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ACCA Passcards
Paper P3
Business Analysis
Passcards for exams from
1 September 2015 31 August 2016
ACP3PC15.indd 1
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Professional Paper P3
Business Analysis
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Preface
Contents
Welcome to BPP Learning Medias ACCA Passcards for Professional Paper 3 Business Analysis.
They focus on your exam and save you time.
They incorporate diagrams to kick start your memory.
They follow the overall structure of BPP Learning Medias Study Texts, but BPP Learning Medias ACCA
Passcards are not just a condensed book. Each card has been separately designed for clear presentation.
Topics are self contained and can be g rasped visually.
ACCA Passcards are still just the right size for pockets, briefcases and bags.
Run through the Passcards as often as you can during your final revision period. The day before the exam, try
to go through the Passcards again! You will then be well on your way to passing your exams.
Good luck!
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Preface
Page
Contents
Page
Business strategy
12
E-marketing
135
Environmental issues
13
Project management
151
17
14
Finance
167
Strategic capability
27
15
185
16
Strategic development
191
41
Strategic choices
53
73
89
95
10
Improving processes
105
11
E-business
111
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1: Business strategy
Topic List
What is strategy?
Levels of strategy in an organisation
Elements of strategic management
The importance of context
The strategy lenses
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What is
strategy?
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Levels of strategy
in an organisation
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Elements of
strategic management
The importance
of context
The strategy
lenses
STRATEGY: a course of action over the long term, including identifying the competences and resources
required, to achieve a specific objective and fulfil stakeholder expectations.
Strategic decisions
Complex
Scope of activities
Subject to uncertainty
Competitive advantage
Exploiting resources/competences
Expectations of key stakeholders
Lead to change
GOALS:
General aim
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What is
strategy?
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Levels of strategy
in an organisation
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Elements of
strategic management
The importance
of context
The strategy
lenses
Corporate
Overall purpose and scope, and how value will be added. Prioritisation and management
of stakeholder expectations. Allocation of corporate resources.
Business
How to compete successfully in par ticular markets. Combines with corporate strategy in
a small organisation. In larger organisations, strategies for strategic business units must
be co-ordinated with corporate strategy, and with each other.
Operational
How the component parts of the organisation deliver the higher-level objectives. Largely
created and delivered by business functions such as marketing, production, finance,
human resources management, and information systems.
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1: Business strategy
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What is
strategy?
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Elements of
strategic management
Levels of strategy
in an organisation
The importance
of context
The strategy
lenses
Strategic choices
How to achieve
competitive advantage
Scope
Direction of development
Method of development
Enabling
Choice
Management of resources
Change
Position
Processes
Relationships
Change management
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What is
strategy?
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Levels of strategy
in an organisation
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Elements of
strategic management
The importance
of context
The strategy
lenses
Limited product range, markets and resources (especially financial), but significant
pressure from competitors
Multinational
Diverse products, processes and markets, with significant resources and multiple
operations
Intangible products
Product information, after-sales service, brand values, staff performance (for both
manufacturing and service companies)
Exam focus
Context is very important in the P3 exam. Question scenarios will provide context for the question requirements.
You must always consider the context of the question and make your answer directly relevant to it.
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1: Business strategy
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What is
strategy?
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Levels of strategy
in an organisation
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Elements of
strategic management
The importance
of context
The strategy
lenses
Johnson, Scholes & Whittington suggest that strategy, and the development of strategic thinking, can be
examined through three lenses.
Strategy as design
Strategy as experience
Strategy as ideas
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2: Environmental issues
Topic List
The organisation in its environment
The macro environment
The competitive advantage of nations
The environment in the future
Competitive forces
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The organisation
in its environment
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The macro
environment
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The competitive
advantage of nations
The environment
in the future
Competitive
forces
All organisations are open systems they have a variety of interchanges with the environment (inputs and
outputs).
The environment can be divided into three
concentric layers:
Environmental element
Basis of analysis
Macro-environment
PESTEL
Key drivers of change
Scenarios
Industry or sector
Macro-environment
Industry or sector
The organisation
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The organisation
in its environment
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The macro
environment
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The competitive
advantage of nations
The environment
in the future
Competitive
forces
The PESTEL framework is based upon six segments: political, economic, socio-cultural, technological, environmental
protection and legal.
Political/legal factors
Economic factors
Contracts
Employment
Health and safety Tax
Other aspects are regulated by supervisory bodies. The
EU is a significant influence.
Political change and political
risks affects the planning
activities of many businesses
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Inflation rates
Employment rates
Interest rates
Tax levels
The business cycle
Growth/fall of GDP
Savings levels
Exchange rates
International trade
Capital markets
Government policy
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The organisation
in its environment
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The macro
environment
Social factors
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The competitive
advantage of nations
The environment
in the future
Competitive
forces
Technological factors
Many strategies are based on exploiting technological change
(eg Internet and e-commerce). Others are defences against
such change (eg emphasising service or quality when a
competitor introduces a major technical development).
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Environmental protection
Pressure coming from many quarters:
Green pressure groups
Employees
Corporate Social Responsibility
Legislation
Environmental risk screening
Sustainability of operations
2: Environmental issues
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The organisation
in its environment
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The macro
environment
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The competitive
advantage of nations
The environment
in the future
Competitive
forces
Four aspects of globalisation are key drivers of change in the macro environment:
Market globalisation
Cost globalisation
Government policy
Global competition
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The organisation
in its environment
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The macro
environment
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The competitive
advantage of nations
The environment
in the future
Competitive
forces
Porter identifies four determinants of national competitive advantage on an industry basis. He refers to them as
the 'diamond'.
Factor conditions
Endowments of inputs to production
Basic: natural resources, climate, labour unsustainable for competitive advantage
Advanced: infrastructure, technical education, hightech industries - promote competitive advantage
Demand conditions
Buyers in the home market set fundamental
parameters such as market segments, degree
of sophistication, rate of growth and rate of
innovation. Early saturation of the home
market will encourage a firm to export.
2: Environmental issues
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The organisation
in its environment
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The macro
environment
Forecasting
Sound knowledge of the environment requires some
element of forecasting. The past is not necessarily
a good guide to the future, but in simple, static
conditions time series analysis and regression
analysis can be used.
Economic forecasting uses leading indicators to
assess future economic conditions.
A scenario is a detailed and consistent view of how
the environment might develop in the future.
Macro scenarios consider possible futures overall.
Industry scenarios look in more detail at a single
industry.
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The competitive
advantage of nations
The environment
in the future
Competitive
forces
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The organisation
in its environment
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The macro
environment
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The competitive
advantage of nations
Competitive
forces
The environment
in the future
Porter says that five forces together determine the long-term profit potential of an industry
2
1 Bargaining power of
suppliers
Depends on:
Number of suppliers
Threats to suppliers'
industry
Number of customers
in the industry
3 Bargaining power of
customers
Depends on:
Volume bought
Scope for substitution
Switching costs
Purchasing skills
Importance of quality
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Notes
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Topic List
Competition dynamics
The marketing mix
Customers and segmentation
Understanding the customer
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Competition
dynamics
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The marketing
mix
Customers and
segmentation
Understanding
the customer
Cycle of competition
Encirclement
Simultaneous flank
attacks
Contraction
Concentrate on most
desirable markets
Incumbent
Flank
Neglected segment
area of technology
Head-on
Identical
marketing
mix
Challenger
Attacks
Incumbent
Guerilla
Aggressive, short
term moves
Flanking
Defends
secondary
markets
Bypass
Unrelated products,
new areas, technical
advances
Position
Change nothing
Pre-emtive
Attack first
Challenger
Defences
Mobile
Broaden and
diversity markets
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Basic, no standards
established
None to few
Growth
Maturity/shakeout
Decline
Overcapacity. Production is
reduced
Specialised distributors
Mass production.
Distribution networks
expanded
Technology is understood
across the industry
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Competition
dynamics
Product
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The marketing
mix
Customers and
segmentation
Place
Design
Features
Quality and reliability
After sales service
Trade off between price and value
offered to customer
Understanding
the customer
Promotion
Market channels
Logistics
Direct distribution or use of
intermediaries?
Speed of delivery
Marketing mix
Price
Luxury or necessity?
Competitors' prices
Quality connotations
Discounts
Payment terms
People
Processes
Efficiency; standardisation;
automation
Queuing and waiting times
Capacity management
Information gathering and
processing
Physical evidence
Evidence of ownership
for services
(intangibility)
Design and specification
of service environment
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Competition
dynamics
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The marketing
mix
Customers and
segmentation
Understanding
the customer
Buyer behaviour models aim to show how purchase decisions are made.
