P3 BA PPTs PDF

ACCA P3
Business Analysis
For exams in December 2014
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Syllabus
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Course structure
C Organising and enabling success
7 Organising for success

8 Managing strategic change
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Chapter 7 • Challenges and concepts
• Types of structure
Organising for • Processes
success • Relationships
• Stereotypical configurations
• Configuration and strategy
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Syllabus learning outcomes 1
Organising and enabling success
• 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
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Organising and enabling success (continued)
• Discuss how organisational structure and external

relationships (boundary-less organisations; hollow modular
and virtual) and strategic alliances (joint ventures,
networks, franchising, licensing) and the supporting
concepts of outsourcing, offshoring and shared services,
can be used to deliver a selected strategy.
• Explore (through Mintzberg's organisational
configurations) the design of structure, processes and
relationships
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Exam guide
• Questions on structure were fairly uncommon under the

old syllabus.
• But.....
• JS&W's fresh approach, emphasising processes and

relationships casts a new light on this rather specialised
topic and brings it into the mainstream of strategic
thinking.
• You cannot afford to neglect this chapter.
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Key model in this chapter
Mintzberg's organisational configurations are explicitly

referenced in the Study Guide and so could be specifically
required in a question.
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Overview
Organising for success
Structure Process Relationships Configurations
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Challenges and concepts 1
Challenges for 21st century organisation structures:
• Flexibility of organisational design

• Effective systems
• Globalisation
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Challenges and concepts 2
Organisational configuration
• Structure
• Processes
• Relationships
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Types of structure 1
An organisation's formal structure shows:
• Who is responsible for what

• Who communicates with whom
• Skills the organisation values and the role of knowledge
and skill within it
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JS&W’s basic 'self contained' structural types
• Functional
• Multidivisional
• Holding company
• Matrix
• Transnational
• Team
• Project
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Exam guide
• Students need to be aware of the clear distinction between

self contained and boundary-less organisational
structures.
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The functional structure
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Advantages of functional departmentation
• It is based on work specialism and is therefore logical

• The firm can benefit from economies of scale
• It offers a career structure
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Disadvantages of functional departmentation
• It does not reflect the actual business processes by

which value is created
• It is hard to identify where profits and losses are made
on individual products
• People do not have an understanding of how the whole
business works
• There are problems of co-ordinating the work of different
specialisms
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Problems in divisionalisation (Mintzberg)
• A division is partly insulated

• The economic advantages it offers over independent
organisations ‘reflect fundamental inefficiencies in
capital markets’
• The divisions are more bureaucratic
• Headquarters management have a tendency to usurp
divisional profits
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Problems in divisionalisation (Mintzberg) continued
• It may be impossible to identify completely independent

products or markets
• Divisionalisation is only possible at a fairly senior
management level
• It is a halfway house
• Each business might be better run independently than
with the others
• The different businesses might offer different returns for
different risks which shareholders might prefer to judge
independently
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Multi-divisional structure 1
Simple
divisionalisation
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Multi-divisional structure 2
The holding company (group) structure
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Advantages of divisionalisation
• It focuses the attention of subordinate management on

business performance and results
• Management by objectives is the natural control default
• It gives more authority to junior managers, and therefore
provides them with work that grooms them for more
senior positions in the future
• It provides an organisation structure which reduces the
number of levels of management
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Matrix organisation
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A matrix organisation is most suitable when:
• There is a fairly large number of different functions, each of

great importance.
• There could be communications problems between
functional management in different functions
• Work is supposed to flow smoothly between these
functions, but the communications problems might stop or
hinder the work flow.
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A matrix organisation is most suitable when (continued):
• There is a need to carry out uncertain, interdependent

tasks.
• Work can be structured so as to be task centred.
• There is a need to achieve common functional tasks so as
to achieve savings in the use of resources.
• There are many geographic areas with distinct needs, but
the firm wishes to exploit economies of scale.
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Advantages of a matrix structure
• Greater flexibility – people, task and structure

• It should improve communication
• Dual authority gives the organisation multiple orientation
• It provides a structure for allocating responsibility to
managers for end-results
• It provides for inter-disciplinary co-operation
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Disadvantages of a matrix structure
• Dual authority threatens a conflict between managers

• One individual with two or more bosses is more likely to
suffer role stress at work
• It is sometimes more costly
• It may be difficult for the management to accept a matrix
structure
• It may slow down decision-making
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Matrix organisation – example
Matrix management first developed in the 1950s in the

