Acca P3

Notes
ACCA Paper P3
Business Analysis
For exams in 2011

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ExPress Notes
ACCA P3 Business Analysis
Contents
About ExPress Notes 3
1. The strategic position of an organization 7
2. The environment and competitive forces 10
3. Marketing and the value of goods and services 16
4. Internal resources and stakeholders 19
5. Strategic choice 22
6. Strategic action 29
7. Information technology 33
8. Project management 38
9. Financial analysis & people 41
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Chapter 1
The Strategic Position of an

Organization
START
The Big Picture
This chapter provides us with a number of key definitions as well as an introduction to some
of the main strategic models.
KEY KNOWLEDGE
Definitions & strategic models

Key definitions:
Strategy: Various definitions are present but a straightforward view is “Strategy is a plan of
action designed to achieve a particular goal”
Strategic planning: An organisation’s process for ascertaining the strategy it should adopt,
taking into account what they want to do, how they are going to do it and what resources
they will need. Strategic planning covers where the organisation is planning on going,
impacts on the whole organisation and involves the long term view. Note the distinction in
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what is meant by “long term” (for example the “long term” is different when comparing the
airline industry with the fashion industry.)
Strategy Hierarchy:
Corporate strategy: covers the “big view” of the organisation.

It answers the question “What business or businesses should
Corporate we be in?
Business strategy: the strategy of a single business

Business organisation or the strategies of strategic business units
(SBUs)
Functional Functional (or operational) strategy: the functional strategies

involving items such as marketing, IT and HRM that support
the business strategy.
It is important that the strategies support each other. For example, if the Business Strategy
of a SBU revolves around providing high quality consultancy advice on certain areas, a
functional strategy for HRM of minimising labour costs would cause problems.
Different strategic models:
1. Johnson, Scholes and Whittington (JSW): The “Rational Model” which shows the strategic
planning process in 3 categories of analysis – choice – implementation.
2. Mintzberg’s Emergent strategy: Very few strategies will result in outcomes exactly as
planned. Instead, strategy will “emerge” and develop over time as the strategy evolves. It
will result in intended, realised and emergent strategies.
3. Lindblom’s incrementalism: Supports the view that strategy delivery should be based on
small (incremental) changes over time rather than a limited number of extensive planned
strategies.
4. Freewheeling opportunism: No planned strategy approach. Grab opportunities as and

when they are identified.
5. JSW “strategic lenses”: design - experience - ideas
Strategic planners should look at strategy through all 3 lenses.
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Analysis
Choice Implementaion
Strategy as design
• Strategy is a process of “design” with logical thought out processes

(in effect, a rational model).
Strategy as experience
• Strategy develops based on previous experiences (in effect, an

emergent strategy).
Strategy as ideas
•Strategy comes from within the organisation as opposed to the

senior management. Ideas are created at all levels of an
organisation.
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Chapter 2
The Environment and Competitive

Forces
START
The Big Picture
In order to design suitable strategic plans, an organisation needs to be aware of the

external issues facing it. It cannot plan in isolation. This chapter looks at a number of
methods of reviewing the environment surrounding an organisation. This area is examined
on a regular basis.
KEY KNOWLEDGE
PESTEL (or PEST or SLEPT) Analysis

An analysis of the external macro environment. The organisation is unlikely to be able to
influence these factors but it should have an awareness of the issues.
Political - global, national and local changes and trends. Taxation policies. Relationships
between certain countries.
Economic - global, regional and local issues. Exchange rates. Link to topical issues such as
global recession, current interest rates for funding.
Social - changes in behaviour and expectations in society. Demographics, lifestyle.
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Technological - changes including hardware, software, e-issues, materials and services.
Global communications.
Environmental – what are the environmental considerations such as recycling, pollution,

attitude of the media, customers, etc.
Legal - changes and predicted changes to regional (e.g. EU) and national legislation.
Regulatory bodies. Changes to employment law.
KEY KNOWLEDGE
Porter’s Diamond