We can distinguish CONSUMER markets and INDUSTRIAL markets. Industrial buyers are more rationally
motivated than consumers in deciding what goods to b uy.
Government, reseller and export markets may also be considered.
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Products
Convenience (everyday) goods
Shopping (higher value) goods
Speciality (unique) goods
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Competition
dynamics
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The Marketing
mix
Customers and
segmentation
Understanding
the customer
Products
Raw materials
Subcomponents
Capital equipment Supplies
Influencer
Buyer
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Market segmentation
Is the subdividing of a mar ket into
increasingly homogeneous subgroups of
customers, where any subgroup can be
conceivably selected as a target market
to be met with a distinct marketing mix.
It is relevant to a focus strategy.
Target market
6:30 AM
Segments should be
Measurable
Potentially profitable
Accessible, and can Susceptible to a distinct marketing mix
be accessed profitably Stable
Policy options
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UNDIFFERENTIATED
CONCENTRATED
DIFFERENTIATED
3: Competitors and customers
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Competition
dynamics
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Marketing
Customers and
segmentation
Understanding
the customer
Key customer
analysis
Customer profitability
analysis
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Strategic customer
is the purchaser of the product offered. This
may not be the end user. The end user's
requirements are important, but those of any
intermediary purchaser are of primary strategic
importance.
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Page 25
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Competition
dynamics
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Marketing
Customers and
segmentation
Understanding
the customer
External forces
Customers and
markets
Industry analysis
Macro-environment
Political
Economic
Social
Technological
Environmental
Legal
New entrants
Substitute products
Bargaining power of customers
Bargaining power of consumers
Rivalry amongst current competition
National competitiveness
Understanding the
customer
Demand conditions
Related industries
Factor conditions
Firm strategy,
structure, rivalry
Inception
Growth
Maturity
Decline
Opportunities
or
Threats
Strategic groups
CSFs
Market segmentation
Marketing mix
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4: Strategic capability
Topic List
The organisation's resources
Cost efficiency
Knowledge
The value chain
The product portfolio
Benchmarking
Managing strategic capability
SWOT and TOWS
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The organisation's
resources
Cost
efficiency
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Knowledge
The value
chain
The product
portfolio
Benchmarking
Strategic capability: the adequacy and suitability of an organisation's resources and competences to
achieve its strategy.
Makeup
Materials
Money
Management
Methods
Men and women
Position-based strategy aims to achieve competitive advantage by positioning a market offering to respond to
the opportunities and threats present in the environment.
Resource-based strategy is based on the possession of distinctive resources, which may be physical
resources or competences. Competences are the activities and processes through which an organisation
deploys its resources effectively.
Threshold competences and resources meet customer's minimum requirements and are needed for survival.
Unique resources and core competences underpin competitive advantage and are difficult for competitors to
imitate or obtain.
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The organisation's
resources
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Cost
efficiency
Knowledge
1
2
3
4
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The value
chain
The product
portfolio
Benchmarking
4: Strategic capability
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The organisation's
resources
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Knowledge
Cost
efficiency
The value
chain
The product
portfolio
Benchmarking
Data
Facts
Information
Relationships between
processed facts
Knowledge
Patterns discerned in
information
Importance of
Total
Some
Context independent
Importance to
Mundane
Relevant IT
systems
Office automation
Data warehouse
Groupware
Expert systems
Report writing software
Intranet
Data mining
Intranet
Expert systems
context
business
The aim of knowledge management is to capture, organise and make widely available all the knowledge that
the organisation possesses (ie use knowledge as a resource to contr ibute to competitive advantage).
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Knowledge management
Records, organises, retrieves and
applies knowledge effectively. IT
systems will probably be used. Good
knowledge management avoids
constant re-invention of the wheel.
Innovation
Innovation is encouraged by top
management; organisational
purposes are continually re-examined;
it is accepted that innovative solutions
can emerge at any level.
A top-down, command and control approach will not promote lear ning based strategy. The company must be
open to the environment and welcome new ideas and fresh insights. However, management must guide the
learning process and take necessary decisions.
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4: Strategic capability
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The organisation's
resources
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Cost
efficiency
IN
RG
MA
SUPPORT ACTIVITIES
FIRM INFRASTRUCTURE
TECHNOLOGY DEVELOPMENT
MA
RG
IN
PRIMARY ACTIVITIES
The product
portfolio
Benchmarking
PROCUREMENT
INBOUND
OUTBOUND MARKETING
OPERATIONS
SERVICE
LOGISTICS
LOGISTICS & SALES
The value
chain
Knowledge
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Distributor/retailer
value chains
Organisation's
value
chain
Supplier
value
chains
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Customer
value
chains
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The organisation's
resources
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Cost
efficiency
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Knowledge
Product form
type within the category
Brand
The specific product
The product
portfolio
Benchmarking
Sales
+
_
Profits
Inception
The value
chain
Growth
Maturity
Decline
Senility
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The development of new products is an important aspect of a firm's strategy. New products can overcome
entry barriers and help give a company a balanced portfolio. Product innovation can also be a major source
of competitive advantage.
How are they new?
How is it approached?
Leader strategy: high cost of
R&D, potential high reward, high
risk
Follower strategy: lower cost, less
R&D expertise needed, lower risk,
reduced reward
4: Strategic capability
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The organisation's
resources
Cost
efficiency
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Knowledge
The value
chain
The product
portfolio
Benchmarking
Intrapreneurship
The R&D effort should support the
organisation's strategy. For
example, product development and
market development are likely to
require different R&D emphases.
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The organisation's
resources
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Cost
efficiency
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Knowledge
Process
The value
chain
The product
portfolio
Benchmarking
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The organisation's
resources
Cost
efficiency
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Knowledge
The value
chain
The product
portfolio
Benchmarking
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Managing
strategic capability
SWOT and
TOWS
Informal processes
Existing strategic capability can be difficult to understand and, theref ore, to manage, especially when it derives from
core competences based on informal processes. Managers must take care not to disrupt such competences by
attempting to manage or formalise them.
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HRM
Much strategic capability depends on people's abilities,
skills and knowledge. Such capability can be enhanced
by HRM practice.
4: Strategic capability
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Managing
strategic capability
SWOT analysis
(also known as corporate appraisal) is a review of:
INTERNAL
EXTERNAL
Strengths
Weaknesses
Opportunities
Threats
SWOT and
TOWS
Internal
Strengths
Match
External
Opportunities
Weaknesses
Convert
Threats
Remedy
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Social
responsibility
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Corporate
governance
The role of
culture
Integrated
reporting
Ethics are ideas about right and wrong that set standards for conduct. Ethics are important to business because
society considers such things impor tant. There are also rules of professional conduct to consider. Ideas of right and
wrong have become more fluid and less absolute. As a result there is a g reater scrutiny of organisations' behaviour
since it is likely to be less subject to definitive internal rules.
Ethical dilemmas
Conflicting views of the organisation's responsibilities
create ethical dilemmas for managers at all levels.
Honesty in advertising
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Social
responsibility
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Corporate
governance
The role of
culture
Integrated
reporting
Examples
Charitable donations
Pollution control
Community activities
BUT
Companies already discharge their responsibilities
by contributing towards tax revenues.
Pressure groups
Employees
Legislation
Environmental screening
Sustainability of resources
Ecological concerns
?
Long term
v
Short term
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Social
responsibility
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The role of
culture
Corporate
governance
Level of interest
Low
High
Low
A
Power
Stakeholders can be:
Internal
Connected
External
Integrated
reporting
High
A: Minimal effort
B: Keep informed; little
direct influence but
may influence more
powerful stakeholders
C: Treat with care; often
passive but capable
of moving to segment
D; keep satisfied
D: Key players
strategy must be
acceptable to them,
at least
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Social
responsibility
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Corporate
governance
The role of
culture
Integrated
reporting
The conduct of an organisation's senior officers constitutes its corporate governance. The influence of those
officers over the behaviour of the organisation and the potential f or both PR and financial disaster make this a
matter of strategic importance.
External measures to improve corporate governance
1 Accounting standards attempt to prevent financial manipulation
2 Codes of professional conduct regulate many senior managers
3 Commissions on standards of behaviour (in the UK) have established best practice
Free flow of information
to stakeholders tends to inhibit
wrong doing by senior managers.
However, commercial confidentiality
must be respected.
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Structural
measures
Non-executive directors
may remain objective and ensure
proper governance in such areas as
ethics, audit and senior manager
remuneration. However, there are now
accusations of partiality within a closeknit body of non-executives in the UK.
