Вы находитесь на странице: 1из 31

ACCA P3 – PROFESSIONAL LEVEL

Business Analysis

SMART Revision notes

Prepared by Darren Sparkes

Email: darrensparkesnotes@sky.com

1
ACCA P3 - Business analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Contents Page no.
A message from Darren…………………………3
Paper 3 Examiners Approach…………….….... 4
Extracts from the Examiners report Dec 08…...5
Examination Technique……………….…..……..7
Background and examination format..…..........10
Syllabus Overview………………………...........11
Strategic Planning………………………...….....12
Mission and Objectives…………………………13
Business & Professional Ethics..………….…...14
Internal Analysis……………….……………..…15
External Analysis……………..………………....16
Strategic Options……………………….……….18
Method of Growth………………………............19
Portfolio Analysis…………………………….….20
Strategic Choice & Change Management…....21
Marketing………………………………………...22
Organisational Structure…………………….….23
International Market Place.…………….……....24
Business Process Change…….…..…………..25
Information Technology……..…….……..........26
Quality………………………………….……......27
Project Management………………………...…28
Role of Finance………………………………...29
Review and Control………………………..…..30
Strategy and People……………………………31

2
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Thank you for requesting a copy of my ‘SMART Revision Notes’.

The notes act as a learning and memory aid for the core models, theories and academic tools included in the syllabus.
However, in order to pass your examination the academic knowledge must be combined with extensive question practice
leading up to the examination.

Your examiner is not interested in the regurgitation of your knowledge but how you APPLY that knowledge to the
scenarios provided in order to answer the requirement set.

I suggest that you should practice as many exam standard questions as possible before the examination. Your practice
answers can be a mixture of answer plans and full written answers to get through as many questions as possible.

However, I would also suggest that it is essential for you to practice at least one full examination to time before entering
the exam room. It is only by replicating the time pressure in the exam that you can appreciate the importance of time
planning on the day.

Keep a look out for relevant articles appearing in your professional magazine or on the Institute’s website prior to the
examination, particularly if they are written by the examiner.

I would welcome feedback on the notes.

And remember….

‘Whether you believe you can or you can’t, you’re right.’ (Henry Ford)

Regards,

Darren Sparkes

3
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Approach Required
‘Differentiation is important to individuals seeking to pass a management and
strategy examination.

It is the ability to link strategic and financial analysis;

it is the confidence to use creative thinking in the way you answer a


particular problem…with alternative ways of viewing and solving a problem’
Ralph Bedrock (Paper 3 Assessor)

There is no absolutely correct answer – candidates who provided


coherent justification… awarded appropriate marks
Steve Skidmore (P3 Examiner)

4
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Extracts from the Examiners comments December 2008
In general:
• Performance showed an improvement on the previous sitting
• Answers much more within the context of scenarios than previous sittings
• Financial and quantitative data figured more prominently in answers
• The three optional questions were equally popular
• Q1b was biggest problem for candidates where many answers did not address the question
• Q1a (PESTEL) so popular it lead to some candidates over-answering it, leading to time problems
• As a result, answers to the final optional question often appeared rushed
• Vast majority of papers were well written and well presented
• Hand writing still remains a problem for some – it is no use having great ideas if no-one can read them

Section A - Question 1
 Q1a – there were plenty of clues in the case study, most of which featured in candidates answers, with the
exception of legal responsibilities
 Some candidates strayed onto internal issues (strengths and weaknesses) which were not given marks
 Q1b – The case study is rich in material to support the cultural web approach
• Asked to explain the three strategy lenses – Some candidates very well prepared – showed great
understanding and gained full marks - Others showed very little knowledge and only scored two or three
marks.
• Overall many candidates provided good answers to question 1
• Reference to the case study context was much better than on previous papers

5
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Section B
 Many more candidates than before supporting their argument with financial analysis
 Many who used financial data in part a failed to do so in part b
 The model answer suggests that MMI should not acquire the company – many candidates approved the
acquisition with justification through IT synergies – credit was given for this approach
 Candidates do not always have to agree with the examiner’s analysis to gain the marks on offer!
• Question combined the themes of project management, quality and the systems development life-cycle
• Part a relatively straight forward which candidates either knew or did not
• Consequently, some candidates scored very few marks whilst others gained full marks
• Part b answered relatively well – many candidates giving a wide range of options.
• Part c – often overlap with part b
• Many candidates did not clearly justify their answer
• In some cases not enough points made to get the marks on offer
• Part b – relatively difficult in the time-constrained pressurised environment of the examination
• Well answered – many scoring eight or more out of ten.
• This was very heartening!!!