This is a model outlining the theory why certain industries are competitive in particular
locations.
There are 4 broad factors within the diamond.
Factor
Conditions
Firm Strategy Demand
& Structure Conditions
Related &
Supporting
Factor conditions include physical resources, human resources and specialised resources.
Demand conditions. A country with sophisticated home buyers who “demand” quality,
advanced and innovative products can create international competitiveness
Related and supporting industries can produce inputs for a company which feed into the
success of the business.
Firm strategy, structure and rivalry. Competition in the home market drives innovation and
quality. Protectionism can weaken a market.
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KEY KNOWLEDGE
Quantitative Techniques

In addition to the qualitative methods of forecasting mentioned above, there are

quantitative techniques where businesses attempt to quantify these forecasts.
Techniques include:
1. Linear regression
This can be used to make forecasts whenever a linear relationship is assumed or predicted.
It models the dependence of one variable (e.g. costs) on one or more explanatory variables
(e.g. output).
2. Time Series Analysis
This involves analysing historical data to make forecasts about the future. The relationship
doesn’t have to be linear and can for example take account of seasonality.
KEY KNOWLEDGE
Porter’s 5 Forces

This model examines the role of 5 forces close to an organisation that impact on its ability to
make a profit and hence how attractive a particular market or industry is.
There are 5 forces as follows:
1. Threat of substitute products
If there are similar products, a customer will be more likely to switch rather than stay with a
product when there are price rises (elastic demand).
2. Competitive rivalry
The rivalry will depend on the number and strength of competitors, economies of scale and
exit barriers.
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3. Threat of new entrants
Markets generating high returns will attract new entrants which in turn could reduce
industry profits. Barriers to entry such as government licenses (mobile phone operators) are
important in reducing the threat of new entrants.
4. Power of customers
The stronger the power of the customer the more pressure it can place on the company.
Issues to consider include the size of the customer relative to the firm’s customer base,
switching costs and availability of substitute products.
5. Power of suppliers
Suppliers of materials and services can exercise power over an organisation. This depends
on the level of differentiation of the product, presence of substitute products, etc. Compare
the power of Intel supplying computer chips to the computer industry vs. a sugar producer
supplying sugar to a soft drinks manufacturer.
Entrants
Suppliers Competition Customers
Substitute
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KEY KNOWLEDGE
Product life cycle

The conditions in which a product is sold change over its life.

Introduction Growth Maturity Decline
Characteristics of each stage
Introduction Growth Maturity Decline

Product may
Potentially New entrants Products start to have minor
unique product. arrive. become similar enhancements
Product
Quality still Design with few to try to “extend
being “tested”. improvements. differences. the tail” of the
lifecycle.
Price can be
Could be high
maintained but Possibly reduced
for “skim Possible further
pressure on prices due to
Price pricing” or low reductions to
pricing arising increased
for penetration stimulate sales.
due to increased competition.
pricing.
competition
Distribution
Limited, Widespread Reduced number
channels
Place specialist distribution of distribution
increase as
locations. channels. channels.
demand rises.
Focus on any
Aimed at the Expands to the Limited amount
Promotion differentiating
“early adopters”. larger market. of promotion.
products.
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Strategic groups
A strategic group comprises companies within an industry that have similar characteristics or
business models. For example, the courier industry can be divided into different strategic
groups such as the global courier companies (e.g. DHL, FedEx, TNT and UPS) and national
courier companies based on variables such as size, geography served and strategic
approach.
An analysis of strategic groups is useful as it helps to identify competitors and how they
compete as well as identifying potential opportunities.
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Chapter 3
Marketing and the Value of Goods

and Services
START
The Big Picture
Paper P3 is not a marketing exam but you need to have an understanding of the
fundamental principles behind marketing and how they impact on the strategic process.
KEY KNOWLEDGE
Market segmentation

A market segment is a group of customers that share similar characteristics and as a result
have similar needs. Ideally, a market segment should have the following:
 distinct from all other segments

 be the same within the segment
 identifiable and accessible
Methods of segmentation
There are numerous methods. Two of the most common ones are:
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 geographical (e.g. country or region)
 demographic (e.g. age, gender, occupation)
KEY KNOWLEDGE
Marketing mix