5: Stakeholders, ethics, culture and integrated reporting
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Social
responsibility
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Corporate
governance
The role of
culture
Integrated
reporting
Reduces risk
Improves performance
Improves external perceptions
Ensures an organisation's strategy is directed
towards the benefit of legitimate stakeholders
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Social
responsibility
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Corporate
governance
The role of
culture
Integrated
reporting
Organisational culture consists of the beliefs, attitudes, practices and customs that affect people during their
interaction with an organisation. It can have an important influence on strategy, both in the way that information
is interpreted and also by determining the acceptability of ideas and behaviour.
The paradigm
The basic assumptions and
beliefs that an organisation's
decision-makers hold in common
and take for granted. It is
essentially conservative since it
is based on collective experience.
It is closely linked to the 'strategy
as experience' lens.
Rituals
and
Routines
Symbols
The
Paradigm
Control
systems
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Power
structures
Organisational
structures
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Social
responsibility
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Corporate
governance
The role of
culture
Integrated
reporting
Definition
The International Integrated Reporting Council offer the following definition. 'Integrated reporting is a process
founded on integrated thinking that results in a per iodic integrated report by an organisation about value
creation over time and related communications regarding aspects of value creation.
An integrated report is a concise communication about how an organisations strategy, governance, performance
and prospects, in the context of its external environment, lead to the creation of value in the short, medium and
long term.'
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Value creation
The International Integrated Reporting Council introduced the Integrated Reporting Framework. The framework defines
resources as 'capitals'
Capitals are used to assess value creation. The framework classifies capitals as being:
Intellectual
Capital
Manufactured
Capital
Financial
Capital
Integrated
Reporting Capitals
Human
Capital
Natural
Capital
Social
Capital
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Social
responsibility
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Corporate
governance
The role of
culture
Interaction of capitals
An increase in one capital may result in a decrease in another.
Example
Paying for a staff training programme may increase human
capital (eg improve staff skills), but reduce financial capital as
the costs of the training programme will lead to a reduction in
the company's financial reserves (eg money).
Integrated
reporting
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Integrated reporting does not involve attaching monetary values to every part of an organisation's operations
Value creation can be measured by the use of qualitative and quantitative performance measures
Example
Customer satisfaction can be measured by comparing
the number of customers retained year on year.
Implications of introducing
integrated reporting
IT costs
Staff costs
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Consultancy costs
Disclosure
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Notes
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6: Strategic choices
Topic List
Diversification
The corporate parent
The corporate portfolio
Generic strategies
Sustaining competitive advantage
Direction and method of growth
Strategy and market position
Success criteria
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Diversification
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The corporate
parent
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The corporate
portfolio
Generic
strategies
Sustaining competitive
advantage
Diversity of products and markets may be advantageous to the organisation for three reasons:
However, there are three questionable reasons that may be given to justify a policy of diversification:
Response to environmental change may be a cover for protecting the interests of top management
and may lead to ill-considered acquisitions
Risk spreading is valid for owner managed businesses, but shareholders in large public companies can
diversify their own portfolios
Powerful shareholder expectations, especially demands for growth, can lead to inappropriate
diversification
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Horizontal integration
Development into activities that are competitive with, or
complementary to, present activities; eg, electricity
companies selling gas. Offers economies of scale.
Vertical integration
The organisation becomes its own supplier (backward
integration) or distributor (forward integration).
Secures supplies
Stronger relationship with end-users
Profits from all parts of value system
Creates barriers to entry
However:
Page 55
However:
Other strategies
Withdrawal
Demerger
6: Strategic choices
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The corporate
parent
The corporate
portfolio
Page 56
Generic
strategies
Sustaining competitive
advantage
Customer:
Company:
Competition:
Currency:
5 Country:
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1.
2.
Advantages
Higher sales and profits
Life cycle extended
Spread seasonality
Spread risk
Disadvantages
Less control
Costly
Adaptations needed
Page 57
3.
Mode of entry?
Direct or
Foreign
Market attractiveness
indirect
subsidiaries or
Competitive advantage possessed exporting
joint ventures
Risks (political; business; currency)
Overseas
Legal/regulatory factors
production
Before getting involved, the company must consider both strategic
('Does it fit?') and tactical/operational ('Can we do it?') issues.
6: Strategic choices
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The corporate
parent
6:47 AM
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The corporate
portfolio
Generic
strategies
Sustaining competitive
advantage
Entry strategies
Exporting
Overseas
production
Direct
Indirect
Export management
firms
Buying offices
Piggy-backing
Export houses
Wholesalers
Distributors
Stockists
Agents
Licensing,
Franchising
Contract
manufacture
to final user
via company
branch offices
E-commerce and Internet
Exporting
Joint
venture,
Consortium,
Strategic
alliances
Wholly owned
overseas production
Acquisition
Organic growth
Overseas production
Advantages
Concentrates production; small start possible; Lower distribution costs; overcomes trade barriers; possibly lower
mnimises overheads
production costs
Key issues
Involvement
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The corporate
parent
Page 59
The corporate
portfolio
Generic
strategies
Sustaining competitive
advantage
The corporate parent imposes costs, so it must create at least enough value to pay these costs. It may destroy
value:
Exercise of managers' political ambitions
Size and complexity can obscure corporate vision
Process and hierarchy slow decisions, stunt enterprise
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6: Strategic choices
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Diversification
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The corporate
portfolio
The corporate
parent
Generic
strategies
Sustaining competitive
advantage
Portfolio analysis is applicable to products, market segments and SBUs. There are four basic strategies:
Build
Invest for market share
growth
Hold
Maintain current
position
Harvest
Manage for profit in the
short term
High
Low
Question mark
Star
Dog
Cash cow
High
Low
Stars build
Cash cows hold or harvest
Question marks build or harvest
Dogs divest or hold
Divest
Release resources for
use elsewhere
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High
Heartland
businesses
Feel
(fit between SBU
CSFs and
parental skills etc)
Alien
businesses
Low
Heartland businesses can benefit from the attention of the parent without r isk of harm from unsuitable developments.
Ballast businesses are well-understood by the parent, but need little assistance. They should bear as little central cost as possible.
Value trap businesses provide good opportunities for parenting, but these opportunities do not relate to the SB U's CSFs.
Alien businesses have no place in the por tfolio. They need the attention of a skilled parent, b ut the actual parent does not have the
skills and resources required to help them. This approach is based on the idea of the cor porate parent as a parental developer.
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6: Strategic choices
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The corporate
parent
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The corporate
portfolio
Generic
strategies
Sustaining competitive
advantage
Low
High
Public or
political
need (and
therefore
support for
expense)
Low
Golden fleece
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The corporate
parent
6:47 AM
The corporate
portfolio
Cost leadership
Aims to be the lowest cost producer in the
industry as a whole
Economies of scale
Use the latest production technology or
cheap labour
Productivity improvement
Minimisation of overheads
Favourable access to inputs
Generic
strategies
Sustaining competitive
advantage
Differentiation
Aims to exploit a product perceived as unique within the
industry as a whole
Page 63
Aspects of differentiation
Focus
Activity is restricted to a particular segment of the market. Either a cost leadership or differentiation strategy is then
pursued. Such concentrated effort can be more effective, but the segment may be attacked by a larger firm.
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6: Strategic choices
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6:47 AM
The corporate
parent
Page 64
The corporate
portfolio
Generic
strategies
Sustaining competitive
advantage
Disadvantages
Cost leadership
Differentiation
Customers
Suppliers
Industry
rivalry
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High
Low
5 Focused differentiation
seeks a high price premium in
return for a high degree of
differentiation.
3, 4 and 5 are all variants on
differentiation.
Low
Page 65
8
Price
High
6: Strategic choices
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Diversification
3/25/2015
The corporate
parent
6:47 AM
Page 66
The corporate
portfolio
Generic
strategies
Sustaining competitive
advantage
Sustaining differentiation
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Options
Be unpredictable
Pre-empt imitation
Small moves disguise intent
Send misleading signals
Attacks on weakness may provoke attempts
to improve
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6: Strategic choices
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Direction and
method of growth
Strategy and
market position
Success
criteria
Ansoff described the four possible growth vectors in the four cells in the diagram below: the growth vector
matrix.
PRODUCT
Existing
New
Existing
Market penetration
Maintain or increase market share
Dominate growth markets
Drive out competition from mature mar kets
Increase usage by existing customers
MARKET
New
Market development
New markets for current products
New geographic areas export
New package sizes
New distribution channels
Differential pricing to suit new segments
Product development
Launch new products (using existing knowledge
of customers and their needs/wants)
May require new competences
Forces competitors to follow suit
Discourages newcomers
May require investment in R&D or new
production facilities
Diversification
Related
Vertical
Forward
Horizontal
Unrelated
(conglomerate)
Backward
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Organic growth
The development of internal resources
Supports learning and is supported by it
Consistent culture and management style
Provides economies of scale
Ease of control
However:
Can be slow
Not good for dealing with barriers to entry
Cooperative methods
Include consortia, joint ventures, licensing,
franchising and sub-contracting. These methods
can enhance access to resources of all kinds , achieve
economies of scale, achieve synergy, and enhance
competences but stop short of a merger or takeover.