6
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Therefore, to pass P3 learn from the examiners
comments:

• Analyse the requirements – verbs and keywords


• Planning – think before you write the answer
• Application, application, application
• Theoretical answers score few marks
• You can only apply what you know – learn it!
• Use and interpret the numbers (they are usually
easy calculations so it’s the interpretation that
gets the marks)
• Time management – the marks are your guide

7
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Examination Technique to give the Examiner what he wants

1. USE 15 MINUTES READING TIME WISELY


 Examine section B questions and choose the two on which you can MAXIMISE MARKS (not necessarily
those on your ‘favourite’ topics)
 If you have some time left then analyse Question 1 requirements and skim read the Q1 scenario to get a feel
for the relevant issues and identify where the information is for each part of the requirements.

2. WORK OUT TIMINGS


 Q1 = 90 minutes. Planning = 20-25 minutes, Writing answer = 65-70 minutes
 Section B Questions = 45 minutes each. Planning up to 10 minutes, Writing answer 35 minutes.
 Break down the time required for each part of the requirements using the marks as a guide. 1.8 minutes per
mark in total, 1.4 minutes per mark after planning.
 I suggest you start with Question 1 as you know you have 90 minutes to complete it.

START PLANNING IN YOUR ANSWER BOOK

3. ANALYSE THE REQUIREMENTS


 Identify the verb, or verbs, and make it stand out. The verb tells you what the examiner wants you to do, e.g.
evaluate, recommend, analyse, calculate. Be sure to identify all the verbs in the requirement just in case
there is more than one thing to do, e.g. analyse and discuss, evaluate and recommend.
 Identify key words. These tell you what to do it on or about, e.g. evaluate what?, recommend what?

4. ALLOCATE MARKS TO EACH VERB IN THE REQUIREMENT


 This can now determine how much to write for each verb in the requirement

5. IDENTIFY RELEVANT MODELS, TOOLS, THEORIES FROM YOUR KNOWLEDGE BANK

8
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
6. DEVELOP HEADINGS AND NUMBERS LAYOUT
 Put key elements of model in plan as headings, e.g. Porters 5 Forces analysis = 5 headings. Headings will
give your answer a framework and structure.
 Use requirements to develop headings to show marker that you are answering the question asked

7. DISTRIBUTE MARKS ACROSS HEADINGS


 This can now determine how much you write under each heading

8. ANALYSE THE SCENARIO


 Make brief notes in your plan under relevant headings from models/tools/theories and requirement
 Find relevant numbers for calculations

9. WRITE UP YOUR ANSWER TO MAXIMISE MARKS


 Layout calculations in a logical and easy to mark format – put them in an appendix in your answer plan
 Add value to calculations by asking ‘SO WHAT?’
 Use as many headings as possible to give the answer structure
 Short sentences in short paragraphs
 Work on 2 sentences for each mark – 1 sentence making your point/answering the question + 1 sentence for
application
 A third sentence giving some ‘SO WHAT?’ could get you another mark
 Leave a blank line between points/paragraphs to make your answer ‘easy on the eye’
 Be strict with timings. When time is up on a question, or part of a question, move on.
 Stick to answering the requirement – use your plan to keep you on track

REMEMBER THE THREE GOLDEN RULES – 1)APPLICATION 2) APPLICATION and 3)APPLICATION

9
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
 Assess the strategic position of the organisation
 Evaluate strategic choices available to an organisation
 Discuss how an organisation might go about its strategic implementation
 Model and redesign business processes and structures to implement and
Exercise professional support the organisation’s strategy taking account of customer and other
judgement major stakeholder requirements
Select relevant  Integrate appropriate information technology solutions to support the
data organisation’s strategy
 Apply appropriate quality initiatives to implement and support the
organisation’s strategy
 Advise on the principles of project management to enable the implementation
Determine appropriate of aspects of the organisation’s strategy with the twin objectives of managing
techniques risk and ensuring benefits realisation
 Analyse and evaluate the effectiveness of a company’s strategy and the
Candidate Requirements financial consequences of implementing strategic decisions
 The role of leadership and people management in formulating and
implementing business strategy
Apply knowledge
and skills

Paper Background
Objectives of the
paper

Format of paper

Section A 50%
 Compulsory
 Major case study
 Usually four parts
 Case will include numbers

Section B 50%
 Choice of two from three
 Each question likely to include
two parts
 Will include short scenario
 May include numbers
10
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Governance and Corporate Social Responsibility

Cultural Web
Syllabus Overview SMART

Mission and objectives


Purpose, Strategy, Policies, Values
Mendelow's power-interest matrix

PEST Stakeholder Analysis


Resource audit

Porters 5 Forces External Analysis Internal Analysis


Core competences

Porters Diamond Corporate


Product Life Cycle Appraisal Porters Value Chain
Benchmarking
CSF’S
SWOT
Porter’s Generic
Strategies BCG, PSPM, DPM, APD,
Portfolio analysis Mkt attract/SBU strength

The Strategy Clock Strategic Withdraw Ansoff’s product-


Options market matrix
TOWS Matrix
Risk
Acquisition vs organic vs joint development

Suitability, Acceptability, Feasibility Strategic Choice Cost/Benefit

Change Management
International
Trading HRM IT Project Management
Structure Implementation

Sources of Finance Quality


Marketing Software Quality
Review and Control
Business Process Change
Not for Profit Organisations