USA in the aerospace industry and with Lockheed, the
aircraft manufacturers.
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Matrix structure: Question 2, June 2011
• The June 2011 exam featured, a question ‘8-Hats’, which

together with investment appraisal, covered the matrix
structure.
• Ensure you have the June 2011 exam paper to hand
when working through the following slides.
http://www.accaglobal.com/content/dam/acca/global/PDF-
students/2012/p3_jun_2011_qu.pdf
Required
• Discuss the principles, benefits and problems of
introducing a matrix management structure at 8-Hats.
(10 marks)
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• Take note of the mark allocation when answering

questions
• 1 mark for each relevant point up to a maximum of 10

marks
• Make sure you are familiar with the entire P3 syllabus

to ensure you are fully prepared for your exam, and do
not overlook those areas that appear to be smaller, or
less-examined
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• Take care to relate to 8-Hats
• The question lends itself to being answered in three

parts: principles, benefits and problems
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The transnational structure
The transnational structure attempts to reconcile global

scope and scale with local responsiveness.
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The team-based and project based structures
Both team and project based structures extend the matrix

approach by using cross-functional teams. The difference is
that projects naturally come to an end and so project teams
disperse.
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Choosing a structure
Goold and Campbell tests to assess proposed structures:
Related to the organisation's objectives and restraints:
• Market advantage
• Parenting advantage
• People test
• Feasibility test
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Choosing a structure
Goold and Campbell tests to assess proposed structures:
Related to design principle:
• Specialised cultures
• Difficult links
• Redundant hierarchy
• Accountability
• Flexibility
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Processes 1
Types of control process
Input Output
Direct Supervision Performance targets

Planning processes Balanced scorecard
Indirect Cultural processes Internal markets
Self-control
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The balanced scorecard
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Relationships 1
• Centralisation means a greater degree of central control.

• Decentralisation means a greater degree of delegated
authority to regions or sub-units.
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Relationships 2
Advantages of centralisation
• Control
• Standardisation
• Corporate view
• Balance of power
• Experience counts
• Lower overheads
• Leadership
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Relationships 3
Disadvantages of centralisation
• Workload
• Job
• Local knowledge
• Flexibility and speed
• Training
• Control
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Relationships 4
Strategic management relationships
• Strategic planning
• Strategic control
• Financial control
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Relationships 5
External relationships
Forms of boundary-less organisational structure:
• Hollow
• Modular
• Virtual
• Network
• Strategic alliances (joint ventures, franchising and

licensing) were discussed above
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Relationships 6
Outsourcing, offshoring and shared servicing
• Outsourcing and offshoring involve external providers

taking on activities previously carried out in house.
• Offshoring involves using external providers in different
countries.
• Shared servicing is an alternative approach where
shared service centres consolidate the transaction-
processing activities within a company.
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Relationships 7
Advantages of offshoring
• Cost savings
• Focus on core activities
• Capability
• Skills
• Flexibility
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Relationships 8
Disadvantages of offshoring
• Quality
• Public perceptions
• Loss of control
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Case Study
• For an interesting perspective on offshoring see:
'RSA brings back 350 call centre jobs back to the UK', by
Steve Hawkes (October 2013), published on the Telegraph
website
http://www.telegraph.co.uk/finance/newsbysector/banksan
dfinance/insurance/10388596/RSA-brings-350-call-centre-
jobs-back-to-the-UK.html
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Relationships 9
Network organisation structures
• Teleworking
• Federations of experts
• One stop shops
• Service networks
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Relationships 10
The shamrock organisation
‘A core of essential executives and workers supported by

outside contractors and part-time help’
Handy
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Relationships 11
The shamrock organisation – The Leaves
• Professional core
• Self-employed professionals or technicians
• Contingent workforce
• Consumers who do the work of the organisation
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Relationships 12
The virtual organisation
A virtual organisation is a geographically distributed network

with little formal structure, probably held together by IT
applications, partnerships and collaboration.
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Relationships 13
Collaborative organisational structures
Contribution systems are a means of extracting and collating

customer contributions.
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Relationships 14
Non-financial motivations for individuals to interact with

organisations:
• By-product of purchase
• Practical solutions
• Social rewards
• Reputation
• Self-expression
• Altruism
(Buchanan and Huczynski)
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Relationships 15
Crowdsourcing
Crowdsourcing involves obtaining information from a large

group of people.
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Stereotypical configurations 1
Mintzberg's theory of organisational configuration
• The strategic apex

