Part 1 P3

Introduction to РЗ
Syllabus Guide Detailed Outcomes

Having studied this chapter you will be able to:
• Explore the scope of business analysis and its relationship to strategy and strategic management in the context
of the relationship diagram of this syllabus
Exam Context
In this chapter we look at the fundamental skills required to pass this paper.
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LEANING Мш»
1: INTRODUCTION ТО РЗ
1 What is РЗ about
1.1 This chapter will introduce you to the P3 paper and the ideas behind business strategy and
how it is formulated.
1.2 The approach taken by the examiner for P3 is a systems approach. It will require you to do
the following;
(a) Learn theory to help you structure answers
(b) Analyse real problems
(c) Present intelligent arguments
(d) Solve real business problems
1.3 The capabilities required for this paper are in three layers - Strategy, Process and People
as follows:
Relational diagram of main capabilities
Strategic position (A) - > Strategic choices (B) Strategic action (C)
il
τ
Business Information Quality Project Financiai
process technology issues management analysis
change (E) (F) (G)
(D) (H)
People (1)
1.4 The course will take you through these stages and highlight the links between them.
1.5 Three particular inter-related process issues are recurrent themes in the P3 syllabus:
(a) Process improvement
(b) Information Systems and e-business
(c) Quality methods
Role of theory
1.6 P3 is a very practical exam. The syllabus also contains a wide range of strategic models
and theories. These models serve three main purposes in the exam:
(a) reference point to help you generate solutions to questions;
(b) frameworks for laying out and structuring answers
(c) specific knowledge tested for a few marks in some questions
1.7 The exam is mostly about your ability to read a scenario about a real business problem and
provide a reasoned and logical answer to the question set. The models provide you with
some further knowledge to allow you to do this and they can be tested in their own right.
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LEARNING MEDIA
However the emphasis is not what you know or have learned ("what are the 5 forces")
but on the imaginative application of the frameworks to a scenario which you will
never have seen before ("how do the 5 forces affect this organisation"). The key skills
required for success in this paper are:
1. IMAGINATION - thinking of ideas on behalf of an

organisation given to you in the exam (e.g. "what
changes should be made to this business" - see
June 2008 Section A).
2. SPONTANEITY - under time pressure the ideas

will have to come to you quickly. The exam will
not be a test of what you can remember but
what you can think of under pressure.
3. PROFESSIONALISM - the way you set your

answer out in a professional manner, using
headings and subheadings and writing in a
fluent, eloquent business style will have a huge
impact on your chances of passing.
1.8 Try not to lose sight of the fact that common sense and business awareness will take you a
long way in this exam. At the same time do be aware that a different learning approach is
required for this paper than, for example, Paper 2 - which is a more traditional "learn it and
churn it" approach.
1.9 Imagine if your Corporate Reporting or Advanced Taxation tutor asked you to attempt an
exam standard question now - without even beginning the course material. Would it be
possible? In this paper it should be possible to score simply by using the skills outlined
above plus some commons sense. So .... attempt this question:
———-1
/
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LEANING MEMA
Lecture example % Exam standard question
Lionel Cartwright considers himself to be an entrepreneur. He has been involved in many business
ventures, each with minimal planning, He claims that this allows him to respond quickly to
changing circumstances.
His father had left him a small road haulage firm - three lorries - but he soon sold this to a larger
operator when he recognised that operating margins were low and competition was severe.
With the money received he bought a fast-food franchise, realising that this was where there was
likely to be substantial growth. However, the franchisor required Lionel to limit both his ambitions
and ideas for expansion to the development of this single franchise site. Lionel did not like this
constraint and sold out and moved on.
He then invested his money in an internet firm, having identified the potential in this market.
Unfortunately for Lionel his investment in the company was insufficiently large to permit him to
have much say in the management of the company so he again sold out.
He demonstrated his opportunism because he managed to sell his investment before the
technology shares had fallen on the global stock exchanges. Lionel now has a cash sum of about
£12 million seeking a suitable investment.
It is clear from Lionel's track record that he enjoys involvement in the management of businesses
and he also prefers some element of control. He appears to have a skill in identifying potential
growth markets and he also seems to have an intuitive knowledge of the market place.
He is currently showing an interest again in the food/restaurant retailing market and he is looking at
organic foods and juices (produce grown without the use of synthetic fertilisers or pesticides). He
has noticed a growing trend in the USA for outlets selling fresh vegetable and fruit juices which are
squeezed to the customer's demand, either to be consumed on premises or taken away for
consumption, as is the case with many fast-food chains.
This development is all part of the growing health-conscious climate. Lionel believes that the
European market is ready for such a venture and this is his initial objective. He has already opened
four outlets in central London.
The juice enterprise needs to be marketed in a sympathetic way. The target clientele, being young,
mobile and affluent will be easily deterred from buying the product if the marketing lacks subtlety.
Consequently any rush towards expansion by using aggressive marketing techniques must be
tempered with caution. It will be too easy to down-grade the enterprise's image, so damaging it in
the eyes of its potential customers.
Lionel had made an effort to understand his skills and believed that he had the necessary market
knowledge. His operation was small enough to be flexible and responsive to sudden changes in
market circumstances and he felt that he had the level of motivation required to be successful in
such a fast-moving, consumer, non-durable industry.
After one year's operations the results from the four London outlets compared with a chain of
similar outlets in the USA seem to demonstrate that Lionel's ambitions may be over-optimistic.
Whilst recognising that the enterprise is still young (although there is the novelty attraction and also
no near competition) the profits are nowhere near as attractive as those being obtained from a
larger chain (20 outlets) in the USA.
14
ЬммтаШит
Table 1: Details of performance of individual outlets in USA and in the United Kingdom
(£'000) (where appropriate)
AH figures refer to the calendar year 2007
UK USA
outlet outlet
Sales 600 750
Cost of materials 200 200
Labour costs 125 125
Rental/lease costs 125 85
Stocks held 30 20
Wasted materials as a % of sales 22 9
Varieties of products available for juicing (actual numbers) 14 25
Marketing costs allocated per unit 60 35
Administration costs allocated per outlet 20 10
Customers per week (actual numbers) 2,000 2,500
Size of store (square metres) 275 250
Numbers of staff 10 15
Number of hours open as a % of total hours available
within any given week 40 65
Waiting time (from order to service) in minutes 15 8
Profit 70 295
Required
As a management consultant acting on behalf of Lionel, provide a critical evaluation of his
business.
Sòlútioni
LEARNING MEMA
2 Chapter summary
In this chapter we have considered:
Section Topic Summary
The P3 paper We have identified the fact that P3 includes a quite

large and often theoretical syllabus but that the paper
itself is quite practical therefore you have to learn not
only the content of models but also how to use them in
the exam. It is also important to build up your practical
business knowledge by keeping up with news stories
and business resources such as the BBC website,
business news on TV and radio and newspapers
articles.
END OF CHAPTER
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What is 'Strategy' ?

• Recognise the fundamental nature and vocabulary of strategy and strategic decisions
• Discuss how strategy may be formulated at different levels (corporate, business level, operations) of an
organisation
• Explore the Johnson, Scholes and Whittington model for defining elements of strategic management - the
strategic position, strategic choices and strategy into action
• Compare three different strategy lenses (Johnson, Scholes and Whittington) for viewing and understanding
strategy and strategic management
• Analyse how strategic management is affected by different organisational contexts
• Discriminate between the concepts of intended and emergent strategies
« Highlight how emergent strategies appear from within an organization
• Explain how organisations attempt to put an intended strategy into place
• Discuss how process redesign, quality initiatives and e-business can contribute to emergent strategies
• Assess the implications of strategic drift and the demand for multiple processes of strategy development
Exam Context
In this chapter we look at the basic ideas of strategy and how it may be developed, It is always important to remember
that questions are generally seeking the strategic rather than purely operational context from your answers. The
appropriateness of the strategic approach adopted is regularly tested and therefore you should be familiar with the
advantages of those approaches.
Qualification Context
Strategy approaches are also covered in Advanced Performance Management (P5).
Business Context
Every organisation has a strategy because every organisation has a goal. The approach adopted to develop that
strategy will depend on a range of factors and organisations must be careful to adopt the approach most suited to their
specific circumstances.
lEAWWO MEDÍA
2: WHAT IS STRATEGY
Overview
What is Strategy
Strategy Definition and

Approaches
Rational Planning Mintzberg's "Crafting Freewheeling Opportunism

Emergent Strategies" and Incrementalism
Design Lens Experience Lens ideas Lens

>. J
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IÍMNWQMHHA
2: WHAT IS STRATEGY
1 What is strategy?
1.1 Strategy is simply the way an organisation seeks to achieve its goal.
1.2 How many different "ways" are there to achieve this goal ? We will discuss this in more
detail soon but in essence there are 3, defined by Johnson, Scholes and Whittington as
"lenses":
(a) Design: With a pre-determined, detailed, focused plan for achieving that goal
(b) Ideas: With no plan: seizing opportunities as and when they arise - based on new
ideas which are exploited to advance you towards the goal
(c) Experience: With a flexible plan which changes and adapts based on experience of
the market, what works and what doesn't
lecture example .1 Discussion question
Identify a suitable long term goal for the following organisations:

(a) A long-established, major, multinational and listed car manufacturer
(b) An 18 year old school leaver trying to establish a new mobile car cleaning business
(c) An NHS hospital specialising in cancer treatment and research.
Solution
(a)
(b)
(c)
2 Strategic approaches to achieving the goal

The following approaches to strategy are used by businesses to achieve their goals:
2.1 Rational Planning (The "Lens" of DESIGN)

This involves detailed, advance planning, analysis and strategy formulation in order to
achieve the organisation's stated goal. It consists of the following stages:
LEAMWGMEMA
2: WHAT IS STRATEGY
POSITION REVIEW AND

AUDIT CONTROL
,r
\
STRATEGIC STRATEGIC
MISSION & CORPORATE STRATEGIC
OBJECTIVES
—*- APPRAISAL
OPTION EVALUATION —»·- IMPLEMENTATION
GENERATION & CHOICE
ENVIRONMENTAL
ANALYSIS
;1_ееШш example^;: Discussion question
In order to achieve their goals from Lecture example 1 above, suggest some specific Advantages
and Disadvantages these organisations will experience if they seek to achieve their goal by
preparing a detailed, long-term (perhaps 5 or 10 year) rational plan and sticking to it;
(a) A long-established, major, multinational and listed car manufacturer
(b) An 18 year old school leaver trying to establish a new mobile car cleaning
(c) An NHS hospital specialising in cancer treatment and research
Solution
(a)
(b)
(c)
20
LEARMNOMEMA
2: WHAT IS STRATEGY
APPLICATION TEST:
Review your answer to c) above. If you were to show that list of advantages and disadvantages to
a stranger who had NEVER seen the question being asked would they be able to deduce from
what you have written down that this is something to do with the NHS ? Or at least a large and
complex public sector organisation ? Does your list of points look very different to the points you
gave for a) above. If the answer to these questions is "no" your answer is not applied...
Reminder: the answers you give in this exam cannot be learned from a study text or set of course
notes.
2.2 Freewheeling Opportunism (The "Lens" of IDEAS)

Used by independent organisations, this approach involves determining the organisation's
goal but resisting the urge to plan how the goal will be achieved. Freewheeling organisations
grab any opportunities which will advance them to their goal as and when they arise. It
involves no planning at all. E.g. "This time next year we will be millionaires" - but we have
no plan for how we will achieve this.
:
№ШЩШТ4р1&1 Discussion Question
Describe 5 kinds of organisations or industries in which the proliferation of ideas will be crucial to
achieving the goal of profit maximisation.
Solution
2.3 Mintzberg's Theory of "Crafting Emergent Strategies" (The 'Lens' of EXPERIENCE)

This involves the formulation of a plan but includes the ability to flex the plan by crafting into
existing operations newly emerging opportunities which were not identified at the planning
stage and crafting out intentions which have become redundant.
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2: WHAT IS STRATEGY
Submergent
(Unrealised)
Strategies
CRAFT OUT
Realised
Strategies
CRAFT
i Lecture example % Discussion question
Describe 5 features of an organisation which should be present in order for Mintzberg's "Crafting
Emergent Strategies" approach to be successful.
Solution
2.4 Logical Incrementalism

This is where an organisation has no clear plan in place but feels its way forward through
small scale, incremental decisions - often taken by customer-facing operational staff rather
than the Strategic Apex of the organisation.
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LEARNING MEMA
2: WHAT IS STRATEGY
Lecture example 5 Discussion question
Describe 5 disadvantages of a top-down strategy approach

1.
2.
3.
4.
5.
2.5 The P3 Syllabus

In a research exercise performed for The Economist in 2005, Bain & Co demonstrated that
long-term, "rational" Strategic Planning had been the favoured approach of top managers
and organisations throughout the 1990s and 2000s - the "hardy perennial" as The
Economist calls it. This article can be viewed at:
http;//www,microsoft.com/business/peopleready/news/economist/cart.mspx
The ideas and topics in the P3 syllabus can be seen as belonging to various stages of this
most popular of strategic approaches:
POSITION REVIEW AND