Software Solutions Investment Appraisal


Non-financial Measures
Financial Measures
BSC
11
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Position
Integrates activities
Competitive advantage Analysis
Corporate =
Strategic level
Relationship with environment
Whole
organisation Business = Tactical
level
Inter-
All stakeholders Functional = Operational level dependant
Long-term

Strategy Choice Action


‘… a course of action, including
the specification of resources, to
Freewheeling Opportunism achieve a specific objective
Johnson,
 Market Driven – reactive Scholes & Strategic Design Experience
 Hands on management
Whittington Lenses
 Exploit complacent players
 Relies on leaders vision
 No formula for success Ideas
Alternative
 Take advantage of market
opportunities Strategic
Planning
× Stock market problems
Purpose

Incrementalism (Lindblom)
 Building block approach
 Build strategy through incremental steps not radical
 Respond and fit to environment
Rational ‘Top Down’ Approach  Utilise scarce resources
shifts
 Accepts uncertainty of future  Provide direction
Mission & Objectives
 Builds commitment  Ensure consistent objectives
× May be too slow  Monitor progress
× Ideas often compromised Corporate appraisal

Strategic options Advantages Disadvantages


Emergent Strategy - ‘Bottom up’ (Mintzberg)  Identification of × Expensive (time
strategic issues and money)
Intended Deliberate Realised Strategic choice  Consistency of goals × Bureaucracy
Strategy Strategy Strategy  Improve × Stifles creativity
performance/survival × Less relevant in
Implementation  Pro-active a crisis
Unrealised  Recognises
Strategy Emergent
environment
strategy Review  Optimum use of
E.G. Honda’s entry into the USA, 3M resources
12
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Purpose
Advantages
 Resolve stakeholder conflict Criticisms
Strategy  Set direction  Meaningless terms used S Specific
 Help formulate strategy  Written retrospectively? M Measurable
 Communicates values to  Not communicated to
employees A Attainable
Policies and employees
 Marketing to customers  Ignored by managers R Relevant
standards
T Timebound

Mission
Values ‘… the most generalised type
of objective which can be Objectives
thought of as its raison d’etre.’

Mission Statement
Published version of the
Culture
‘The way we do things around here’
Mission
Mission and
Stakeholders Objectives Cultural Web
– cultural paradigm
 Routines & Rituals
 Stories & Myths
 Symbols
 Power structure
Mendelow’s Power – Interest Matrix Critical Success  Organisation structure
Interest Factors  Control systems
Low High
"The limited number of areas
in which results, if they are
Not for Profit Organisations
A B satisfactory, will ensure
Low Minimal Effort Keep Informed successful competitive
Features of objective setting
performance for the
Give Direction Education / organization.  Multiple and contradictory objectives
Communication  Participation in objective setting
They are the few key areas  Providers of funding different to beneficiaries of service
Power  Priorities may change frequently
where things must go right for
the business to flourish.  Value for money a requirement not an objective
 Increased role of personal objectives
C D
If results in these areas are
Keep Satisfied Key Players
High not adequate, the
organization's efforts for the Efficiency Economy
Intervention Participation – Keep
Close period will be less than
desired."
Effectiveness

13
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Equal opportunities
Corporate Governance C Competence
 Divorce of ownership and control Consumer health and safety
O Objectivity
 Separate roles of CEO and Chairperson Bribes
 Audit Committee / Remuneration Committee P Professional due care
Safety in the workplace
 Directors re-election at least every 3 years P Politeness Issues
 Non-exec Directors I Integrity
Sustainability
Fair Trade
o Independent T Technical Standards
o Role on audit / remuneration Honesty in Advertising
committees Environment
o Corporate conscience
o Mentors to inexperienced execs
o Strategic value through expertise
Professional Ethics Corporate Social
‘Self control, not self interest’ Responsibility
Johnson, Scholes & Whittington – Ethical Stances

Short-term Long-term Multiple Shaper of Views on Business Ethics


shareholder shareholder stakeholder society
interest interest obligation
Business and
Professional ‘The business of
business is business’

Innovation &
Reputation
and branding Small company
advantage in the
Ethics (Shareholder View -
Friedman)
ideas from supply chain
close links to Management to concentrate on
community
Avoid future Government policy Long-term Self-Interest / maximising profits and
Competitive shareholder wealth.
Stakeholder view
advantage Firms should acknowledge their social
Businesses have no duty to
Recruitment responsibilities.
Benefits to Business society.

