
>andy
2articipation Education N co!!unication 5acilitation N support )egotiation Manipulation Coercion
'ulture :The way we do things around here<
*he chane @anter
E'cellence Culture – 2eters and ;ater!an 9 A S S ' A S H
2roductivity through people A bias for action Stic to the nitting Si!ple structure Close to the custo!er Autono!y and entrepreneurship Si!ultaneous loose%tight properties >ands on9 value driven
-uality :5itness for use<
Huality control reactive Huality Assurance proactive
5our costs of HualityF Appraisal 2reventative & &
'hane
Internal E'ternal
m!lementation ssues
'hane
'ontext of Triggers & &
Methods Survey research and feedbac Therapy groups =T%6roups? Tea! 0uilding Change Agents & & & &
&ranisational 1evelo!ment *o increaseE evel of trust ielihood of solving proble!s penness of co!!unication evel of individual and group responsibility for proble! solving & & & &
Custo!ers
*-/ :6et it right first ti!e< Co!petence Types of change & & & &
E!ergent Incre!ental Step Transfor!ational Continuous i!prove!ent
Co!!it!ent
, C
Costs
&
Internal failure
Co!!unication © Darren Sparkes, 2010 These notes are not intended to cover the whole of the E3 syllabus CIMA E3 – Enterprise Strategy
* Continued on ne't page &
E'ternal failure &
2lanned
/anaement )ew Ideas )
!rocess
& & & & & & &
8ecruit!ent Appraisals Training 8eward Oob design Involve!ent Status and security
&
Co!!it!ent
&
Huality
&
5le'ibility
MotivationF Maslow – >ierarchy of needs &
>8M Strategy
>8M 2ractices
HR/ &utcomes
0ehavioural utco!es
2erfor!ance utco!es
5inancial utco!es
Staff understand org
6uest model of HR/ Increased ability to )etwors 6roupware
m!lementation ssues GcontFd= HR/ "enefits Motivated worforce Intranet 2eople encouraged to generate N use nowledge
*urn tacit into ex!licit
Systems E'tranet @nowledge closest we can get to ulti!ate :co!petitive advantage<
&r0anisational
/ana0ement Se.uences Associations rganisational Structure
nformation Systems *echnolo0y Technological Classification 2olitics
ssues 2 9roblems 1ata /inin $ Turning data into infor!ation 5orecasting Errors in data 8eports "e%!otivation
1ata 5arehousin0 Clustering Suppor t strategic decision !aing arge relational database 5or!at of infor!ation Social barriers I!prove .uality of data Suppor t integrated value chain Speed up response ti!es to .ueries Inco!patible syste!s N processes
2redictive !odels "escriptive Issues =cont
1 !odels transfer barriers
These notes are not intended to cover the whole of the E3 syllabus
co!pete N add value &
>erberg – >ygiene factors and !otivators
9e!!ard < A!!lications 9ortfolio > igh
Strategic – Critical to f uture business success @ey perational– Critical to sustain e'isting business
ow
>igh 2otential – Innovative with high future potential Support – I!prove !anage!ent effectiveness but not critical to the business
Strategic i!portance in current co!petitive environ!ent
>igh ow Strategic i!portance in predicted co!petitive 0eat the five forces Galue chain 6eneric strategies 4ey business 'ost
Strateic ea!on
'onsiderations !plications 1$ $ 3$
Identify business needs Identify IT gap Identify potential opportunities
9erfor!ance
9rocess nnovation Co!pletely new and radical processes$ 1$ $ 3$ &$ ($
;or bacwards fro! outco!es not tass E!power the end user Increase access to databases in parallel activities Capture infor!ation only
Re$enineerin 8adical N f unda!ental change for .uantu! leaps in perfor!ance
1evelo!in an * Strate0y Strategic i!pact of future syste!s ow >igh
Strategic i!pact of current syste!s
Support – )o strategic value
Turnaround – E'pect info syste! to beco!e strategically i!portant in the future ow
5actory – See strategic value of info syste! now but e'pect value to decrease in the future
Strategic – "epend on info syste! f or co!petitive advantage > igh
/carlan J /c4enneyFs +arls 8 evels of * Strate0y IS Strategy % syste!s 9lanning
*echnol
IM Strategy – !anage!ent processes =C32T?