ΑΙΙΠΙΤ CONTROL
Chapter 5 Chapter 13: Projectmanagement
Chapter 14: Managing people
Chapter 15: Change management
\ .
STRATEGIC STRATEGIC
MISSION & CORPORATE STRATEGIC
OBJECTIVES
fr- OPTION - EVALUATION •
IMPLEMENTATION
APPRAISAL
GENERATION & CHOICE
Chapter 3 Chapter 6 Chapter 8: Structures
Chapter 7 Chapter 7
Chapter 9: BP R
Chapter 10: E-commerce
Chapter 11: Quality
/ Chapter 12: Marketing
ENVIRONMENTAL
AIMAL Y blb
Chap ter 4
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ίΙΑΜΝΟΜίΜΑ
2: WHAT IS STRATEGY
3 Chapter summary
1 Strategy The different ways in which strategies can be

formulated to achieve organisational goals
2 Business Analysis How the syllabus fits together and can be seen as
belonging to specific stages of a rational planning
Q1Q16 Study Text approach
Chapter 1
END OF CHAPTER
24
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Mission, Objectives and
Stakeholders: The Goal

• Advise on how organisations can communicate their core values and mission
• Evaluate, through stakeholder mapping, the relative influence of stakeholders on organisational purpose and
strategy
» Assess ethical influences on organisational purpose and strategy
• Explore the scope of corporate social responsibility
• Assess the impact of culture on organisational purpose and strategy
• Prepare and evaluate a cultural web of an organisation
• Advise on the implications of corporate governance on organisational purpose and strategy
Exam Context
Issues of corporate governance and Corporate Social Responsibility - whether acting ethically or ecologically - are
becoming increasingly important to consumers and governments alike. They could therefore be considerations for most
section A questions as well as who the stakeholders are and how this impacts on the mission and objectives of the
organisation. It could also be a section В question in its own right. A straightforward stakeholder analysis came in
Section A of the December 2009 paper.
Ethics and governance are key topics within the new syllabus. You will have covered some of the basics in Fl
Accountant in Business as well as P7 Audit and assurance. Much of the new P1 Professional Accountant is concerned
with these issues as well.
Business Context
Corporate governance in the UK has for the last 15 years or so developed on a non-statutory basis in response to some
high profile concerns about executive power (eg director's bonuses in water companies). The US system has
traditionally been much more laissez-faire with regulation minimised. That is until Enron and other financial scandals.
US regulation contained in the Sarbanes-Oxley Act is now statutory and severe.
ШШLEARHNGMEMA
3: MISSION, OBJECTIVES AND STAKEHOLDERS: THE GOAL
Overview
Strategic Planning
Vision
Goals
41
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Mission Objectives Stakeholders, Governance

-
and Culture
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1 Mission, goals and objectives

1.1 Strategic decisions need to be informed in the first instance by the purpose of the
organisation. No matter which approach to strategy is adopted (even Freewheeling) the
organisation needs to be clear about its goal. Only then can strategic decisions be effective
and directed towards what the organisation is trying to achieve.
1.2 There is a hierarchy of business aims:

(a) Vision: The ideal future position of the company
(b) Mission: The determination that the company wishes to achieve its
vision
(c) Mission statement: A document on which the mission is formally stated. It gives
substance and clarity to a vision.
(d) Goals: The intentions behind decisions or actions.
(e) Objectives: Measures used to plan the achievement of mission and target
resources (should be SMART).
2 Ä raţionai view of the roie of mission

2.1 Mission describes the organisation's basic function in society, in terms of the products and
services it produces for its clients. It is usually formulated at the Corporate level in the
organisation,
2.2 Mission statements can assist strategic management by:

(a) providing a rationale as to why the organisation exists
(b) communicating clearly a company's chosen market, and its role within it
(c) promoting goal congruence in the lower levels (business and operational levels)
(d) acting as a trigger for objective setting
2.3 There is no universally agreed format for mission statements, however to be effective a
corporate mission must contain the following four components suggested in the Ashridge
model (Campbelletal).
(a) Strategy The basis of competition to be adopted by the organisation (e.g.
cost leadership or differentiation), the product range and the market
scope
(b) Purpose Why and for whom the organisation exists
(c) Standards Organisational policy and standards of behaviour - including ethics
(d) Values The organisation's culture.
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LEARNING MEMA
Suppose a consultant submitted the following mission statement to BPP for use in its future
strategy;
"We aim to provide the highest quality accountancy training courses in the world in order to
maximise shareholder wealth. Our teaching approach is both professional and informal and we are
passionate about innovation in our product delivery."
Using Campbell's framework discuss why this mission statement is effective. In what ways is it
ineffective ?
Solution
Lectore example 2 Discussion question
Discuss the various ways in which a not-for-profit organisation's mission statement would differ
from the example given above.
Solution
28
lEMMNOMtOIA
Write a mission statement for a #ell established prison in England seeking to restore public
confidence in its abilit
Solution
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3 Objectives
In support of an organisation's mission statement it is usual to formally state a series of
long-term strategic objectives. Although these are drafted in the "SMART' format they differ from
operational objectives in their scope and time-frame and will usually incorporate both Critical
Success Factors (CSFs) such as growth, quality, innovation, social responsibility etc.) together
with Key Performance Indicators (KPIs) such as market share %, customer complaints, repeat
sales, emissions etc..
3.1 Whereas the Mission Statement is often vague and open-ended an organisation's objectives
should have the following properties:
Specific
Measurable
Attainable
Relevant
Time bound
3.2 When creating a set of objectives the organisation must consider the needs of all of its
stakeholders (see below) and ensure where possible these are met. In doing so a broad
range of measures will be required, both financial and non-financial.
29 UJJ
LEARNING MEDÍA
Are these objectives SMART?

1 To satisfy the demands of our shareholders by improving profitability
2 To develop innovative, market leading products to sustain long-term growth
3 To deliver outstanding customer service at all times
Re-write the above objectives to include both CSFs and KPIs and thus make them SMART:
Solution
1.
2.
3.
4 Stakeholders: Who do we exist for ?

4.1 Stakeholders are those individuals or groups who have an interest in the organisation.
They are likely to have their own objectives met or affected by the actions of the
organisation.
4.2 To have any chance of success, the organisation's mission and objectives must take into
account the attitudes of stakeholders.
Johnson & Scholes identified three categories of stakeholder in any organisation (ICE).
Managers, staff
Suppliers,
shareholders,
customers,
competitors
Government, pressure
groups, local community
4.3 In the exam it is important to use the language of the scenario, i.e. if the scenario
relates to a hospital referto patients and doctors, rather than customers and
employees.
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Suggest 8 relevant stakeholders for each of the following 3 organisations. TEST: if you were to
give your list of stakeholders to a complete stranger who didn't know what you were doing would
they be able to at least deduce which organisation you were analysing ? This is a good test of
"application"..,
Solution
BBC Shell UK pic Virgin Airways
-
- -
4.4 There are two approaches to stakeholder theory for profit-orientated businesses:
• Strong view - Each stakeholder in the business has a legitimate claim on
management attention
• Weak view - Satisfy various stakeholders, only if it enables the firm to satisfy its
primary goal of the long-term growth in shareholders' wealth
Stakeholder mapping
4.5 Assuming the stronger view, Mendelow devised a matrix for classifying stakeholders in
terms of their relative level of interest and power. Each quadrant defines the type of
relationship to be sought between the organisation and its stakeholders.
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LEARNING М н ж
Level of interest
Low High
Low Minimal
effort Keep informed
eg casual employee eg local community
Degree of
Power and Influence
High Keep
satisfied Key players
eg central government eg major customer
4.6 The organisation's stakeholders can be plotted on the matrix with a(+) or a(-) sign to indicate
their support or opposition to a stated strategy. The company must then decide if dissenting
parties can be persuaded to change their opinion, or can be moved around the grid to
lessen their influence (eg. change suppliers).
MureexampleB Discussion question
Using Mendeiow's matrix prioritise TWO "key player" stakeholders for each of the 3 organisations
in Lecture example 5 clearly stating your reasons.
Solution
BBC Shell UK pic Virgin Airways
- - -
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5 Ethics in business
,5,1 Ethics are the rules and principles of behaviour which help us decide between right and
wrong.
5.2 The organisation's approach to ethics stems right back to its mission since this is where
organisational actions should flow.
6 Corporate social responsibility

6.1 Corporate Social responsibility (CSR) centres on the approach taken by organisations to
provide benefit to society in general rather than specific stakeholders.
Suggest 8 examples of actions which organisations could argue were "socially responsible acts"
Solution
4,
5.
6.
7.
8.
Given that institutional investors are usually looking for a financial return and nothing more,
suggest 5 ways in which a listed pic could justify these actions to shareholders;
Solution
1.
4· : í
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5l· !
33
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ItMMNfl MEDIA
7 Corporate governance
7.1 Corporate governance can be defined as the conduct of senior officers in an organisation.
The governance framework is who the organisation serves and how priorities are decided.
7.2 Corporate governance regulation arose due to abuses of power by senior executives and
they provide checks and balances to senior executive power. Examples include the
Combined Code in the UK and the Sarbanes-Oxley Act in the US.
7.3 This is a consequence of the agency problem - the owners of larger businesses
(shareholders) being separated from the managers (directors) who act as their agents but
may in reality seek their own personal objectives.
8 Organisationaf culture
8.1 Organisational culture can be summarised as the body of values and beliefs about the
nature of the organisation and the way it conducts business held by its members.
The cultural web (specifically highlighted by the examiner)

8.2 Johnson and Scholes compiled a Cultural Web in which they attempted to pictorially
represent those organisational assumptions taken for granted and represent collective
experience.
8.3 This provides a key framework for your exam to determine and assess the underlying
culture of an organisation by assessing a number of its visible characteristics. We can
therefore determine how an organisation behaves and how strategy develops.
í Symbols \
[ and Titles
Myths and
Power \
Stories
Relationships I
Rituals Ш
and p 7 Organisation
Routines I I Structure
( Control j
\ Systems J
8.4 The paradigm is the basic assumptions and beliefs that decision makers hold in common.
34
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lecture example 9 Discussion question
Suggest 5 reasons why having an identifiable corporate culture can be beneficial to organisations.
Solution
1.
2.
3.
4.
5.
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36
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3; MISSION, OBJECTIVES AND STAKEHOLDERS: THE GOAL
3.1 MotorWays Services PLC

Motorways Services Pic manages the premises upon which certain key motorway service stations
are based.
They own the premises and subject to licensing by the Ministry of transport, let out franchises to
companies that want space in the units on site. Most are taken by national names such as Burger
Queen and Lotsa Coffee however the general stores are run by independent franchisees.
The petrol franchise has recently been signed with a large supermarket who will combine petrol
filling services with a "metro" style mini-supermarket on site.
Required
Identify the key players for the company and suggest how they may impact on the company
strategy.
38
lEARNMO MEDIA
9 Chapter summary
• Section Д Topic Summary

1 Mission and objectives There are various levels of corporate goals from the
higher level vision and mission down to business
and personal objectives. A Mission Statement is a
written statement of the mission of a business and it
should be inspiring and show the purpose and
expectations of the business.
2 Stakeholders Stakeholders are anyone with an interest in the
business and they need to be taken into account
and managed by those running the business.
Stakeholders can be mapped according to the
combinations of power and interest that they have
which allows managers to identify the key players.
3 Strategic lenses The approach to strategy adopted by a business

can be described as one of three lenses or ways of
looking at the business. Design is likely to be
systematically planned using a rational approach.
Experience means learning from experience and is
likely to be more innovative and strategies more
emergent. Ideas is even less formal and is
constantly evolving.
4 Corporate governance, Ethical considerations and corporate governance
ethics and CSR arrangements can be sources of strength or
weakness for an organisation.
Corporate social responsibility is a potential source
of competitive advantage if valued by customers or
it may be required of a business by other
stakeholders (eg government, shareholders or local
community).
5 Culture Culture is a key driver or constraint to strategic
performance. It can be assessed as "how we do
things around here" but can also broken down more
Q5 Study Text systematically by looking at the elements of JSW's
Cultural Web.
6 Structure and strategic Two further key models of culture are Harrison's
cultures (Handy's) organisational cultures that are aligned
consistent with the structure of the organisation.
Chapter 5
Finally, Miles and Snow identified strategic cultures
which can be used to assess a businesses
approach to strategy.
39
ŁEARMNCMEMA
END OF CHAPTER
40
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LEAMNOMEDÄ
Environmental Analysis: (O&T)

• Determine the opportunities and threats posed by the environment of an organisation
• Assess the macro-environment of an organisation using PESTEL
• Highlight the key drivers of change likely to affect the structure of a sector or market
• Explore, using Porter's Diamond, the influence of national competitiveness on the strategic position of an
organisation
• Evaluate the sources of competition in an industry or sector using Porter's five forces framework
• Analyse customers and markets
• Prepare scenarios reflecting different assumptions about the future environment of an organisation
• Discuss the significance of industry, sector and convergence
Exam Context
Environmental analysis is a fundamental first step in any strategic approach. Strategy can be seen as distinct from
operational management in that it is forward looking and outward looking therefore some consideration of the genera!
and industrial environment is vital in most questions. This area featured in Q1 of the Pilot paper including PESTEL and
Porters five forces and was tested in the June 2008 section A Q1 and December 2009.
A range of environmental factors and tools are covered in others papers. In particular PESTEL and economic factors
are covered in both F1 Accountant in Business and P5 Advanced Performance Management.
Business Context
The need to consider the external environment is highlighted by the current effect that global warming is having on the
agricultural sector and supermarkets. The most popular response to carbon emissions from cars is to move to bio-fuels.
This increases the demand for crops thereby increasing the attractiveness of agriculture but also pushing up food prices
to the consumer.
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4: ENVIRONMENTAL ANALYSIS (О&Т)
Overview
Environmental Analysis (O&T
Macro-environment International Industry or Sector
5 forces
¿
1
r
PESTEL Diamond
Λ Λ
Scenario planning
-
42
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4; ENVIRONMENTAL ANALYSIS (O&T)
1 The externai environment

1,1 The environment is everything external to the organisation's boundaries. It can be viewed at
three levels:
(a) global environment
(b) national environment
(c) industry or sector environment.
GbNtRAL (macro-)
ENVIRONMENT
(Global and nationa
PHYSICAL ENVIRONMENT
2 Why analyse the environment?