Societal benefits will arise as a


Reduced risk result of commercial success.
Attract ethical No universal acceptance of
investor funds morals & ethics
Potential problems
Conflict of CSR with shareholder wealth
 Reduced revenues
Competitive disadvantage Disclosure of business information  Increased costs
 Diverts funds from shareholders
 Distracts management
Deciding what is ethical Bad publicity from monitoring and enforcement
14
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
 Manpower
 Management Strategic
 Money Assets
 Make-up
 Machinery  Valuable
Same as Different to  Methods Architecture
 Rare
competitor / easy competitor /  Material  Can’t be copied
to copy difficult to copy  Markets  Not substitutable
 Management Info  Give access to wide Reputation
Resources Basic Unique range of markets
9 M’s

Competences Threshold Core Innovative


Core Competences Ability
‘…the activities or
processes that critically
underpin competitive
Strategic Capability advantage.’
– Resource audit

Knowledge Management Porter’s Value Chain

Internal Analysis …identify activities within the firm which


add value to customers and those that
Tacit do not
(Strengths & Weaknesses) Primary Activities
 Inbound Logistics
 Uncover Knowledge  Operations
 Discover Knowledge  Outbound logistics
Benchmarking  Marketing and sales
 Capture Knowledge
 Share Knowledge  Service
 Distribute Knowledge 1. Select processes to be
 Lever Knowledge benchmark Support/secondary activities
 Maintain Knowledge 2. Assign responsibilities
Value Networks  Procurement
3. Choose type of benchmarking  HRM
4. Choose partner  Technology development
5. Interaction  Firm infrastructure
Explicit 6. Collect data
7. Implement changes Uses
Knowledge Workers  Streamline linkages
 Roving role  Eliminate non-value added activities
 Temporary roles
Competitive Internal  Business Process Re-engineering
 Benchmark key processes
 Selection based on skill & competences
 Input into own development Process/Activity
 Separate & relevant incentive schemes
 Remote locations
BEST IN PRACTICE
 Flexible working
15
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Technological
 Internet Ecological
Social & Demographic  Government  Globalisation
Economic  Income distribution spending on RnD  Pollution
 Globalisation  Education levels  Communications  Energy usage
 Economic cycle  Population size  Speed/rate of  Disposal of waste
 Interest rates  Age profile change  Sustainability of
 Inflation  Lifestyle changes  Processes and resources
 Employment levels  Fashions and tastes methods of
 Exchange rates  Consumerism production

Political PESTEL analysis Legal


 Taxation (External, Environmental analysis)  Health And Safety
 Government policy  Employment
 Foreign trade  Consumer protection
regulations  Monopoly legislation


Protectionism
Globalisation External Analysis  Industry watch dogs

(Opportunities and Threats)

Porter’s 5 Forces
(Competitive,
Threat from New Market Entrants Threat from Substitute
Barriers to Entry: Industry analysis)
Technologies
 Economies of Scale  Can same features be produced
 Other cost advantages cheaper?
 Capital requirements  Can new features be provided for same
 Access to distribution channels cost?
 Patents, Government policy Competitive Rivalry  Level of danger may be influenced by
 Reaction of existing firms Greatest where: barriers to entry and/or power of buyers
 Competitors of similar size
 Slow market growth rate
 High fixed cost industry
Power of Buyers  Lack of differentiation Power of Suppliers
Power greatest where: Power greatest where:
 Few buyers  Few suppliers
 High number of suppliers available  Few substitutes
 Cost is high proportion of buyers total cost  High switching costs
 Low switching costs External Analysis  Threat from forward integration
 Buyers have low profits (Opportunities and Threats)  Customer not significant to supplier
 Buyers have full information  Supplier has differentiated product
 Little product differentiation

16
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Problems:
 No common shape
 Unpredictable
 Self-fulfilling Firm structure, strategy, rivalry
prophecy
 Product orientated –
ignores market
Porter’s
Factor Diamond Demand
conditions ‘National conditions
Product Life-cycle Competitive
Stages: Advantage’
 Introduction: high risk, little competition, low volume, high advertising = losses + negative cash
 Growth: increased competition, growing volumes, EOS, high advertising = losses to profits + negative Related and supporting industries
to positive cash
 Maturity: steady repeat sales, high volumes, EOS, low level advertising = profits + positive cash
 Decline: falling volumes, falling prices = profits to losses + positive to negative cash, divest

Balance the portfolio

External Analysis
(Opportunities and Threats)
Corporate Appraisal
Internal + External Analysis
= Corporate Appraisal = Position
Appraisal= SWOT Analysis
Strengths Weaknesses
INTERNAL Internal Analysis
Factors specific to the organisation
EXTERNAL
External Analysis Opportunities Threats
Factors open to all in the industry

17
ACCA P3 – Business Analysis TOWS
These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
To beat the five
High Hybrid Differentiation Focused Porters Five forces
Differentiation Forces
PESTEL
Porter’s Generic Strategies
Benefit
Strategically develop
Low Price Strategic Fail
Clock
organisation in line  Overall Cost Leadership
with environment (better margin, potential price cuts, entry
barrier, reduce supplier power)
 Differentiation
Low No Frills Fail Fail Market Facing (Premium price, better margin, barrier,
reduce buyer power)
 Focus (Niche)
Low Price High Positioning view (Cost or Differentiation, focus on market
needs, develop core competencies)

Method of Growth? (See next page) Resource Based View What Basis?

