Professional Documents
Culture Documents
Course slides
For exams in June 2008
Syllabus
A B C Strategic planning and control Economic, fiscal, market and environmental factors Performance measurement systems and design
D E
F
Slide 2
Marks
60-70
Section B
Total
30-40
100
Slide 3
Slide 4
Slide 5
Chapter 1
Slide 7
Slide 8
Strategic Planning
Strategy
A course of action to achieve a specific outcome
Strategic Planning
The formulation, evaluation and selection of strategies for the purpose of developing a longterm course of action.
Slide 9
Strategic Planning
Scope
Characteristics Information
Slide 10
Management Control
Scope
Characteristics Examples
Slide 11
Operational Control
Scope
Information
Slide 12
Rational model
3 main stages Strategic analysis Strategic choice Strategic implementation
Slide 13
of our current position to get to our desired future position to make a success of our strategic choice
Slide 14
ENVIRONMENT ANALYSIS
Slide 15
Identifies risks
Inflexible
Lack commitment
Slide 16
Environmental Analysis
PEST
Porters 5 forces
Understand inherent attractiveness of industry Understand impact of individual forces
Slide 17
Corporate Appraisal
Identify
INTERNAL ANALYSIS
Strengths
Weaknesses Opportunities Threats
ENVIRONMENT ANALYSIS
Slide 18
Position Audit
Identify
INTERNAL ANALYSIS
Strengths
Weaknesses
ENVIRONMENT ANALYSIS
Slide 19
SWOT Analysis
INTERNAL : RELATIVE TO COMPETITION STRENGTHS exploit WEAKNESSES rectify
OPPORTUNITIES seize
THREATS nullify
OBJECTIVE
SALES GAP
FORECAST
TIME
Slide 21
Gap Strategies
Efficiency Expansion Diversification
Slide 22
Sales
Profit
Time Introduction
Slide 23
Growth
Maturity
Decline
Lecture Example 1
What advantages and disadvantages do large companies such as Marks & Spencer face when relying on the rational model to derive new strategy ?
Slide 24
Lecture Example 1
Advantages
Focus on key strategic issues and risks Coordinates and integrates diverse business activities within the organisation Improves communication with stakeholders
Slide 25
Freewheeling opportunism
..should not bother with strategic planning..
Advantages Short term opportunities grasped Reactive Encourages initiative Creative Disadvantages Control difficult Long term opportunities missed Purely profit driven Not Proactive
Slide 27
Benchmarking
How
Understand your own business processes Establish who/what to benchmark Collect and analyse data Implement improvements
Slide 28
Benchmarking
Who
Internal between SBUs Functional best in any industry Competitive direct competitors Strategic competitors strategies
Slide 29
Benchmarking why ?
Advantages Position audit Identify CSFs Identify potential advantage Problems No best solution Reactive Information dependant
Slide 30
Payback
NPV Cost-benefit
Probability
Sensitivity Standard deviation
Slide 31
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q1
Q2
Q3
Q4
Slide 32
Chapter 2
Budget Cycle
Determine Budget
Control
Planning
Operate
Slide 34
Slide 35
Slide 36
Fixed/Flexible/Flexed Budgets
Fixed
original budget based on single level of activity
Flexible
to cope with different levels of activity useful at planning stage
Flexed
necessary as a control device based on actual activity level
Slide 37
Beyond Budgeting
Move away from traditional budgeting
Employee empowerment
Slide 39
Slide 40
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q5
Q6
Q7
Q9
Q10
Slide 41
Chapter 3
Modern
produce in shorter production runs/producing on demand inventory is unacceptable & will accept some idle-time complex/diverse product ranges Customer is priority Focus: FLEXIBILITY
Slide 43
Quality management
Traditional
Not value adding Resource intensive Tolerance of waste within limits TQM
Abandon variances
Slide 44
Elements of TQM
Work teams given responsibility for their area Clear identification of customer
Clear identification of supplier Quality circles Any bonus paid on quality improvements
Slide 45
Implications of TQM
Cross functional teams new control systems
Functional organisation
Company
Sales Purchasing
Accounts
Production
Slide 47
Slide 48
Divisionalisation approaches
Functional departments
Geographic division
Product/brand division Customer/market
Slide 49
Centralisation v Decentralisation
Pro-centralisation Pro-decentralisation
Central decisions
Wider view Resource allocation Crisis decisions
Management overload
Junior managers morale Local decisions Develop junior managers
Slide 50
Multi-Divisional
Company
Product 1
Product 2
Product 3
Finance
Marketing
Purchasing
Slide 51
Clients
B C
Slide 52
Slide 53
Value Chain
Firm Infrastructure
Support Activities
Technology Development
Human Resource Management Procurement Inbound Operations Outbound Logistics Logistics Marketing & Sales Service
Slide 54
Slide 55
Steps in BPR
Identify Business Objectives Identify specific processes to be redesigned Evaluate existing processes
OAR
OAR
OAR
ACTIVITIES
Slide 57
COST DRIVERS
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q11
Q12
Q13
Q14
Q15
Slide 58
Chapter 4
Exploitation of information
Slide 60
Intranets
Internal network Hold centralised, digitised information Accessible by all
Slide 61
EDI
Electronic Data Interchange
Computer to computer interchange Standardised, agreed exchanges Used between business partners
Slide 62
Extranets
Allow external, authorised users access to internal information Use internet technology
Slide 63
Databases
Systems which hold collections of records and files, designed in such a way as to facilitate access to the whole user community
Slide 64
Database Structure
User 1
User 2
Database Administrator
Store
Slide 65
Data Warehouse
A separate database that stores current and historical data of potential interest to managers throughout the company (Laudon and Laudon)
Slide 66
Data Warehouse
Information directory
Slide 67
Other Systems
CRM Systems
Facilitate the creation of a comprehensive customer profile giving everyone in the organisation one view
SCM Systems
- Provide links across the supply chain to enhance efficiency and sharing of information
ERP Systems
Provide firm wide integration of processes and information
Slide 68
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q17
Q18
Slide 69
Chapter 5
Lecture Example
Despite having a wide range of business interests Virgin have received wide and often negative press about the standard and value for money of its rail service. Suggest environmental factors which Virgin management should consider and continuously monitor during their rail business planning process
Slide 71
Lecture Example
Virgin Rail
Government legislation (integrated transport policies, safety measures, etc.) The franchisers power and attitude Competition Level of service Pricing
Slide 72
Slide 73
Slide 74
Pricing Strategies
Premium pricing
Price discrimination
By age By time By place
Product bundling
Psychological pricing
Multiple products/loss leaders Discounts
Slide 75
Porters 5 Forces
POTENTIAL ENTRANTS
SUPPLIERS
INDUSTRY COMPETITORS
BUYERS
SUBSTITUTE INDUSTRIES
Slide 76
BCG Matrix
High
Low
High
Star
Question Mark
Cash Cow
Dog
Slide 77
Ansoffs Matrix
Present Present
PRODUCT
Withdrawal Consolidation
MARKET
Penetration
Market Development
New
Related Unrelated
Slide 78
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q19
Slide 79
Chapter 6
Culture
Economics
Competitive forces
Politics
Technology Funding Legal factors
Slide 81
Organisational culture
Values
Attitudes
Norms
Expectations the way we do things round here Handy
Slide 82
Levels of Culture
Basic which guides behaviour within the organisation
Overt expressed in the organisation and members Visible style of office and dress rules etc
Slide 83
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q20
Slide 84
Chapter 7
Stakeholders:
Customers
Suppliers Competition Employees Local Community connected
connected
external internal external
Slide 86
Interest
High
Power
High Keep Satisfied (-)
Slide 87
Slide 88
Views on Stakeholders
Strong View
All stakeholders have legitimate claim on management Management should adopt a balanced approach Weak View Management should focus on enhancement of shareholder wealth Management should only consider other stakeholders if assisting the core objective
Slide 89
UK government
EU
Consumers
Employees
Pressure groups
Slide 90
Corporate Ethics
Two approaches Organisation exists to maximise shareholder wealth Organisation should benefit all stakeholders
Slide 91
Considerations Who are stakeholders? Implications? Rights? Considered rights? Honest dealings? Compensation? Consequences?
Professional Ethics
Objectivity
Professional competence
Professional behaviour
Technical standards
Integrity
Confidentiality
Slide 92
Ethical codes
Content Employee employer relationship Customer care Supplier relations Bribery Implementation Senior mgmt support Followers prosper Offenders punished Explained to staff Detail provided Staff have access
Slide 93
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q21
Slide 94
Chapter 8
information
Slide 96
Lecture example
New outlets E-commerce strategy Pricing Promotion strategies Staff rota Inventory replenishment
Strategic
Tactical
Operational
Slide 98
Slide 99
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q22
Slide 100
Chapter 9
Information
is data that has been processed in a way to be meaningful and useful to its recipients. Information is data with added business value. Information systems collect, process and provide information for use within the organisation.
Slide 102
Informal
1. Cross-departmental networking 2. The Grapevine 3. Social gatherings
Slide 103
Informal
1. Suppliers and other intermediaries 2. Customers and their representatives 3. The Internet
Slide 104
The Internet
The Internet an international network of networks, both commercially and publicly owned E-commerce the process of buying and selling using computer mediated communications
Slide 105
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q23
Q24
Slide 106
Chapter 10
Slide 108
Answer
a) Secure location (i) locked doors, access cards, security guards, reception personnel, keypad access b) Personnel controls (i) ID cards including photograph (ii) sign in/out procedure IT (i) alarm systems Portable equipment (i) register to include booking out procedures, barcoding/postcode marking Checking (i) equipment audits
Slide 109
Slide 110
Answer
a) Hardware (i) card access to rooms, (ii) firewall computers, (iii) CCTV
Software (i) passwords, (ii) virus checkers (iii) computer access logs (iv) file access logs Organisational arrangements (i) internal audit (ii) division of duties
Slide 111
Viruses
A virus is a piece of software which may damage the software and data held on the computer. Writing, distributing or planting viruses is an offence under the Computer Misuse Act. Cheap, commercial, anti-virus software is available from many sources. Many organisations also install firewalls on computers connected to the internet.
Slide 112
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q25
Slide 113
Chapter 11
Performance hierarchy
Vague
Timeless
Objectives
Slide 115
Specific
Timebound
Effective when all members work towards rather than against its main principles
Slide 116
Campbell et al
Purpose Strategy Policies & Behaviour Standards Values & Beliefs
Slide 117
Mission statements
Advantages Nature Common culture Focus Goal congruence Criticisms Vague/meaningless Not representative Implementation needed
Slide 119
A - agreed
R - realistic T - time bound
Slide 120
Objective setting
Mission
Vertical consistency
Horizontal Consistency
Slide 121
Gap analysis
Objective
Objective
GAP
eg profit
Forecast
Time
Slide 122
Ansoffs Matrix
Present Present PRODUCT New
Withdrawal Consolidation
Product Development
Diversification
MARKET
Penetration
Market Development
New
Related
Unrelated
Slide 123
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q26
Slide 124
Chapter 12
Introduction
Aim of private company is to maximise shareholder wealth Analysis can be performed across 4 areas:
Profitability Liquidity Gearing Shareholders ratios
Slide 126
Financial analysis
Profitability and return
Debt and gearing
Must compare
Different firms and time periods
Liquidity
Shareholders ratios
P/E, div cover, div yield, EPS, div cover ROCE, margins, asset turnover Debt/equity, interest cover Receivables/payables/inventory days, current ratio, acid test
Slide 127
Slide 128
Limitations/strengths of ratios
Limitations
Need a comparator Must be clearly defined Inflation effects Differing bases Historical
Strengths
Easier to understand than absolutes Changes over time can be seen Gives context Can help create targets Summary of results
Slide 129
Profit as a measure
Advantages Simple Relates to shareholder wealth Disadvantages Easily manipulated Short term enhancement Absolute measure
Slide 130
ROCE/ROI
Profit before interest and tax x 100%
RI
Controllable divisional profit notional interest charge (Head Office Investment x ROI) Advantages Fewer dysfunctional decisions Can account for risk Disadvantages Profit based absolute measure Investment base? Determining ROI? Inter-divisional comparisons difficult
Slide 132
NPV calculations
Cashflows
Exclude inflation Include inflation Must be Future Incremental Cash
Use current/real cashflows Use money/nominal cashflows Discount at real rate, r Discount at money rate, m
Sensitivity analysis
How much can NPV change before NPV is negative? Sensitivity = NPV total PV cashflow NPV total = 1,148
Sensitivity
= 1,148
2,544 = 45%
If the chain sells for 45% less than our initial estimate the NPV of the project will be zero. If the estimate is further out than this, the project would return a negative NPV.
Slide 135
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q27
Q28
Q29
Q30
Q31
Slide 136
Chapter 13
Porters 5 Forces
Threat of New Entrants
Competitive Rivalry
Substitute Industries
Slide 138
Lecture Example
Using the model identify the forces and their strength for a clothing manufacturer
Slide 139
Lecture Example
Buyers retail stores, strong
Suppliers staff (labour), manufacturers (fabric and equipment) weak Substitutes Other manufacturers, strong New Entrants Easy to set up on basic level (China currently entering market), strong
Lecture Example
Buyers Value adding activities, keeping up with trends
Suppliers Single supplier deals regularly reviewed Substitutes Build reputation (no subs for clothing!) New Entrants Build reputation Competition Branding or niche products
Slide 141
BCG Matrix
High High
Low
Star
Question Mark
Cash Cow
Dog
Slide 142
Assess trends
Evaluate competitors
Evaluate risk
Slide 143
Ansoffs Matrix
Present PRODUCT New Product Development Diversification Market Development Related Unrelated
Present
Market Penetration
MARKET
New
Slide 144
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q34
Q35
Slide 145
Chapter 14
EVA
Calculate NOPAT interest rate (WACC) x net assets (or capital charge) NOPAT
Take reported profit after tax Adjust for non-cash items Add back net interest cost Economic depreciation is a cost
Example
Profit after tax = 160, depreciation = 30, tax rate = 30%, interest = 20, WACC = 15%, replacement cost of net assets = 1,100
20X8 NOPAT
= 160 + 30 + 20 x 0.7 = 204 Net Assets = 1,100 EVA = 204 15% x 1,100 = 39
Slide 148
EVA
Advantages
Measures value added to Shareholders Cash based Easy to communicate
Disadvantages X
Lots of adjustments to profit Historic measure Relies on estimate of interest rate Difficult to make comparisons
Slide 149
Slide 150
Beer
Beer
Rooms
Slide 151
Slide 152
Slide 153
Use variable cost and transfer share of profits at end of year to supplying division If external market exists
charge receiving division variable or marginal cost supplying gets market price
Two Part Tariff Variable cost for transfer plus fixed costs at year end
Lower of
External Market Price and Net revenue in receiving division
Slide 157
Negotiation
Head Office intervention
Slide 158
Slide 159
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q36
Q37
Q38
Q39
Q40
Slide 160
Chapter 15
Not-for-profit organisations
Prime goal for assessed by economic measures
Profit making may be part of this activity however
Examples
Charities, Councils, Forces, Colleges, NHS
Slide 162
Slide 163
Lecture Example
Highlight problems that may occur when using league tables
Tunnel Vision Lack of true comparability Creative accounting Self fulfilling prophecy
Slide 164
VFM
example
Economy
washing up liquid
more clean plates per $
Efficiency
Effectiveness should be
Slide 165
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q41
Q42
Q43
Q44
Q45
Slide 166
Chapter 16
Accountability
Agency theory Hard and soft accountability
Link to performance Group scheme
Slide 168
Motivation
challenging but achievable goal congruence
Slide 169
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q46
Q47
Slide 170
Chapter 17
Balanced Scorecard
Customer Internal
Financial
Slide 172
Slide 173
Balanced Scorecard
Features
Broad outlook internal & external matters financial & non-financial Identifies customer needs
Development
Specific to company Can be created at all levels of management
Slide 174
Market
Customer Satisfaction Flexibility
Financial
Productivity
Quality Delivery
Cycle time
Waste
Operations
Slide 175
Performance pyramid
Derives from the idea that the organisation operates at different (management) levels Each of these levels has different concerns
But they should support each other in achieving business objectives
LINKAGES
Slide 176
Slide 177
Standards/Targets
ensure equity/fairness
Slide 178
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q48
Q49
Q50
Q51
Q53
Slide 179
Chapter 18
Focus on past
Not full picture
Solution = NFPIs
Slide 181
Value of NFPIs
Quick
Problems of NFPIs
Information overload
Balanced Scorecard
Slide 183
Lecture Example 1
In the role of coffee shop manager, suggest some NFPI for your business
Returning customers Comments Occupancy Knowledge of staff New product take up Stock outs
Slide 184
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q54
Q55
Q56
Q57
Q58
Slide 185
Chapter 19
Declining companies
Slatters ten symptoms
Measures
Liquidity Z score Argentis A score
Slide 187
Review leadership
Slide 188
You should now be able to attempt the following key question from the BPP Learning Media Practice and Revision Kit.
Q59
Slide 189
Chapter 20
Slide 191
Kaizen costing
Continuous improvement
Slide 192
Just In Time
Supplier Base JIT purchasing Raw material & components Work-in Progress
Manufacturing Resources Planning (MRP 2) Advanced Manufacturing Technology Total Quality Management Computer Integrated Manufacturing
Target costing
To reduce the life-cycle costs of new products through cost reduction: Pre-production planning R&D
Slide 194
X (X) X
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q60
Q61
Q62
Slide 196
Chapter 21
Value-based management
Value mind set
Value drivers
Any variable that affects the value of the company
Management processes
Slide 198
Six Sigma
Define Measure Analyse Improve Control
Performance Prism
Stakeholders satisfaction Strategies Processes Capabilities Stakeholder contribution
Slide 199
You should now be able to attempt the following key questions from the BPP Learning Media Practice and Revision Kit.
Q63
Q64
Q65
Q66
Slide 200