2.1 The primary reason to consider the external environment is to identify:
(a) Opportunities; and
(b) Threats
2.2 Further benefits include:

(a) environmental developments will either confirm or invalidate planning
assumptions;
(b) changes or the threat of changes in the business environment can in itself provide a
trigger to strategy formulation;
(c) encouraging an 'open organisation' which is responsive to the needs of change,
(systems theory).
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4: ENVIRONMENTAL ANALYSIS (O&T)
3 Macro-environment
3.1 PESTEL analysis is a framework for analysing the general environment, and anticipating the
future.
Ρ Political
E Economic factors
S Social or demographic developments
Τ Technological developments affecting the methods of production or the types of
products demanded
E Environmental
L Legal and regulatory
3.2 These are factors that impact on all businesses and should be assessed in terms of their
impact on the individual business being analysed.
lÉGtüre example 1 Real world application
Using PESTEL as a framework suggest a range of Threats and Opportunities faced by a major UK
brewery which both manufactures and sells alcoholic beverages through a national chain of
branded pubs.
^§з1Шоп
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LEMMING MEDIA
APPLICATION TEST:
If you were to show this answer to a stranger who had NEVER seen the question being asked
would they be able to deduce from what you have written down that this is something to do with a
brewery or a chain of pubs? If not your answer is not applied ...
notes.
4 International environment
Porter's competitive advantage of nations
4.1 Porter observed that certain industries form certain countries are globally successful, and
asked a simple question:
Why does a nation become the home base for successful international competition in
a particular industry?
4.2 The elements that can be used to assess a industry within a nation are;
(a) Factor conditions - relate to the resources enjoyed by a country. These can be
categorised as:
• Basic factors - eg land mass, climate, natural landscape
• Advanced factors - basic factors improved by investment eg infrastructure,
skills base, population, ore wealth
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4: ENVIRONMENTAL ANALYSIS (O&T)
(b) Demand conditions - strong demand and sophisticated customers tastes will drive
quality up and costs down through economies and learning curve
(c) Related and supporting industries - if effective will provide strong supply chain and
hence quality and cost advantages
(d) Firm strategy, structure, rivalry - the national cultural factors in the nation,
including the extent of rivalry and the way managers and consumers think can again
drive up quality and innovation to meet customer demand and drive down costs in the
search for competitive advantage,
4.3 The combination of these factors can create a 'cluster' of extremely competitive firms that
are well placed to compete internationally.
1Щдге example! Real world application
Using the following real world examples, apply Porter's Diamond to suggest some of the reasons
these nations enjoy a global competitive advantage in these industries:
Nation Industry
Germany Cars (Audi, Porsche, Mercedes-Benz, BMW, VW)
Brazil Coffee
Japan Electronics (Sony, Matsushita, Nintendo.. Fujitsu)
South Africa Diamonds
USA Films (Hollywood studios)
Scandinavia Telecoms and Navigation (Nokia, Ericsson,

TeliaSonera, Suunto)
Solution
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IfAWINOMïMA
S Scenario planning
5.1 The external environment is uncertain and often volatile. Strategy is forward looking and
therefore we need to undertake some kind of forecasting. These forecasts can therefore
become unreliable.
5.2 Responses to findings may be - optimism, caution, flexibility or seeking to influence the
relevant variables.
6 Industry or sector environment

6.1 Customers and competitors are key stakeholders that must be considered in any
question.
6.2 Here we can look at the industrial forces as a whole using the 5 Forces model in which
Michael Porter argues that industry profitability is influenced, and thereby determined by
the pressures of five competitive forces.
6.3 The 5 Forces Model structurally analyses an entire industry or strategic group of
close competitors, and has two main uses:
(a) Understanding the inherent attractiveness or profitability of a particular market
segment (or industry), then
(b) Identifying actions relating to each individual force on the organization that:
• mitigate their damaging effects (threats), and/or
• promote the beneficial effects (opportunities).
6.4 You should consider the 5 forces model as a structure for any question that asks for an
environmental or industrial analysis.
LEARNING М Н Я А
4; ENVIRONMENTAL ANALYSIS (O&T)
6.5 Porter's 5 Forces Model
Potential
Entrants
1J Threat of
New
Entrants
Bargaining Bargaining
Power of ļšompetitioa Power of
:SuppMers and BjMliŕy i Buyers
^V
Threat of
Substitute
Substitutes;
Lecture example 3 Real world application
Using the five forces model analyse the supermarket industry under the five headings explaining
with justification some of the influences that should be considered under each heading.
Solution
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ΐΕΜΝίΝΟΜΕΜΑ
Practice scenarios
LEARNING MEDIA
4.1 X Ltd
X is a large multinational conglomerate based in the Far East. It is looking at a new proposal to
diversify into the manufacture of cars and has identified Germany as a potential manufacturing
base, to then export cars around the EU. A report commissioned by X has revealed the following
about Germany:
Large population
Highly skilled workforce
Excellent higher education system
World class rail/road/air/sea links
Wealthy and discerning consumer population
• Excellence in the manufacture of automobiles, white goods and tools
• Large reserves of coal and iron ore
Required
Discuss how Porter's Diamond theory could be applied to help X make the decision.
What other information would they need to help them decide?
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7 Chapter summary
Section Topie Summary

1 Macro-environment An important part of strategy formulation is to
consider the external environment. The macro-
environment refers to elements that impact upon all
businesses. A PESTEL analysis allows a business
to identify opportunities and threats in the macro-
environment.
2 International Michael Porter identified the key factors that
environment determine the international competitiveness of
industries emanating from one nation (eg Japanese
cars or French wine). These factors form his
Diamond model to analyse the competitiveness of
nations.
3 Industrial environment. The specific environmental opportunities and threats

within an industry can be assessed using Porter's 5
forces that show the pressures on profitability within
Q3Q4 Study Text an industry and hence its attractiveness.
Chapter 2
Case studies
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END OF CHAPTER
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LEAWNGMEBÍA
Positiosi Audit: (S&W)

• Explore the role of the value chain in creating and sustaining competitive advantage
• Advise on the role and influence of value networks'
• Advise on the continuing need for cost efficiency
» Assess different approaches to benchmarking an organisation's performance

• Explain and assess a range of portfolio models (the growth/share (BCG) matrix, the public sector portfolio matrix,
market attractiveness/SBU strength matrix, directional policy matrix, Ashridge Portfolio Display) that may assist
corporate parents manager their business portfolios
• Assess the contribution of the lifecycle model and the cycle of competition to understanding competitive
behaviour /
• Discriminate between strategic capability, threshold resources, threshold competences, unique resources and
core competences
• Discuss the capabilities required to sustain competitive advantage
• Explain the impact of new product, process and service developments and innovation supporting business
strategy
• Discuss the contribution of organisational knowledge to the strategic capability of an organisation
• Identify opportunities for managing the strategic capability of an organisation
Exam Context
Again this is core material for section A of the exam but that could also be tested in its own right in section B. A
particular model of relevance in a number of situations is Michael Porter's value chain that lays out the activities that
should contribute towards organisational value creation, examined in section Β December 2009 . Strengths and
weaknesses were the focus of the section A question in the December 2007 exam.
You will not have encountered most of the techniques covered in this chapter.
Business Context
SONY are an organisation who stick to their core competency of "miniaturisation" - they adopt a resource based
strategy and see which markets this unchanging internal strength can next be applied to (from Hi-Fis to mobiles, laptops,
MP3 players and even surgical equipment)
m¿¿j
LEARNING M E M A
5: POSITION AUDIT (S&W)
Overview
Position Audit (S&W)
Resource Resource audit Capabilities Value chain

Vs and (resources and
Position benchmarking competences)
Products and
knowledge
Position Audit
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5; POSITION AUDIT (S&W)
1 Introduction
1.1 Managers need to understand the internal resources and competences of an organisation
to enable them to formulate and implement a strategy. In particular they need to know if they
are adequate and suitable.
1.2 In this chapter we will be considering a range of tools that you can use to undertake an
internal analysis leading to the identification of an organisation's:
(a) Strengths; and
(b) Weaknesses
1.3 By the end of this chapter we will have a range of tools to undertake a SWOT analysis - the
internal strengths and weaknesses together with the external opportunities and threats from
the previous Chapter.
2 Resource versus position based strategy

2.1 There are two main approaches to strategy formulation that an organisation can adopt:
(a) a position based strategy; or
(b) a resource based strategy
2.2 A position based strategy requires the organisation to analyse the environment and
position itseif with appropriate competences and resources to compete. It involves adapting
to changes in the external environment.
Щайге examples Discussion question
Describe 3 potential problems with this approach
Solution
1.
2.
3,
2.3 A resource based strategy takes the approach that sustainable competitive advantage
comes through possession of distinctive resources:
(a) physical resources (asset infrastructure, rights to raw materials); and/or
(b) competences (skills, knowledge etc - especially for service companies)
It involves remaining faithful to the organisation's core competencies in the face of external
changes - if necessary finding new markets in which to exploit this competency.
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LEAWNOłtoiA
Describe 3 potential problems with this approach
Solution
1.
2,
3.
2,4 Johnson, Scholes and Whittington take the view that a resource based strategy is the
most appropriate approach to take for most organisations because this is the best way of
maintaining advantage (ie sustainability) since we then have control over the means of
obtaining advantage.
3 Resource audit
3.1 The first stage of assessing internal capability is to undertake a resource audit to identify
the resources in place.
3.2 This is the starting point whether adopting a resource based approach to strategy (ie find
the environment that fits our capabilities) or a position based approach (ie finding the
resources to meet the environment).
3,3 The main tool to undertake a resource audit is a list known as 9 M's. This acts as a
checklist of areas to assess as strengths or weaknesses as follows:
Manpower: An analysis of human resources

Щ analysis qfefinąnćiałiresourcęś a"
Machinery An analysis of operational resources
Materials и Purchasing айй śuipplierś factors £Ż
Markets Issues of marketing and distribution to the customers
M#ã||rneht ';ТЩео^
Methods Processes used to create outputs from inputs

'pai&ppiillř
Management Strategic use of IT and IS
Information
Systems
γ jj j 56
lEMNINOMïMA
Lecture example 3 Practice question
Using the 9 M's identify the key resources that you would expect to find in a global pharmaceutical
company, and explain why they are important to that particular industry.
Solution
4 BCG Matrix (Product Portfolios)

4.1 This model can be used to assess and evaluate an organisation's product portfolio OR the
individual Strategic Business Units (SBUs) or divisions of a Corporate Parent.
4.2 The BCG matrix classifies products/services or SBUs/divisions in terms of potential cash
generation and cash expenditure requirements. The matrix presupposes that there are only
two factors that directly influence competitive position:
(a) the growth rate of the market segment the organisation serves (usually at the early
stages of the life cycle)
(b) the relative market share of the segment (depending on how dominant we are in
that segment)
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RELATIVE MARKET SHARE

HIGH LOW
HIGH
STARS QUESTION MARK MARKET GROWTH
CASH COW DOG LOW
Uses of BCG analysis
4.3 Internal balance should be checked.