Beware of ‘Stuck in the Middle’


Limitations


Definition of market
Ignores factors such as competitors Strategic Options Uses
 Suggests strategies in isolation  Analyse rivals
 Suggest own strategy
What Direction?  SBU level strategy

Horizontal diversification – competitive products, Limitations


complementary products, by-products
Do nothing
/ Withdraw  Unclear definition of industry
 Defines advantage in terms of position not
resources
Vertical Integration Ansoff’s Matrix
Advantages Products, existing and new (PEN)  Lack of empirical evidence
Disadvantages
 Economies of combined
Markets, existing and new (MEN)  Ignores middle ground
ops  Increased operational
gearing  Restricts firm to position in present
 Economies of control and industry
 Reduced flexibility to
coordination
change partners  Market Penetration (cost reductions,  Requires perfect information
 Avoiding the market price reductions, advertising, minor product
 Tap into technology  Capital investment needs
modifications)
Conglomerates  Product Development (exploit Risks
Advantages Disadvantages existing customers, RnD, buy-in and badge,  Product
 Flexibility  No additional benefit to JV’s, Licensing)
 Quick growth  Market
shareholders through  Market Development (new markets
 Access to capital synergies such as foreign markets, new segments such  Operations and
 Portfolio effect  No operating advantages as adult to child or industrial to consumer) management
 Avoidance of anti-
monopoly legislation
 Diversification (related = vertical  Financial
integration or unrelated = conglomerate 18
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Advantages Disadvantages Advantages Disadvantages
 Quick  Purchase premium  No premium for assets  Slow
 Lower risk  Integration issues  People development  Increases number of
 Overcomes barriers to entry o Systems  Staged investment competitors
 Same number of competitors o People  Established culture  Overcoming barriers to
 Can block a competitor o Culture  Introduction of new entry
 Possible synergies  Synergies do not technology and systems  No opportunity for
 Possible under-valuation of materialise easier synergies
target  Reputation of target  Possibility of grants  Higher risk

Acquisition Organic
Acquisition versus
Porter’s 3 Tests for Growth
Organic growth
Acquisitions Divestment
 The attractiveness test Possible synergies  Quick
 The cost of entry test  Market  Higher price due to
 The better off test  Economies of scale strategic value
 Shared activities
 Surplus assets


Vertical integration
Skills transfer
Method of Withdrawal 
Demerger
Gives shareholders


Dilution of risk
Reduced power of Growth? 
an exit route
Management can
focus on core areas
buyers/suppliers
 Tax advantages  Two companies can
develop separate
identities
Joint Venture
Separate business entity
with equity form two or
more businesses
Joint Development
Methods Management Buyout
(MBO)
Strategic Alliance  Quick growth Consider
 Access to competences  On-going involvement of
Long-term agreement to Licensing
share knowledge,  Less financial risk/outlay holding company
Giving the right to
competences, technology  Overcome product, market,  Why is holding company
exploit brand, recipe,
for mutual benefit operational risk selling?
process etc for a
share of the profits × May lose competences  Loss of Holding company
× Train future competitors help, e.g. technical support,
Franchising × Brand infection finance services
Giving the right to exploit a business × Operational and contractual  Quality of management team
method/model in return for a capital sum disputes  Price
plus a share of the profits. Franchisor × Ownership of assets  Personal risk, e.g. home at
usually provides support e.g. marketing, × Sharing of profits risk?
training, technical
19
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Problems:
 Definition of axes
 Definition of market
Directional Policy Matrix Business Sector
 No account of complimentary goods Prospects
 Assumes high market share = advantage
Unattractive Average Attractive
BCG Matrix
Phased
Relative market Withdrawal withdrawal Double or quit
High share Low Weak
Proceed with
STAR PROBLEM CHILD care
High Build then Hold Build or Divest Proceed with
Losses to profits, negative Losses, negative cash Company’s Phased care Try harder
Market to positive cash Competitive Avge withdrawal
growth capabilities Growth
CASH COW DOG
Hold then Harvest Harvest then Divest Growth
Low Profits and positive cash Profits to losses, positive Cash Leader
to negative cash Strong
Generation
Leader

Public Sector Portfolio Matrix


High
Value for money
Low Portfolio
High Analysis
Public Public sector Star Political hot box
need &
Funding Market Attractiveness/SBU Strength matrix
effective Business strength/Competitive position
ness Golden Fleece Back drawer issues –
discontinue
Low Strong Average Weak

Enhance Lead Hold leadership Maintain


Opportunities to add value High Diversify Leverage leadership
Low High Re-invest strengths In attractive
High Use EOS segments
Ballast Heartland
Avoid ‘me too’ Segment Harvest
Edge of Long-term Differentiate between growth Price-up
Heartland Industry Med
Re-invest and harvest Cut costs
attractiveness Line pruning
Ability to
Add value Segment focus Harvest through
Low Seek sale of business Divest/Liquidate
advantage
Alien Territory Value trap
Low
20
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Ashridge Portfolio Display – Corporate Parents
Acceptability
Suitability
Is the proposed strategy suitable for the
Will the proposed strategy meet Feasibility
the objectives of the organisation Has the organisation got, or can it get,
present situation and circumstances of the and, therefore, be acceptable to
organisation? the necessary resources to carry out the
the major stakeholders? strategy?
i.e. Is it suitable given the SWOT
analysis?