The 'marketing mix' is a set of controllable marketing tools that organisations can use to
achieve its marketing objectives. It is commonly known as “the 4Ps”.
Product Price
 Features  Pricing strategy (e.g. penetration,
 Size, colour, components skim)
 Brand  Discounts (e.g. volume, payment)
 Packaging  Payment / credit terms
 Accessories
Place Promotion
 Distribution channels  Selling strategy
 Geographic coverage  Sales promotion
 Warehousing and inventory levels  Advertising
 Transportation
The service marketing mix (extended marketing mix) refers to the 7Ps. Namely, the 4Ps
model plus:
People
 Customers
 Employees – recruitment and training
 Management
Processes
 Methods of providing a service
Physical evidence
 Linked to using a service – e.g. brochure, certificates
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KEY KNOWLEDGE
Critical success factors (CSF)

Within any organisation there are certain factors that will be critical to the success of that
organisation. If the organisation fails to achieve the objectives associated with these
particular factors the organisation will fail.
CSFs will vary from industry to industry. An example of a CSF for an online food delivery
company would be prompt and accurate home delivery.
Key Performance Indicators (KPIs) measure the performance of the CSFs.
KEY KNOWLEDGE
Porter’s value chain

Firm Infrastructure
Support
Support
Human Resource Management
Activities
Technological Development
Procurement
Service
Operations
Outbound
Marketing
Logistics
Primary
Inbound
& Sales
Logistics
Primary Activities
The value chain was introduced by Porter and represents an approach to looking at the
development of competitive advantage within an organisation. All organisations consist of
activities which “link” together to develop the value of a business. Together these activities
represent the value chain.
The value chain represents a series of activities that both create and build value. Combined
they represent the total value delivered by an organisation. The “margin” in the diagram is
the added value (the difference between the total value of the activities and the cost of
performing them).
Primary activities: related with production. Support activities: provide the background
for the effectiveness of the organisation (e.g. HRM)
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Chapter 4
Internal Resources and Stakeholder
START
The Big Picture
This chapter looks at how organisations utilise resources and competencies to develop
competitive advantage.
KEY KNOWLEDGE
SWOT analysis

Strengths (internal) Weaknesses (internal)
e.g. resources and capabilities e.g. lack of certain resources or capabilities
Opportunities (external) Threats
e.g. arrival of new technology e.g. arrival of substitute product
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Threshold resources and competencies: These are the minimum required by an organisation
to meet customer’s minimum requirements. In effect, this is what is required to stay in
business.
Core competencies: These are processes and activities undertaken by an organisation which
are seen as being central to their success. Core competencies are capabilities which are
critical to a business achieving competitive advantage.
They provide customer benefits and are difficult for competitors to imitate.
A core competency can take many forms such as technical knowhow or customer
relationships.
Amazon.com has a number of core competencies such as reliable and efficient online
ordering and delivery system.
KEY KNOWLEDGE
Stakeholder mapping

Stakeholders are individuals, groups or organisations that can impact or be impacted by, an
organisation.
Mendelow’s Matrix allocates stakeholders into quadrants according to their level of power
and how likely they are to exercise that power (i.e. their interest).
Stakeholder Interest
Low High
High
Keep satisfied Key players
Stakeholder
Power
Minimum effort Keep informed
Low
Low High
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KEY KNOWLEDGE
Culture

The Cultural Web (Johnson) provides an approach for analysing or influencing an
organisation’s culture.
There are 6 inter-related elements which together help to create the “paradigm” (pattern) of
the work environment.
Stories
Power
Rituals
Structures
The
Paradigm
Control
Symbols
Systems
Organ.
Structures
1. Stories and myths – The previous events and people talked about. Creates a message
about what is valued.
2. Rituals and Routines – The daily behaviour of people within the organisation that signals
what is acceptable.
3. Symbols – Logos and design, dress codes.
4. Organisational Structure – Both the formal and informal reporting structures.
5. Control Systems – Processes in place to control the organisation.
6. Power Structures – who makes the decisions, who influences the strategic direction?
Corporate Social Responsibility (CSR) refers to the organisation’s duty to look after all
of its stakeholders as opposed to just the shareholders.
Traditionally, CSR was often seen as a burden on a company but now it is often seen as a
source of opportunity (e.g. improvement in a company’s reputation).
CSR often involves a Stakeholder Needs Analysis whereby organisations identify their key
stakeholders and what their needs are.
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Chapter 5
Strategic Choice
START
The Big Picture
This chapter covers a number of important issues. The focus is on the choices available to
an organisation as well as methods for making appropriate decisions.
KEY KNOWLEDGE
Parenting style theory (Gould & Campbell)