Page 69
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Direction and
method of growth
Strategy and
market position
Success
criteria
Joint ventures
Franchises
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Direction and
method of growth
Strategy and
market position
Success
criteria
Market challengers
Market leaders
Aims
Aim
Market followers
Market nichers
Page 71
6: Strategic choices
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Direction and
method of growth
Success
criteria
Strategy and
market position
External factors
SO
ST
Use strengths to
Use strengths to
maximise opportunities minimise threats
Internal
factors WO
WT
TOWS Matrix
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and concepts
3:55 PM
Types of
structure
Page 74
Processes
Relationships
Collaborative
organisational structures
An organisation's configuration consists of the structures, process and relationships through which it
operates.
3 major challenges
1
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and concepts
3:55 PM
Types of
structure
Page 75
Processes
Relationships
Collaborative
organisational structures
Self-contained organisational structures: historically most organisations have tended to be 'self contained' as the y are distinct
from external groups (customers, competitors and suppliers).
Johnson, Scholes and Whittington identify review seven basic structural types:
1 Functional
According to the type of work logical but does not reflect value creating processes
2 Multidivisional
3 Holding company
4 Matrix
Co-ordination across functional lines allows flexibility, but may cause confusion (dual authority)
5 Transnational
National units operate independently, but share capabilities some have a specialisation that
supports the whole organisation
6 Team-based
7 Project
Similar to team-based, but with a finite life, since projects by definition have a finite life
No single model of organisation is suitable for all purposes. Managers must choose a structure in the light of which challenges they
regard as most pressing.
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Challenges
and concepts
3:55 PM
Types of
structure
Page 76
Processes
Relationships
Collaborative
organisational structures
Control processes determine how organisations function. They may be analysed according to whether they deal with
Inputs or Outputs, and whether they involve Direct management action or more Indirect effects. For example,
balanced scorecards are direct output-based processes.
Outputs
Direct
Indirect
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Traditional accounting measures are inadequate for assessing overall progress. Other matters must be considered,
especially as financial reporting is heavily retrospective in focus. The balanced scorecard covers most of the angles
with its four perspectives. Note that individual measures are company specific.
Customer perspective
Financial perspective
Page 77
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and concepts
3:55 PM
Types of
structure
Page 78
Processes
Relationships
Collaborative
organisational structures
Organisational relationships are categorised as internal or external. Degree of centralisation is an important issue in internal
relationships.
Advantages of centralisation
Advantages of decentralisation
Goold and Campbell identify three types of strategic decision making and control.
1 Strategic planners have a small number of core businesses. Planning and control are centralised.
2 Strategic controllers tend to be diversified. The strategic apex provides objectives and guidelines, but leaves planning initiatives
to business unit managers.
3 Financial controllers are more interested in profit targets than b usiness unit strategy. Use financial performance for control.
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Boundary-less organisation structures involve the organisation collaborating with outside parties to make
it more flexible during times of change.
Page 79
Hollow organisations
Modular organisations
Network
Virtual
Shamrock organisation
Alliances
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and concepts
3:55 PM
Types of
structure
Page 80
Processes
Relationships
Collaborative
organisational structures
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Outsourcing has made the concept of the boundar y-less organisation possible. Outsourcing involves the
contracting out of certain internal functions to a third par ty.
Offshoring is a form of outsourcing which involves an external party in a different country providing an
organisation with a particular process.
Advantages of offshoring
Page 81
Cost savings
Focus on core activities
Improve capability
Skills
Flexibility
Disadvantages of offshoring
Quality issues
Public perceptions
Loss of control
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and concepts
3:55 PM
Types of
structure
Page 82
Processes
Relationships
Collaborative
organisational structures
Shared servicing is an alternative to outsourcing. A shared service centre brings together certain functions
within an organisation.
IT support functions are commonly combined to provide services to the entire organisation, not just one
department.
Advantages of shared
service centres
Reduced headcount
Reduction in overhead costs
Facilitates knowledge sharing
Standardised approaches
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Alliances
Network organisations
Page 83
Self-employed
professionals and
technicians paid by
results benefits
may telecommute
Contingent
workforce
Often part time/temp
no career track routine
work engaged as
required
Professional core
Their skills define the
organisation's core
competencies
Consumers
eg buyers of
DIY furniture
Flexible structure
Collaborative culture
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and concepts
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Types of
structure
Page 84
Processes
Relationships
Collaborative
organisational structures
Reputation
Self-expression
Altruism
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Crowdsourcing involves obtaining information from a large group of people. Organisations can use this
information to help solve commercial problems.
Drawbacks of crowdsourcing
Lack of credibility
Collaborators do not have to collaborate
Page 85
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Stereotypical
configurations
Configuration
and strategy
Mintzberg's view
truc
Tec
hno
s
Standardise work,
work processes,
outputs, skills eg
quantity assurance
staff
ture
Strategic
Apex
Middle
Line
administer and
implement
Support
Staff
Operating Core
Directly involved in operations:
seek autonomy
Ancillary services eg
legal, PR
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Simple
Co-ordination
mechanism
Direct supervision
Key part
Environment
Possible characteristics
Strategic apex
Simple/dynamic (even
hostile)
Machine
bureaucracy
Professional
bureaucracy
Complex/stable
Decentralised, emphasis on
training
Divisional
form
Standardised
outputs
Adhocracy
Middle line
Complex/dynamic
Mintzberg mentions one other co-ordinating factor: mission. A missionary organisation is one welded together by
ideology or culture. It features simple systems and network relationships in team structures. It works well in a
simple and static environment.
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Stereotypical
configurations
Configuration
and strategy
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Topic List
Situation analysis for change
Styles of change management
Change management roles
Change management levers
Pitfalls of change management
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Situation
analysis for change
3:57 PM
Styles of change
management
Page 90
Change
management roles
Change
management levers
Pitfalls of change
management
The management of change star ts with an understanding of three main consider ations.
Features to preserve
Organisational diversity
Capability to manage change largely depends
on experience
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Situation
analysis for change
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Styles of change
management
Page 91
Change
management roles
Change
management levers
Pitfalls of change
management
Characterised by
Appropriate to
Persuasion
3 Intervention
Change agents
Incremental change
4 Direction
5 Coercion/edict
Different approaches may be appropriate to different stakeholders. Normal management practice will also affect
the style used. It may be advantageous to use more than one style.
Page 91
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Situation
analysis for change
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Styles of change
management
Page 92
Change
management roles
Change
management levers
Pitfalls of change
management
A change agent is an individual or group that helps to bring about strategic change in an organisation.
Johnson, Scholes and Whittington examine change agency by considering three distinct groups:
Strategic leaders
Middle management
Providers of advice; translation of strategy at local level; implementation and control
Outsiders
Bringing a fresh point of view, such as a new chief executive or the use of consultants
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analysis for change
3:57 PM
Styles of change
management
Page 93
Change
management roles
Change
management levers
Pitfalls of change
management
A turnaround strategy is required when a business is in terminal decline. It has its own change management
techniques:
Crisis stabilisation management changes comm unication with stakeholders attention to target mar kets
concentration of effort financial restructuring prioritisation
In other circumstances, change management levers relate to the cultural web.
Changing routines
Tactics
careful timing, use of 'quick wins', handling job losses with care
Page 93
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Situation
analysis for change
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Styles of change
management
Page 94
Change
management roles
Change
management levers
Pitfalls of change
management
Change programmes may be subverted and lead to unintended consequences. This has four implications for
change management.
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Topic List
The background to process change
The business change lifecycle/POPIT
The process-strategy matrix
A process redesign methodology
Process commoditisation
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The background to
process change
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A process redesign
methodology
Process
commoditisation
Business processes and business process re-engineering play vital roles in enabling an organisation to
implement its strategies successfully.
Value chains
Supply chain
management
Change management
Business Process
Re-engineering
Project management
Information technology
(Software packages, eg ERP)
Information technology
(e-business opportunities)
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The organisation
Inputs
People
Materials
Money
Information
Outputs
Goods
Services
Profits
Taxes
Page 97
as a whole
Design and
implementation
Process
Management
Job
Harmons approach
Improvement projects should be tied to specific cor porate
goals, or else focus will be lost.
There must be 'buy-in' by managers and staffs. This requires
change management and alignment of incentives.