Strategic
Risk Choice Cost/Benefit
`

Strategic Drift

Strategy Environment
Job Factors
Lewin’s Force
Field Analysis
Types of Change Personal
Extent of change Factors
Transformation Realignment
Driving Forces Restraining Forces
Social
Incremental Evolution Adaptation Factors
Speed Change
of Management Strengthen Weaken
Organisational
Change Factors
Revolution Reconstruction
Big Bang
Unfreeze Change Refreeze
Supporting
Time Power Mechanisms

Change  Participation
Kaleidoscope  Education & communication
Scope Readiness  Facilitation & support
 Negotiation
Preservation Capacity  Manipulation
Diversity Capability
 Coercion
21
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Coordinated marketing
Implementation Issues
Customer needs
Profitability Analyse environment
Marketing and competitors – PEST
Target Markets Strategy / Porter’s five forces
Kotler’s Four
Pillars
Market Segmentation and
Marketing Target Market
A Awareness …identify, anticipate and satisfy …division of the market into
homogenous groups of potential
I Interest customer requirements customers who may be treated
D Desire similarly for marketing purposes
A Action Product Sales
Production  Geographic
 Demographic
Communications Mix: o Age
Physical Advertising Firm’s orientation o Gender
Evidence Sales promotion o Income
Public relations o Family life-cycle
Personal selling  Social class
Processes Marketing 

Psychological
Education
 Hobbies
People
Promotion  Distribution
channels Marketing Research Undifferentiated
 Market coverage …systematic gathering,
Place  Outlet locations recording and analysing of data
7 P’s about problems relating to the
Differentiated
 Warehousing
marketing of goods and services
Marketing Mix – 4P’s Concentrated
…set of controllable
marketing variables used to Field Research Desk research
Price produce desired response in Product qualities (Primary data) (secondary data)
the target market Features, options,
range, warranty, Interviews, focus groups, External
branding, packaging questionnaires, Internal CSO reports,
 Price levels experiments, Test Accounts, Sales Business
 Discounts monitors, Trade
Product marketing reports, Customer
journals,
 Allowances complaints
Product Life Cycle newspapers
 Payment terms
 Delivery options
Product
to meet Product
needs mix

22
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Implementation Issues
Divisional
 Multiple products &
Entrepreneurial markets

Functional Matrix
Fast decisions  Autonomy for SBU
 Responsive to market  Economies of scale managers  Breakdown of silo’s
 Congruence  Specialists with some autonomy  Training of SBU managers  Shared knowledge
× No career structure  Career structures  Frees up senior managers  Skill development
× No autonomy  Frees up entrepreneur  Focus on specific  Innovation and creativity
× Single product & market × Slow decisions (bureaucratic) products/markets × Dual command
× Functional silo’s × Loss of congruence? × Dilution of functional
× Few products & markets × Duplication of effort authority
× Time consuming meetings
× Isolation of SBU
Centralised vs Decentralised managers

Virtual
S Strategy Types of Structure Network Organisation
Organisation
T Technology
O Objectives Outsourcing
P People  Reduced cost

T Tasks
Planning and control Organisational External


Skill shortages
Flexibility
Relationships  Focus on core business
I
E
Ideology
Environment  Direct supervision
Structure ×
×
Loss of control
Supplier dependency
× Confidentiality
S Size  Planning processes × Loss of in-house skills
 Performance Mintzberg’s
management Structural
Decentralisation  Internal market Managing  Simple structure =
 Culture Business Strategic Apex entrepreneurial
Advantages:  Self-control Units Techno- Support
 Machine bureaucracy
 Frees senior = functional
structure Middle Line Staff
management  Professional
 Better local decisions bureaucracy =
 Better motivation decentralised
Operating core
 Flexibility Strategic Synergy
 Training/career path Planning co.s Manager
 Divisional form
 Adhocracy = matrix

Disadvantages: Financial Portfolio


 Loss of control Control co.s Manager
 Loss of congruence
 Duplication of effort
 Extra costs of control Strategic Parental
Control co.s Developer
23
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Country Political
specific costs Influences Acquire
resources Political
Legal
Diversify
sources of Economic
Economies Cost advantages
of scale Expand sales sales &
supply
Social/cultural
Convergence of Markets Reasons for growth in
international business Objectives of General
international risks Technological