This is a framework for the role of the corporate headquarters and how it gets involved in
the strategic development of the businesses within the group.
They identified 3 styles which companies tend to follow:
Financial Control Strategic Control Strategic Planning

Head office sets financial A middle ground between Head office plays a central
targets but limited role in financial control and strategic role in setting the strategy of
setting strategy of SBU. planning. Head office co- the SBU.
ordinates and reviews
strategy.
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KEY KNOWLEDGE
Boston Consulting Group (BCG) Matrix

This matrix helps organisations analyse their product lines or business units. It helps
identifies priorities and where resources should be allocated.
Items are allocated to the various quadrants according to how attractive the market is
(measured as the growth rate) and how strong a position they hold within the market (their
market share)
Market Share
High Low
High Stars Question Marks

Growth Rate
Low Cash Cows Dogs
A balanced portfolio would have:
1. Stars to ensure the future.
2. Question marks to convert to Stars.
3. Cash Cows to provide funding to develop the Stars and Question Marks.
General Electric matrix
An organisation’s SBUs are entered onto the matrix based on industry attractiveness and
business strength. The appropriate action for each segment is shown in the table below.
Selective
High Invest / Grow Invest / Grow
Business Position
Investment
Selective
Medium Harvest / Divest Invest / Grow
Investment
Selective
Low Harvest / Divest Harvest / Divest
Investment
Low Medium High
Industry Attractiveness
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Business strength determined by for example, financial position, competencies and supplier
relationships.
Industry attractiveness determined by for example, competitors within the industry, growth
rate of industry.
The three cells in the top right hand corner of the matrix are the most attractive in which to
be. These require a policy of investment for growth.
The three cells running diagonally are of medium attractiveness. Management should review
these carefully to determine which ones to invest in and retain.
The three cells in the bottom left hand corner are less attractive. Management should
consider a policy of harvesting or divesting these items.
KEY KNOWLEDGE
Porter’s Generic Strategy

Porter identified 3 generic strategies that are commonly used by businesses to create and
maintain competitive advantage:
 Differentiation
 Cost leadership
 Focus
Selling price
Higher profit
Selling Selling
due to higher
Profit price price
selling price
Profit
Higher profit
Profit due to lower
cost
Cost Cost Cost
"In the Cost

Differentiation middle" leadership
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1. Differentiation
This involves a product or service that is considered to be “different” or unique within its
industry. Due to these unique characteristics the organisation can charge a premium. The
uniqueness of the item could be based on a variety of things such as the design, technical
features, support service, branding, etc.
Examples of companies that have used the differentiation strategy include:
 Apple computers, iPhones and iPods.

 Land Rover off-road cars.
2. Cost leadership
This is where an organisation can produce goods or services at a lower cost than the
industry average. Importantly, note that this does not mean lower quality.
Low cost production can be obtained by way of economies of scale, preferential access to
raw materials or labour, access to extensive distribution channels, etc. The “cost leadership
product” is often a basic good or service which is made available to a large customer base.
Examples of companies that have used cost leadership strategies include:
 Dell computers
 Wall mart stores
3. Focus
This is where an organisation concentrates on a small number of niche markets.
Differentiation focus – an example would be a specialist holiday or tour operator (e.g.

specialising in Skiing holidays).
Cost focus – an example would be a small chain of retailers that create their own label range
of products.
Strategy clock (Bowman)
The strategic clock is a method of analysing an organisation’s competitive position in

contrast with its competitors’ ways of competitive positioning.
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The clock is classified into 8 parts. Namely:
1. Low added value

2. Low price
3. Hybrid
4. Differentiation
5. Focused differentiation
6. High price / standard value
7. High price / low value
8. Standard price / low value
4. Differentiation

High
3. 5. Focussed
Hybrid differentiation
Perceived added value
2. Low price 6
7
1. Low price, low
added value 8
Low
Low Price High
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KEY KNOWLEDGE
Ansoff’s matrix (the Product – Market Mix)