(a) Proper distribution of resources between SBUs e.g. largest should be stars or cash
cows
(b) Sufficient cash flows from cash cows to
(i) cover corporate overheads
(ii) permit investment in question marks and stars
(iii) pay interest on corporate debt
(iv) provide dividends to shareholders
(c) There should be sufficient successor SBUs to replace declining stars and cash cows
(i) to provide long-term funds to finance the strategic plan
(i) to absorb cash surpluses now.
4.4 It is also possible to.

(a) Assess trends by mapping matrix at regular intervals and superimposing on earlier
matrices to reveal direction and momentum of each product.
(b) Evaluate competitors by creation of portfolios based on their products or business

divisions.
'(c) Evaluate risk by adjusting a portfolio to reflect impact of hypothetical scenarios or

changes in key environmental variables. This can be accomplished by sensitivity
analysis.
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LESININO №DIA
Suggest 5 concerns which a manager may have with a "Star" product/division:
Solution
2.
3.
4.
5.
Lecture example £ Practice question
Discuss some of the Strengths and Weaknesses of the following 4 organisations who each have 5
product divisions in their portfolio. Which organisation has the strongest portfolio if long term,
sustainable growth in profitability and market capitalisation is the aim ?
2.
XXX XX X XX
XX
3. 4.
XX
XXX Λ Λ Α Λ Λ
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5 Product Life Cycle (Product Portfolio: 2)

5.1 The product portfolio can be assessed by considering where products are in their product
life cycle.
Sales and
profits
Saies
mility Time
Profit
5.2 Product innovation - can be a major source of competitive advantage but brings a burden
of cost and uncertainty. In particular the development phase incurs major expenditure
without any revenues meaning that products enter the markets needing to recover those
costs. This means that;
(a) pressure may be on payback periods
(b) businesses may be more likely to charge high prices
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IEAWNOMEBIA
5,3 For some organisations product innovation can be a major source of competitive advantage
by:
(a) Attracting early adopters (buyers who want the latest innovation)
(b) locking in customers by unacceptable costs of switching to competitors,
(c) experience curve cost advantages.
(d) defining the industry standard.
(e) price skimming
(f) Legal protection for intellectual property (eg patents)
Suggest 5 ways in which a business may seek to extend the maturity stage of a product
Solution
1.
2.
3.
4.
5,
6 Value chain
6.1 Michael Porter observed that an organisation is essentially a system that converts inputs
into outputs, the aim being to "add value' to the customer which they will find attractive and
be willing to pay for and therefore make profits.
6.2 Porter analysed the various activities of an organisation into a value chain. This is a model
of value adding activities and the relationships between them.
Ц А Ю Ж О MEDIA
5: POSITION AUDIT (S&W).
FIRM INFRASTRUCTURE
. co TECHNOLOGY DEVELOPMENT
o t
HUMAN RESOURCES MANAGEMENT
co o
PROCUREMENT
INBOUND OPERATIONS OUTBOUND MARKETING

LOGISTICS LOGISTICS AND SALES
PRIMARY ACTIVITIES
6.3 The activities in the value chain are as follows:

PRiMARY
(a) Inbound logistics - receiving, storing and handling stocks of raw materials
(b) Operations - processing raw materials into finished goods
(c) Outbound logistics - storing finished goods and distributing them to customers
(d) Marketing and sales - marketing and selling activities
(e) Service - after or during sales services separate from the product (eg warranties)
SUPPORT
(a) Procurement - purchasing function
(b) Human resources - all functions related to staff procurement and development
(c) Technology development - management of IT and R&D functions
(d) Infrastructure - everything else! (eg senior managers and finance function)
6.4 As with other models you may want to use it as a framework to supply sub-headings to
break up and focus your answer.
Suggest a range of at least 10 relevant activities which a premier standard, triple Michelin starred
restaurant should include in its value chain and determine which area of the value chain this
activity belongs in.
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Solution
I>
PRIMARY ACTIVITIES
Value system
6.5 A company's value chain is not bounded by a company's borders, it's connected to what
Porter describes as a value system.
x\
'w
/
/ E 3istributor/re tailer \
ч
/ calue chains
\
Organisation's Customer
value value
chain chains
Supplier
value
chains
6.6 As well as managing its own value chain, a firm can secure competitive advantage by
managing the linkages (ie relationships) with the value chains of its suppliers and
customers.
6.7 For example, our inbound logistics needs to coordinate well with the outbound logistics
and operations planning of suppliers. Increasingly this will be facilitated by the use of
technology (eg extranets and EDI). This is discussed more fully in chapter 10.
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7 Benchmarking
7.1 Benchmarking is:
• data gathering, of targets and comparators;
• identifying relative levels of performance (and particularly areas of
underperformance);
• adoption of identified best practices to improve performance.
7.2 Benchmarking therefore enables a firm to :

(a) meet industry standards by copying others,
(b) challenge existing ways of doing things
(c) assess current resources and competence
7.3 Benchmarking can come in different forms:

(a) Internal - division against division
(b) External - company against competitor
(c) Functional - single function against same function in a different industry
(d) Strategic - against rivals in terms of strategic intent or actions
Suggest 5 disadvantages of benchmarking as a means of pursuing organisational goals
Solution
1.
2.
3.
4,
5,
8 Strategic capability
8.1 Strategic capability is the term used by Johnson, Scholes and Wittington to describe the
strengths and weaknesses of an organisation. Capability is assessed in terms of
competences and resources being threshold (ie minimum to compete) and unique (ie
providing a competitive advantage):
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.;Term:^.:;;;;.-4;;..:ľ.;.:.r·.;'' Definition v/v;ř.../;;.

Threshold Those capabilities essential for the organisation to be able to
capabilities compete in a given market.
Unique resources Those resources that critically underpin competitive ad
and that others cannotBäsíiy imitateur obtain
Core competences The activities and processes through which resources are
deployed in such a way as to achieve competitive advantage in
ways that others cannot imitate or obtain.
9 Knowledge
9.1 Organisational knowledge is the collective and shared experience accumulated through
systems, routines and activities of sharing across the organisation.
9.2 As organisations become more complex and larger the need to share and pool what people
know becomes more of a challenge but more important for sustainable competitive
advantage.
lecture example 9 Practice question
Suggest 5 practical ways in which an organisation could more effectively manage (I.e. obtain, store
and share) its organisational knowledge.
SölutiDTf
1.
2.
3.
4.
5.
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Practice scenarios
iMNtNO MEDIA
5.1 ABC Ltd

A private college, ABC Ltd, provides training for professional accountancy qualifications. It derives
most of its funds from employers and self-financing students. For most qualifications there are a
number of stages that students need to go through until full accreditation; this can take up to four
years.
In recent years, the college has placed emphasis on recruiting lecturers who have achieved
success in delivering good academic knowledge of the syllabus in class along with good pass
rates. This has led to the college further improving its reputation within the academic community,
and applications from prospective students for its courses have increased significantly.
The college has good student support facilities in respect of website learning support, student
helpdesks and excellent material. They have recently implemented a sophisticated online student
booking system. Courses at the college are administered by well-qualified and trained non-
teaching staff that provides non-academic (that is, not learning-related) support to the lecturers and
students.
The college has had no difficulty in filling its courses. The college has also noted in the last year a
significant increase in the number of students transferring from other training providers.
You are the college's management accountant and have been asked by the Chief Executive of the
college to review the increasing rate of transfer of students to ABC's courses.
Required
Apply value chain analysis to the college's activities and advise the Chief Executive how this
analysis wili heip to determine why the rate of transfer to ABC from other providers is increasing.
LÍARNNOMEDW
10 Chapter summary

Chapter 4
Sections 4, 7 & 8 1 Resource versus Two approaches to strategy formulation are position
position strategies or resource.
A position approach means identifying opportunities
in the market and obtaining the resources to meet it
- positioning ourselves in line with opportunities.
Q10 Study Text A resource approach means obtaining a unique
resource to gain a sustainable competitive
advantage.
JSW favour the latter approach since our position
can often be copied by competitors meaning that
any advantage is short lived.
Resource audit and A resource audit is an assessment of resources

benchmarking using a framework (eg 9Ms) to identify initial
strengths and weaknesses. These resources may
be benchmarked to identify best practice.
2 Capabilities The terminology of a resource based strategy
includes resources (things we have) and
competences (how we put them together to produce
goods and services) that are as a minimum
threshold but ideally will be unique to gain
sustainable competitive advantage.
3 Value chain The value chain is Michael Porter's model of the
inter-related activities that can add value as
perceived by the customer. Analysis of these
activities can allow the business to identify strengths
and weaknesses and identify options for
improvement.
4 Products and Knowledge is a resource and any business can
knowledge benefit from capturing that (tacit) knowledge and
sharing it so that it becomes explicit and an asset to
all staff.
The product portfolio needs to be in balance so that
those that reach the end of their life cycle can be
replaced over time with those that are new to the
market and have potential for profitability and cash
generation.
END OF CHAPTER
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lEMMNGÄDIA
Corporate Appraisal:
(S&W) + (O&T) = SWOT

• Formulate an appropriate SWOT analysis
Exam Context
Again this is core material for section A of the exam but that could also be tested in its own right in section B.
You will not have encountered most of the techniques covered in this chapter.
Business Context
Most organisations will at some stage perform a SWOT on their business - it is probably the most commonly used
business framework of them all
69 WPJJJ
LEARNING MIDIA
6: CORPORATE APPRAISAL (S&W) + (O&T) = SWOT
Overview
Corporate Appraisal
Position Audit
SW
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1 SWOT analysis (corporate appraisal)

1.1 The SWOT analysis combines the results of the environmental analysis and the internal
appraisal into one framework for assessing the firm's current and future strategic fit.
Strengths Weaknesses
Internal
to the M
Conversion
company a
t
c
h'
i
Exist n
independently g Conversion
of the <—
company
Opportunities Threats
lecture examples Exam standard for 20 marks based on a Section A question
Chelsea
Chelsea is a large civil engineering company, which carries out various building contracts within
both its home and overseas markets. Its main area of work, particularly overseas, is in road
construction. The company has a strong financial track record and successfully survived a major
recession within its home market about ten years ago.
Economic circumstances in overseas markets
During the last three years, the overseas markets in which Chelsea has been carrying out building
contracts have suffered a serious economic recession. Business confidence in these markets has
been seriously weakened over this period. One country which has been adversely affected is
Eastlandia. Chelsea has been engaged in carrying out contract work in Eastlandia for several
years. Government action in Eastlandia to protect its ailing economy has also had an adverse
impact on foreign contractors such as Chelsea operating within this country.
The concern felt by Chelsea's directors regarding the economic situation in Eastlandia has been
increased as a result of recent events involving a large development company called Derby, which
Chelsea has worked with in the past. Derby, which is wholly owned by Eastlandian shareholders,
had previously received Eastlandian government backing. However, it has recently been allowed
to go into receivership without any further government support. The government announced that
partial repayment of debts owed by the development company to local investors would take priority
over those it owed to foreign investors. The result of this is that foreign investors are unlikely to see
any recovery of their loans.
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The serious economic situation in Eastlandia has threatened to result in an economic recession,
There has been a constant negative effect on related industries within the country, such as steel,
building materials and transport. Another major concern for Chelsea's directors is the constant
threat posed by currency fluctuations and the possibility of the Eastlandian government being
forced into currency devaluation.
Work in progress
Currently Chelsea is engaged in the construction of a major road linking two parts of a new
Eastlandian city, bypassing the central congested area. Chelsea is engaged as a subcontractor to
a major Eastlandian development company - a different company from Derby, which went into
receivership recently. Chelsea accepted the contract after estimating that it would provide a high
net present value. At the time that the investment appraisal was undertaken, the expected
currency exchange rate between Eastlands (Eastlandia's currency) and £ sterling (Chelsea's home
currency) was 7.26 to the £ in the current year and 7.54 to the £ in the next year. In fact the current
exchange rate is 7.74 to the £ and the forward rate in 12 months' time is quoted at 8.56 to the £.
As far as Chelsea's overall business is concerned, the contract represents about 10% of total
turnover for the company. The contract commenced three months ago and Chelsea is to be paid in
Eastlands. Progress payments for the work done to date have been delayed without any
explanation. The contract is about 15% complete and is expected to be completed in 21 months,
which is three months later than planned. This will result in penalty payments being incurred by
Chelsea.
The directors of Chelsea have expressed to the contract manager for the road development in
Eastlandia their concern reaardina the need to undertake remedial work on what has been
completed so far. This has resulted from use of faulty materials obtained from an Eastlandian
supplier. The remedial work has already consumed the total amount of the financial contingency
which was allowed for in the contract estimates.
Strategic information and market size
Chelsea uses external databases to establish the levels of its own share of the market and overall
patterns of market growth and development. In addition, the management accounting department
of the company provides internal information on market share and growth and internal capacity to
meet its future contractual demands. Over the last two years there has been a general decline in
market opportunities but Chelsea has managed to increase its overall market share. This has been
achieved because of its strong réputation for using good quality materials and applying high
standards of workmanship.
One of the major criticisms being made in Eastlandia is the poor quality of civil engineering
projects which have been completed quickly. There have been reports of numerous site casualties
amongst the site workers during the construction process. Some buildings have partially collapsed
after construction has been completed and there have been instances where roads have started to
break up shortly after they have opened. This has caused civilian casualties with some fatalities
and resulted in noisy public protests in Eastlandia about the lack of attention to safety in civil
engineering and building work,
Chelsea is well regarded by the Eastlandian government. It has taken a long time for the directors
of Chelsea to build the company's reputation and gain recognition in Eastlandia for its
workmanship.
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Possible future development