Trend to Global growth


products
Competitive
Forces

Exporting


Low capital outlay
Low risk
The International

×
Can learn about market
May not meet customer needs
Market Place
× Perceived lack of commitment
× High distribution costs
Methods of International Expansion
Joint Venture &
Franchising
 Access to local resources Global Multi-Domestic Hybrid
 Reduced national sentiment
 Shared capital input
 Perceives foreign markets as  See overseas market as distinctive  Standardise wherever possible,
 Access to competences and similar to domestic market  Customised products and e.g. RnD, Branding
knowledge
 Products & marketing mix marketing mix  Market convergence may allow
× Shared profits
constant  Increased overseas sales volumes standardised product
× Lose competences
 Standardisation to save time and BUT  BUT
× Train competitor
money  Fewer EOS giving higher costs, so  Demand-driven
× Operational disputes
 Supply-driven policy volumes not turned into profits  Customised marketing mix
where necessary = GLOCAL
Foreign Direct Investment
 Closer to market
 Retain profits
 More control STAFFING
 Reduced operational conflicts
× High financial risk  Overcomes lack of host skills,  Multi-cultural view, inexpensive  Efficient use of HR, builds strong
× Staffing decision unified culture, Transfers × Limits career mobility, isolates HQ culture and management
× Integration difficulties competencies from subsidiaries network
× Resentment by host, single × Subject to National immigration
cultural view policies, expensive

24
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Transition
Implementation Issues
Strategic Development
Low Importance High Process Re-engineering

Complex but not core Complex & dynamic Redesign


High competence High strategic value for
- Outsource advantage Process Redesign
Process - Process Improvement
Complexity Analysing
Dynamics Static / commodity Static but valuable
- Outsource/Automate - automate for efficiency Process Improvement
Low - Minimum resources Planning Gaps &
disconnects –
Failures in
Improving Processes communication
Harmon’s
Process-Strategy
Matrix Simplification – Value -added
Eliminate duplicated analysis –

Business activities Eliminate non-value


added activities

Process Change Process


Measures Feedback control systems

 Interviews Software Solutions –


 Questionnaires TARA
Systems Development Life
 Observation
 Documenting tools Cycle
 Workshops
  Technical Action Review Targets
Protocol Analysis Feasibility
 Prototyping  Operational
 Economic
Analysis  Social
 Staff training
 Installation Weighting and Scoring Input-Process-Output
 File conversion
Actuals
Design  Quality of Support
 Testing
 User Friendliness
 Ability to meet needs
Generic Solutions
Implementation  Compatibility/Integration
 Speed
 Costs
 Cost
 Supplier factors
 Risk
 Software Review  Support
 System × Unique needs
 Project × Supplier power
× Compatibility/Integration 25
ACCA P3 – Business Analysis These notes are not intended to cover
× No theadvantage
whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Implementation Issues Barriers
McFarlan's Strategic Grid
 Technophobia
 Security
Strategic impact of future systems  Set-up costs
Value chain  Running costs
Low High  Limited
opportunities E-business
Support – Turnaround –  Limited resource
No strategic value Expect info system Generic strategies  Disinterested
L to become customers
o strategically Integrated
w important in the E-commerce
Strategic future
impact of Porters Five Forces
current E-commerce
systems
Factory – Strategic –
H See strategic value Depend on info
i of info system now system for
g but expect value to competitive Strategic
h decrease in the advantage Context Web-
future Presence

Information
Customer
Relationship Technology Push vs Pull
Management
Customer Life
Cycle
Downstream
Supply Chain E-sourcing

6 I’s (Customers) Management


 Integration E-procurement
Selection E-purchasing
 Industry structure
 Independent E-marketing Upstream
locations  Switching costs (Suppliers) E-payment
Acquisition  Individualisation  Disintermediation
 Intelligence  Re-intermediation
 Interactivity E-branding  Updates Risks
 Communication
Retention  User community
 Technology
-Recency 7P’s  Tracking
preferences  Organisational
-Frequency  4P’s
 Customisation  No cost savings
-Monetary  People
Extension value  Processes
 Physical evidence
26
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Internal Implementation Issues Quality
Certification
External Failure
Commitment Communication
Appraisal Quality
Costs Standards
(PAF) Competence
Preventative
6 C’s
Customers
Proactive Continuous
improvement
Quality Assurance

Reactive

Quality Control TQM


‘Fitness for ‘Get it right
99.99966%
Use’ first time’
Level 1
Performed process Capability
Maturity Quality
Model
Level 2 Six
Integration
Managed process
(CMMI) Sigma
Quality
Level 3 Software
Defined process
Key 3.4 defects in
Requirements 1 million
Level 4
Quantitatively Mangd Problem Solving
Process
(DMAIC) Team Roles
Level 5 6 C’s
Optimising process
The ‘V’’ Model
Define 6 Sigma
Test Plans Champion Master Black belt
Measure
Requirement spec A Acceptance testing Implementation
Leader
Functional spec S System testing Analyse
Black Belt
System Design I Integration testing
Improve
Unit Design T Unit testing Green Belt
Control
Coding
27
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Implementation Issues Project Evaluation & Review Technique (PERT)
 Purpose
 Technological  Scope
 Operational  Deliverables
 Economic  Tolerate / Accept Gantt Chart Critical
 Costs Path
 Social  Treat / Reduce
 Time Analysis
 Transfer / Insure
 Objectives
 Terminate / Avoid
Resources  Stakeholders
Project  Org structure
Risk Initiation Work
Document Breakdown
Quality  Time
SWOT Structure
 Quality
Project
Time Feasibility  Resources
Appraisal Statements of
 Evaluation
 Dissemination Work
 Sponsor  Exit
 Manager Stakeholders Initiation  Sustainability
 Team
Product
Breakdown
Tie up loose Project Planning
Structure