This allows companies to identify a number of options to grow the business via existing and
/ or new products in existing and / or new markets.
Existing Products New Products
1. Consolidation
Existing Markets 2. Penetration 4. Product development
3. Withdrawal
New Markets 5. Market development 6. Diversification
1. Consolidation. This is not “doing nothing”. It is doing enough to maintain the existing
position.
2. Penetration. Actively trying to increase the share of the market through techniques
such as advertising and PR.
3. Withdrawal. Pulling out of a particular market. Reasons could include it’s loss making
or a company wants to utilise resources elsewhere.
4. Product development. Developing new products to sell to existing markets. An

example would be a soft drinks manufacturer launching a new healthy range of
drinks.
5. Market development. Existing products are sold in new markets. This can either be
for example geographical (McDonalds establishing restaurants in new geographical
areas) or can be repositioning the market (e.g. Land Rover developing from an
agricultural market vehicle to mainstream car producer).
6. Diversification. Generally considered to be the most risky. There are a number of

types of diversification:
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a. Backwards vertical integration whereby an organisation takes on the role of
its supplier. An example would be an oil refining company taking on the role
of its supplier of oil exploration – i.e. it would now be in a position to supply
itself with its raw materials.
b. Forwards vertical integration whereby an organisation takes on the role of its
customer. For example, a farmer sets up a farm shop to sell direct to the
public rather than to shops.
c. Unrelated diversification refers to a new product or service in a completely
new market.
Methods of expansion.
Internal Development. “Organic” growth using an organisations own resources.
Mergers & Acquisition. Often treated as being the same thing, these are in fact different. A
true merger is a “joining of equals” where organisations of approximately the same size and
strength come together (e.g. when Glaxo Wellcome and SmithKline Beecham merged to
form GlaxoSmithKline). An acquisition (or takeover) is usually the purchase of a smaller
target company by a larger one. The acquisition may be friendly (the company being
acquired is in favour of the takeover) or hostile (the company does not want to be taken
over).
Strategic Alliance. A formal relationship between parties which aims to achieve certain
strategic objectives whilst enabling them both to remain independent. An example of a
strategic alliance would be when a hotel chain and a restaurant chain work together.
Franchise. The Franchisor gives the right to the Franchisee to use its brand in exchange for
a capital sum and /or a royalty payment. Examples of a franchise include certain McDonald’s
restaurants around the world.
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Chapter 6
Strategic Action
START
The Big Picture
This chapter covers a number of techniques involved in the implementation of strategic

plans.
Structures
Corporate structure was studied at paper F1. Paper P3 is not so much about explaining the
structures but rather matching the appropriate structure with the chosen strategy.
Types of structure
 Functional: based around functions such as production, R&D, sales, etc

 Divisional: based around divisions which could be geographic divisions or product
divisions.
 Matrix: this combines functional and divisional
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KEY KNOWLEDGE
The Change Kaleidoscope (Balogun and Hope Hailey)

This helps management design approaches to change within a company. It contains 3 rings:
 An outer ring which relates to the wider strategic change.

 A middle ring which looks at the more specific change features.
 An inner ring which provides a range of choices for management to use.
Organisational Change Context
Power Time
Design Choice Scope
Readiness
‐ change path
‐ change start
‐ change target
Capacity
‐ change roles
Preservation
Capability
Diversity
The kaleidoscope does not create prescriptive choices for management to use. Instead, just
like a real kaleidoscope changes the image so the change design mechanisms will change.
KEY KNOWLEDGE
Lewin’s change models

1. Unfreezing, Moving, Refreezing
Unfreezing Moving Refreezing

Shows the need for change The actual change occurs Stabilising the situation to
and gets people “ready” for here. the new approach.
change.
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Change can only happen once people have been “unfrozen” and existing ideas and
misconceptions have melted.
2. Force field analysis
Driving forces (pushing Restraining forces

for change) (resisting change)
Current state Desired state
The length of the arrow represents the time duration of the force and the thickness of the
arrow represents the strength of the force.
There are driving forces pushing for change and forces resisting change. To encourage
change, change agents should strengthen driving forces and reduce restraining forces.
KEY KNOWLEDGE
Business Process Reengineering (BPR)