IT Strategy – infrastructure *echnology 'ontrol
© &rganisation Darren Sparkes, 2010 CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole of the E3 syllabus
Technology Supporting rganisation of
Strateic 6rid "usiness 9rocess G9'4= areas
%unctional
' ' ' '
Econo!ies of scale Specialists with so!e autono!y Career structures 5rees up entrepreneur Slow decisions =bureaucratic? 5unctional silo
I!ple!entation Issues cont
1ivisional Multiple products N !arets Autono!y for S0K !anagers
' ' '
Training of S0K !anagers 5rees up senior !anagers 5ocus on specific products!arets oss of congruence7 "uplication of effort I so la tio n of S0K !anagers
+ntre!reneurial '
8esponsive to !aret
)o career structure )o autono!y Single product N !aret
Career E!ployee !otivation "ecisions
Huality 5le'ibility Autono!y
S * & 9
Strategy
*
Tass
Technology wnership
+ S
Environ!ent Sie
'entralised vs 1ecentralised Speed Motivation of
6reiner Fs 6rowth /odel /intHber0 'onf i Str Techno% structure
contact
&ranisational Structure Congruence
'hecklist 5eatures of rganisation
'
Shared nowledge
'
Innovation and creativity authority
1ecentralisation S!an of control Fs Structural 'onfiurations AdvantagesF 5rees senior !anage!ent 0etter local decisions 0etter !otivation 5le'ibility Trainingcareer path & & & & &
5lat;ide
' '
Encourages delegation Huicer9 !ore infor!ed decisions
' ' '
of lower levels ower !anage!ent costs 2ro!otions real and !eaningful Closer contact between senior !anage!ent and lower levels
' ' '
2ro!otional opportunities S!ooth progression between levels More personal
'
Encourages par ticipation
Tall)arrow
aff &
Si!ple structure
&
Machine bureaucracy
&
2rofessional
&
"ivisional for!
f unctional
decentralised
perating core "isadvantagesF & & &
oss of congruence "uplication of effort E'tra costs of control
6rowt h thro ugh "irection Coordination
© Darren Sparkes, 2010 These notes are not intended to cover the whole of the E3 syllabus CIMA E3 – Enterprise Strategy
3 2sychological saturation Collaboration Control "elegation eadership Creativity &
oss of control Adhocracy !atri' &
bureaucracy St Middle ine structure Support Strategic Ape' entrepreneurial Ti!e consu!ing !eetings "ual co!!and "ilution of functional
'
Sill develop!ent
'
0readown of silo
'
8evolutionar y Crisis
Autono!y 8ed Tape
' 5ast decisions
/arket ,eader % largest !aret share Supplier Marets 8ecruit!ent Marets Influence Marets Internal Marets
G9ayne= Six
/arketin Stratey Analyse environment and com!etitors – 2EST 2orter
ing to the
/arket Sementation and *aret /arket
6eographic "e!ographic
& &
o o o
o
Age 6ender Inco!e
5a!ily life%cycle
Social class 2sychological Education >obbies
& & & &
2roduct Sales
irmFs orientation
Mareting #identify9 anticipate and satisf y custo!er re.uire!ents
/arket nicher pursued by larger fir!s
'om!etitive Strate0ies 2roduction
Co!!unications Mi'F Sales pro!otion 2ublic relations 2ersonal selling
A
Awareness
1 A
Action
"esire
/arketin
Kse of inter!ediariesF Econo!ic criteria Control criteria & &
/arketin Research #syste!atic gathering9 recording and analysing of data about proble!s relat !areting of goods and services
9romotion 9lace "ifferentiated
/arketin /ix < 79Fs #set of controllable !areting variables used to produce desired response in the target !aret Concentrated
9rice ield Research =2ri!ary data? Interviews9 focus groups9 .uestionnaires9 e'peri!ents9 Test !areting 1esk research =secondary data? 9roduct #ualities range9 warranty9 pacaging9 branding E'ternal CS reports9 0usiness ! onitors9 Trade 4ournals9 newspapers Internal Accounts9 Sales reports9 Custo!er co!plaints & & & & & & & & &
Cost based Target pricing "iscri!inatory pricing 2sychological pricing 2ro!otional pricing 2roduct line pricing Captive product pricing Maret si!!ing Maret penetration
9roduct 2roduct ife Cycle 2roduct to !eet needs ine E'tension
0rand E't
Multi%branding E'isting 2roduct
)ew 0rand )ew 2roduct
0rand Strategies E'isting 0rand
ine E'tension
0rand E'tension
)ew 0rand
© 2roduct Darren Sparkes, 2010 These notes are not intended to cover the whole of the E3 syllabus CIMA E3 – Enterprise Strategy