Compare PID
ends
Management Cost
to Outcome Ensure
Completed
(IPECC) Breakdown
Structure

Formally terminate Execution


project
Completion Put plan into action

Final report & audit Monitor


And Project Leader
Control
Evaluate performance
Smooth TARA
handover
 Motivation
Corrective
 Planning
Action Frequency  Co-ordination
Project
Adjust Plan Initiation  Communication
Document  Problem solving
 Complexity  Change Mgt
Fast Track  Risk  Budgeting
 Cost  Meetings
Crashing
Motivation
Increase
resource 28
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
 Economy
 Efficiency
 Effectiveness  Cost
 Management  Gearing
 R&D  Control
Raise  Support Services
Spend funds maximum  Security
Competitive effectively  Cash flow
Strategy funds
 Availability
 Exit routes  Retained earnings
Core Costs  Ordinary shares
Objectives
Investment Financial Considerations
Strategy Strategy
Equity
Not for Profit
Organisations Financing
Decisions Alternatives Pref shares
Strategy

Debt
Grants
ROCE
Payback
Role of Finance 

Debentures
Loans
Traditional  HP/Leasing
Methods Investment  Overdraft
Appraisal  Trade Creditors
Ratios

Discounted cash  ROCE


flow techniques  Asset turnover  Gross/Net Margin
Profitability
 ROCE  ROE
 Receivables
NPV  Payables
IRR  Inventory Efficiency
 Revenue/employee
 Current ratio
Liquidity
 Quick ratio
Inter-firm comparison Limitations
Limitations  Only comparative Gearing
 Accounting policies  Inflation
 Bias by large/small firms  Definitions  Dividend cover
 Unrepresentative avge  Accounting policies Investor ratios  Interest cover
 Industry classifications  Availability of info  EPS
 Financial periods  Historical  PE ratio

29
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Problem:
no account taken of invested Return On Residual
capital used to generate Investment Income (RI)
profits
Examples (ROI)
 Gross margin
 Net margin PBIT
 Cost % sales PBIT X 100 = % (CE x imputed interest rate)
 Profit CE RI
Profit Related Measures

Relative Measure % Absolute Measure £’s


Benefits
 Longer-term
measures
 More difficult to
manipulate Review and Control Problems:
 Sub-optimal
Problems:
 Absolute measure
 Measures investment poor for
determinants and decisions performance
results  Deplete capital comparisons
 Promotes goal assets too early
congruence The Balanced Scorecard
 Includes
stakeholders
Financial Perspective
Joint issues when used in isolation
 Backwards looking measures
Potential  Short-termist decisions
Drawbacks Customer Internal Business  Open to easy manipulation of discretionary costs and
× Measures conflict Perspective Perspective capital employed
with each other
× Requires cultural
change Learning & Growth
Perspective
× Overload – Conclusion
‘paralysis by
analysis’
Financial measures should not be used in
× Time and cost isolation to measure performance but should
× No obvious
1. Identify CSF’s be combined with non-financial measures.
relationship with
2. Identify competences required for CSF’s
shareholder wealth
3. Develop KPI’s for competences
4. Measure competence
5. Take action – continuous improvement

30
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Implementation Issues  Exploitative autocratic
Current & future
 Benevolent authoritative
HR needs
 Participative
 Democratic
 Trait
HR Gap Labour supply  Style
 Contingency  Charismatic  Communication
 Situational  Transformational  Teamwork
 Transactional  Delegation
Current HR  Motivation
position  Trust
Classical
Likert's
Management  Performance
HR Planning Styles  Potential
Strategic and
Leadership  Training
coherent
Recruitment
approach
Purpose
Learning
organisation
Assessment

Workplace
Strategy and & Appraisal

Knowledge
Management
Learning People Barriers

 Confrontation
Competency Performance
 Judgement
Job design Measurement
Frameworks Reward  Chat
Management  Bureaucracy
 Event
TARA Motivation  Unfinished
 Scientific Mgt business
 Job enrichment  Categories
 Japanese Mgt  Levels
 BPR  Design Issues
 Analyse behaviour  Employee ranking
 Teamwork  Techniques
 Recruitment  Rating scales
 Succession  Strategic alignment
 Training needs  Checklists
 Manage planning  Critical incident method
performance  Free reporting
 Benchmarking Considerations:  Performance contract
 Fair & consistent  BARS
 Motivation  Appraisal interviews
 Reward performance
 Recognise job factors
 Control salary costs
31
ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009