BPR is a method aimed at improving the efficiency and effectiveness of business processes
within an organisation.
The process – strategy matrix (Harmon) is based on:
 The importance of the process

 The complexity of the process
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Complex process that are not part Complex processes of high

Complex
of core competencies. strategic value.
Process type
Outsource Focus on people based process

improvements
Simple processes of low value. Simple processes of high strategic

value.
Simple
Automate in ERP application Automate for efficiency

or outsource
Low High
Strategic importance of process
Business processing Outsourcing (BPO) is a form of outsourcing that involves contracting 3rd
parties to undertake specific functions. Typically, back office functions such as accounting
activities are outsourced.
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Chapter 7
Information Technology
START
The Big Picture
This looks at IT in the context of supporting strategic plans and linking with various models
referred to previously such as Porters 5 Forces, Value Chain Analysis, etc.
What is e-business?
E-commerce is the buying and selling of goods and services over the internet.
E-business is broader than e-commerce as it also includes IT issues that support key
business processes as well as enabling businesses to work more closely with suppliers and
to better satisfy customer needs.
It inherently involves fast moving and innovative processes.
B2B (Business to business): transactions between business (e.g. a manufacturer to a

wholesaler). Could be used to link a VCA of the purchaser to a VCA of a supplier.
B2C (Business to Consumer): an individual purchasing from a retailer.
Stages of eBusiness
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1. Web presence – in effect being simply a “brochure on the internet”. The aim is to reach a
wider audience and broaden the brand image.
2. Basic e-commerce - undertaking entry level e-commerce to enable the business to

conduct transactions on line. Facilities such as PayPal have made this possible for even the
smallest of businesses.
3. Building and maintaining relationships – integrating core areas of the business to enable
closer and quicker relationships with suppliers and customers. Includes CRM facilities.
4. Creating the future – fully integrated systems with minimal human interaction. Systems
update automatically.
McFarlans Grid
This is used to assess business and IT alignment and to select projects which need
developing.
Strategic impact of future systems

Low High
Low
Turnaround – not overly
Support - Uses IT primarily for
Strategic impact of
dependent on IT at the moment

current systems
support activities such as payroll

but may look to use IT to improve
processing.
position in the future.
Factory – IT is used heavily for

day to day business but not Strategic – critical for success
viewed as a competitive both now and in the future.
advantage.
High
Push / Pull Supply Chain
A supply chain is the system of resources, processes and people that move a product or
service from the initial supplier to the end customer. The supply chain transfers the raw
materials into a finished product that will be delivered to the end customer.
A push based supply chain is where the products are pushed through the process to the end
customer (i.e. from production to retail). Manufacturing levels are often based on historical
levels.
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The majority of businesses comprise a hybrid of some form between push and pull supply
chains. Ford is an example of a business at the push end of the scale whilst technology
companies such as Dell are at the other end where demand pull is dominant.
E-marketing using the 6 Is.
1. Interactivity – traditional marketing is mainly push whereas e-marketing is

predominately pull (i.e. the customer looks for the information)
2. Intelligence – a wide variety of low cost marketing information can be collected.
3. Individualisation – personalization is easier compared to the traditional mass

marketing methods.
4. Integration – possible to integrate e-communication into the wider e-buying process.
5. Industry structure – can be radically impacted as a result.
6. Independence of location – e communication creates global possibilities from remote

locations.
Customer Relationship Management (CRM) consists of systems and processes that