• The technostructure
• The operating core
• The middle line
• Support staff
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Mintzberg’s types of organisation
• The simple structure (or entrepreneurial) structure

• The machine bureaucracy
• The professional bureaucracy
• The divisional (or diversified) form
• The adhocracy
• The missionary organisation
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Exam question – Mintzberg
• A question in the December 2010 exam asked candidates

to explain how an understanding of organisation
configuration could have helped predict the failure of the
implementation of a proposed structure in the organisation
discussed in the scenario.
• This question specifically referenced Henry Mintzberg’s
configuration stereotypes to help student’s identify what
they were being asked to do.
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Configuration and strategy
+
Performance Time
–
The change and performance J curve
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Summary
• Challenges and concepts

• Types of structure
• Processes
• Relationships
• Stereotypical configurations
• Configuration and strategy
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Course structure
C Organising and enabling success
7 Organising for success

8 Managing strategic change
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Chapter 8 • Diagnosis: situation analysis for
change
Organising for • Styles of change management
success • Change management roles
• Change management levers
• Pitfalls of change management
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Syllabus learning outcomes
Managing strategic change
• Explore different types of strategic change and their

implications
• Determine and diagnose the organisational context of
change using Balogun and Hope Hailey's contextual
features model and the cultural web
• Establish potential blockages and levers of change
• Advise on the style of leadership appropriate to manage
strategic change
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Exam guide
• It is very important to be aware that strategic change may

be implicit in a scenario rather than being the explicit
subject of a question requirement.
• You must be able to recognise the factors that drive
change and constrain the ways in which it may be
effected.
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Key models
• Balogun and Hope Hailey's contextual features model
• The cultural web (already covered in Chapter 5)
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Overview
Managing strategic change
Analysis of Managing
change change
Style Roles Levers Pitfalls
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Introduction
• The need for change may arise from a number of sources

including changes in the environment, review of strategic
capability or a decision to implement a new strategy.
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Diagnosis: situation analysis for change 1
Types of change (Balogun and Hope Hailey)
Scope of change
Realignment Transformation
Incremental Adaptation Evolution

Nature of
change ‘Big bang’ Reconstruction Revolution
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Exam guide
• The June 2008 exam featured a question on strategic

change, and the examining team noted it was the least
popular of the optional questions.
• The examining team also noted that, despite the question
being clearly built around Balogun and Hope Hailey's
matrix of the nature and scope of change and the
contextual features model, many candidates' answers
suggested they were unfamiliar with this area of the
syllabus.
• Make sure you learn it!
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The context of change

Aspects of context
• Scope
• The time available
• The preservation of some organisational characteristics and
resources may be required.
• Diversity of general experience, opinion and practice is
likely to ease the change process
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Aspects of context
• The capability to manage and implement change

• Capacity to undertake change
• The degree of workforce readiness for change
• The power to effect change
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The context of change
• The compulsory question in the December 2010 exam

required candidates to identify and analyse the contextual
factors of a strategic change.
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Contextual factors: Question 1, December 2012
• Question 1 in the December 2012 exam featured, amongst

other areas, the contextual factors.
• Ensure you have the December 2012 exam paper to hand
students/acca/p3/exampapers/p3_2012_dec_q.pdf
Required
Time, scope, capability and readiness for change are four
contextual factors that affect strategic change.
Evaluate the potential influence of these four factors at
Steeltown Information Technology on any strategic change
proposed by the EA Group. (12 marks)
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• 1 mark for each appropriate point up to a maximum of

12 marks
• The issues explored in this question are four of the
eight contextual factors, identified by Balogun and
Hope Hailey, which influence strategic change.
• To score well on this part of the question, you will need
to be familiar with this model and the specific definitions
of the four contextual factors.
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• Too many answers did not concern themselves with

strategic change but instead focused on changes in the
type of systems developed at Steeltown and the fact
that there was a backlog of applications and that user
departments found it difficult to specify system
requirements in advance.
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• Too few candidates commented on the competencies that

the EA Group would bring to the problem, concluding that
Steeltown would not have the ability to implement strategic
change itself. This is probably true, but the scenario makes
it clear that responsibility for strategic change lies with the
EA Group.
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Force Field Analysis
• Force Field Analysis illustrates how forces driving change

within an organisation could be impeded by forces of
resistance.
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Forcefield analysis
• Be aware that change management and project

management are intimately linked: any project is quite
likely to result in change, while change is often
implemented through projects.
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Example – introducing teachers' performance
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Styles of change management 1
• Education & communication