IT is vital: IT specialists must take a strategic view; line
managers must understand IT.
Terminology
Process improvement is a tactical, incremental technique.
Process re-engineering is for strategic, fundamental change.
Process redesign is for intermediate scale significant change.
9: Business process change
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process change
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A process redesign
methodology
Process
commoditisation
The business change lifecycle provides a framework for assessing the key stages involved in undertaking a
business change project.
Alignment
Realisation
Implementation
Definition
Benefits
Management
Design
The lifecycle provides a broad umbrella framework from which different process change methodologies can
operate.
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The POPIT model (four view model) focuses on four interrelated areas that require consideration if a
business change project is to be a success .
Organisation
Information
Technology
People
Page 99
Processes
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process change
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A process redesign
methodology
Process
commoditisation
This analyses processes in terms of their complexity on one axis and their strategic importance on the other.
High
Complex decision,
design or negotiation
processes
Many complex rules;
expertise required
Process
complexity
and dynamics
Simple procedure or
algorithm
Low
Examples:
sales order processing
Strategic Importance
High
Vital for success,
high added value
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7:47 AM
1
2
3
4
Page 101
A process redesign
methodology
Process
commoditisation
The Methodology
Planning
Project charter defines goals, scope and roles. Project redesign team
nominated. Detailed project plan produced including time and cost b udgets.
Analysing the existing process
May not be needed if:
Full system documentation already exists There is no existing process
Radical change makes it unnecessary
Requires full process documentation, including goals, inputs, activities, outputs,
performance, incentives and how the process is managed. Project goals and
assumptions are then re-examined.
Designing the new process
Possible solutions are considered and the best chosen. May require simulation
of proposals. Must be fully documented. Must obtain management approval.
Development
Functional and resource implications followed through: training, IT, job
specifications designed. Overall change to a process structure may be made
at this stage: this is a project in itself.
Transition
Depends on change management. Merges into routine monitoring.
9: Business process change
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process change
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A process redesign
methodology
Process
commoditisation
Outsourcing
Reduces the workload on managers, enabling concentration on core competences
Exploits suppliers' economies of scale, knowledge and experience
May be a core competence itself
Getting the best from outsourcing depends on relationship management
Specification of services and standards
Performance measurement
Ability to adjust elsewhere if standards not achieved
Davenport says adoption of process standards (eg quality standards) will enable more processes to be
outsourced. This implies:
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Disadvantages
Page 103
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Notes
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Topic List
Process redesign patterns
Standard software packages
Establishing software requirements
Assessing software packages
Selecting software packages
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Process
redesign patterns
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Standard
software packages
Page 106
Establishing
software requirements
Assessing
software packages
Selecting
software packages
A process redesign pattern is a general approach to redesigning processes for their improvement. Harmon describes four
basic redesign patterns:
Re-engineering
Starts with a clean sheet of paper
Fundamental rethinking
Radical and large scale improvements possible
Highly disruptive
High risk of failure
view of customer
Activities may be value adding, value enabling
(essential preliminaries such as preparation and set-up)
or non-value adding (eg inspection or reworking
errors)
Similar results as simplification.
Simplification
Eliminates redundancy/duplication
Identify, model and challenge all systems
Requires judgement and flexibility to deal with subtlety
and complexity
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Process
redesign patterns
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Standard
software packages
Establishing
software requirements
Advantages
Page 107
Assessing
software packages
Selecting
software packages
Disadvantages
Property rights reside with supplier, who
controls development and support
Supplier may go out of business
Competitive advantage cannot be achieved if
package available to competitors
Inadequate performance or restricted
functionality a problem as not 'bespoke'
Changing requirements will not be catered for
ERP systems are based on limited, standardised modules. This means that the organisation must adapt to
the standard system rather than designing its own most appropriate and efficient processes. However, the
alternative (adapting a standard package to local requirements) destroys the advantages of purchasing the
standard package and introduces further complications. Tailoring ERP software to fit an existing system is
generally a mistake.
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redesign patterns
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Standard
software packages
Page 108
Establishing
software requirements
Assessing
software packages
Selecting
software packages
There are seven techniques for collecting information at the start of an IS project.
Research techniques can be analysed as good (G), very good (VG) or not good (NG) in how they deal with
problems associated with change aversion, vagueness in responses, how much existing systems are taken for
granted, tacit knowledge, new systems, or lack of analyst experience.
Change
aversion
Vagueness
Taken for
granted
Tacit
knowledge
New
system
Inexperience
Interview
NG
Observation
NG
VG
NG
VG
Protocol analysis
NG
NG
VG
VG
VG
Document analysis
NG
NG
VG
Workshop
VG
NG
VG
NG
VG
Prototype
VG
NG
VG
VG
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redesign patterns
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Standard
software packages
Page 109
Establishing
software requirements
Assessing
software packages
Selecting
software packages
Skidmore & Eva: Software packages maybe assessed against ten high-level requirement categories, each of which is
made up of more detailed specific requirements. Not all high-level categories will receive the same weighting.
Imperatives are non-negotiable, absolute requirements and must be established very early on in the project.
1
2
3
4
5
Typical
Typical
Weighting
Weighting
6 Supplier social responsibility
Functional requirements support
2
30
business or operational functions
10
7 Initial implementation requirements relates
10
Non-functional requirements still
to installation; file creation and conversion; setup;
essential, but not related to business
and training
functionality eg legal compliance
2
8 Operability requirements documentation,
10
Technical requirements IT details and
support, upgrades, legal protection (source code
preferences may include imperatives
in escrow)
Design requirements mostly relate to
5
will almost always be
9 Cost constraints
20
system flexibility
imperatives but time and
cost trade-offs against
15
Supplier stability requirements to
2
other issues may be
ensure continuance of technical support
10 Time constraints
considered
includes financial position, reputation,
insurance, legal status, quality status
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redesign patterns
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Standard
software packages
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Establishing
software requirements
Assessing
software packages
Selecting
software packages
Client
Response format
Long-tem relationships
Implementation
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11: E-business
Topic List
Principles of e-business
Organisations and their customers
Hardware and software infrastructure
IT controls, continuity planning and
disaster recovery
Big Data
IT and strategy
Supply chain management
E-procurement
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Hardware and
software infrastructure
IT controls, continuity
planning and disaster recovery
Big Data
E-business is 'the transformation of key business processes through the use of Inter net technologies' (IBM). If a financial
transaction is involved, the process becomes e-commerce. (E-business and e-commerce are often confused. Note the
distinction: a transaction must be involved to constitute e-commerce.)
E-business features
Challenges traditional business models
by replacing traditional intermediaries
Adopting e-business
Purposes
Increase revenues
Improve channel efficiently (eg improved communication)
Control and automate operations
Reduce costs
Gain visibility
E-business adoption pyramid
Mature capability
E-HR
Web-conferencing
E-collaboration
E-invoicing
E-procurement
Document management
Web portals
Company intranet
Email, internet, company website, remote working
Initial capability
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Benefits of e-business
Barriers to e-business
Smaller businesses may regard e-business as irrelevant to them for reasons of size, cost of implementation or
typical customers not being users.
Other barriers
Critical mass of internet users required this will vary by country
Lack of ability or interest in credit tr ansactions
Different languages and cultural attitudes (eg to risk) will affect willingness to trade online
Security concerns
Skills required/training needs
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Hardware and
software infrastructure
Exchange initiated by
Varieties of e-commerce
Business
Consumer
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IT controls, continuity
planning and disaster recovery
Big Data
Delivery by
Business
Consumer
eg bpp.com
eg Amazon.com
eg Priceline.com
eg eBay.com
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Classification by characteristics
Brokerage
Value proposition
Advertising
Revenue
Infomediary
Market opportunity
Competitive
environment
Merchant
Manufacturer
Affiliate
Market strategy
Community
Subscription
Organisational
development
Management team
Utility
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Hardware and
software infrastructure
IT controls, continuity
planning and disaster recovery
Big Data
E-business architecture
E-business services
Application layer
Infrastructure
E-commerce software systems; Customer
Relationship Management systems; Performance
enhancement; Supply chain management; data
mining and content management systems
Players
Microsoft, IBM, Ariba,
BroadVision, Peoplesoft,
Siebel, Akamai
Web browser, operating systems; server software and Microsoft, Sun, Linux
standards; networking software and database
Oracle, Sybase, IBM,
management systems; encryption software
Microsoft, Verisign
Storage/physical layer
Web content for Internet, intranet and extranet sites. PayPal, CyberCash,
Customers' data. Transactions data. Payment
Microsoft, Real Networks,
systems.Streaming media solutions. Hosting services Apple, IBM
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Internet technology
TCP/IP. Internet technology is based on the Transmission Control
Protocol and Internet Protocol, (TCP/IP) which allowed several
smaller, predecessor networks running on different software to
be linked.