organisations use to organise and develop both current and prospective customers. Typical
objectives of a CRM system are to improve customer service, build loyalty and ultimately
improve the performance of the organisation.
CRM involves such activities as front office (e.g. direct contact with customers), back office
(e.g. invoicing procedures) and B2B relationships (e.g. interaction with suppliers).
E-business Pricing
E-business pricing can follow similar pricing techniques to traditional areas of business.
Points to be aware of include:
Price-Quality Relationship
A priori one would expect a positive correlation between price and quality.
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High Skimming Premium
Price
Low Economy Penetration
Low High
Quality
The four principal pricing strategies are shown in the above quadrants. The more interesting
ones involve High-Low and Low-High combinations.
Economy (pricing)
This is a no frills low price.
Skimming
Enter the market at a high price to catch customers willing and able to pay the price.
Penetration pricing
Go in at a very low price to win market share.
Premium pricing
Maintain a high price due to the nature of the product.
Cost plus
A markup is added to the (production) cost.
Target pricing
This method “backs into” the price by calculating the required profit and the possible
production costs first.
Promotional Pricing
These are in support of campaigns to raise customer awareness of a product.
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Perceived value pricing
Plays on perception of value and what the market is willing to pay.
Value Pricing
Increasing the value content of the product so as to defend market share (in times of
difficult economic conditions or competition).
Product range pricing
Sell a “core” product cheaply and price high related products.
Captive Product Pricing
Similar to “product range” but product is more closely tied to the initial product.
Competitive pricing
Using competitors as a benchmark.
Price differentiation
Pricing the same product at different levels in different markets.
Psychological Pricing
Plays on the emotion of the consumer.
Product Line Pricing
The overall price reflects the benefits provided by the constituent parts.
Optional Product Pricing
The pricing of additional products and services once the customer has made the initial
purchase.
Product Bundle Pricing
Combining products into one pack and pricing it overall.
Geographical Pricing
Similar to price “differentiation”.
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Chapter 8
Project Management
Project management is the process of planning and organising resources to achieve a

specific goal or objective. A project is a separate task having a defined beginning and
ending. Given the temporary nature of the majority of projects there are specific skills that
are necessary for managing projects.
Typical challenges for project management are:
 Scope (what exactly is required from the project)

 Time
 Budget
The major stages of project management revolve around the following:
 Initiation
 Planning or development
 Production or execution
 Monitoring and controlling
 Closing
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Stages of project management
KEY KNOWLEDGE
Work Breakdown Structure

A work breakdown structure (WBS) is a tool used in project management to breakdown and
organise the total work of the project into individual discrete components. An extract for a
WBS when a company decides to enter a new market with an existing product is:
Enter a new market
Team 1 Team 2 Team 3

Marketing Logistics Legal
Local Local
Ideas
distributors requirements
Marketing Transport Accounting

plan mechanism consolidation
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KEY KNOWLEDGE
Network diagrams (Critical Path Analysis)

Critical Path Analysis (CPA) formally identifies tasks which must be completed on time for
the whole project to be completed on time. It is a project management tool that identifies:
 Individual activities that make up a project.

 The order in which the activities have to be undertaken.
 Activities which can only happen once other activities have been completed.
 Activities which can be undertaken simultaneously.
KEY KNOWLEDGE
Project Initiation Document

A Project Initiation Document (PID) is a term representing the initial plan of approach
for a project.
The PID brings together all the key information that is needed to commence and run the
project. All the project stakeholders should be aware of it and it should be signed off by the
project sponsors.
It defines all the major aspects of a project and forms the basis for its management and the
assessment of its overall success.
Typical contents of a PID include:
 Project objectives
 Scope
 Project team members
 Business Case
 Constraints
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Chapter 9
Financial Analysis and People
START
The Big Picture
Financial analysis is dealt with in depth elsewhere in the ACCA syllabus. The key
thing for the P3 syllabus is using financial information to support or enhance your
arguments.
KEY KNOWLEDGE
Financial expectations of stakeholders