• Collaboration & participation
• Intervention
• Direction
• Coercion
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Question: Styles of change management
• Can you suggest circumstances under which either

education & communication or coercion change
management styles would be appropriate?
• Explain why you have chosen these circumstances.
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Answer: Styles of change management
Education & communication may be appropriate when:

— There is time available to achieve the change. This is
because education & communication is often a time-
consuming process.
— Misinformation surrounding the need for change maybe a
major issue. An education & communication approach
offers the chance to put this right.
— There is a reasonable level of trust between staff and
management. Education & communication is still a fairly
top-down approach so staff need to be confident that the
decisions made by management are the right ones.
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• Coercion may be appropriate when:

— The organisation is facing a crisis. This will mean that
change has to be achieved quickly in order to survive
— It will be impossible to gain acceptance of change by
certain stakeholders, so the only way to achieve it is to
impose it.
— Radical change is required, and it is not practical to
involve many people.
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Note that in the same situation different styles may be used

for different stakeholders. For example, a company
undergoing cost-cutting and restructuring may use education
& communication for major shareholders and coercion for
support functions being cut.
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Change management roles 1
A change agent is an individual or group that helps to bring

about strategic change in an organisation.
JS&W (amended)
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Strategic leadership
Leadership is the process of influencing an organisation

(or group within an organisation) in its efforts towards
achieving an aim or goal. JS&W
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Approaches to strategic leadership (Farkas and

Wetlaufer)
• Strategy
• Human assets
• Expertise
• Control
• Change
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Charismatic and transactional leadership
• Transactional leaders focus on systems and controls

and generally seek improvement rather than change.
• Charismatic leaders energise people and build a vision

of the future.
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Outsiders may contribute to the change process:
• A new chief executive

• New managers
• Consultants
• Other external stakeholders
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Change management levers 1
• Turnaround
• Challenging the paradigm
• Changing routines
• Symbolic processes
• Power and politics
• Communication and monitoring
• Tactics
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Elements of a turnaround strategy
• Crisis stabilisation
• Management changes
• Communication with stakeholders
• Attention to target markets
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Elements of a turnaround strategy (continued)
• Concentration of effort
• Financial restructuring
• Prioritisation
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Crisis stabilisation
Measures to increase revenue
• Tailor marketing mix to key market segments

• Review pricing policies to maximise revenue
• Focus activities on target market segments
• Exploit revenue opportunities if related to target
segments
• Invest in growth areas
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Measures to reduce costs
• Cut costs of labour and senior management

• Improve productivity
• Ensure clear marketing focus on target market segments
• Financial controls
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Measures to reduce costs (continued)
• Strict cash management controls

• Reduce inventory
• Cut unprofitable products and services
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Management changes
New managers may be required because:
• The old management allowed the situation to deteriorate

and may be held responsible by key stakeholders
• Experience of turnaround management may be
required
• Managers brought in from outside will not be prisoners
of the old paradigm
• A directive approach to change management will
probably be required
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Challenging the paradigm
• Newcomers to the organisation are likely to trust

objective evidence that new conditions require new
approaches.
• A careful analysis of just what is taken for granted,
possibly through workshop sessions, may enhance
an objective assessment of new ideas.
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Challenging the paradigm
• Scenario construction can be used to bring

managers to a better understanding of changing
conditions by presenting a range of possible futures and
their implications for the organisation.
• It may be appropriate to take firm action to bring senior
managers close to the daily reality of what the
organisation does.
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Symbolic processes
• New rituals
• Formal systems and processes
• Changes to physical aspects of the workplace
• The behaviour of leaders and change agents
• Language
• Stories
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Question: Change management levers
• ZS plc is a large branch-based financial services

organisation that is facing increasing competition and
needs to boost revenues. At present, the organisation
largely focuses on efficient processing but management
are keen to change into a “sales-driven” organisation.
• Using the cultural web, suggest practical steps
management could take to achieve their goal.
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Answer: Change management levers
— Stories – Presentations to staff telling them about

top salespeople and techniques they use
— Symbols – Opening up branch space so that staff
contact with customers is increased
— Power structures – Promote people based on their
sales skills
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Answer: Change management levers
— Organisational structures – Less silo-based

structure to encourage staff to share sales leads
and opportunities rather than focus just on their
process.
— Control systems – Publish “league tables” of branch
sales performance, with rewards for the best.
— Rituals and routines – Establish regular briefings on
new products available and sales targets.
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Power and politics