The Eastlandian government has invited Chelsea's directors to tender for other civil engineering
work. Chelsea has taken up the invitation and if the company were successful in all its tenders, the
total commitment in Eastlandia would represent about 40% of its order book.
In recognition of the importance of the Eastlandian market and in order to reduce the potential
losses from developers who engage their services becoming insolvent, the directors of Chelsea
have proposed that a strategic alliance be formed. It is proposed that this alliance will be
established with an Eastlandian civil engineering contractor who, it is hoped, will have an insight
into the financial integrity of potential customers. The alliance partners would be able to give clear
advice as to which of these Eastlandian customers would be suitable for the establishment of
contractual arrangements.
Required
Prepare a SWOT analysis for Chelsea and identify factors that should be considered in order to
reduce the potential impact posed by threats, (20 marks)
Solution
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6: CORPORATE APPRAISAL (S&W) + (О&Т) = SWOT
2 Chapter summary

Chapter 4
1 SWOT A corporate appraisal brings together the strengths
and weaknesses of an internal appraisal with the
opportunities and threats of the environmental
analysis. This is called a SWOT analysis.
END OF CHAPTER
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LEARNING M B M
Strategie options
generation

• Evaluate, through the strategy clock, generic strategy options available to an organisation
• Advise on how price-based strategies, differentiation and lock-in can help an organisation sustain its competitive
advantage
• Explore how organisations can respond to hypercompetitive conditions
• Assess opportunities for improving competitiveness through collaboration
• Determine generic development directions (employing an adapted Ansoff matrix and a TOWS matrix) available to
an organisation
• Assess how internal development, mergers, acquisitions and strategic alliances can be used as different
methods of pursuing a chosen strategic direction
• Establish success criteria to assist in the choice of a strategic direction and method (strategic options)
• Assess the suitability of different strategic options to an organisation
• Assess the feasibility of different strategic options to an organisation
• Establish the acceptability of strategic options to an organisation through analysing risk and return on investment
• Explore the relationship between a corporate parent and its business units
• Assess the opportunities and potential problems of pursuing different corporate strategies of product/market
diversification from a national, international and global perspective
• Assess the opportunities and potential problems of pursuing a corporate strategy of international diversity,
international scale operations and globalisation
• Discuss a range of ways that the corporate parent can create and destroy organisational value
• Explain three corporate rationales for adding value - portfolio managers, synergy managers and parental
developers
Exam Context
The most important and examinable chapter of all - always tested in some form or other. In many questions where you
are asked to make a recommendation or suggest options you will be able to identify some reasoned solutions. The
content of this chapter provides you with some further tools and a step by step approach to identifying and developing
strategic options. This section was included in section В in the pilot paper and featured in December 2007, June 2008
and in section A of the December 2009 exam.
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7: STRATEGIC OPTIONS GENERATION
This is not an area covered in other papers in the syllabus.
Business Context
Merger and acquisition activity is higher now than at any time. This can be seen in industries such as banking and retail.
As groups become bigger in an attempt to get economies of scale there is a greater imperative for others to do the same
to compete.
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Overview
Strategic options generation
Generic options
Suitable
Focus
Acceptabie
Direction
Feasible
Method
Ĺ.
' ι ι
Organic Acquisition/Merger Strategic Partnerships
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1 What might an organisation do to reach its

objectives?
1.1 The following three stages approach should be used to generate strategic choice,
(a) Generic strategy: the basis and scope on which the organisation chooses to
compete, (Michael Porter)
(b) Strategic direction: which products, services and markets the organisation wishes to
compete in. (Igor Ansoff)
(c) Method: how the strategy is to be achieved. (Lynch)
2 Porter's three generic strategies

2.1 Porter argues that successful firms use one of three means to pursue their strategic
objectives, and gain sustainable competitive advantage. These are:
(a) Cost leadership
(b) Differentiation
(c) Focus.
2.2 The first step is for the firm to decide the basis of its competitive advantage, which will be
either
Cost Stuck in the
leadership middle Differentiation
V * _, à f c
Higher Profit
ì f, O-
Higher Profit Profit
Higher costs Higher costs
•
Lower costs
2.3 The second step is the decision upon competitive scope:

(a) Narrow focus - product aimed at a defined group only
(b) Broad focus - product available to market as a whole.
Porter recommends the formulation of strategy at the lowest strategically relevant level. It
follows that a single company may follow different strategies in each of its strategic business
units.
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2,4
BASIS OF COMPETITIVE ADVANTAGE

LOW COST DIFFERENTIATION
BROAD TARGET
COST LEADERSHIP DIFFERENTIATION

M&S'
Ryanair Volvo
PETITIVE SCOPE FOCUS
DIFFERENTIATION
COST FOCUS FOCUS
NARROW TARGET eSure / Ferrari
Cost leadership
2.5 Organisation aims to become the lowest-cost producer in its chosen market.
Advantages include:
(a) Establishes a barrier to entry
(b) Enables firm to remain profitable in price cutting phase of mature industry
(c) Allows price cuts to win market share.
(d) Increases margins when market prices are higher
Lecture example Τ Practice question
Suggest a range of at least 5 practical ways in which an organisation can reduce its cost base. Try
to locate each suggestion in the relevant area of Porter's value chain as discussed in Chapter 5,
Solution
1.
2,
3.
4.
5.
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Differentiation
2.6 The firm seeks to dominate the market by providing a product that is regarded as having
some clear perceived difference, which enables it to command a premium price.
2.7 Advantages include:

(a) Creates a barrier to entry through product differentiation
(b) Reduces the impact of price competition from rivals through switching competitive
emphasis away from price
(c) Increases customer loyalty and switching costs
Suggest 5 practical advantages of pursuing a differentiation strategy rather than a cost leadership
strategy:
Solution
1.
2.
3.
4.
5.
3 Focus
3.1 If a firm lacks the resources to dominate the broad (or mass) market, it can seek to
dominate a niche within the markets. This is known as market segmentation.
3.2 Focus can be used in a variety of ways.

(a) Meeting the needs of a particular buyer group
(b) Focusing on excellence in a particular technology or stage in the production process
(c) Limiting operations to a small geographical area
The Strategy Clock

3.3 The examiner may also expect you to be aware of the concept of the "strategy clock"
developed by Bowman when he described the strategic options within the diagram below. In
essence this simply suggests that over-priced products will fail.
80
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Differentiation
4
High Focused
Hybrid differentiation
3 5
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S
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&
TS Low
Τ»
ra price
TS
>
'as
υ
φ
α
7/Strategies
destined
No frilis
for ultimate
Low
failure
Low Price High
4 Strategic direction
Ånsoff s Matrix
4,1 The next stage is to consider direction - current markets and products and/or new
markets and products? This is where Ansoff s matrix can help:
PRODUCT
(OR SERVICE) ' EXISTING / PRESENT NEW
MARKET
'
Withdrawal
Do Nothing
EXISTING/PRESENT Product Development
Consolidation
Market Penetration
NEW Market Development

- Geographical Diversification
- New Segment • Related
- New Use • Unrelated
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7: STRATEGIC OPTIONS GENERATION ·
4.2 The matrix is intended to include all strategic directions in which an organisation can go in
terms of products or markets - from withdrawing a product range from an existing market to
diversifying into new products/markets altogether.
LMüre examples Practice question
Use Ansoff's matrix to generate 10 strategic growth options for a doctor's surgery currently
offering the traditional General Practitioners' appointment service but experiencing a worrying drop
in patient numbers. You must think of at least 2 ideas in each of the 4 quadrants of the matrix."
Solution
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Y
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2, α d •£.»·
IU-,, --, , r ni i t Я •fo eviraci li'- -- '•'"// !,
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ι ι h i' r SxfÛ^
4. άΜ-ί
5.
6.
7,
8.
10.
APPLICATION TĒST:
If you were to show this answer to a stranger who had NEVER seen the question being asked
would they be able to deduce from what you have written down above that this is something to do
with a medical practitioner ? If the answer to this questions is "no" your answer is not applied.,.
notes.
5 Methods of implementing strategic choice

5.1 The final decision having identified the basis of competition (Porter), and the direction
(Ansoff) is the method. Lynch's Expansion Matrix identifies a range of ways in which we
can implement chosen strategies.
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/ / /
COMPANY —••
INTERNAL EXTERNAL
NEW DEVELOPMENT DEVELOPMENT
LOCATION
Joint Venture
HOME Internal Development Merger
COUNTRY Acquisition
Alliance
Franchise/Licence
Exporting Joint Venture

Overseas office Merger
ABROAD Overseas manufacture Acquisition
Multinational operation Alliance
Global operation Franchise/Licence
âuiêxample 4 Discussion question
ι hink of two disadvantages and two advantages of each of the following "methods" highlighted in
Lynch's matrix;
1 Acquisition
2 Franchising
3 Internal development
Solution
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Letture example 5 Exam standard question
Alexander Simmonds is the founder and Managing Director of Playwell Ltd, a privately owned UK
company specialising in making educational toys for young children and for children with special
educational needs. These toys are robust and of simple construction, made from high quality
materials, mainly wood, acquired form a local supplier. The main selling lines are building blocks of
different shapes, sizes and colours, and toy trains and carriages (with no mechanical or electrical
components). These simple toys are intended to stimulate the imagination of young children and to
help them develop their visual and coordination skills.
Alexander started the company in the early 1990s. He had initially made toys in his garage for his
own children. He soon was persuaded to expand his activities and he had a ready demand for his
products from friends and neighbours. In 1993 he was made redundant from his full-time job and
he decided to put his redundancy money into setting up his own company. To his surprise the
demand for his products grew at a faster rate then he had expected. There was an obvious gap in
the market for simple and high quality toys, Young children did not appear to want the complex and
high technology products which were expensively promoted on television and in magazines. The
early success of the company was helped by being a low-cost operation. At the start, Alexander's
sales were made on a direct basis, using no intermediaries. He promoted his products within a fifty
mile radius using local newspapers; orders were shipped directly to the customers. Additionally the
supplier of the materials provided Playwell with extended and low cost credit until the final payment
was made to the company for the completed toys. This arrangement has continued to the present
time.
Between 1993 and 1998 sales grew from a figure of £30,000, to almost £700,000. Net profit after
tax was about 12% and Alexander's policy has been to reinvest these profits into the business. By
1998 he had moved out of his garage and had taken over a small factory in an industrial
development area in a nearby town. Skilled labour was relatively easy to acquire. There was high
unemployment as a result of recent factory closures. By 1998 Alexander employed nearly 30
people in a range of jobs including design, manufacturing, sales, invoicing and distribution. Labour
turnover was, unsurprisingly, very low. The workers were very loyal and Alexander paid them
competitive wages and -provided them with above average benefits, particularly attractive in an
area where unemployment was still high. The firm continued to grow at a rate of about 20% a year
during the late 1990's and early 2000's. Although most of the sales were still marketed directly to
the customer, a significant proportion of sales were now made through one retailer who had a
group of fifteen shops. This retailer sells products for young children, ranging through clothing, cots
and prams as well as toys, and even today this retailer still relies on Playwell for a significant
amount of its toy purchases. About 40% of the UK sales (excluding those to the special
educational needs market) are currently made to this retailer. The target market of these shops is
professional and middle-class parents who generally value quality above price.
As in any growing organisation Alexander now found himself moving away from hands-on
operation and becoming more concerned with future growth and strategy. By the end of 2004
Alexander decided to look at another market to generate increased growth in sales. Although sales
were now almost £1.5 million a year and there were nearly 50 employees, the company now had
the capacity to double its output. Fixed costs, including labour, accounted for 60% of total costs
and any future increase in sales ought to generate improved profit margins. This was important if
the company was to prosper and grow and provide security for the workers in an area where
employment opportunities were limited. The company was then looking for sales to increase by
84
about 30% per year. However such an increase could not be easily funded out of retained
earnings. Playwell's performance and conservative financial record was sufficiently attractive for
the company's bank to be more than willing to extend its credit lines so as to provide the necessary
working capital.
The new area that Playwell was interested in was the development of toys designed for the 'special
educational needs' market. This term is generally used to refer to the education of children who
have one or more physical, mental, or emotional disabilities. Toys such as shaped building blocks,
sponge balls, pegboards, and three dimensional puzzles can all help children with disabilities to
improve their visual perception, spatial awareness, memory and muscle control. In addition there
were other products such as balance boards and beams and disks, all made from high quality
wood, which can help to co-ordinate mental and muscular activities. However it was likely that the
method of marketing and distribution might have to be adapted. The new market segment was
much more easily identifiable and accessible. Data bases of parents of children with special
education needs were readily available and it was possible to access the parents of these children
via the specialist schools which these children attend. These schools were enthusiastic about
Playwell's products but they alone could not support the this new range of products. In fact part of
Playwell's strategy was to distribute its products to these schools at very low prices in the hope
that parents would then purchase these specialist toys for home use. This proved less easy than
had been anticipated. Firstly, parents of these children with specialist educational needs incurred
many other expenses such as the additional costs of care. Furthermore because of the increased
care which these children usually required, one of the parents often had to stay at home or could
only take on part-time work. Consequently the parents' discretionary income was significantly less.
In addition, whereas the company had hoped that the teachers would recommend its products to
the parents, it became apparent that the teachers were no doing so, being worried that the parents
would not have the expertise to use some of the equipment properly. As a result the revenues from
this market were not as large as had been anticipated, particularly as the products' placement in
the schools were seen initially as loss-leaders. Nevertheless sales of Playwell's core products (the
non-specialist toys) were still gradually increasing (8% a year), but the momentum of earlier years
was now not being maintained. By the beginning of 2006 Alexander decided that any future market
expansion should be focused overseas, although he still intended to persevere with the 'special
education' venture.
The company had acquired a good reputation within the United Kingdom and was operating in a
growing niche market in which Playwell was a significant participant. However, the company now
decided that exports were to be the favoured means of growth. In an effort to avoid high risks
Alexander decided to concentrate his activities in Western Europe. There were a number of
advantages to this strategy - the purchasing processes of both parents and children were thought
to be similar to that of the domestic market, transportation costs were likely to be lower than sales
to America or Asia, and being part of the European Union, there would be no trade barriers.
However after an initial period of success, Playwell discovered that sales were not as easily
achieved as they had been in the UK. Firstly the major European countries of France, Germany
and Italy were at different stages in the business cycle to the UK. Whilst the British economy was
growing the continental ones were suffering from recession. Consequently the demand for
products such as toys was not buoyant. Furthermore high interest rates within the UK resulted in a
high level of the pound sterling against the Euro and other continental currencies so making any
export from the UK an expensive option. It appeared that price was now becoming a serious
consideration in the customer's purchasing decision, particularly for a company with no strong
overseas reputation. (Table 1 provides financial data for Playwell over the past few years).
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Alexander had now made two efforts to expand his business, neither of which could be judged as
successful and he was now anxious to determine the future progress of the company.
Table 1
£ million
2004 2005 2006 2007 2008 2009
(forecast)
Sales to General Toy
Retailers-UK 1.50 1.62 1.75 1.89 2.04 2.20
Cost of Sales 0.53 0.57 0.62 0.67 0.72 0.78
UK Special Needs Toys