Client/server architecture. Client computers access services
from server computers. Each computer has a unique IP address.
World Wide Web and Hypertext. The world wide web is a
system of interlinked computer-stored documents. The links are
provided by hypertext address hyper links.
Alternative Internet access technologies
Interactive digital TV (IDTV) allows interactions via a cable TV
link or phone line for terrestrial or satellite broadcast.
Mobile phones can be used for m-commerce and web access
using Wireless Application Protocol (WAP), General Packet
Radio Service (GPRS) and 4th generation (4G) technology.
Wireless Fidelity (WiFi) Hotspots also allow wireless connection
to the Internet, largely for notebook computers.
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Hardware and
software infrastructure
IT controls, continuity
planning and disaster recovery
Big Data
IT controls
For an organisation's IT assets to oper ate effectively adequate control measures must be put in place.
Controls are needed to prevent
Theft
Fraud
Human error
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Continuity planning is focused on ensuring the survival of an organisation and its oper ations from both
internal weaknesses and external threats.
Disaster recovery is part of continuity planning. It is focused on the continuation of an organisation's IT
infrastructure in the event of a disaster occurring.
Causes of disasters
Standby procedures
Recovery procedures
Personnel management
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Hardware and
software infrastructure
IT controls, continuity
planning and disaster recovery
Contents of a disaster
recovery plan
Big Data
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Hardware and
software infrastructure
IT controls, continuity
planning and disaster recovery
Big Data
Big Data
Organisations today have more transactional data than they have ever had before about their customers,
suppliers and about their operations.
Factors driving Big Data
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Hardware and
software infrastructure
IT controls, continuity
planning and disaster recovery
Big Data
3 Vs of Big Data
Laney suggests that Big Data can be defined b y considering the 3 Vs: volume, velocity and variety (or
variability)
Volume
Velocity
Variety
Diversity of source data
Lots of data is unstructured (ie not in a database)
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Hardware and
software infrastructure
IT controls, continuity
planning and disaster recovery
Big Data
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Creating transparency
Making data more easily accessible to relevant stakeholders, in a timely manner, can create value in its own
right for example, by revealing insights from data which had previously been too costly or complex to process.
Performance improvement
The increasing amount of transactional data stored in digital form provides organisations with an increasing
amount of accurate and detailed performance data in real or almost real time .
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Hardware and
software infrastructure
IT controls, continuity
planning and disaster recovery
Big Data
Decision making
The sophisticated analytics tools which are used to unco ver previously hidden patterns and trends in data could
also be used to improve decision making.
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IT and
strategy
Supply
chain management
E-procurement
The Internet has the capacity to transform many businesses via the introduction of new technology and skills and, eventually,
the re-positioning of the offering to fit the new market conditions.
Organisations can visualise the necessary changes at three interconnected levels.
Level 1 The simple introduction of new technology to connect electronically with employees, customers and suppliers
(eg through an intranet, extranet or website)
Level 2 Re-organisation of the w orkforce, processes, systems and strategy in order to make best use of the new technology
Level 3 Re-positioning of the organisation to fit it into the emerging e-econom y
A strategy for e-commerce should be considered at the highest level of management, and based on the standard cr iteria for
strategic choice:
Suitability. For most companies, e-commerce will be a supplement to more tr aditional operations, with the website forming a
supplementary medium for communication and sales. The marketing mix must remain internally consistent so that the
website and associated processes send the same messages as the tr aditional operation.
Acceptability. The e-commerce strategy must be acceptable to important stakeholders. Distributors are particularly important
here.
Feasibility. Feasibility is a matter of resources. The fundamental resource is cash, but the availability of the skilled labour
needed to establish and administer a website will be crucial to the e-commerce strategy.
Objectives, costs, benefits and budgets must be considered, and a coherent position estab lished.
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IT and
strategy
Supply
chain management
E-procurement
E-business strategy
Process models
Planning cycles
Power base
Positional power and strength in the mar ket place Success based on manipulation of cr itical information
Core focus
Customer orientation
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Stage 2
Stage 3
Stage 4
Presence
Portals
Transaction integration
Company integration
Content
Window to the Web
No integration
E-mail
Profiles
Two-way communications
E-mail
Order placing
Cookies
No on-line financial
transactions
B2B/B2C
B2B
Communities
Full integration
E-marketplaces
E-business
Auctions
Uses e-commerce systems to
manage CRM and supply
3rd party emarketplaces
chain
Low-level collaboration
Value chain integration
On-line financial transactions
High-level collaboration
Such models can help management to understand the actions and resources required in their organisation,
since these very from stage to stage. They can also assist overall planning and control of development.
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IT and
strategy
Supply
chain management
E-procurement
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High
IT can enhance
delivery of product
Oil refining
Banking,
Airlines
Cement
Fashion
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IT and
strategy
Supply
chain management
E-procurement
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IT and
strategy
Supply
chain management
E-procurement
Benefits of e-procurement
Cost reduction
Might include process efficiencies, reduction in the actual cost of goods and ser vices, and
reduced purchasing agent overheads
Reduced inventory
levels
Control
Wider choice of
supplier
Improved
manufacturing
cycles
Knowing product numbers, bid prices and contact points can help businesses close a deal
while other suppliers are struggling to gather their relevant data
The ability to control par ts inventories more effectively
In theory, resources can be sourced from suppliers an ywhere in the world, perhaps at much
lower prices than could be obtained if the organisation only considered local suppliers
Moving to e-sourcing speeds up the sourcing process dr amatically but the increased efficiency
and speed can also put the rest of a supply chain in chaos if it is not prepared to step up its
performance to meet the increased speed in the purchasing link of the chain
Intangible benefits
Staff are able to concentrate on their prime function and there is financial tr ansparency and
accountability
Benefits to
suppliers
Reduction in ordering and processing costs, reduced paperwork, improved cash flow and
reduced cost of credit control
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IT and
strategy
Supply
chain management
E-procurement
Risks of e-procurement
Control over potential for unauthorised purchases; can suppliers deliver the required quality?
Organisational risk that processes do not work or users do not adapt to them
Data security issues: access, storage, protection, back-up
Management may lose spending control
Supply chain needs to be able to operate much more quickly else it could destabilise the system
Methods of e-procurement
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12: E-marketing
Topic List
E-marketing
Customer relationship management
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E-marketing
Customer relationship
management
E-marketing has been defined as 'the application of the Inter net and related digital technologies to achieve
marketing objectives' (Chaffey).
Functions of Internet marketing
Global reach
Lower cost
Ability to track and measure results
24 hour marketing
Personalisation/'one to one'
More interesting campaigns
Better conversion rate
Any online e-communication must be consistent with the overall marketing goals and current marketing
efforts of the organisation.
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Marketing
research;
Analysis of webserver log files
Tasks
Resources,
Partnering &
outsourcing
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Situational
analysis
Control
Objectives
Actions
Strategy
Tactics
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E-marketing
Customer relationship
management
E-marketing planning
Competitor analysis
Intermediary analysis
Marketing audit
Measurement: acquisition costs, leads, sales, ROI. Use web analytics to measure
impact of leads; sales and brand effects delivered over the Internet; create online
CRM capability
Objective setting
Strategy
Tactics
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Global reach of electronic products and ser vices opens previously inaccessible
markets for exploitation
Industry structure
Integration
Interactivity
Individualisation
Intelligence
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E-marketing
Customer relationship
management
2 Price
The Internet has made pricing very competitive; increased price transparency and the
ability to 'shop around'
3 Place
New market places and channel structures. Since the Internet has global reach,
customer convenience is very important
4 Promotion
Reach more customers; target more specifically; use of email; banner advertising
5 People
People can be replaced with automated processes, such as 'FAQ' pages on web
6 Process
New processes are required for online marketing, linking to other operational systems
7 Physical evidence
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One of the most complex decisions involved in the marketing mix is setting the price of the goods.
Eight step process for determining price
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E-marketing
Customer relationship
management
Online branding
A brand is a means of differentiating essentially identical products. It is effective to the extent that its production
can generate positive associations ('brand values') such as quality, style, value for money, advanced technology.
Visual identity is the basic element of ordinar y branding: this remains important online, but the domain name
assumes equal significance.
Online brand options
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E-marketing
Customer relationship
management
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Retention
Extension
Add value
Add value
Add value
Promotion
Incentives
Services
Profiles
Customer service
Direct e-mail
Extranets
Personalisation
Community
Promotions
Loyal schemes
Customer selection
Acquisition
Customer selection
Customer selection
Direct e-mail
I learning
On-site
promotions
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E-marketing
Customer relationship
management
Modern computer database systems enable rapid processing and analysis of customer data f or relationship
marketing purposes.