Objectives of political activity
• Building the power base

• Achieving compliance
• Overcoming resistance
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Political mechanisms
• Manipulation of resources
• Relationships with powerful groups and individuals
(elites)
• Exploitation of subsystems
• Symbolic activity
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Tactics
• Timing
• Job losses
• Quick success
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Tactics – Timing
• A crisis can be used to justify extensive change

• Windows of opportunity may occur, as, for example,
when a takeover occurs
• Messages about timing must be coherent
• Fear and anxiety about change as such may be reduced
if unpleasant consequences can be decoupled in time
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Pitfalls of change management 1
Eight unintended outcomes of change programmes

(Harris and Ogbonna)
• Ritualisation of change
• Hijacked process of change
• Erosion
• Reinvention
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Eight unintended outcomes of change programmes

(continued)
(Harris and Ogbonna)
• Ivory tower change

• Lack of attention to symbols
• Uncontrolled efforts
• Behavioural compliance
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Implications for change management
• Monitoring and control are vital aspects of change

management, as is the flexibility to adjust programmes
as they unfold.
• It is essential to understand the existing culture and its
effects, since they are highly likely to hinder planned
change.
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Implications for change management (continued)
• It will generally be advantageous to involve the

organisation's people in the change process.
• Change represents a major challenge and may be
more difficult to implement than it seems at first.
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Summary
• Diagnosis: situation analysis for change

• Styles of change management
• Change management roles
• Change management levers
• Pitfalls of change management
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Course structure
D Business process change
9 Business process change

10 Improving processes
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Chapter 9 • The background to process
change
Organising for • Harmon's process-strategy matrix
success • A process redesign methodology
• Process commoditisation and
outsourcing
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Business change
• Explain that business change projects are initiated to

address strategic alignment
• Apply the stages of the business change lifecycle
(alignment, definition, design, implementation, realisation)
• Assess the value of the four view (POPIT – people,
organisation, processes and information technology)
model to the successful implementation of business
change
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The role of process and process change initiatives
• 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 matrix
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The role of process and process change initiatives

(continued)
• Explore the commoditisation of business processes

• Advice on the implications of business process
outsourcing
• Recommend a business process redesign methodology
for an organisation
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Improving the processes of the organisation
• Evaluate the effectiveness of current organisational

processes
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Exam guide
• The syllabus places considerable emphasis on processes.
• This is a very practical topic and it is easy to see that the

examining team will have plenty of scope for practical
questions based on it.
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Introduction – Linkages to other syllabus areas
Change management
Value chains
Project management
Business Process
Re-engineering
Supply chain
management
Information technology
(e-business opportunities)
Information technology
(Software packages, eg
ERP)
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Key models
• Harmon's process – strategy matrix
• The business change lifecycle
• POPIT (four view model)
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Overview
Business process change
Business The role of process

change and process change
initiatives
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The background to process change 1
• Organisations as systems
• Systems theory
• Open and closed systems
• The business change lifecycle
• Business process re-engineering
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• IT and BPR
• Workflow systems
• Software engineering
• The Rummler-Brache methodology
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• Quality improvement methods

• The internet
• The effect of business consolidations
• The current position
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Systems theory
A system is a collection of interrelated parts which taken

together forms a whole such that:
• The collection has some purpose

• A change in any of the parts leads to or results from a
change in some other part or parts
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Systems theory
An organisation is, therefore, a type of system.
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Type of systems (General systems theory)
A closed system is isolated from its environment and

independent of it, so that no environmental influences affect
the behaviour of the system, nor does the system exert any
influence on its environment.
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An open system is connected to and interacts with its

environment. It takes in influences from its environment and
also influences this environment by its behaviour. An open
system is a stable system which is nevertheless continually
changing or evolving.
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• Few systems are entirely closed.
• Many are semi-closed – the relationship with the

environment is in some degree restricted.
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Semi-closed system – the calculator
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The business change lifecycle
Alignment
Benefits
Realisation Definition
Management
Implementation Design
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Exam focus
• The examining team has indicated that the lifecycle model

should enable students to gain a greater understanding of
the business change concept.
• The lifecycle could be used to frame answers to future