& !i' 5eatures9 options9 Advertising Interest
% serve s!all seg!ent9 not
Six /arkets /odel % runner%up9 fighting to
2rofits fro! sales o individual products
Calculating "22
Sales =price ' nu!ber of units – returns? +SSE 'osts =unit cost P ordering P inventory P storage P transport P shelf stacing P wastage P breaage? I!proving "22F Increase sales price Increase sales volu!e 8educe costs of stocing ffer incentives & &
& &
Evaluation of "22F &
Easier and cheaper to cut price
&
Ignores relationships between products f
ConsiderF & & & &
2resent value of e'isting N future purchases 2robability of custo!er retention 2robability of custo!er purchasing new products Costs of initial attraction
"rawbacsF & & &
>ard to factor in co!petitors "ifficult to pinpoint life%cycle stage Kncertainty of environ!ental factors
Typical cost driversF
"22 – "irect 2roduct 2rofitability
& &
"elivery cycle rdering !ethod
9roduct 3iew
9rofitable 9roducts or 'ustomersM
Single period view of
Account 2rofitability
'ustomer 3iew ife%Cycle custo!er value & & & & &
Mini!u! order sie Install telesales E"I Charge service fees I!pose flat order charge "iscri!inatory pricing
custo!ers
$ Calculate annual revenues earned fro! custo!er seg!ents 3$ Calculate annual costs of serving the seg!ent including the :hassle< factor &$ Identify and retain :.uality< custo!ers ($ Eli!inate or re$enineer unprofitable "eveloping Custo!er 8elationshipsF 1evelop custo!er retention sche!es for staff Reduce staff turnover +levate custo!er retention in corporate thining Analyse detailed infor!ation on & & & &
custo!ers and their buying habits & & &
/onitor custo!er relationships +ngage with custo!er 1evelop ideas to increase loyalty
1R+A/+1 Evaluation of CA2F ü Includes non%production costs ü Identifies custo!er groups of value to the fir! ü Enables assess!ent of value of !areting e'penditure
changes Calculation difficulties Single period view
5ocus !areting !aintaining N custo!er base
Custo!er Mareting © Darren Sparkes, 2010 These notes are not intended to cover the whole of the E3 syllabus CIMA E3 – Enterprise Strategy
( enhancing e'isting resources on eads to ill%4udged product
Manage!ent
seg!ents value of custo!er
CA2 – Custo!er &
2roduct sie &
>ard to predict future behaviour than conduct "22 e'ercise &
Too product focussed
' & 9 9 *
Confidentiality b4ectivity 2rofessional due care 2rofessional Co!petence Integrity Threats
E.ual opportunities Consu!er health and safety
9rofessional +thics :Self control9 not self interest< 5air Trade Safety in the worplace >onesty in Advertising Environ!ent
8eputation Innovation N
and branding
advantage in the
ideas fro!
supply chain
"usiness and 9rofessional +thics
Sustainability
'or!orate 6overnance & & &
&
"ivorce of ownership and control Separate roles of CE and Chairperson Audit Co!!ittee 8e!uneration Co!!ittee )on%e'ec "irectors Independent o 8ole on audit re!uneration o co!!ittees o o o
Corporate conscience Mentors to ine'perienced e'ecs Strategic value through e'pertise
Issues
'or!orate Social D*he bu business is
Giews on 0usiness Ethics
D*he business of businessF Manage!ent to concentrate on !a'i!ising profits and shareholder wealth$ 0usinesses have no duty to society$ Societal benefits will arise as a result of co!!ercial success$ Co!petitive advantage
S!all co!pany
close lins to co!!unity Avoid future 6overn!ent 6overn!ent policy
+nlihtened Self$nterest 5ir!s should acnowledge their social responsibilities$ responsibilities$ 8ecruit!ent
"enefits to "usiness 8elieve stress on Attract ethical investor funds funds
Co!petitive disadvantage )o universal acceptance of !orals N ethics
Conflict of CS8 with shareholder wealth & & & &
8educed revenues Increased costs "iverts funds fro! shareholders "istracts !anage!ent "is
9otential !roblems "eciding what is ethical "isclosure of business infor!ation 0ad publicity fro!2010 !onitoring and enforce!ent © Darren Sparkes, CIMA E3 – Enterprise Strategy
These notes are not intended to cover the whole whole of the E3 syllabus
, !anage!ent
Griedman= Res!onsibility &
"irectors re%election at least every 3 years
9olitical sponsorship 9olitical power Saturated ho!e !aret