Relationship
Competitive commitment
Persuasive communication
Regular communication
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E-marketing
Customer relationship
management
B2B
B2C
Market structure
Nature of the
buying unit
Individuals or families
Type of buying
decision
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Method
Tailor messages based on customer Target mail and e-mail based on the types and frequency of purchases
usage
indicated by the customer's purchase profile.
Recognise customers after purchase Reinforce the purchase decision by appropriate follow-up.
Cross-sell related and
complementary products
Personalise customer service
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E-marketing
Customer relationship
management
Data mining is a set of statistical techniques used to identify trends , patterns and relationships in data. It may
be predictive or descriptive.
Operational CRM
Collaborative CRM
Analytical CRM
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CRM solutions
Applications
Electronic marketing: eg email campaigns
Target mailing: based on sales history
Sales analysis: details of sales achieved can
indicate prospects for further, related sales
Order building: order takers can be provided
with customer details, purchasing habits and
order history
Back office integration
Existing data must be integrated with the CRM
system so that loose ends are minimised; eg an
order taker must have access to inventory records
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Notes
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project management
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The project
lifecycle
4:16 PM
Building the
business case
Page 152
Practical aspects
of project planning
Project
management
Controlling
projects
Project
management software
A project is an undertaking that has a beginning and an end and is carried out to meet estab lished goals
within cost, schedule and quality objectives. (Haynes, Project Management)
Quality
Budget
Timescale
Unproven technology
Changing client specifications
Politics at all levels/lack of management support
Poor project management
Over optimism
Poor leadership by technical experts
Poor planning
Poor control
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Take
corrective action
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Perform
tasks
Measure
progress
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project management
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lifecycle
4:16 PM
Building the
business case
Page 154
Practical aspects
of project planning
Project
management
Controlling
projects
Project
management software
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Definition
Page 155
Design
Development
Delivery
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project management
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lifecycle
4:16 PM
Building the
business case
Page 156
Practical aspects
of project planning
Project
management
Controlling
projects
Project
management software
The business case is used to secure funding, then re visited and revised during the life of the project.
Elements of a business case
Introduction
Management summary
Description of current situation
Options considered
Analysis of costs and benefits
Investment appraisal
Impact assessment
Recommendations
Appendices and supporting information
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Decision of criteria
Advantages
Accounting
Rate of
Return
(ARR)
Acceptable projects
achieve target ARR
Select project with highest
ARR
Pay back
Period (PP)
Net Present
Value
(NPV)
Internal
Rate of
Return
(IRR)
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Limitations
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Building the
business case
Page 158
Practical aspects
of project planning
Project
management
Controlling
projects
Project
management software
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project management
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lifecycle
4:16 PM
Building the
business case
Page 159
Practical aspects
of project planning
Project
management
Controlling
projects
Project
management software
Work breakdown structure is the analysis of the project into units stages and tasks . It establishes time
estimates, resource and materials estimates, and identifies direct and overhead costs.
Gantt charts plan and record activities
Resource histograms plan and control resources
ACTIVITY
TIME
1
2
3
4
5
UNITS
8
7
6
5
4
3
2
1
7
14
C
21
42
DAYS
L
H
B
D
35
28
M
K
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Practical aspects
of project planning
Project
management
Controlling
projects
Project
management software
The person who takes ultimate responsibility for ensuring the desired result is achieved on time and within
budget is the project manager. The project manager has responsibilities to management (eg to k eep them
informed), to the project itself, and to the project team (eg ensur ing that the team has the resources required).
Skills required
Planning
Obtaining resources
Teambuilding
Communication
Co-ordinating project activities
Monitoring and control
Problem resolution
Quality control
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Multidisciplinary team
Members have different skills, knowledge and
experience. Such teams can solve problems with
cross-disciplinary aspects.
Multi-skilled team
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Practical aspects
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Project
management
Controlling
projects
Project
management software
THE OUTCOMES
1. Productivity
2. Group satisfaction
INTERVENING FACTORS
Members: Belbin identified that the members of effective teams play different roles within the team
Task: Degree of urgency, complexity and importance influence both group and manager
Process and procedures: A team that tackles its work systematically will be more effective than one that muddles through
Motivation and leadership: High productivity outcomes may be achieved if work is arranged so that satisfaction of
individuals' needs coincides with high output. Style of leadership can also affect the outcome.
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1 Co-ordinator
2 Shaper
3 Plant
6 Implementer
Introverted, but intellectually dominant and imaginative; source of ideas and proposals
but with disadvantages of introversion.
Analytically (rather than creatively) intelligent; dissects ideas, spots flaws; judges
accurately.
Sociable, extrovert, relaxed; source of new contacts, but not an originator; explores
opportunities.
Practical organiser, turning ideas into tasks; trustworthy and efficient, but not excited.
7 Team worker
8 Completer
9 Specialist
4 Monitor-evaluator
5 Resource-investigator
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Practical aspects
of project planning
Project
management
Controlling
projects
Project
management software
A progress report shows the current status of the project, usually in relation to the planned status . Where
actual progress is slower than planned, slippage has occurred. Slippage can be dealt with using a v ariety of
options:
Do nothing
Add resources to make up lost ground
'Work smarter' to be more efficient
Replan
Reschedule, ie change the phasing
Introduce incentives to enhance individual performance
Change the specification
If a project starts to slip, but has a fixed deadline and cannot be delayed, a project manager should consider
fast-tracking and crashing.
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Risk management
Benefits realisation
Assess risks
Probability
Consequences
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Practical aspects
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Project
management
Controlling
projects
Project management
software
Project management software can be used to help project planning and control.
Planning
Software can be very useful for scheduling resource usage (network diagrams; Gantt charts;
'what if?' analysis)
Estimating Store data about tasks to provide more accurate estimates for similar tasks in future
Monitoring Monitor actual progress, and automatically update the plan for critical path. Should help provide
an early warning of any risks to the project
Reporting Progress reports can be generated to help co-ordinate activities
Advantages
Disadvantages
May be difficult to use
Unnecessary for small, stand-alone projects
Managers spend too much time producing
documents rather than managing the project
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Topic List
The finance function
Finance and strategy
Financial management decisions
Cash forecasts
Obtaining equity funds
Bank loans and loan capital
Budgets
Evaluating strategic options
Ratio analysis
Comparison of accounting figures
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Finance
and strategy
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Financial
management decisions
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Cash
forecasts
Obtaining equity
funds
Budgets
Processing transactions
Maintaining accounting records
Producing month-end reports
Report results to internal and external
stakeholders
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function
Finance
and strategy
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Financial
management decisions
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Cash
forecasts
Obtaining equity
funds
Budgets
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Finance
and strategy
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Financial
management decisions
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Cash
forecasts
Obtaining equity
funds
Budgets
Orientation
Internal orientation
Direction
Backward looking
Goal congruence
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Competitor analysis
Financial effect of competitor response
Product profitability
Portfolio analysis
Customer profitability
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Pricing decisions
Product-market decisions
Capacity expansion
Brand valuation
Shareholder wealth
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Obtaining equity
funds
Cash
forecasts
Budgets
Funding strategies
Launch
(Questions mark)
Growth
(Star)
Maturity
(Cash cow)
Decline
(Dog)
Very high
High
Medium to low
Low
Keep low
May be increased
Can be high
Funding
Venture capital
Equity
Secured Debt
Nil
Nominal, if any
High
Total
Business risk
Dividends
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Finance
and strategy
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Financial
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Cash
forecasts
Obtaining equity
funds
Budgets
In seeking to attain the financial objectives of an organisation, a financial manager has to mak e decisions on three topics:
Investment decisions
Financing decisions
New projects
Takeovers
Mergers
Sell-off/divestment
Dividend decisions
Dividend decisions may affect
views of the company's long-term
prospects, and thus the shares'
market value.
Payment of dividends limits the
amount of retained earnings
available for re-investment.
Consider interaction of decisions, eg paying out dividends leaves less funds available to finance investments.
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Financial
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Cash
forecasts
Obtaining equity
funds
Budgets
Cash forecasting should ensure that sufficient funds will be a vailable, when needed, to sustain the activities of
an enterprise at an acceptable cost.
A cash budget or forecast is a detailed budget of estimated cash inflows and outflows incorporating both
revenue and capital items.
Cash forecasts can help in planning the str ucture of an organisation's finances
A business will also need to take account of economic variables (such as inflation, interest rates) and
business variables (such as changes in the competitive environment).