examination questions.
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Alignment
• The external environment
• Bottom-up change
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Case Study: The external environment
• For an interesting perspective on the need to consider

the external environment in the UK supermarket sector
see ‘Morrisons banks Ocado tie-up to click with
shoppers’ by Sarah Butler (October 2013) published on
the Guardian website:
http://www.theguardian.com/business/2013/oct/11/morriso
ns-ocado-home-delivery-service
• 'Morrisons delivery vans hit the road as grocer goes live
with online service' (January 2014) published on the
Yorkshire Post website:
http://www.yorkshirepost.co.uk/business/business-
news/morrisons-delivery-vans-hit-the-road-as-grocer-
goes-live-with-online-service-1-6366340
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POPIT
The POPIT (four view model)
Organisation
Information
technology
People Processes
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POPIT model
• The examining team have indicated that candidates

should be prepared to use the POPIT model as a
framework for answering a question in the exam.
• A case study could illustrate a scenario where elements of

the model have been neglected, and candidates could
then be asked to assess the impact of this on the
implementation of a change project.
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Usefulness of POPIT
• Business change projects may fail to adequately consider

the four perspectives of the POPIT model.
• Attention may be heavily focused on the technological and
process aspects of change without fully understanding how
a change will affect people and the organisation as a whole.
• The application of the POPIT model forces project teams to
take a far more holistic view of business change, identifying
those issues that may hinder the project’s success.
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POPIT considerations
Organisational context
• Management support
• Cross-functional working
• Jobs and responsibilities
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Processes
• IT support
• Manual processes & system workarounds
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People
• Skills
• Staff motivation
Information Technology
• Information systems
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Implementation
• Forcefield analysis
• Communication
• Rewards
• Training
• Systems
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Realisation of the benefits of change
• Benefit owner
• Financial and non-financial benefits
• Holistic approach
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Business process re-engineering
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.
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Why focus on processes?
Without a focus on processes:
• It is unclear how value is achieved or can continue to be

achieved.
• The effects of change on the operation of the business are
hard to predict.
• There is no basis to achieve consistent business
improvement.
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Why focus on processes? (continued)
Without a focus on processes:
• Knowledge is lost as people move around or out of the

business.
• Cross-functional interaction is not encouraged.
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Business process re-engineering – key words:
• Fundamental and radical

• Dramatic
• Process
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Hammer’s seven principles for BPR
• Processes should be designed to achieve a desired

customer-focused outcome rather than focusing on
existing tasks.
• Personnel who use the output from a process should
perform the process.
• Information processing should be included in the work that
produces the information.
• Geographically-dispersed resources should be treated as
if they are centralised.
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Hammer’s seven principles for BPR (continued)
• Parallel activities should be linked rather than integrated.

• Workpeople should be self-managing, exercising greater
autonomy over their work.
• Information should be captured once at source.
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Davenport and Short’s five-step approach to BPR:
1. Develop the business vision and process objectives

2. Identify the processes to be redesigned
3. Understand and measure the existing processes – to
ensure previous mistakes are not repeated and to provide
a baseline for future improvements
4. Identify change levers
5. Design and build a prototype of the new process
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Problems with BPR
• Any successful BPR programme is likely to result in

significant changes that will affect staff widely.
• It neglects the direct link to effectiveness originally
envisaged and may, by reducing the number of managers in
an organisation, reduce innovation and creativity at the
same time (hollowing out).
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Problems with BPR (continued)
• While BPR practice generally seeks to empower workers, it

assumes they will work within structures and systems
imposed by others. It places strict limits on the scope for
releasing their potential with such modern ideas as
teamworking and coaching.
• Features such as segregation of duties and management
supervision may be lost.
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The Rummler-Brache methodology
The Rummler-Brache methodology sees processes as cross-

functional wholes and considers them from three structural
levels and three design perspectives.
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Structural levels
• The organisation as a whole

• The process
• The job or performance level
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Perspectives
• Goals and measures of achievement

• Design and implementation of processes
• Management
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Quality improvement methods
• Total Quality
• Six Sigma
• ISO 9000 certification
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The current position
• Process improvement is a tactical, incremental technique.