&pportunities for lower costs
Reasons for rowth in in international business G9&S*= ' "i & *rade barriers reduced pportunities for !anage!ent 2EST Maret @nowledge +cono!ies of scale ultural versity 5inancial Reduced ris 28SAC
"enefits of international 0rowth G'&99+R= 6eneral ( 5orces 9ressure on 83CE 5actor Conditions
8elated N supporting industries
Strategy9 Strategy9 structure9 N rivalry
9orterFs 1iamond :)ational Co!petit Co!petitive Advantage<
"e!and Conditions
+x!ortin
'
ow capital outlay
'
Can learn about !aret
2erce 2erceive ived d lac lac of of co!! co!!it! it!ent ent >igh >igh dist distri ribu buti tion on cos costs ts
*he nternational /arket 9lace '
Efficient use of >89 builds strong culture and !anage!ent networ Sub4ect Sub4ect to )ational )ational i!!igrati i!!igration on polic policies9 ies9 e'pensive e'pensive
cultural !yopia9 ine'pensive ine'pensive ' Alleviates cultural
i!its i!its care career er !obi !obilit lity y9 isolat isolates es >H >H fro! subsidiaries
'
verco!es lac of host sills9 unified culture9 Transfers co!petencies 8esen 8esent!e t!ent nt by host9 host9 cultu cultural ral !yopia !yopia
S*A%%)6 Ooint venture9 5ranchising9 5oreign "irect Invest!ent E'por ting &
Standardise wherever possible9 e$g$ 8n"9 0randing Maret convergence !ay allow
& & &
"(* 1emand$driven Custo!ised !areting !i' where necessary 6CA
See overseas !aret as distinctive Custo!ised products and !areting !i' Increased overseas sales volu!es "(* 5ewer ES giving higher costs9 so volu!es not turned into profits & &
&
&
& &
& &
2erceives foreign !arets as si!ilar to do!estic !aret 2roducts N !areting !i' constant Standardisation to save ti!e and !oney Su!!ly$driven !olicy
6lobal $ 6eocentric /ultinational $ 9olycentric +thnocentric
/ethods of nternational +x!ansion
Noint 3enture J ranchisin
' Access to local resources '
Shared capital input nowledge
ose co!petences
perational disputes
orein 1irect nvestment
'
Closer to !aret
'
More control
>igh financial ris
© Darren Sparkes, 2010 These notes are not intended to cover the whole of the E3 syllabus CIMA E3 – Enterprise Strategy
Staffing decision
'
8educed operational conflicts
'
8etain profits Train co!petitor Shared profits
'
Access to co!petences and
'
8educed national senti!ent May not !eet custo!er needs
'
ow ris
risks 2
Aims of !erformance measuresE & & & & &
Motivation Congruence Accurate reflection of perfor!ance AccountabilityControllability 8econcile long and short%ter!
*ransfer 9ricesE & &
& & & &
/arinal 'ost – no incentive for seller N inflated profit for buyer ull 'ost G'ost 9lus= – !ay be no incentive for the buyer N no incentive for seller to control costs /arket !rice – no buyer incentive &!!ortunity 'ost – usually best 'entrally set – uncontrollable )eotiated – powerful divisions
9roblemE no account taen of invested capital used to generate profits
Return &n nvestment Residual
& & &
E'a!ples 6ross !argin )et !argin Cost L sales
20IT J 1 ** L CE 20IT 8I 8elative Measure L Absolute Measure R
2rofit 8elated Measures 9roblemsE
&
"eplete capital assets too early
9roblemsE &
Absolute !easure poor for perfor!ance co!parisons
Review and 'ontrol Noint issues when used in isolation & & &
0acwards looing !easures Short%ter!ist decisions pen to easy !anipulation of discretionary costs and capital e!ployed
5inancial 2erspective Custo!er 2erspective Internal 0usiness 2erspective
Innovation and earning 2erspective 1$ $ 3$ &$ ($
Identify CS5
Shareholder 3alue Analysis +conomic 3alue Added G+3AC=
9otential 1rawbacks
with each other 8e.uires cultural change verload –
analysis< Ti!e and cost )o obvious relationship with shareholder wealth
'onclusion !easure perfor!ance but should be co!bined with
*he "alanced Scorecard
' ' '
"enefits onger%ter! !easures More difficult to !anipulate Measures deter!inants and
' '
Includes staeholders
!anaged to increase activities and processes
© Darren Sparkes, 2010 These notes are not intended to cover the whole of the E3 syllabus CIMA E3 – Enterprise Strategy
/ :paralysis by Measures conflict
non%financial !easures$ 5inancial !easures should not be used in isolation to
2ro!otes goal