Sales 0.30 0.30 0.25 0.25 015
Cost ofSales 0.14 0.14 0.11 0.11 0.07
Overseas Sales 0.50 0.55 0.55
Cost of Sales 0.30 0.33 0.33
Total sales 1.50 1.92 2.05 2.64 2.84 2.90
Fixed costs 0.65 0.95 1.00 1.25 1.40 1.40
Required
You have been retained as a business consultant by Alexander to provide impartial advice as to
the future strategy which the company should adopt. Given its relative failure in its last two
ventures, provide a briefing paper recommending strategies that Playwell could pursue in the next
two to three years. You should support your recommendation with appropriate financial analysis
and the use of Porter's, Ansoff s and Lynch's frameworks. (20 marks)
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ШУШЮОМНЯА
86
β Evaluating strategies
6.1 Once the options have been generated using the 3 step approach described above those
options need to be evaluated in order to choose the most appropriate one.
6.2 The evaluation process effectively means that strategies are examined according to a
number of relevant criteria. Johnson and Scholes narrow these down to the following three
broad criteria -
(a) suitability,
(b) acceptability ;and
(c) feasibility.
Suitability
6.3 Does the strategy provide an appropriate answer to the situation identified in the corporate
appraisal? Determining the suitability of an option can be undertaken in two stages:
6.4 Establishing the rationale, where we ascertain if the strategic option:

(a) exploits the company's strengths and distinctive competencies
(b) grasps opportunities
(c) addresses weaknesses
(d) combats threats
(e) fits the organisation's mission and goals
(f) suits internal politics and corporate culture
Acceptability
6.5 Acceptability is concerned with the expected performance of outcomes if a strategy is
implemented. It can be assessed in three broad ways:
(a) Returns L p¡ n a n c ¡ a | considerations

(b) Risk J
(c) Stakeholder's attitude
6.6 The organisation requires to objectively assess the likely returns from accepting a particular
option (eg ROCE, cost benefit analysis, DCF).
6.7 The organisation must be able to determine the level of risk associated with a particular
option. Risk assessment techniques include:
(a) Key financial ratios, such as gearing and interest cover
(b) Break-even analysis
(c) Sensitivity analysis
Feasibility
6.8 Feasibility is concerned with whether the option can be achieved, (eg resources, is it legal,
time etc)
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7 Who makes the final decision? Corporate parent vs

strategic business units (SBUs)
7.1 The examiner will expect you to identify from the scenario whether you are addressing the
role of parent or SBU.
Value of parent to the group - Ashridge mode!

7.2 The most successful groups will be where the parental skills match the needs of the
SBUs with the greatest potential for growth and profitability.
7.3 This is assessed in the Ashridge model by reference to two variables.

(a) 'Feel': The degree of fit between the parent's skills, and the SBU
(b) 'Benefit': the degree of fit between the SBU opportunities and the parent.
7.4 Maximum value will be created where the parental skills match the SBU opportunities,
7.5 Value may be destroyed (ie the group is worth less than if were run as separate
companies) if the parental skills don't match - frankly, they shouldn't be running those
businesses!
Benefit (fit between SBU opportunities
and parental skills etc)
Low High
High Ballast \ Heartland
businesses \ businesses
Feel
(fit between SBU and
parental skills etc)
Alien Value trap

businesses businesses
1 ПМ1
(a) Heartland businesses - benefit from the attention of the parent without risk of harm
from unsuitable developments; these are key SBU's and should be retained and built)
(b) Ballast businesses - well-understood by the parent, but need little assistance; these
should be held and/or harvested
(c) Value trap businesses - good opportunities, but they do not relate to the SBU's
CSFs; only retained if they can be moved into the heartland; this means that the
parent needs to acquire the requisite skills and resources to realise the SBU's
potential or divest.
(d) Alien businesses - have no place in the portfolio; no skills and no opportunities
therefore divest.
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8 Managing diversity
8.1 The corporate parent determines the extent of diversification of the group . The group of
companies can be diverse in two main ways:
(a) products and markets; and
(b) geographically - by being domestic, international or global
Lecturş example 6 Discussion question
Discuss some of the risks associated with the following corporate strategies:
- Geographical Market Development
- Withdrawal
- Unrelated Diversification
Solution
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7; STRATEGIC OPTIONS GENERATION
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Practic© scenarios
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7.1 Bowman's Strategy Clock

Company A - sells low quality gifts and trinkets for under $5 each from a seaside beach hut in a
tourist town
Company В - sells high quality portraits by well known artists at a price agreed based on the
specific needs of the client; located in central locations in quality addresses in major cities
Company C- is a basic service airline for which all extras (including pre-booked seats) are paid for
as extras; headline prices are very low however only a few seats are available online at these
prices with the average price being mid range and 20% of seats being at the upper end of
available prices for similar routes; they fly out of regional airports rather than the larger capital city
airports
Using the strategy clock identify each product and assess their potential for sustainable
competitive advantage due to the strategy and product positioning adopted.
7.2 SSP
Schwarz-Schumacher pic (SSP) are a market leading traditional maker of quality gentleman's
shoes. They also have a less popular fashion brand called Sch-Schu that has growing popularity
with teenagers.
Required
Using Ansoff s matrix assess the directions for growth available to SSP highlighting risks and
opportunities.
7.3 SJM Pic

SJM pic is a long-established retail organisation operating nationally. It is a listed company which
has enjoyed profitable trading and now ranks as one of the leading retailers in the country.
The company has recognised that its customers are increasingly using personal transport and
value the convenience of 'out-of-town' locations. The object of building stores in such a location is
to provide customers with easier access to shopping facilities as this is often difficult within the
busy city environment. Typical of the out-of-town location is a large car parking facility and good
public transport links.
SJM pic established a plan five years ago to build a number of out-of-town superstores near four
major cities. The first of these superstores has now been in operation for one year.
SJM has followed its competitors in developing out-of-town sites and is considering a partnership
initiative with another retailer whose merchandise would not be a competitive threat. This would
involve joint development of superstores on out-of-town sites.
Required
Assess the likely factors that should be considered in relation to this proposal to jointly develop the
out-of-town superstores.
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9 Chapter summary
1 Section Topic Summary

Chapter 6
1 Generic options Michael Porter identified two bases of competition -
cost leadership or product differentiation. This is
the first choice - do we compete with a low cost
standard product or a differentiated product that will
command some form of premium? For most
Q6 Study Text
companies it is not a good idea to get stuck in the
middle of these positions since margins will be
easily squeezed.
2 Focus A second consideration is the scope of operation -
do we focus on a few customers with a narrow
range of products or do we go for a wider range of
customers with a more diverse range of product
lines? In part this will be determined by the
resources we have available.
3 Direction The next stage having decided upon the basis of
competition and the focus is to consider the specific
direction by looking at the options for
product/market combinations. This is the purpose
of Ansoff s matrix which identifies options relating to
current and new products and markets.
4 Method The method of implementation can range from
internal development to acquisition of another
business or a looser partnership arrangement. The
options for expansion both home and abroad are
outlined in Lynch's matrix.
5 Evaluation Finally having identified a range of possible options

we can evaluate them using three key strategic
criteria - Suitability (does it meet our key
objectives?), Acceptability (will key stakeholders
approve?) and Feasibility (can it be done/can we
afford it?)
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Implementation; Structure

• Advise on how the organisation can be structured to deliver a selected strategy
• Explore generic processes that take place within the structure, with particular emphasis on the planning process
• Discuss how internal relationships can be organised to deliver a selected strategy
• Discuss how external relationships (outsourcing, strategic alliances, networks and the virtual organisation) can
be structured to deliver a selected strategy
• Explore (through Mintzberg's organisational configurations) the design of structure, processes and relationships
Exam Context
Organisational structure is one of the areas that you may consider to be a strength or weakness for the business in a
section A question. It is also an area that is often tested in detail in section В including recommending a different
organisation configuration to support or implement a proposed strategy. Note that if this is the case change
management is also worth considering to support your answer.
Structure was covered in F1 Accountant in business. Note that the idea of the organisation is extended here to include
configuration that includes relationships and processes as well.
Business Context
The existence of communications technology has enabled more flexible organisational configurations to be created. The
increase in home workers, tele-commuting and portfolio working has created new environmental factors such as worker
status for the self-employed.
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8: IMPLEMENTATION; STRUCTURE
Overview
Implementation: Structure
Structure Control processes Relationships
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1 Organisational configuration
1.1 The way in which an organisation is configured comprises three elements;
(a) Organisational structure
(b) Control processes; and
(c) Relationships
1.2 These three elements are highly inter-related and should be consistent with the strategy
being followed by the organisation.
2 Organisational structure
2.1 An organisation's structure includes responsibilities, communication lines and
organisational values (eg the importance placed on skills and knowledge).
Before advising an organisation on the type of structure they should adopt in order to implement
their chosen strategy you would need to consider the "situational factors" of the organisation to
ensure you advised the most appropriate structure. Make a list of 10 situational factors which will
help determine the appropriate structure for an organisation:
Solution
ι
2.
3.
4.
5.
6.
7.
8.
9.
10.
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2.2 You need to be able to discuss, evaluate and make recommendations upon the following
structural types:
Simple / Entrepreneurial
Functional
Matrix
Divisional
Network
Virtual
Simple/Entrepreneurial
2.3 All business decisions are taken centrally by a single individual.
Finance
Marketing
lecture example % Discussion question
Suggest the advantages and disadvantages of this structure:
Solution
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8: IMPLEMENTATION: STRUCTURE
Functional
2.4 Decisions are taken by the Board of Directors with each function represented by a
departmental or functional head:
Managing
Director
Financial Production Marketing Distribution

Director Director Director Director
tófűre example;!; Discussion question
Soltitiom
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Matrix
2.5 Matrix type structures maintain coordination by co-working across functions. This usually
means some form of dual authority that can be complex and confusing and may make
control more difficult.
| | ļ | | 1
Production Sales Finance Distribution R&D Marketing
Dept Dept Dept Dept Dept Dept
Area Manager A
Area Manager В
Area Manager C
Solution
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Organisational forms
2,6 Mintzberg described organisational forms using organigrams as follows:
Operating Core
2.7 The five components of an organisation need to be in the appropriate balance for the
strategy and environment and culture that they face.
2.8 The five components are:

(a) Strategic apex - is the source of direction for the organisation (eg board of directors);
they seek to control
(b) Middle line - are the middle managers that convert direction into tasks and
procedures; they seek autonomy
(c) Operating core - are those that provide the outputs of the organisation; they seek
autonomy and mutual working
(d) Technostructure - exist to standardise through procedures and checking (eg quality
control, compliance);
(e) Support staff - support the operating core; they seek their expertise to be
recognised as vital (eg finance, administration)
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3 Contro! processes
3,1 The processes that form part of organisational configuration are control processes that can
be categorised into four types:
Input Output
Direct Supervision Performance targets
Planning Balanced scorecard
Indirect Culture Í Internal markets •
Self-control 5 ^
3.2 Control is an essential element of implementation and is essential to the success of a

chosen strategy. In the exam you may therefore discuss controls in the context of:
(a) assessing the strengths and weaknesses of current strategic control arrangements
(b) ensuring that particular strategies and processes are successfully managed and
implemented (eg project management, a quality initiative, a culture change, a
takeover or merger etc etc)
Input controls
3.3 Direct input controls - include supervision and budgeting and lend themselves to stable
and simple organisations,
3.4 Indirect input controls - include peer pressure and goal congruence so that control is
internalised by staff at the risk of stifling innovation
Output controls
3.5 Performance targets - are useful in large organisation where direct controls are not
possible for the whole organisation due to volume and distance; they are also useful when
an organisation is highly regulated and non-compliance results in serious sanctions (eg
banks, health).
3.6 Balanced scorecard - to concentrate on one area of a business leads to the detrimental
treatment of another. For example, to focus on just the financial aspects may lead to poor
morale and low innovation within the business.
Balanced scorecard
3.7 The four perspectives of Kaplan and Norton's balanced scorecard are:
(a) The financial perspective - what should we be measuring to gauge whether or not
we are satisfying our shareholders? This might include cash flow, profitability, or cost
per unit.
(b) Customer perspective - what should we be measuring to establish whether our
customers are happy? This might include satisfaction surveys, complaints, product
choice, safety records, and so on.
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(c) Internal business perspective - what should we be measuring now to ensure that
our business performs in the short term? This might include operational goals in
manufacturing (eg rework rates), administration (eg response times to queries) and
logistics (eg delivery times).
(d) Innovation and learning perspective, - what should we be measuring to ensure
that we are developing long term capabilities and increase in skills? This might
include measures for research (eg new products released), recruitment (eg staff
turnover), or winning new customers.
3.8 A balanced scorecard approach can provide a justification for a strategy, support long term
control and provide an holistic view.
3.9 It can cause problems however of interpretation and sending confusing mixed messages
to managers and other stakeholders.
3.10 Internal markets - can be used to control outputs by extending the market discipline
operated by staff with external customers to their internal customers; this has the
disadvantages of excessive bureaucracy and potential for transfer-pricing to lead to
dysfunctional behaviour.
Gray-Nard Holdings is a publishing house specialising in legal textbooks around the world. They
have encountered a number of problems and the Global MD is concerned that the current holding
company structure may not be appropriate. The following issues have caused particular problems
of late:
(a) Inconsistent treatment of European Union legal issues in textbooks published in different
EU states
(b) Increasing costs of overheads
(c) Increase in missed deadlines
(d) Greater degree of typographical errors
(e) Conflict and an increasing blame culture
Required
(i) Explain how structure may be a contributory factor to the above problems and suggest any
possible changes to organisational structure that may help the situation at the HB
Group.
(ii) Identify and explain the benefits to HB of one key performance indicator (KPI) for each of
the perspectives of the balanced scorecard.
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Solution
4 Relationships
4.1 There are two types of relationship that make up the configuration of an organisation:
(a) internal - degree of centralisation and the centre/SBU relationship
(b) external - alliances, networks, flexible firm and virtual organisations
internal relationships
4.2 Centralisation refers to the level in the organisation's structure at which decisions are
taken.
Identify 5 advantages of both centralised and decentralised structures.
Solution
Centralised Decentralised
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External relationships
4.3 External relationships are increasingly co-operative rather than adversarial. We will
consider alliances, networks, flexible firms and virtual organisations.
With outside organisations

4.4 Alliances - include partnerships, consortia and strategic alliances (eg airline code
sharing where same ticket takes a passenger on a range of carriers);these are less formal
and may have problems with knowledge sharing between partners.
4.5 Networks - relates to more fluid and loose arrangements often associated with
outsourcing of functions, shared services, flexible staffing and leased assets. Examples
include teleworking and one-stop shops for professional services as well as integration of
car competitors through shared parts and technology and common suppliers.
With individuals (or organisations that provide staff)

4.6 Flexible firm - is a firm that makes greater use of non-permanent staff supporting a smaller
core of multi-skilled staff.
4.7 The shamrock organisation provides flexibility in cost, numbers and skills of staff. Staff
will be more mobile and hours and responsibilities are less prescribed.
4.8 Virtual organisation - is a geographically dispersed organisation linked by information

technology and communications.
4.9 In the exam you are likely to discuss the importance of establishing and managing
relationships both upstream (with suppliers) and downstream (with retailers or consumers).
4.10 Both SCM and CRM are increasingly supported and facilitated by the creative use of
technology.
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Identify 5 advantages of a virtual structures.
Solution
1.
2.
3.
4.
5,
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rracîice scenarios
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шшIEMWNGMEM
8.1 Bloggs Toys Pic

Bloggs Toys Pic is based in Surrey in the south and has grown over the last four years to an extent
that it has four main departments - production, sales, administration and quality assurance.
The chief executive believes that these departments have become too unwieldy and that the sales
teams and design and production teams (part of the production team) are not close enough to the
expanding regional markets in the UK,
The medium term strategy is to maintain a narrow range of products that can be sold as a quality
brand and by expanding manufacturing to new factories in the north.
Required
Identify the two key advantages and disadvantages to Bloggs Toys of adopting
(a) A departmental; or
(b) A holding company structure
for the proposed expansion and recommend a structure.
8.2 Compufix Ltd

Compufix Ltd provides help line and maintenance services to large stores who sell computers and
other IT equipment under warranty.
The workload is by definition variable since it is not predictable when customers will have problems
with their equipment. Approximately 30% of customers also purchase an annual maintenance call
that is arranged sometime within 50-55 weeks of the purchase date or the ¡ast maintenance visit,
Help line staff work from home and are provided with telephone and IT equipment that is
networked via a Virtual Private Network (VPN). They also do service visits. Regional teams of
engineers are allocated to help line or visits on a daily basis by head office control. Head office
also provides technical support to the engineers.
All staff are currently employed. There is an active market for IT support engineers working on
their own or as outsourcing firms on contract paying significantly more gross than Compufix pay.
Turnover has risen significantly in the last year.
Required
Identify the main advantages and disadvantages of Compufix adopting a flexible firm approach.
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5 Chapter summary

Chapter 7
1 Configuration JSW refer to organisational configuration which is
how they are organised. There are three inter
related elements to configuration - structure, control
processes and relationships.
Q7 Study Text 2 Structure Structure determines modes of communication and

control as well as being important for career
progression.
There are two main types of structure based on a
hierarchy (eg divisions or holding company) or a
matrix (including transnational for global operations)
3 Control processes Control processes aid strategic management with a

balanced scorecard approach being the most
popular for strategic control.
4 Relationships Both internal and external reiationships need to be
carefully managed particularly with the existing of
partnerships and alliances and more flexible and
virtual organisational structures.
The organisational configuration needs to support the strategy and be consistent with the
processes and process improvement undertaken by the business which is the subject of the
next chapter.
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END OF CHAPTER
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LEARNING MEDIA
Implementation; Changing
business processes

• Advise on how an organisation can reconsider the design of its processes to deliver a selected strategy
• Appraise business process change initiatives previously adopted by organisations
» Establish an appropriate scope and focus for business process change using Harmon's process-strategy mix
• Explore the commoditisation of business processes
• Advise on the implications of business process outsourcing
• Recommend a business process redesign methodology for an organisation
• Evaluate the effectiveness of current organisational processes
• Describe a range of process redesign patterns
» Establish possible redesign options for improving current processes of an organisation
• Assess the feasibility of possible redesign options
• Assess the relationship between process redesign and strategy
• Establish information system requirements required by business users
» Assess the advantages and disadvantages of using a generic software solution to fulfil those requirements
• Establish a process for evaluating, selecting and implementing a generic software solution
• Explore the relationship between generic software solutions and business process redesign
Exam Context
Improving business processes may appear as part of either a Section A or Section Β question. The principles of process
redesign and improvement came up in the pilot paper and the December 2007, June 2008 and December 2009 section
Β questions.
The importance of management information systems is considered in P5 Advanced Performance Management and
some of the issues raised here are common to that paper. Much of the rest of this chapter will however be new.
Business Context
Toyota needed long production runs because of the set up time for the dies to cast panels to be fitted to their cars. Any
misalignment would cause a series of ill-fitting panels and lots of wastage. By redesigning the process so that the die,
111
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9: IMPLEMENTATION: CHANGING BUSINESS PROCESSES
weighing several tons, could be moved easily on rollers meant that the production process could be more flexible and
output could be checked for errors as production proceeded saving on waste.
Overview
Changing Businesses Processes
' · — -^ '~ * ^
Process improvement Process redesign Process re-engineering
Feasibility
Software packages
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1 Improvement projects
1.1 According to Harman process change can be of three types depending on the level of
change required.
(a) Process improvement is a tactical level, incremental technique that is appropriate
for developing smaller, stable existing processes.
(b) Process redesign is an intermediate scale of operation appropriate for middle sized
processes that require extensive improvement or change.
(c) Process reengineering is used at the strategic level when major environmental
threats or opportunities mandate fundamental re-thinking of large scale, core
processes that are critical to the operation of the value chain.
1.2 We will consider process improvements under three main headings:

(a) feasibility
(b) levels of process improvement
(c) software solutions
2 Feasibility
2.1 Before any change is undertaken an organisation must check the change feasibility under 4
headings:
(a) Social feasibility - What is the impact on people involved in system?
(b) Technical feasibility - Is there a technically feasible solution?
(c) Environmental feasibility - What will the impact by on the environment?
(d) Financial feasibility - Will the project pay back?
2.2 This should be undertaken at two stages:

(a) Initially - to determining the level of improvement required/possible - improvement,
redesign or re-engineering
(b) Project stage - to determine the feasibility of the particular process change options
identified (see chapter 13)
3 Process improvement
3.1 This is a continuous process of improving existing processes as required (see chapter 10 on
quality management systems and approaches) for more detail on continuous improvement.
4 Process redesign
4.1 Process redesign is a more extensive improvement of middle sized processes.
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5 Process re-engineering
5.1 Business Process Re-engineering is the fundamental rethinking and radical redesign of
business processes to achieve dramatic improvements in critical contemporary measures of
performance, such as cost, quality, service and speed.
(Hammer & Champy- Reengineering the Corporation, 1993)
The key words here are 'fundamental', 'radical', 'dramatic' and 'process'.
5.2 Principles of BPR

(a) Design process to achieve a desired customer-focused outcome.
(b) Personnel who use the output from a process should perform the process.
(c) Information processing should be included in the work that produces the
information.
(d) Geographically-dispersed resources should be treated as if they are centralised.
(e) Parallel activities should be linked rather than integrated.
(f) Workpeople should be self-managing, exercising greater autonomy over their work.
(g) Information should be captured once at source.
5.3 5 Step approach to BPR
Slip 1 Develop the business vision and process objectives.
Stip 2 Identify the processes to be redesigned.
Step 3 Understand and measure the existing processes,
Step 4 Identify change levers.
Stip S Design and build a prototype of the new process.
Lecture example 1
Describe 5 reasons why BPR may not be easy to implement.
Solution
1.
2.
3.
4.
5.
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6 Theoretical frameworks
6.1 Harman describes four basic redesign patterns.
(a) Re-engineering starts with a clean sheet of paper.
(b) Simplification eliminates redundant process elements.
(c) Value-added analysis eliminates activities that do not add value.
(d) Gaps and disconnects targets problems at departmental boundaries.
Process - strategy matrix