Johnson & Scholes propose that strategic options are evaluated using:
1. Suitable. Would it help? Does it fit in with the strategic position of the
organisation. e.g. does it take advantage of an opportunity or reduce a threat
(within SWOT analysis)
2. Feasible. Would it work? Use of techniques such as cash flow analysis and
working capital reviews.
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3. Acceptable. Is it acceptable to the relevant stakeholders? Techniques to use
include NPV, ROCE, sensitivity analysis and ratio analysis.
Financial implications of strategic choices.
1. Efficiency ratios (e.g. asset turnover, debtor days and creditor days).
2. Gearing ratios (e.g. debt equity ratio).
3. Liquidity ratios (e.g. current ratio and quick ratio).
4. Profitability ratios (e.g. gross margin, operating margin and ROCE).
5. Interest ratios (e.g. interest coverage).
Leadership
There are numerous theories on leadership.
Analysing them into two complementary groups results in:
1. Traditional. This group includes the trait theories which state that a person will be a
good leader if they have certain characteristics (traits).
2. Contemporary. This group involves transactional leaders (who focus on systems and
processes) and transformational leaders who provide vision and inspiration as well as
utilise emotional intelligence to improve the situation.
KEY KNOWLEDGE
The Budgetary Process
Budgets
A budget is a quantitative plan addressing the future.
Budgetary control systems seek to monitor performance against the budget in a timely way
so that deviations can be identified and rectified. The system can only work as well as the
care and thought that went into defining performance targets to be measured, and the
incentives (and sanctions) that follow from achievement (or not) of those targets.
Goal congruence at all levels of the organisation – corporate, divisional and individual – must
exist for a budget, and its attendant control systems, to be effective.
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Problems frequently encountered when using conventional budgets:
 They invite “gaming” of the system;
 They can be inflexible;
 They are often imposed from the top – “Top Down”;
 There is an indirect connection with the company’s strategy;
 They are used for too many different purposes;
 They reinforce centralising tendencies in the company;
 There is a lack of goal congruence between corporate, divisional and individual goals
KEY KNOWLEDGE
Decision Trees

A decision tree is a schematic tree-shaped diagram which is used to determine a particular

course of action. Each branch of the decision tree shows a possible decision or occurrence.
The tree structure shows how one choice flows to the next. The use of branches indicates
that each option is mutually exclusive.
Decision trees allow users to take a situation with multiple possible solutions and display it in
a simple, easy-to-understand format that shows the relationship between different events or
decisions. The tree starts on the left and the furthest branches on the tree represent
potential end results.
(end of ExPress Notes)
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1. The strategic position of an organization 7

2. The environment and competitive forces 10

3. Marketing and the value of goods and services 16

4. Internal resources and stakeholders 19

9. Financial analysis & people 41

Components of an effective study system

 The ExPress notes for that paper

Your stage in These ExPress ExP ExP ACCA online

Our ExPress notes fit into our portfolio of materials as follows:

Notes Notes Notes

To maximise your chances of success in the exam we recommend you visit

The Strategic Position of an

Corporate strategy: covers the “big view” of the organisation.

Business strategy: the strategy of a single business

Functional Functional (or operational) strategy: the functional strategies

Different strategic models:

4. Freewheeling opportunism: No planned strategy approach. Grab opportunities as and

5. JSW “strategic lenses”: design - experience - ideas

Strategic planners should look at strategy through all 3 lenses.

• Strategy is a process of “design” with logical thought out processes

• Strategy develops based on previous experiences (in effect, an

•Strategy comes from within the organisation as opposed to the

The Environment and Competitive

In order to design suitable strategic plans, an organisation needs to be aware of the

Social - changes in behaviour and expectations in society. Demographics, lifestyle.

Environmental – what are the environmental considerations such as recycling, pollution,

There are 4 broad factors within the diamond.

In addition to the qualitative methods of forecasting mentioned above, there are

2. Time Series Analysis

There are 5 forces as follows:

1. Threat of substitute products

Suppliers Competition Customers

Introduction Growth Maturity Decline

Characteristics of each stage

Introduction Growth Maturity Decline

Marketing and the Value of Goods

 distinct from all other segments

 Methods of providing a service

 Linked to using a service – e.g. brochure, certificates

Key Performance Indicators (KPIs) measure the performance of the CSFs.

Internal Resources and Stakeholder

Strengths (internal) Weaknesses (internal)

e.g. resources and capabilities e.g. lack of certain resources or capabilities

Opportunities (external) Threats

e.g. arrival of new technology e.g. arrival of substitute product

3. Symbols – Logos and design, dress codes.

4. Organisational Structure – Both the formal and informal reporting structures.

5. Control Systems – Processes in place to control the organisation.

They identified 3 styles which companies tend to follow:

Financial Control Strategic Control Strategic Planning

High Stars Question Marks

Low Cash Cows Dogs

A balanced portfolio would have:

1. Stars to ensure the future.

2. Question marks to convert to Stars.

General Electric matrix

Low Medium High

Cost Cost Cost

"In the Cost

Examples of companies that have used the differentiation strategy include:

 Apple computers, iPhones and iPods.

Examples of companies that have used cost leadership strategies include: