© Darren Sparkes

,
2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1
Email: darrensparkesnotes@sky.com
Prepared by Iton Chicheke
Notes
SMART
Stratey
Enterprise
!E"E!
PAPER E# $ STRATE%IC
CIMA
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus

An i!portant !essage fro! "arren#########$$3
"ealing with the pre%seen case%study !aterial#####&
A !essage fro! the E'a!iners###########$(
E'a!iners co!!ents )ove!ber **+########$,
The scope for nu!bers in the e'a!ination######$$-
E'a!ination Techni.ue############$#$$#/
0ac1ground to 2aper###############$$$+
Syllabus 3verview###############$$$$$$11
Strategic 2lanning#############$$##$#1
Mission and 3b4ectives#############$$$$$$13
Internal Analysis#################$$1&
E'ternal Analysis#################$1(
5illing the 6ap##################$1,
Strategic 3ptions#################1-
Method of 6rowth################$$$1/
Strategic Choice and I!ple!entation########$$1+
Change Manage!ent and other I!ple!entation Issues$$*
"eveloping an IT Strategy#############$
3rganisational Structure##############$3
Mar1eting####################$$&
2rofitable custo!ers or products7$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$(
0usiness and 2rofessional Ethics##########$,
The International Mar1et 2lace###########$$-
8eview and Control################$/
Page No.
Contents
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
3
"arren Spar1es
8egards9
:;hether you believe you can or you can<t9 you<re right$< =>enry 5ord?
And re!e!ber#$
I would welco!e feedbac1 on the notes$
@eep a loo1 out for relevant articles appearing in your professional !agaAine or on the Institute<s
website prior to the
e'a!ination9 particularly if they are written by the e'a!iner$
>owever9 I would also suggest that it is essential for you to practice at least one full e'a!ination to ti!e
before entering
the e'a! roo!$ It is only by replicating the ti!e pressure in the e'a! that you can appreciate the
i!portance of ti!e planning on the day$
I suggest that you should practice as !any e'a! standard .uestions as possible before the
e'a!ination$ Bour practice
answers can be a !i'ture of answer plans and full written answers to get through as !any .uestions
as possible$ In particular, you must practice the new pilot paper for the new E3 examination.
Bour e'a!iner is not interested in the regurgitation of your 1nowledge but how you A22CB that
1nowledge to the
scenarios provided in order to answer the re.uire!ent set$ The e'a!iner feedbac1 fro! every e'a!
sitting confir!s this$
The notes act as a learning and !e!ory aid for the core !odels9 theories and acade!ic tools included
in the syllabus$
>owever9 in order to pass your e'a!ination the acade!ic 1nowledge !ust be co!bined with e'tensive
.uestion practice leading up to the e'a!ination$
Than1 you for re.uesting a copy of !y :SMA8T )otes<$
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
&
It is essential that you fa!iliarise yourself well with the pre%seen !aterial before entering the e'a! roo!$
However, this
must not be to the detriment of your wider studies. Remember, the Section A of the exam only
accounts for 50%
of the marks. ou will still have to com!lete two Section " #uestions that will be com!letely un$
seen.
§
§
§
§
§
§
Co!plete a thorough analysis of the pre%seen !aterial$ As a start point you could conduct a
corporate appraisal
=S;3T? of the organisation in .uestion9 that is9 a full internal and e'ternal analysis =see pages 1& and
1( of these notes?$ This should help you to recognise the !a4or issues affecting the organisation$ 2ay
particular attention to any
nu!bers and what they !ay tell you about the organisations perfor!ance and position$
Bou should avoid too !uch e!phasis on the research of industry infor!ation$ Ceave that for your T&
T32CIMA
e'a!inationD
5ro! your analysis9 identify the related syllabus areas and learnEreview the! in light of the position and
proble!s of the organisation$
Bou can now conduct so!e scenario planning$ Thin1 of the different scenarios that could appear in
the un%seen !aterial and the re.uire!ents that could be as1ed by the e'a!iner$ 8e!e!ber that there is
li1ely to be at least four
separate re.uire!ents$
2ractice your approaches to answering the scenarios that you have identified$
0e warned9 identifying li1ely re.uire!ents is a dangerous occupation$ It is done here for you to start
thin1ing !ore widely about the pre%seen !aterial$ 3nce in the e'a! roo! you !ust %&'(S &) *H+
A'*(A, R+-(.R+/+)* .)
*H+ -(+S*.&) and avoid re!licatin0 an answer to a different re#uirement that you had !re!ared
for.
2urchase a revision 1it fro! one of the big tuition providers that contain a nu!ber of !oc1 e'a!s
=probably around , different un%seen scenario<s? based upon the actual pre%seen !aterial and practise as
!any as you can to ti!e$
§
3nce the real e'a!ination pre%seen !aterial has been released by CIMA you should do the following in
preparation for
the e'a!F
1ealin0 with the !re$seen material
The !ost significant change in the new E3 paper is the addition of :pre%seen< case study !aterial for
Section A =scenario co!!on to all three strategic papers?$ This will be available for students to download
fro! www$CIMAglobal$co! around , wee1s prior to the e'a!ination$ The pilot paper pre%seen !aterial
has five pages$ 3nce in the e'a!ination there will be additional :un%seen< case study !aterial and the
re.uire!ents$ The pilot paper contains two pages of :un%seen< !aterial$
© Darren Sparkes, 2010
These notes are not intended to cover the whole of the E3 syllabus
CIMA E3 – Enterprise Strategy
(
P6)
CIMA
for
(Co-examiners
be reware
poin!s wi"" ne#er
paper, an a series of brief
answers !o !$is
$i%$"&'(
in
esirab"e
is
ar%)men!
of
ep!$
!$a!
re*o%nise
s$o)"
+,*ania!es
mana%emen! a**o)n!in%'(
in !$e *on!ex! of
s!ra!e%&
b)siness
in
exam
an
i!(s
exam-
s!ra!e%&
#er& *"ear' I! isn(! a b)siness
b)siness mana%emen! pi""ar, b)! i!s !i!"e is
+I!(s eas& !o %e! *arrie awa& wi!$ a"" !$e moe"s *o#ere in !$e
(P6) s&""ab)s
an for%e! w$& i!(s !$ere in !$e firs! p"a*e' .$e s&""ab)s is a! !$e
!op of !$e
Approach
8e.uired
+/#era"" !$is paper is a ba"an*e !es! of !$e ke& s&""ab)s areas an
*o#ers a n)mber of we"" )se s!ra!e%i* !oo"s an moe"s'
Cania!es s$o)" no! fin an& s)rprises in !$is paper an a we""
prepare *ania!e s$o)" $a#e no iffi*)"!& in bo!$
emons!ra!ion of s&""ab)s know"e%e an in !$e app"i*a!ion of !$is
!o !$e #ario)s examina!ion s*enarios'(
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
,
0imi!e app"i*a!ion
1enera" is*)ssion of !$e pro*ess of *ompe!i!or ana"&sis
2n3)s!ifie re*ommena!ions in !erms of w$& !$e& were appropria!e !o !$e s$or! or "on% !erm
4o! answerin% !$e 5)es!ion se!
Ins)ffi*ien! app"i*a!ion
Des*rip!ion ra!$er !$an e#a")a!ion of !$e propose s!ra!e%ies
0imi!e6no app"i*a!ion
7e*ommena!ions wi!$ no6"imi!e 3)s!ifi*a!ion
In*")in% a ran%e of s!ake$o"ers no! in*")e in !$e s*enario informa!ion
Some repe!i!ion of poin!s mae be!ween ea*$ s)%%es!ion
Imba"an*e is*)ssions of s)%%es!ions
0imi!e6no 3)s!ifi*a!ion of re*ommene *o)rse of a*!ion
Par! * a repea! of answer !o par! b
§
§
§
§
§
§
§
§
§
§
§
§
§
Se*!ion 8
§
§
§
§
§
9now"e%e Mana%emen! 5)es!ion #er& poor"& answere as *ania!es $a no *"ear )ners!anin% of
9now"e%e Mana%emen!
+, wi!$ no referen*e !o !$e s*enario informa!ion'(
/n"& %eneri* benefi!s of know"e%e mana%emen! %i#en wi!$ no referen*e !o !$e s*enario
Ins)ffi*ien! ep!$ of is*)ssion : )se of s$or! form answers s)*$ as b)""e! poin!s
Pro#ision of *a"*)"a!ions %oo b)! "imi!e *ri!i*a" ana"&sis or is*)ssion p")s poor )se of !$e s*enario
informa!ion
8asi* es*rip!ion of !$e ;i#e ;or*es moe" wi!$ "imi!e app"i*a!ion !o !$e s*enario
§
<x!ra*!s from !$e <xaminers *ommen!s 4o#ember 200=
Se*!ion A - >)es!ion 1
Cost of Capital
=debt E e.uity E ;ACC?
Co!pany
Galuations
"iscounted Cash flow
=)2G E I88 E A88?
+nter!rise Strate0y
*he sco!e for numbers2calculations in the examination
E'pected Galues
Costing
Absorption E !arginal?
Gariances including planning variances
2ricing E transfer pricing
8atio Analysis
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
-
="22 E CG2 E CA2 E
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
/
.1+)*.% R+,+3A)* /&1+,S, *&&,S, *H+&R.+S %R&/ &(R 4)&5,+16+ "A)4
5.
&
This can now deter!ine how !uch to write for each verb in the re.uire!ent
A,,&'A*+ /AR4S *& +A'H 3+R" .) *H+ R+-(.R+/+)*
7.
&
&
Identify the verb9 or verbs9 and !a1e it stand out$ The verb tells you what the e'a!iner wants you to do9
e$g$
evaluate9 reco!!end9 analyse9 calculate$ 0e sure to identify all the verbs in the re.uire!ent 4ust in
case there is !ore than one thing to do9 e$g$ analyse and discuss9 evaluate and reco!!end$
Identify 1ey words$ These tell you what to do it on or about9 e$g$ evaluate what79 reco!!end what7
A)A,S+ *H+ R+-(.R+/+)*S
8.
S*AR* 9,A)).)6 .) &(R A)S5+R "&&4
&
&
&
&
H1 I +* !inutes$ 2lanning I *%( !inutes9 ;riting answer I ,(%-* !inutes
Section 0 Huestions I &( !inutes each$ 2lanning up to 1* !inutes9 ;riting answer 3( !inutes$
0rea1 down the ti!e re.uired for each part of the re.uire!ents using the !ar1s as a guide$ 1$/ !inutes
per !ar1 in total9 1$& !inutes per !ar1 after planning$
I suggest you start with Huestion 1 as you 1now you have +* !inutes to co!plete it$
5&R4 &(* *./.)6S
:.
&
&
E'a!ine section 0 .uestions and choose the two on which you can MAJIMISE MA8@S =not
necessarily
those on your :favourite< topics?
If you have so!e ti!e left then analyse Huestion 1 re.uire!ents and s1i! read the H1 un%seen !aterial
to get a feel for the relevant issues and identify where the infor!ation is for each part of the re.uire!ents$
(S+ :0 /.)(*+S R+A1.)6 *./+ 5.S+,
;.
9, A )
E'a!ination Techni.ue to give the E'a!iners what they want
2A"I – 2lan9 Analyse9 "esign9 I!ple!ent
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
+
R+/+/"+R *H+ *HR++ 6&,1+) R(,+S < ;=A99,.'A*.&) := A99,.'A*.&) and 8=A99,.'A*.&)
&
&
&
&
&
&
&
Cayout calculations in a logical and easy to !ar1 for!at % Add value to calculations by as1ing :S3 ;>AT7<
Kse as !any headings as possible to give the answer structure
Short sentences in short paragraphs % 2aragraphs of 3E& sentences !a'i!u! % Coo1ing for !ar1s for
each paragraph
9++ for : marks < 2oint9 Evidence9 E'plain =So what7?
Ceave a blan1 line between paragraphs to !a1e your answer :easy on the eye<
0e strict with ti!ings$ ;hen ti!e is up on a .uestion9 or part of a .uestion9 !ove
on$ Stic1 to answering the re.uire!ent – use your plan to 1eep you on trac1
./ 9,+ / +)*
;0. 5R.*+ (9 &(R A)S5+R *& /A>./.S+ /AR4S
&
&
"ecide which points you are going to put in your answer =trying to put in everything usually leads to going
over ti!e? and start with your strongest points
"ecide how you are going to layout your answer to !a1e life easy for the !ar1er and !a'i!ise !ar1s
1+S .6)
?. *H.)4 "+%&R+ &( 5R.*+
&
&
Ma1e brief notes in your plan under relevant headings fro! !odelsEtoolsEtheories and re.uire!ent
5ind relevant nu!bers for calculations
A ) A , S+
@. A)A,S+ *H+ S'+)AR.&
&
This can now deter!ine how !uch you write under each heading
A. 1.S*R."(*+ /AR4S A'R&SS H+A1.)6S
&
&
2ut 1ey ele!ents of !odel in plan as headings9 e$g$ 2orters ( 5orces analysis I ( headings$ >eadings
will
give your answer a fra!ewor1 and structure$
Kse re.uire!ents to develop headings to show !ar1er that you are answering the .uestion as1ed
B. 1+3+,&9 H+A1.)6S A)1 )(/"+RS ,A&(*
& Evaluate the @ey e'ternal factors affecting an organisation<s strategy
& Evaluate the i!pact of infor!ation syste!s on an organisation
& Advise on i!portant ele!ents in the change process
& Evaluate tools and !ethods for successfully i!ple!enting a change progra!!e
& 8eco!!end change !anage!ent processes in support of strategic infor!ation
& Evaluate the process of strategy develop!ent
& Evaluate tools and techni.ues used in strategy for!ulation
& Evaluate tools and process of strategy i!ple!entation
E'ercise professional 4udge!ent
Select relevant
"eter!ine appropriate techni.ues
'andidate Re#uirements
Apply 1nowledge and s1ills
Aims of the !a!er
"ack0round
%ormat of !a!er
& Interacting with the Co!petitive Environ!ent *L
& Change Manage!ent *L
& Evaluation of Strategic 2osition and Strategic 3ptions 3*L
& I!ple!entation of strategic plans and perfor!ance evaluation 3*L
Study 5ei0htin0
Section A 50%
& Co!pulsory
un%seen
& Ksually four parts
Section " 50%
& Choice of two fro! three
& ;ill include short scenario
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1*
&
Each .uestion up to three parts
&
Case will include nu!bers
&
Ma4or case study9 pre%seen and
data
Syllabus &verview
3 E<s – Efficiency9 Econo!y9 Effectiveness
CS5<s
SMA8T
Mission and ob4ectives
2urpose9Strategy9Standards9Galues
Mendelow power%interest !atri'
2EST
Sta1eholder Analysis
8esource audit
M<s
E'ternal Analysis
Internal Analysis
Core co!petences
=SA8I?
2orters ( 5orces
Corporate
Appraisal
S;3T
Co!petitor Analysis =283SAC?
Galue Chain
0ench!ar1ing
2CC E 0C6
8esource 0ased vs 2ositioning
;ithdraw
Strategic
3ptions
Ansoff<s product%
2orter<s 6eneric
Strategies
8is1
Ac.uisition vs organic vs 4oint develop!ent
Suitability9 Acceptability9 5easibility
6a!e theory9 8eal options
Cha
CostE0enefit
Strategic Choice
nge Manage!ent
>8M E IT
Culture
I!ple!entation
Structure
International Trading
Huality
Mar1eting
Ethics
8eview and Control
CS5<s
5inancial Measures
83I E 8I
SGA E EGAC
0alanced Scorecard
)on%financial Measures
@2I<s
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
11
!ar1et !atri'
Integrates activities
Co!petitive advantage
8elationship with environ!ent
;hole organisation
All sta1eholders
0usiness I Tactical level
Cong%ter!
Strate0y
DStrate0y is the direction and sco!e of an or0anisation over the lon0 termE which achieves advanta0e for the
or0anisation throu0h itFs confi0uration of resources within a chan0in0
environment, to meet the needs of markets and to fulfil stakeholder
ex!ectations.F
Alternative
%reewheelin0 &!!ortunism
& >ands on !anage!ent
& E'ploit co!placent players
& 8elies on leaders vision
& )o for!ula for success
' Ta1e advantage of !ar1et opportunities
M Stoc1 !ar1et proble!s
Rational D*o! 1ownF A!!roach
Mission N 3b4ectives Corporate appraisal Strategic options Strategic choice I!ple!entation
8eview
Intended
Strategy
"eliberate
Strategy
8ealised
Strategy
Knrealised
Strategy
E!ergent
Strategic
Strat
Analysis Choice I!ple!e
+mer0ent Strate0y $ D"ottom u!F G/intHber0=
strategy
+.6. HondaFs entry into the (SA, 8/
.ncrementalism G,indblom=
& 0uilding bloc1 approach
& 0uild strategy through incre!ental steps not radical
' Accepts uncertainty of future
' 0uilds co!!it!ent
M Ideas often co!pro!ised
Strategic
2lanning
& 8espond and fit to environ!ent
& 2rovide direction
& Monitor progress
9ur!ose
Advanta0es
' Identification of strategic issues
' Consistency of goals
' I!prove perfor!anceEsurvival
' 2ro%active
' 8ecognises
' 3pti!u! use of resources
1isadvanta0es
M E'pensive =ti!e and !oney?
M 0ureaucracy
M Stifles creativity
a crisis
Strategy
Strategic
Choice
Analysis
© Darren Sparkes, 2010
These notes are not intended to cover the whole of the E3 syllabus
CIMA E3 – Enterprise Strategy
1
I!ple!entation
environ!ent
Cess relevant in
M
May be too slow
M
shifts
Ensure consistent ob4ectives
Ktilise scarce resources
&
&
&
Mar1et "riven – reactive
=Oohnson N Scholes?
5unctional I 3perational level
Corporate I Strategic level
OS;
2osition
2urpose
Galues
/ission Statement
:# the !ost generalised type of ob4ective which can be thought of as its raison d<etre$<
standards
Advanta0es
& Set direction
& >elp for!ulate strategy
& Co!!unicates values to e!ployees
& Mar1eting to custo!ers
Strategy
'riticisms
& Meaningless ter!s used
& ;ritten retrospectively7
& )ot co!!unicated to e!ployees
& Ignored by !anagers
S Specific
/ Measurable
A Attainable
R 8elevant
2olicies and
&bIectives
/ission and
&bIectives
% . R +
1eterminantsE
.nnovation
Resource utilisation
+'cellence =Huality of service?
% '
ResultsE
%inancial perfor!ance 'o!petitiveness =0rignall et al?
%le'ibility
Stakeholders
Cow
Interest
>igh
1
@ey 2layers – @eep Close
2articipation
'
@eep Satisfied
Intervention
"
@eep Infor!ed
Education E Co!!unication
A
Mini!al Effort
6ive "irection
Cow
>igh
/endelowFs 9ower < .nterest /atrix
2ower
'ritical Success
%actors
"The limited number of areas in which results, if they are
successful competitive performance for the organization.
They are the few key areas where things must go right for the business to flourish.
If results in these areas are organization's efforts for the
period will be less than
desired."
)ot for 9rofit &r0anisations
Effectiveness
=3utputs?
Efficiency
=2rocess?
Econo!y
%eatures of obIective settin0
& 2articipation in ob4ective setting
& 2riorities !ay change fre.uently
& Increased role of personal ob4ectives
=Inputs?
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
13
not adeuate, the
&
Galue for !oney a re.uire!ent not an ob4ective
&
2roviders of funding different to beneficiaries of service
&
Multiple and contradictory ob4ectives
satisfactory, will ensure
Ti!ebound
*
&
8esolve sta1eholder conflict
& Strategy
& Structure
& Syste!s
& Staff
& Style
& Shared values
& S1ills
'om!etences
Threshold 38 Core7
'ore 'om!etences
:#the activities or processes that critically underpin co!petitive advantage$<
S A R
.
& Galuable
& 8are
& Can<t be copied
& )ot substitutable
& 6ive access to wide range of !ar1ets
Strategic
Assets
3alue )etworks
#identify activities within the fir! which contribute to co!petitive advantage and those which do not$
9rimary Activities
& Inbound Cogistics
& 3perations
& 3utbound logistics
& Mar1eting and sales
& Service
Su!!ort2secondary activities
& 2rocure!ent
& >8M
& Technology develop!ent
& 5ir! infrastructure
(ses
& Strea!line lin1ages
& Eli!inate non%value added activities
& 0usiness 2rocess 8e%engineering
0ench!ar1 1ey processes
&
9orterFs 3alue 'hain
? /Fs
& Manpower
& Money
& Ma1e%up
& Methods
& Materials
& Manage!ent infor!ation
Architecture
Reputation
.nnovation
/c4insey A S
Resources
.nternal Analysis
GStren0ths J 5eaknesses=
Resource Audit2
9roduct ,ife$cycle
Sta0esE
advertising I losses P negative cash growing volu!es9 E3S9 high
advertising I losses to profits P
negative to positive cash
& /aturityE steady repeat sales9 high volu!es9 E3S9 low level advertising
I profits P positive cash
& 1eclineE falling volu!es9 falling prices I profits to losses P positive to negative cash9 divest
"alance the !ortfolio
9roblemsE
& )o co!!on shape
& Knpredictable
& Self%fulfilling prophecy
& 2roduct orientated – ignores !ar1et
9roblemsE
& "efinition of a'es
& "efinition of !ar1et
& )o account of co!pli!entary goods
& Assu!es high !ar1et share I
advantage
"enchmarkin0
9ortfolio Analysis
Internal
Co!
3$ Choose partner
&$ "eter!ine !easures
($ Collect data
,$ Cearn and i!prove
-$ I!ple!ent changes
1$ "eter!ine processes to be
$ Choose type of bench!ar1ing
>arvest then "ivest 2rofits to losses9 positive to negative cash
>old then >arvest
2rofits and positive cash
Cow
1&6
'ASH '&5
9R&",+/ 'H.,1
Cosses9 negative
S*AR
0uild then >old
Cosses to profits9 negative to positive cash
Relative market
>igh
"alance t
"'6 /atrix
>igh
share
Cow
0uild or "ivest
Cosses9 negative cash
2r
Co!petitive
2rocessEActivity
"+S* .) 9RA'*.'+
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1&
"alance the !ortfolio
bench!ar1
&
6rowthE increased co!petition9
&
.ntroductionE high ris19 little co!petition9 low volu!e9 high
9osition Audit
0asic 38 Kni.ue7
/odel
&
Mar1ets
&
Machinery
&
Manage!ent
+conomic
& 6lobalisation
& Econo!ic cycle
& Interest rates
& Inflation
& E!ploy!ent levels
& E'change rates
Social J 1emo0ra!hic
& Inco!e distribution
& Education levels
& 2opulation siAe
& Age profile
& Cifestyle changes
& 5ashions and tastes
& Consu!eris!
*echnolo0ical
& Internet
& 6overn!ent spending on 8n"
& Co!!unications
& SpeedErate of change
& 2rocesses and !ethods of production
& Transportation
9 2rediction of 8eaction
R 8esources
S Strategy
A Assu!ptions
+xternal Analysis
G&!!ortunities and *hreats=
9+S* analysis
G+xternal, +nvironmental analysis=
9olitical and ,e0al
& Ta'ation
& 6overn!ent policy
& 5oreign trade regulations
& Monopoly legislation
& Environ!ental legislation
E!ploy!ent legislation
& Consu!er protection
& 2rotectionis!
'om!etitor
Analysis
'om!etitive Rivalry
6reatest whereE
& Co!petitors of si!ilar siAe
& Slow !ar1et growth rate
& >igh fi'ed cost industry
& Cac1 of differentiation
9orterFs 5 %orces G'om!etitive, .ndustry analysis=
*hreat from )ew /arket +ntrants
"arriers to +ntryE
& Econo!ies of Scale
& 3ther cost advantages
& Capital re.uire!ents
& Access to distribution channels
& 2atents9 6overn!ent policy
& 8eaction of e'isting fir!s
*hreat from Substitute
& Can sa!e features be produced
& Can new features be provided for sa!e
& Cevel of danger !ay be influenced by
9ower of "uyers
9ower 0reatest whereE
& 5ew buyers
& >igh nu!ber of suppliers available
& Cost is high proportion of buyers total cost
& Cow switching costs
& 0uyers have low profits
& 0uyers have full infor!ation
& Cittle product differentiation
9ower of Su!!liers
9ower 0reatest whereE
& 5ew suppliers
& 5ew substitutes
& >igh switching costs
& Threat fro! forward integration
& Custo!er not significant to supplier
& Supplier has differentiated product
Threats
EJ
3pportunities
;ea1nesses
8)AC
Strengths
I)TE
.nternal K +xternal Analysis
L 'or!orate A!!raisal L 9osition
EJTE8)AC
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1(
A!!raisalL S5&* Analysis
barriers to entry andEor power of buyers
cost7
*echnolo0ies
cheaper7
&
Co!petences
'
3b4ectives
&
/arket 0rowth
%illin0 *he 6a!
6a! Analysis
Target
3b4ective e$g$ 83I
Efficiency
2enetration
)ew products or new !ar1ets
"iversification
6A9
5uture
2lans
Current operations
1$ "efine the scope of the scenario
$ Identify the !a4or sta1eholders
3$ Identify basic trends
&$ Identify 1ey uncertainties
($ Construct initial scenario the!es
,$ Chec1 for consistency and plausibility
-$ "evelop learning scenarios
/$ Identify research needs
+$ "evelop .uantitative !odels
1*$ Evolve towards decision scenarios
Scenario 9lannin0
Ti!e
ü 5ocuses !anage!ent on future possibilities
ü Encourages creative thin1ing
ü Encourages co!!unication and participation
ü Identifies sources of uncertainty
ü Identifies !ost i!portant variables
û Costly
û Kses resources on scenarios that will not
û Tendency for !anagers to get carried
û 8is1 of self%fulfilling prophecy
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1,
away
!aterialise
û 3ften inaccurate
2orters 5ive
5orces
>arness core co!petences to give sustainable co!petitive advantage
& Strategic Assets
& Architecture
& 8eputation
& Innovative ability
2EST
9orterFs 6eneric Strate0ies
& &verall 'ost ,eadershi! =better !argin9 potential price cuts9 entry barrier9 reduce supplier power?
=2re!iu! price9 better !argin9 barrier9 reduce buyer power?
& %ocus G)iche=
=Cost or "ifferentiation9 focus on !ar1et needs9 develop core co!petencies?
"eware of DStuck in the /iddleF (ses
& Analyse rivals
& Suggest own strategy
& S0K level strategy
,imitations
& Knclear definition of industry
& "efines advantage in ter!s of position not
& Cac1 of e!pirical evidence
& Ignores !iddle ground
& 8estricts fir! to position in present
industry
& 8e.uires perfect infor!ation
Strategically develop organisation in line with environ!ent
2ositioning view
=outside%in?
8esource 0ased Strategy
/ethod of 6rowthM =See next !a0e=
5hat "asisM
Ci!itations
& "efinition of !ar1et
& Ignores factors such as co!petitors
& Suggests strategies in isolation
Strate0ic &!tions
5hat 1irectionM
HoriHontal diversification – co!petitive products9 co!ple!entary products9 by%products
1o nothin0
2 5ithdraw
AnsoffFs /atrix
oducts9 e'isting and new =2E)?
/arket 9enetration =cost reductions9 !odifications?
9roduct 1evelo!ment =e'ploit e'isting custo!ers9 8n"9 buy%in and badge9 OG<s9 Cicensing?
/arket 1evelo!ment =new !ar1ets
such as foreign !ar1ets9 new seg!ents such as adult to child or industrial to consu!er? 1iversification =related I vertical integration or unrelated I conglo!erate?
2r
&
&
&
&
3ertical .nte0ration
Advanta0es
1isadvanta0es
& Econo!ies of co!bined
& Increased operational
& Econo!ies of control and
gearing
coordination
& 8educed fle'ibility to
& Avoiding the !ar1et
change partners
& Tap into technology
& Capital invest!ent needs
'on0lomerates
Advanta0es
1isadvanta0es & 5le'ibility
& )o additional benefit to
& Access to capital
shareholders through
& 2ortfolio effect
& )o operating advantages
!onopoly legislation
Risks
& Mar1et !anage!ent
& 5inancial
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1-
&
Avoidance of anti%
synergies
&
3perations and
&
Huic1 growth
&
2roduct
price reductions9 advertising9 !inor product
ops
Mar1ets9 e'isting and new =ME)?
2r
resources
=Inside%out?
&
1ifferentiation
To beat the five
forces
Ac#uisition
1isadvanta0es
& 2urchase pre!iu!
& Integration issues o Syste!s o 2eople
o Culture
& Synergies do not
!aterialise
& 8eputation of target
Advanta0es
& Huic1
& Cower ris1
& 3verco!es barriers to entry
& Sa!e nu!ber of co!petitors
& 2ossible synergies
& 2ossible under%valuation of target
&r0anic
6rowth
1isadvanta0es
& Slow
& Increases nu!ber of co!petitors
& 3verco!ing barriers to
entry
& )o opportunity for synergies
& >igher ris1
Advanta0es
& )o pre!iu! for assets
& 2eople develop!ent
& Staged invest!ent
& Established culture
& Introduction of new technology and syste!s easier
& 2ossibility of grants
9orterFs 8 *ests for
Ac#uisitions
& The attractiveness test
& The cost of entry test
& The better off test
/ethod of
6rowthM
Ac#uisition versus
1ivestment
' Huic1
' >igher price due to strategic value
9ossible syner0ies
& Econo!ies of scale
& Surplus assets
Gertical integration
& S1ills transfer
& "ilution of ris1
& 8educed power of buyersEsuppliers
& Ta' advantages
5ithdrawal
1emer0er
' 6ives shareholders
' Manage!ent can focus on core areas
develop separate identities
Noint 3enture Separate business entity with e.uity for! two or !ore businesses
Noint 1evelo!ment
/ethods
/ana0ement "uyout
G/"&=
Consider
& 3n%going involve!ent of holding co!pany
& ;hy is holding co!pany
selling7
& Coss of >olding co!pany help9 e$g$ technical support9 finance services
& Huality of !anage!ent tea!
& 2rice
& 2ersonal ris19 e$g$ ho!e at ris17
Strate0ic Alliance Cong%ter! agree!ent to share 1nowledge9 co!petences9 technology for !utual benefit
' Huic1 growth
' Access to co!petences
' Cess financial ris1Eoutlay
' 3verco!e product9 !ar1et9 operational ris1
M May lose co!petences
M Train future co!petitors
M 0rand infection
M 3perational and contractual disputes
M 3wnership of assets
M Sharing of profits
,icensin0
e'ploit brand9 recipe9 share of the profits
%ranchisin0
!ethodE!odel in return for a capital su! usually provides support e$g$ !ar1eting9
training9 technical
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1/
plus a share of the profits$ 5ranchisor
6iving the right to e'ploit a business
process etc for a
6iving the right to
'
Two co!panies can
an e'it route
&
&
Shared activities
&
Mar1et
&r0anic 0rowth
Acce!tability
;ill the proposed strategy !eet the ob4ectives of the organisation and9 therefore9 be acceptable to the !a4or sta1eholders7
Suitability
Is the proposed strategy suitable for the present situation and circu!stances of the organisation7
i$e$ Is it suitable given the S;3T
analysis7
%easibility
the necessary resources to carry out the
CostE0enefit
8is1
Strate0ic
+valuation J 'hoice
6ame *heory
& Concerned with the interrelationships between the co!petitive !oves of a set of co!petitors
& Can be a useful tool to analyse and understand different scenarios
& 8elies on two 1ey principlesF
% Strategists ta1e a rational9 infor!ed view of potential co!petitor actions
% If a co!petitors strategy allows the! to do!inate us then the priority is to eli!inate that strategy
5or e'a!ple9 ta1ing co!petitor reaction into account9 a co!pany !ay not be any better off by !a1ing a particular strategic !ove as it !ay be cancelled out by the
co!petitor$ This !ay leave both co!panies worse off than they were before$
Real &!tions
Q:#the net present value rule is not sufficient$ To !a1e intelligent invest!ent choices9 !anagers need to consider the value of 1eeping their options open$< ="i'it and
2indyc19 1++(?
Q#all business decisions are real options#they confer the right but not the obligation to ta1e so!e initiative in the future$ =Cewent9 1++&?
8eal options capture the value of !anagerial fle'ibility to adapt decisions in response to une'pected !ar1et develop!ents$
/c4inseyFs 7 for Real &!tions
1$ Kse standard )2G approach to produce valuation of invest!ent
$ Kse scenario planning to deter!ine the potential futures
& Model the uncertainties in the pro4ect with event trees
3$ Identify the decision options at 1ey stages of the pro4ect
& Convert event tree into decision tree
&$ Galue the portfolio of options using the 0lac1 N Scholes portfolio approach
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1+
strategy7
>as the organisation got9 or can it get9
sta0e !rocess
KnfreeAe Change 8efreeAe
8ole
Tas1
Oob 5actors
Cultural ;eb
& Stories
& 8ituals
& Sy!bols
& 2ower structure
& 3rganisation structure
& Control syste!s
Strengthen
;ea1en
2ersonal 5actors
2ower
2erson
Social 5actors
"riving 5orces
8estraining 5orces
=resistance?
>andy<s cultural types
3rganisational 5actors
,ewinFs %orce
%ield Analysis
& 2articipation
& Education N co!!unication
& 5acilitation N support
& )egotiation
& Manipulation
& Coercion
'ulture
:The way we do things around here<
*he chan0e
@anter<s prescription for creativityF
A Acceptance of change
. Interaction
* Tolerance of failure
A Ac1nowledge creative behaviour
E'cellence Culture – 2eters and
;ater!an
9 2roductivity through people
A A bias for action
S Stic1 to the 1nitting
S Si!ple structure
' Close to the custo!er
A Autono!y and entrepreneurship
S Si!ultaneous loose%tight properties
H >ands on9 value driven
-uality
:5itness for use<
Huality control
I reactive
Huality Assurance I proactive
5our costs of HualityF
& Appraisal
& 2reventative
'han0e
Internal
E'ternal
.m!lementation
.ssues
'han0e
'ontext of
Triggers
&
&
Methods
& Survey research and feedbac1
& Therapy groups =T%6roups?
& Tea! 0uilding
& Change Agents
&r0anisational 1evelo!ment
*o increaseE
& Cevel of trust
& Ci1elihood of solving proble!s
& 3penness of co!!unication
& Cevel of individual and group responsibility for proble! solving
Custo!ers
*-/
:6et it right first ti!e<
Co!petence
Types of change
& E!ergent
& Incre!ental
& Step
& Transfor!ational
Continuous i!prove!ent
Co!!it!ent
, C<s
Costs
& Internal failure
Co!!unication
© Darren Sparkes, 2010
These notes are not intended to cover the whole of the E3 syllabus
CIMA E3 – Enterprise Strategy
*
Continued on ne't page
&
E'ternal failure
&
2lanned
/ana0ement
)ew Ideas
)
!rocess
& 8ecruit!ent
& Appraisals
& Training
& 8eward
& Oob design
& Involve!ent
& Status and security
& Co!!it!ent
& Huality
& 5le'ibility
MotivationF
& Maslow – >ierarchy of needs
>8M >8M HR/ 0ehavioural 2erfor!ance 5inancial
Strategy 2ractices &utcomes 3utco!es 3utco!es 3utco!es
Staff understand org<n goals N values
6uest model of HR/
Increased ability to
)etwor1s
6roupware
.m!lementation
.ssues GcontFd=
HR/
"enefits
Motivated wor1force
Intranet
2eople encouraged to generate N use 1nowledge
*urn tacit into ex!licit
Systems
E'tranet
@nowledge I closest we can get to ulti!ate
:co!petitive advantage<
&r0anisational
/ana0ement
Se.uences
Associations
3rganisational Structure
.nformation Systems *echnolo0y
Technological
Classification
2olitics
.ssues 2 9roblems
1ata /inin0 $ Turning data into infor!ation
5orecasting
Errors in data
8eports
"e%!otivation
1ata
5arehousin0
Clustering
Support strategic decision !a1ing
Carge relational database
5or!at of infor!ation
Social barriers
I!prove .uality of data
Support integrated value chain
Speed up response ti!es to .ueries
Inco!patible syste!s
N processes
2redictive !odels
"escriptive
I!ple!entation Issues =cont<d?
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
1
!odels
transfer
barriers
4nowled0e
co!pete N add value
&
>erAberg – >ygiene factors and !otivators
9e!!ard < A!!lications
9ortfolio
>
i g h
Strategic – Critical to future business success
@ey 3perational– Critical to sustain e'isting business
C o w
>igh 2otential – Innovative with high future potential
Support – I!prove !anage!ent effectiveness but not critical to the business
Strategic i!portance in current co!petitive environ!ent
>igh
Cow
Strategic i!portance in predicted co!petitive
0eat the five forces
Galue chain
6eneric strategies
4ey business
'ost
Strate0ic
5ea!on
'onsiderations
.!plications
1$ Identify business needs
$ Identify IT gap
3$ Identify potential opportunities
9erfor!ance
9rocess
.nnovation
Co!pletely new and radical processes$
1$ ;or1 bac1wards fro! outco!es not tas1s
$ E!power the end user
3$ Increase access to databases
&$ Cin1 parallel activities
($ Capture infor!ation only
Re$en0ineerin0
8adical N funda!ental change for .uantu! leaps in perfor!ance
1evelo!in0 an
.* Strate0y
Strategic i!pact of future syste!s
Cow
>igh
Strategic i!pact of current syste!s
Support –
)o strategic value
Turnaround – E'pect info syste! to beco!e strategically i!portant in the future
C o w
5actory –
See strategic value of info syste! now but e'pect value to decrease in the future
Strategic – "epend on info syste! for co!petitive advantage
>
i g h
/c%arlan J /c4enneyFs
+arls 8 ,evels of
.* Strate0y
IS Strategy %
syste!s
9lanning
*echnol
IM Strategy –
!anage!ent processes =C32T?
IT Strategy –
infrastructure
*echnology
'ontrol
&rganisation
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus

Technology
Supporting
3rganisation of
Strate0ic 6rid
"usiness 9rocess
G9.'4=
areas
%unctional
' Econo!ies of scale
' Specialists with so!e autono!y
' Career structures
' 5rees up entrepreneur
M Slow decisions =bureaucratic?
M 5unctional silo<s
M 5ew products N !ar1ets
I!ple!entation Issues cont<d
1ivisional
' Multiple products N
!ar1ets
' Autono!y for S0K
!anagers
' Training of S0K !anagers
' 5rees up senior !anagers
' 5ocus on specific productsE!ar1ets
M Coss of congruence7
M "uplication of effort
M Isolation of S0K
!anagers
+ntre!reneurial
' 8esponsive to !ar1et
M )o career structure
M )o autono!y
M Single product N !ar1et
Career
E!ployee !otivation
"ecisions
Huality
5le'ibility
Autono!y
S Strategy
* Technology
& 3wnership
9
* Tas1s
. Ideology
+ Environ!ent
S SiAe
'entralised vs 1ecentralised
Speed
Motivation of
6reinerFs
6rowth /odel
/intHber0
'onfi
Str
Techno% structure
contact
&r0anisational
Structure
Congruence
'hecklist
5eatures of
3rganisation
/atrix
' Shared 1nowledge
' Innovation and creativity authority
1ecentralisation
S!an of control
Fs Structural
'onfi0urations
AdvantagesF
& 5rees senior !anage!ent
& 0etter local decisions
& 0etter !otivation
& 5le'ibility
& TrainingEcareer path
5latE;ide
' Encourages delegation
' Huic1er9 !ore infor!ed decisions
' Encourages participation
of lower levels
' Cower !anage!ent costs
' 2ro!otions real and !eaningful
' Closer contact between
senior !anage!ent and lower levels
TallE)arrow
' 2ro!otional opportunities
' S!ooth progression between levels
' More personal
aff
& Si!ple structure I
& Machine bureaucracy
I functional
& 2rofessional
decentralised
& "ivisional for!
3perating core
"isadvantagesF
& Coss of congruence
& "uplication of effort
& E'tra costs of control
6rowth through 8evolutionary Crisis
"irection Autono!y
Coordination 8ed Tape
© Darren Sparkes, 2010
These notes are not intended to cover the whole of the E3 syllabus
CIMA E3 – Enterprise Strategy
3
2sychological saturation
Collaboration
Control
"elegation
Ceadership
Creativity
&
Coss of control
Adhocracy I !atri'
&
bureaucracy I
St
Middle Cine
structure
Support
Strategic Ape'
entrepreneurial
Ti!e consu!ing !eetings
M
"ual co!!and
"ilution of functional
M
M
'
S1ill develop!ent
'
0rea1down of silo<s
2eople
!anagers
path
'
Congruence
'
5ast decisions
/arket ,eader
% largest !ar1et share
Supplier Mar1ets
8ecruit!ent
Mar1ets
Influence
Mar1ets
Internal
Mar1ets
G9ayne=
Six
/arketin0
Strate0y
Analyse environment and com!etitors – 2EST
E 2orter<s five forces E
283SAC E &2<s
8eferral Mar1ets
/arket 'hallen0er
increase share
Custo!er
Mar1ets
/arket %ollower
% runner%up9 ai!ing to hold share
Kndifferentiated
ing to the
/arket Se0mentation and
*ar0et /arket
#division of the !ar1et into ho!ogenous groups of potential custo!ers who !ay be treated si!ilarly for !ar1eting purposes
& 6eographic
& "e!ographic
o Age
o 6ender
o Inco!e
o 5a!ily life%cycle
& Social class
& 2sychological
& Education
& >obbies
2roduct
Sales
%irmFs orientation
Mar1eting
#identify9 anticipate and satisfy custo!er re.uire!ents
/arket nicher
pursued by larger fir!s
'om!etitive
Strate0ies
2roduction
Co!!unications Mi'F
Sales pro!otion 2ublic relations 2ersonal selling
A Awareness
1 "esire
A Action
/arketin0
Kse of inter!ediariesF
& Econo!ic criteria
& Control criteria
/arketin0 Research
#syste!atic gathering9 recording and analysing of data about proble!s relat
!ar1eting of goods and services
9romotion
9lace
"ifferentiated
/arketin0 /ix < 79Fs
#set of controllable !ar1eting variables used to produce desired response in the target !ar1et
Concentrated
9rice
%ield Research =2ri!ary data?
Interviews9 focus groups9 .uestionnaires9 e'peri!ents9 Test !ar1eting
1esk research
=secondary data?
9roduct #ualities
range9 warranty9 pac1aging9 branding
E'ternal CS3 reports9 0usiness !onitors9 Trade 4ournals9 newspapers
Internal Accounts9 Sales reports9 Custo!er co!plaints
& Cost based
& Target pricing
& "iscri!inatory pricing
& 2sychological pricing
& 2ro!otional pricing
& 2roduct line pricing
& Captive product pricing
& Mar1et s1i!!ing
& Mar1et penetration
9roduct
2roduct Cife Cycle
2roduct to !eet needs
Cine E'tension 0rand E't
Multi%branding )ew 0rand
E'isting 2roduct )ew 2roduct
0rand Strategies
E'isting 0rand Cine E'tension 0rand E'tension
)ew 0rand
2roduct
© Darren Sparkes, 2010
These notes are not intended to cover the whole of the E3 syllabus
CIMA E3 – Enterprise Strategy
&
!i'
5eatures9 options9
Advertising
Interest
.
% serve s!all seg!ent9 not
Six /arkets /odel
% runner%up9 fighting to
2rofits fro! sales o individual products
Calculating "22
Sales =price ' nu!ber of units – returns?
,+SSE
'osts =unit cost P ordering
P inventory P storage P transport P shelf stac1ing P wastage P brea1age?
I!proving "22F
& Increase sales price
& Increase sales volu!e
& 8educe costs of stoc1ing
& 3ffer incentives
Evaluation of "22F
& Easier and cheaper to cut price
& Ignores relationships between products
f
"22 – "irect 2roduct 2rofitability
ConsiderF
& 2resent value of e'isting N future purchases
& 2robability of custo!er retention
& 2robability of custo!er purchasing new products
& Costs of initial attraction
"rawbac1sF
& >ard to factor in co!petitors
& "ifficult to pinpoint life%cycle stage
& Kncertainty of environ!ental factors
Typical cost driversF
& "e!and uncertainty
& "elivery cycle
& 3rdering !ethod
9roduct 3iew
9rofitable
9roducts or
'ustomersM
Single period view of
Account
2rofitability
'ustomer 3iew
Cife%Cycle custo!er value
& Mini!u! order siAe
& Install telesales E E"I
& Charge service fees
& I!pose flat order charge
& "iscri!inatory pricing
custo!ers
1$ Analyse custo!er base and divide into
$ Calculate annual revenues earned fro! custo!er seg!ents
3$ Calculate annual costs of serving the seg!ent including the :hassle< factor
&$ Identify and retain :.uality< custo!ers
($ Eli!inate or re$en0ineer unprofitable
"eveloping Custo!er 8elationshipsF
& 1evelop custo!er retention sche!es for staff
& Reduce staff turnover
& +levate custo!er retention in corporate thin1ing
& Analyse detailed infor!ation on
custo!ers and their buying habits
& /onitor custo!er relationships
& +ngage with custo!er
& 1evelop ideas to increase loyalty
1R+A/+1
Evaluation of CA2F
ü Includes non%production costs
ü Identifies custo!er groups of value to the fir!
ü Enables assess!ent of value of !ar1eting e'penditure
changes
M Calculation difficulties
M Single period view
5ocus !ar1eting
!aintaining N
custo!er base
Custo!er
Mar1eting E
© Darren Sparkes, 2010
These notes are not intended to cover the whole of the E3 syllabus
CIMA E3 – Enterprise Strategy
(
enhancing e'isting
resources on
Ceads to ill%4udged product
M
Manage!ent
8elationship
seg!ents
value of custo!er
CA2 – Custo!er
&
2roduct siAe
&
>ard to predict future behaviour
than conduct "22 e'ercise
&
Too product focussed
' Confidentiality
& 3b4ectivity
9 2rofessional due care
9 2rofessional Co!petence
. Integrity
* Threats
E.ual opportunities
Consu!er health and safety
9rofessional +thics
:Self control9 not self interest<
5air Trade
Safety in the wor1place
>onesty in Advertising
Environ!ent
8eputation
Innovation N and branding
advantage in the
ideas fro!
supply chain
"usiness and
9rofessional
+thics
Sustainability
'or!orate 6overnance
& "ivorce of ownership and control
& Separate roles of CE3 and Chairperson
& Audit Co!!ittee E 8e!uneration Co!!ittee
& )on%e'ec "irectors
o Independent
o 8ole on audit E re!uneration
co!!ittees
o Corporate conscience
o Mentors to ine'perienced e'ecs
o Strategic value through e'pertise
Issues
'or!orate Social
D*he bu business is
Giews on 0usiness Ethics
D*he business of businessF
Manage!ent to concentrate on !a'i!ising profits and shareholder wealth$
0usinesses have no duty to society$
Societal benefits will arise as a result of co!!ercial success$
Co!petitive advantage
S!all co!pany
close lin1s to co!!unity
Avoid future 6overn!ent policy
+nli0htened Self$.nterest
5ir!s should ac1nowledge their social responsibilities$
8ecruit!ent
"enefits to "usiness
8elieve stress on
Attract ethical investor funds
Co!petitive disadvantage
)o universal acceptance of !orals N ethics
Conflict of CS8 with shareholder wealth
& 8educed revenues
& Increased costs
& "iverts funds fro! shareholders
& "istracts !anage!ent
"is
9otential !roblems
"eciding what is ethical
"isclosure of business infor!ation
0ad publicity fro! !onitoring and enforce!ent
© Darren Sparkes, 2010
CIMA E3 – Enterprise Strategy These notes are not intended to cover the whole of the E3 syllabus
,
!anage!ent
G%riedman=
Res!onsibility
&
"irectors re%election at least every 3 years
9olitical sponsorship
9olitical power
Saturated ho!e !ar1et
&pportunities for lower costs
Reasons for 0rowth in international business G9&S*=
'
"i
&
*rade barriers reduced
pportunities for !anage!ent
2EST
Mar1et @nowledge
+cono!ies of scale
ultural versity
5inancial
Reduced ris1
283SAC
"enefits of international 0rowth G'&99+R=
6eneral
( 5orces
9ressure on
83CE
5actor Conditions
8elated N supporting industries
Strategy9 structure9
N rivalry
9orterFs
1iamond
:)ational Co!petitive Advantage<
"e!and Conditions
+x!ortin0
' Cow capital outlay
' Can learn about !ar1et
M 2erceived lac1 of co!!it!ent
M >igh distribution costs
*he .nternational
/arket 9lace
' Efficient use of >89 builds strong culture and !anage!ent
networ1
M Sub4ect to )ational i!!igration policies9 e'pensive
' Alleviates cultural !yopia9 ine'pensive
M Ci!its career !obility9 isolates >H
fro! subsidiaries
' 3verco!es lac1 of host s1ills9 unified culture9 Transfers co!petencies
M 8esent!ent by host9 cultural !yopia
S*A%%.)6
Ooint venture9 5ranchising9 5oreign "irect Invest!ent
E'porting
& Standardise wherever possible9 e$g$ 8n"9 0randing
& Mar1et convergence !ay allow
standardised product
& "(*
& 1emand$driven
& Custo!ised !ar1eting !i' where necessary I 6C3CAC
& See overseas !ar1et as distinctive
& Custo!ised products and
!ar1eting !i'
& Increased overseas sales volu!es
"(*
& 5ewer E3S giving higher costs9 so volu!es not turned into profits
& 2erceives foreign !ar1ets as si!ilar to do!estic !ar1et
& 2roducts N !ar1eting !i'
constant
& Standardisation to save ti!e and !oney
& Su!!ly$driven !olicy
6lobal $ 6eocentric
/ultinational $ 9olycentric
+thnocentric
/ethods of .nternational +x!ansion
Noint 3enture J %ranchisin0
' Access to local resources
' Shared capital input 1nowledge
M Cose co!petences
M 3perational disputes
%orei0n 1irect .nvestment
' Closer to !ar1et
' More control
M >igh financial ris1
M Integration difficulties
© Darren Sparkes, 2010
These notes are not intended to cover the whole of the E3 syllabus
CIMA E3 – Enterprise Strategy
-
Staffing decision
M
'
8educed operational conflicts
'
8etain profits
Train co!petitor
M
Shared profits
M
'
Access to co!petences and
'
8educed national senti!ent
May not !eet custo!er needs
M
'
Cow ris1
risks
2
Aims of !erformance measuresE
& Motivation
& Congruence
& Accurate reflection of perfor!ance
& AccountabilityEControllability
& 8econcile long and short%ter!
*ransfer 9ricesE
& /ar0inal 'ost – no incentive for seller N inflated profit for buyer
& %ull 'ost G'ost 9lus= – !ay be no
incentive for the buyer N no incentive for seller to control costs
& /arket !rice – no buyer incentive
& &!!ortunity 'ost – usually best
& 'entrally set – uncontrollable
& )e0otiated – powerful divisions
9roblemE
no account ta1en of invested capital used to generate profits
Return &n
.nvestment
Residual
E'a!ples
& 6ross !argin
& )et !argin
& Cost L sales
20IT J 1** I L CE
20IT
8I
8elative Measure L
Absolute Measure R<s
2rofit 8elated Measures
9roblemsE
& Sub%opti!al invest!ent decisions
& "eplete capital assets too early
9roblemsE
& Absolute !easure poor for perfor!ance co!parisons
Review and 'ontrol
Noint issues when used in isolation
& 0ac1wards loo1ing !easures
& Short%ter!ist decisions
& 3pen to easy !anipulation of discretionary costs and capital e!ployed
5inancial 2erspective
Custo!er
2erspective
Internal 0usiness
2erspective
Innovation and
Cearning 2erspective
1$ Identify CS5<s
$ Identify co!petences re.uired for CS5<s
3$ "evelop @2I<s for co!petences
&$ Measure co!petence
($ Ta1e action – continuous i!prove!ent
Ad4usted )32AT
=Ad4usted CE ' i!puted interest rate? EGA
The business should be shareholder wealth – i$e$ all
Shareholder
3alue Analysis
+conomic 3alue
Added G+3AC=
9otential
1rawbacks
with each other
M 8e.uires cultural change
M 3verload –
analysis<
M Ti!e and cost
M )o obvious relationship with shareholder wealth
'onclusion
!easure perfor!ance but should be co!bined with
*he "alanced Scorecard
"enefits
' Conger%ter! !easures
' More difficult to !anipulate
' Measures deter!inants and
' 2ro!otes goal
' Includes sta1eholders
!anaged to increase activities and processes
© Darren Sparkes, 2010
These notes are not intended to cover the whole of the E3 syllabus
CIMA E3 – Enterprise Strategy
/
:paralysis by
Measures conflict
M
non%financial !easures$
5inancial !easures should not be used in isolation to
congruence
results
&
2rofit
=CE ' i!puted interest rate?
GR&.=
.ncome GR.=