6.2 Harman's Process Strategy matrix can be used to categorise the organisations processes
into four groups.
(a) Outsource - Complex and dynamic processes but not centrally important: hard to
automate, so outsource, examples: advertising, staff counselling.
(b) Improve - Complex, dynamic, high value important processes: careful process
improvement, focusing on people, their skills and their interactions, example: product
development.
(c) Automate/outsource - Simple, commodity-like processes of low strategic

importance: automate with off-the-shelf systems or outsource, example, payroll
accounting.
Automate - Simple but Important: automate to improve efficiency using eg
workflow, CRM, Six-Sigma, example: sales order processing.
Low Strategic importance High
High
Outsource Improve
Process
complexity
Automate/Outsource Automate
Low
Lecture example 2
4D is a large teaching hospital. While it offers a full range of hospital services to its local
community it also has a large staff of professors and lecturers who teach and train all kinds of
medical student. 4D has a very good reputation for clinical excellence.
One of the areas in which 4D is very highly regarded is the training of surgeons. Three of the nine
operating theatres in the hospital can be observed from a gallery, though only a number of
students can watch any operation due to space constraints. This allows students to watch a
procedure and then ask questions of their lecturer or the surgeon.
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9: IMPLEMENTATION: CHANGING BUSINESS PROCESSES-
The IT department of 4D has just developed a new Information System for use in operating
theatres. This system uses web technology to allow students anywhere in the world to
videoconference with a lecturer during an operation. The students can observe the operation and
the surgical team, and discuss the procedure with the surgeon and their lecturer. The system also
works 'in reverse' so a surgeon at 4D can watch a student perform an operation elsewhere in the
world and provide guidance and support.
Requirement
Discuss whether the new system is an example of Business Process Re-engineering or Process
Improvement and explain 5 benefits of the new system for 4D.
Solution;
7 Software solutions
7.1 An implementation issue that you may have to consider in the exam is whether the software
selected to improve a process should be:
(a) a standard package - such as an ERP system which would be supplied by the
software supplier in modules that can be built up as required; or
(b) a bespoke system - written specifically for the business.
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L E M N W G MIDIA
Lecture example 3
Discuss the advantages and disadvantages of the use of standard software packages for a major
bank.
Solution
Advantages Disadvantages
Stages of s o f t w a r e implementation
7.2 A business using software packages to instigate change needs to go through three stages;
(a) Establish software requirements
(b) Assess software packages
(c) Select a supplier
Establishing software requirements

7.3 A range of techniques can be used to establish software requirements. These include:
(a) interviews
(b) questionnaires
(c) observation
(d) protocol analysis
(e) workshops
(f) prototyping
Assessing software packages

7.4 Skidmore and Eva suggest that software packages may be assessed against 10 high level
categories of requirement as below.
• Functional requirements Supplier citizenship requirements
• Non-functional requirements Initial implementation requirements
• Technical requirements Operability requirements
• Design requirements Cost constraints
• Supplier stability requirements Time constraints
Selecting software packages

7.5 When selecting software packages for an organisation it is essential to work through a
clearly defined set of phases.
WJJJ
LEARNING MEDIA
Skidmore and Eva recommend the following five stages:

Obtaining tenders
First pass selection
Second pass selection
Implementation
Long-term relationship
118
Practice scenarios
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LEMMING MEMA
9.1 CH9 Co
CH9 Co is a manufacturing company that has the following main processes:
• Stock - they hold a standardised set of materials for 85% of items the remaining 15%
generally being specific to bespoke customer orders and made especially for those jobs
• Manufacturing - computer controlled and few labour interventions the exception being the
finishing on the "hand-made" range
• Logistics - all finished goods are shipped to customers based on various order dates and
leading to a range of complicated route plans; CH9 managers feel that they are spending
too much time and effort on this area
• Support functions - such as payroll, invoicing, HR and marketing; these are areas that are
straightforward but currently labour intensive (eg payroll input each month)
• Design - of increasing importance due to a growing market for innovative bespoke products
Required
Using Harman's process-strategy matrix suggest what CH9 should do with each process.
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IIAWINOMEMA
120
8 Chapter summary

1 Process change There are different levels of process change -
process improvement at the tactical level, process
redesign for intermediate projects and process
reengineering which is a fundamental change
2 Process improvement Process improvement is a continuous approach to
seek to improve the processes that a business uses
to provide its products or services to its customers.
These improvements are likely to be minor but
constant and seek to provide flexibility and
responsiveness to changing needs of customers and
other key stakeholders.
3 Feasibility An important early stage of process improvement is
feasibility. Any improvement project should be
assessed under the headings of social, technical,
environmental and financial feasibility.
4 Process redesign Process redesign methodology has five stages -
planning, analysis, redesign, development and
transition; the direction taken will be determined by
the strategic importance and complexity of the
process (Harman's matrix),
5 Process reengineering Process reengineering is a fundamental rethink of
the processes of the business based on desired
outcomes.
6 Software selection Process improvement often uses software solutions
that go through the stages of feasibility, identifying
requirements, assessing packages and selecting
Chapter 8 suppliers
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END OF CHAPTER
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LEARNING M I D I A
Implementation; I.T. and E-
bysiness

• Discuss the meaning and scope of e-business.

• Advise on the reasons for the adoption of e-business and recognise barriers to its adoption.
• Evaluate how e-business changes the relationships between organisations and their customers.
• Discuss and evaluate the main business and marketplace models for delivering e-business.
• Advise on the hardware and software infrastructure required to support e-business.
» Advise on how the organisation can utilise Information technology to help it deliver a selected strategy.
• Analyse the main elements of both the push and pull models of the supply chain.
• Discuss the relationship of the supply chain to the value chain and the value network.
β Assess the potential application of information technology to support and restructure the supply chain.
• Advise on how external relationships with suppliers and distributors can be structured to deliver a restructured
supply chain.
• Discuss the methods, benefits and risks of e-procurement.
• Assess different options and models for implementing e-procurement.
Exam Context
E-business solutions are worth considering in most questions. It could also be a specific requirement in either Section A
or B. This was tested in section Β of the December 2007 exam and also appeared in the pilot paper.
This is not an area covered in other papers in the syllabus.
Business Context
We take e-commerce for granted these days expecting to make a larger proportion of our purchases online than ever.
This has changed the way we browse but also how we pay. An increasing number of businesses (eg petrol stations,
retail shops) no longer take cheques as method of payment since the unit handling cost to the banks and therefore to
businesses is increasing.
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10: IMPLEMENTATION: LT. AND E-BUSINESS
Overview
Implementation: IT and E-business
• — - » •<
E-business Varieties of E-commerce Supply chain management

.... J
Impacts Channel structures Restructuring
Hardware and software Business models E-procurement
Technoloav
•J
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10: IMPLEMENTATION: I.T. AND E-BUSINESS
1 E-business
1.1 E-business or electronic business is the automation of business processes of all types
through electronic means (eg online trading, use of e-mail etc).
Describe 5 key customer-orientated features of a national rail provider's website which could be
implemented to reduce the cost base of the business.
Solution
Шигеехагар1е2; Idea generation question
Identify the key hardware and software requirements for a business that operates an e-business
strategy.
Solution
Hardware Software
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10: IMPLEMENTATION; I.T. AND E-BUSINESS
2 Varieties of E-commerce
2.1 E-commerce is trading online via websites and can take a variety of forms.
Delivery by
Business Consumer
-Ω
τ» B2B Business models B2C Business models
Φ Business
eg VerticalNet.com eg Amazon.com
oj
σ>
c C2B Business models C2C Business Models
j= Consumer
υ eg Priceline.com eg eBay.com
χ
;Шцге example 3 Idea generation question
ALP Trading
ALP Trading is a gift company supplying toys and sweets as party bags for children's parties,
weddings and other party events. They order the goods from a range of suppliers and sell them on
separately or (for an additional fee) packaged.
They have been successful and are growing all aspects of their business including sales to
individuals but also to party organisers who order in bulk.
They have traded so far online and have used their website (alptrading.freeweb.co.org) to
advertise, take orders and payment (credit card only). Once a web order is taken it goes into an
orders pending file that is checked at the beginning of each day. The details of the order are then
input to the picking and despatch system and a confirmation printed and posted to the customer.
Whilst payment is taken directly it can sometimes be difficult to match payment to order and some
customers have complained when being e-mailed for payment before an order can be despatched
when payment has already been taken.
ALP trading highest position on the main search engines has been on page 5. ALP generates
some revenue from adverts and pop-ups form other companies.
The directors are very keen to expand into the hen/stag party market providing a more adult
version of their current products.
Requiredt
Describe the weaknesses of the current system and suggest improvements to ALP Trading's
current e-business approach.
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10: IMPLEMENTATION: IT. AND E-BUSINESS
Solution
3 Restructuring the supply chain

3.1 The options to manage the supply chain can be shown as a continuum:
Vertical Vertical ļ Virtual

Integration disintegration integration
^ h.
~4 w
3.2 Vertical integration - eg suppliers and manufacturers owned by same parent - resulting
from related diversification. Results in greater control of supply chain and retaining margins
within the group. Common in stable markets.
3.3 Vertical disintegration - is the opposite; various diseconomies of scale or scope in a

previously integrated company or group have required the production process to be broken
down into separate, unrelated companies, each performing a limited subset of activities
required to create a finished product. Risk is shared in volatile markets.
3.4 A virtually integrated company is one in which core business functions, as well as non-
core functions, take place in external organisations.
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10: IMPLEMENTATION: I.T. AND E-BUSINESS
4 E-Procurement
4.1 Е-procurement is the purchase of supplies and services through the internet and other
technology and networking systems. This is the purchasing company's side of B2B
transactions.
Lecture example 4 Ideas generation
Suggest 5 ways in which е-procurement can reduce the costs associated with an organisation's
Inbound Logistics.
Solution
1.
2.
3.
4.
5.
5 Market place channel structures

5.1 Channel structures are the means by which a manufacturer or selling organization delivers
products and services to its customers.
5.2 A traditional channel structure would be raw material to manufacturer to intermediary to

retailer to customer. E-business has lead to changing role of intermediaries such as
wholesalers, packagers and even retailers including:
(a) disintermedîation
(b) reîntermediation
(c) countermediation
5.3 Disintermedîation is the removal ofintermediaries in a supply chain that formerly linked a
company to its customers (eg direct selling via website).
5.4 Reîntermediation is the establishment of new intermediaryjOles (eg price comparison

sites) for traditional intermediaries that were disintermediated.
(a) Provide customers with new, important value-added services not provided in the
new direct customer-supplier relationship .
(b) Provide customers with more efficjentmeans of transacting business.
5.5 Countermediation is the creation of a new intermediary by an established company in

order to compete via e-business with established intermediaries
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llMNINOMmiA

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Introduction to РЗ

Syllabus Guide Detailed Outcomes

1. IMAGINATION - thinking of ideas on behalf of an

2. SPONTANEITY - under time pressure the ideas

3. PROFESSIONALISM - the way you set your

Lecture example % Exam standard question

Section Topic Summary

The P3 paper We have identified the fact that P3 includes a quite

Syllabus Guide Detailed Outcomes

Strategy Definition and

Rational Planning Mintzberg's "Crafting Freewheeling Opportunism

Design Lens Experience Lens ideas Lens

lecture example .1 Discussion question

Identify a suitable long term goal for the following organisations:

2 Strategic approaches to achieving the goal

2.1 Rational Planning (The "Lens" of DESIGN)

POSITION REVIEW AND

;1_ееШш example^;: Discussion question

2.2 Freewheeling Opportunism (The "Lens" of IDEAS)

2.3 Mintzberg's Theory of "Crafting Emergent Strategies" (The 'Lens' of EXPERIENCE)

i Lecture example % Discussion question

2.4 Logical Incrementalism

Lecture example 5 Discussion question

Describe 5 disadvantages of a top-down strategy approach

2.5 The P3 Syllabus

POSITION REVIEW AND

Section Topic Summary

1 Strategy The different ways in which strategies can be

Syllabus Guide Detailed Outcomes

» Assess ethical influences on organisational purpose and strategy

• Explore the scope of corporate social responsibility

• Assess the impact of culture on organisational purpose and strategy

• Prepare and evaluate a cultural web of an organisation

• Advise on the implications of corporate governance on organisational purpose and strategy

Mission Objectives Stakeholders, Governance

1 Mission, goals and objectives

1.2 There is a hierarchy of business aims:

(d) Goals: The intentions behind decisions or actions.

2 Ä raţionai view of the roie of mission

2.2 Mission statements can assist strategic management by:

Lecture example 1 Discussion question

Lectore example 2 Discussion question

Lecture example 3 Discussion question

Lecture example 4 Discussion question

Are these objectives SMART?

4 Stakeholders: Who do we exist for ?

Lecture example 5 Discussion question

BBC Shell UK pic Virgin Airways

MureexampleB Discussion question

BBC Shell UK pic Virgin Airways

6 Corporate social responsibility

Lecture example 7 Discussion question

Lecture example 8 Discussion question

The cultural web (specifically highlighted by the examiner)

lecture example 9 Discussion question

3.1 MotorWays Services PLC

• Section Д Topic Summary

3 Strategic lenses The approach to strategy adopted by a business

Syllabus Guide Detailed Outcomes

• Determine the opportunities and threats posed by the environment of an organisation

• Assess the macro-environment of an organisation using PESTEL

• Analyse customers and markets