• Process re-engineering is a strategic level rethinking of
core processes.
• Process redesign is for intermediate scale processes that
need significant change.
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Harmon's process-strategy matrix
Low Strategic importance High
High Outsource Improve
Complexity
Low Automate/ Automate

outsource
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Using Harmon’s process-strategy matrix
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
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Q: Using Harmon’s process-strategy matrix
• 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 Harmon’s process-strategy matrix suggest what CH9
should do with each process.
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A: Using Harmon’s process-strategy matrix
Stock – generally quite simple but an important

process for manufacturing so automate as much as
possible; maybe with greater intervention by
production, design and procurement for the 15%
bespoke stock
Manufacturing – high strategic importance and

potentially complex so improve the process –
particularly the preparation for the hand made range
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A: Using Harmon’s process-strategy matrix
Logistics – possibly of lower strategic importance to

growth since not part of the product itself;
outsourcing may be the answer since logistics is not
a core competence – consider buying in the
expertise; may be concerns over losing control over
this element of their supply chain however
Design – complex and strategically important –
innovative use of technology but also recruiting the
best designers to improve the process of making an
increasing range of bespoke products; therefore
continuously improve the whole process
Support – simple and low strategic importance –
outsource
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Harmon’s process-strategy matrix
The June 2013 exam included a question in which students

were asked to use Harmon’s process-strategy matrix to
analyse the characteristics of three process areas featured
in the scenario.
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Harmon’s process-strategy matrix
• Harmon's matrix could also be useful if the scenario

describes an organisation which has a number of
processes but which is not performing as well as it should.
• In this case you could use the matrix to suggest which
processes the organisation should concentrate on as
being most important to improving its performance
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A process redesign methodology 1
Phase 1 Planning
Goals are set, project scope is defined, project team

members and other roles are identified and the overall
schedule is developed.
Phase 2 Analysis
Current workflow is documented, problems identified and a

general approach to a redesign plan is established.
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Phase 3 Redesign
Possible solutions are considered and the best chosen;

objectives for the next phase are defined.
Phase 4 Development
All functional implications are followed through, aspects are

improved, including management and information systems.
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Phase 5 Transition
The redesigned process is implemented; modifications are

undertaken as required.
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Advantages of having a methodology
• A plan provides discipline for the overall process and helps

to prevent it from losing focus.
• Successful implementation depends on acceptance by
staff and managers who will have to operate the new
process: the methodology emphasise the need for obtaining
support at all appropriate stages.
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Initiating a redesign
• Strategic apex (executive committee)

• Process architecture committee
• Organisation structured around its systems and processes
rather than functionally
• A process redesign steering committee
• A project facilitator
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Important aspects
• Design of supporting management roles and

responsibilities is required, as are the supporting
performance measures.
• Rationalisation of reporting responsibilities may be
possible and desirable. A new organisation structure may
result.
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Important aspects (continued)
• Where very complex processes are concerned, it may be

appropriate to run simulations and prepare cost
estimates on two or more possible new designs. This is
likely to require the use of software tools.
• The new design must be fully documented.
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Exam focus
• It is very easy to envisage that the examining team might

set a question that requires you to describe how a specific
process redesign project might proceed.
• If you cannot recall exactly how Harmon's methodology
proceeds, you could base your answer on the business
change lifecycle model.
• Failing this, do not be afraid to use your knowledge of the
general principles of project management.
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Process commoditisation and outsourcing 1
• Outsourcing enables organisations to benefit from their

suppliers' scale economies.
• The establishment of standards for processes will make
them easier to outsource.
• Some processes may thus be commoditised.
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Successful outsourcing depends upon:
• The ability to specify with precision what is to be supplied:

this involves both educating suppliers about the strategic
significance of their role and motivating them to high
standards of performance.
• The ability to measure what is actually supplied and thus
establish the degree of conformance with specification
• The ability to make adjustments elsewhere if specification
is not achieved.
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Practical considerations relating to outsourcing:
• It can save on costs by making use of a suppliers'

economies of scale.
• It can increase effectiveness where the supplier deploys
higher levels of expertise.
• It can lead to loss of control, particularly over quality.
• It means giving up an area of threshold competence that
may be difficult to reacquire.
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Process commoditisation
• Process outsourcing is still uncommon.