Cash deficits will be funded in different ways, depending on whether they are short or long term. Businesses
should have procedures for investing surpluses with appropriate levels of risk and return.
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Cash
forecasts
Obtaining equity
funds
Budgets
Equity is the issued ordinary share capital plus reserves which represent the investment in a company by its
ordinary shareholders.
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Cash
forecasts
Obtaining equity
funds
Budgets
Overdrafts
v
loans
Loans
Medium/long-term purposes
Interest and repayments set in advance
Bank won't withdraw at short notice
Shouldn't exceed asset life
Can have loan-overdraft mix
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Loan capital or loan stock is debentures and other long-term loans to a business. It has a nominal value,
which is the debt owed by the company, and interest is paid at a stated coupon on this amount.
Example
Company issues "10% loan stock"
Coupon is therefore 10% of the nominal value
So, $100 of stock will receive $10 interest each year (gross before tax)
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Financial
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Cash
forecasts
Obtaining equity
funds
Budgets
Strategic objectives
Strategic plans
Budgets
Benefits of budgets
Limitations of budgets
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Evaluating
strategic options
Ratio
analysis
Comparison of
accounting figures
Relevant costs and marginal costing are useful f or evaluating strategic options.
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Ratio
analysis
Evaluating
strategic options
Remember!
Consider the requirements of the question and the contents of the scenar io carefully before
calculating ratios. The examining team will be looking for relevant ratios accompanied by meaningful
comments, including appropriate comments on the limitations of ratio analysis.
Liquidity ratios
Comparison of
accounting figures
Current ratio
Inventory turnover
Account receivable
days
Dividend yield
Earnings per share
Price/earnings ratio
Interest yield
Dividend cover
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Evaluating
strategic options
Sales growth
Profit growth
ROCE
P/E ratios
Dividend yields
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Ratio
analysis
Comparison of
accounting figures
% growth in profit
% growth in turnover
Changes in gearing ratio
Changes in current/quick ratios
Changes in inventory/receivables
turnover
Changes in EPS, market price,
dividend
Remember, however:
Inflation can make figures
misleading
Results in rest of
industry/environment, or economic
changes to give context
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Notes
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Topic List
Strategic leadership
Job design
Knowledge work
Staff development
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Strategic
leadership
Job
design
Knowledge work
Staff
development
Trait theories
Behavioural theories
Transformational theories
Contrast with transactional theories (all others on this
page). Transformational theories emphasise teams,
change and vision to deal with r apid development in the
environment. Van Maurick lists five expectations of
modern leaders:
Contingency theories
Adair
Effective leaders attend to task needs, group needs and individual
needs
Fiedler
Leadership style depends on personality; effectiveness depends on
three situational variables
Position power authority
Task structure clear, well-defined
Leader/subordinate relations
Task orientated approach suitable when situation very favourable or
very unfavourable in less extreme cases, a people centred
approach is more effective.
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Job
design
Knowledge work
Staff
development
JOB DESIGN is all about organising work four approaches are identified.
Scientific Management
Japanese model
Job enrichment
Re-engineering
All job design must reconcile the need to exploit specialisation and the division of labour, with the need to
integrate and control the fragmented activities that result.
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Job
design
Knowledge work
Staff
development
Assumptions about
motivation
Pay piecework
Job design
Scientific
Management
Prescribed standard
methods
Human
relations/job
enrichment
Japanese
style
Multi-skilling to achieve
flexibility
BPR
Strong leadership from the Emphasis on market discipline Process teams. Empowerment.
top. Exploitation of IT.
and serving the needs of the
Multidimensional jobs
Abandonment of traditional customer
structures and methods
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Job
design
Knowledge work
Staff
development
Knowledge is a vital strategic asset and m ust be managed. Since it primarily exists in the brains of
employees, they must be managed in a way that stimulates learning and creativity.
To
Type of work
Individual
Project teams
Focus
Task performance
Narrow
Rapid
Slow
Employee loyalty
Peers, profession
Contribution to success
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Job
design
Knowledge work
Staff
development
Human resource development (HRD) can be viewed as an investment in strategic capability, since it improves both skills
and commitment. Investment in people is akin to investing in any other type of asset people become 'human capital'.
This can be either 'top-down' (driven by management) or 'bottom-up' (empowered employees recognise their own skills
gaps).
Competences
The required outcomes expected from the performance of a task in a w ork role, expressed as performance standards
with criteria.
Succession planning
Succession planning provides for continuity of leadership and facilitates management development at all levels, by focusing it
on objectives that support overall strategy.
The plan should focus on future requirements
Top management should drive the plan, not the HR specialists
A pool of talent and trained ability is a more useful asset than simple identification of succession candidates
Assessment should be objective and not given precedence over development
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Topic List
Realised strategy
Developing intended strategies
Developing emergent strategies
Challenges and implications
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Developing
intended strategies
Developing
emergent strategies
Challenges and
implications
The 'strategy as design' lens sees strategy as an essentially managerial process. Understanding of the strategic position
informs strategic choice: and this choice creates intention. Strategy into action is about how that intention is realised. A fully
realised strategy can also arise in the ways illustrated by the two other strategy lenses, experience and ideas. Such strategies
emerge rather than being the result of any kind of complex, top down management process.
Also, remember that managers' intentions may not actually be realised: this can happen for a variety of reasons, such as
lack of resources, failures of forecasting, lack of control and so on.
Emergent strategy
Realised strategy
Intended strategy
Unrealised strategy
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SWOT
Position
audit
Strategic choice
Generate options eg generic
strategies, market based
strategies
Graduate options
Strategic implementation
Projects
Resources
Change
e-business
etc
Feedback control
Actual performance
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Realised strategy
Advantages
Identifies risks
Forces managers to think
Forces decision-making
Formal targets enable control
Enforces organisational coherence
and co-ordination
Disadvantages
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Developing
intended strategies
Developing
emergent strategies
Challenges and
implications
Large scale planning departments were used in the mid 20th centur y
to operate the formal approach. More recently, other more flexible
techniques have been used.
Workshops and project teams
Can be set up at any level to consider problems
Can work within overall strategic direction from above
Can undertake strategic analysis
Can generate new ideas and approaches
Can work on strategic change
Consultants
Can lend authority and credibility to top management
Can bring fresh approach to confused situations
Can bring wide experience and knowledge
Can have wide range of roles in change management
May assist with strategic decisions
Imposed strategy
Powerful external stakeholders can constrain decisions about
strategy. Very obvious in public sector where government policy sets
the framework for decisions.
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Developing
intended strategies
Developing
emergent strategies
Challenges and
implications
Emergent strategies do not arise in a random way: they require extensive management
Strategies may emerge through a process of
logical incrementalism: the deliberate
development of strategy by experimentation and
learning from partial commitments'.
Generalised view of goals
Constant environmental scanning rather than
firm forecasts
Combination of strong core business and
experiments with options by project groups
Formal and informal processes of development
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Developing
intended strategies
Developing
emergent strategies
Challenges and
implications
Danger!
Strategy can emerge from the assumptions and pr actices of the paradigm. This brings experience
of past success to the problem. However, this process can lead to strategic drift, especially if major
organisational change is required.
Strategic drift
Occurs when strategies progressively fail to address the strategic position of the organisation and
performance deteriorates.
Johnson, Scholes and Whittington suggest that strategic drift arises because organisations prefer
small adjustments to large ones.
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Developing
intended strategies
Developing
emergent strategies
Challenges and
implications
You need to remember that there is no single correct way to develop strategy an effective strategy may result from the
simultaneous working of several processes. Strategy development is likely to vary at different times and in different contexts.
As part of strategic management, an organisation's environment can be analysed in ter ms of complexity and change:
Environmental
Conditions
Simple
Complex
Static
Historical analysis and
forecasting
Scenario planning
Logical incrementalism
Learning organisation
Decentralisation and
specialisation
Decentralisation
Specialisation
Experience
Learning
Dynamic
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Developing
intended strategies
Developing
emergent strategies
Challenges and
implications
At the end of the syllabus, review the subject of strategy as a whole, and think how all the components fit together, using the
relational diagram of syllabus capabilities for P3 as a guide:
Strategic position (A)
Business and
process
change
(D)
Project
management
(F)
Information
technology
(E)
Financial
analysis
(G)
People (H)
Remember the importance of having an overall strategic perspective (position, choice, action)
Remember also the need for all the components of an organisation (middle and bottom la yers) to fit with, and suppor t,
that overall strategy; and finally remember that sometimes stategy can emerge from those middle and bottom la yers
rather than being imposed by the strategic apex
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Notes
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Notes
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Notes
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Notes
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Notes
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Notes