• The establishment of standards for a wide range of
processes will have important consequences, since
processes themselves will become commodities.
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Advantages of outsourcing
• Can save on costs by making use of a specialist providers'

economies of scale
• Can increase effectiveness where the supplier deploys
higher levels of expertise (eg in software development)
• Allows the organisation to focus on its own core
activities/competencies
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Advantages of outsourcing (continued)
• Can deliver benefits and change more quickly than

business process reorganisation in-house
• Service level agreements mean that the company knows
the level of service they can expect
• Cost control. The creation of a ‘customer/contractor'
relationship introduces a focus on cost control which is
sometimes lost when functions are performed internally.
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Disadvantages of outsourcing
• Finding a single supplier

• Confidentiality
• Loss of control
• Quality issues
• Inflexible, long term contracts
• Difficult to switch to a new supplier if there are problems
• Loss of threshold competence
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Outsourcing: Question 3, June 2010
• A section B question in the June 2010 exam, Ergo City,

featured, amongst other areas, the potential benefits of
outsourcing.
• Ensure you have the June 2010 exam paper to hand when
working through the following slides.
students/2012j/jun2010ques.pdf
Required
Evaluate the potential benefits to the city authority and its IT
employees, of outsourcing IT to Pro-Tech Public.
(12 marks)
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marks
• Take care to apply your answer directly to the scenario
rather than simply churning out the list of pros
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Solution
• Reduction in staffing costs

• Reduction in internal conflicts
• Concentrate on core business
• Greater skills/better technology
• Improved morale
• Stake in the new company
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Summary
• The background to process change

• Harmon's process-strategy matrix
• A process redesign methodology
• Process commoditisation and outsourcing
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Course structure
D Business process change
9 Business process change

10 Improving processes
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Chapter 10 • Managing and measuring
processes
• Process redesign patterns
Improving processes
• Standard software packages
• Establishing software requirements
• Choosing research techniques
• Assessing software packages
• Selecting software packages
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Improving the processes of the 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
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Software solutions
• 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
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Exam guide
• The examining team is known to be interested in software

approaches to process change, so we confidently await
regular demonstrations of this interest in the form of
questions that address the material in this chapter!
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Key models
The Study Guide for this chapter does not explicitly

reference any models.
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Overview
Improving processes
Redesigns Software
Measuring
patterns packages
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Managing and measuring processes 1
• Organisations should be structured around processes rather

than functions.
• The hierarchy of management objectives and performance
measures will be similarly structured.
• Process improvement becomes part of every manager's
task.
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Process redesign patterns 1
A process redesign pattern is a general approach to

redesigning processes for their improvement.
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Basic redesign patterns (Harmon)
• Re-engineering starts with a clean sheet of paper.

• Simplification eliminates redundant process elements.
• Value-added analysis eliminates activities that do not add
value.
• Gaps and disconnects target problems at departmental
boundaries.
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Value-added analysis conditions:
• The customer is willing to pay for the output

• The process changes the output in some way
• The process is performed correctly at the first attempt
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Non-value-adding activities:
• Preparation and set-up activities

• Control and inspection activities
• Movement of a product
• Activities that result from delay or failure of any kind
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Value Added – Toyota
Since Toyota restarted production cars in the late 1940s it

has employed the concept of value added to its activities.
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Gaps and disconnects
• The organisation as a whole

• The process
• The job or performance level
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Feasibility
• Technical
• Social
• Environmental concerns
• Financial
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The process diagram
Get raw Wood to carpenter

Store manager Reject
materials Fabric to upholsterer
Accept
Receive raw
Inspect Make chair frame Send to upholsterer
Carpenter materials
Accept Polish
Upholsterer Receive raw
Inspect Make seat Receive chair frame Assemble chair and
materials
finish
Quality Reject
Accept
inspector Inspect
item
Reject
item
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Exam focus
• Business process diagrams provide a useful way of

summarising the activities in a business process, and in
this way can also identify potential areas of improvement
in the process.
• You will not be asked to draw a business process diagram
in your exam, but you may be asked to interpret one.
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Standard software packages 1
ERP – general characteristics
• Standard ERP packages are robust systems that

incorporate wide experience of business procedures and
their automation
• Based on standardised modules
• Not necessarily optimised for any given commercial
application
• It reverses the normal method. ‘You begin with a solution'
(Harmon)
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Exam focus
• Be prepared to contrast Harmon's reservations about

standard packages with Davenport's view that process
standards will have a positive effect on how business is
conducted.
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Tailoring ERP software disadvantages
• The cost advantage of buying off the shelf is destroyed.

• Introduction is delayed.
• Reliability is reduced.
• New versions of the same software will be useless until they
too have been modified.
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The middle course is to purchase the source code for a

package and modify it in-house as required.
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Disadvantages of the middle course:
• Destroys the advantages of purchasing a standard package

• Internal developers are initially unfamiliar with the programs
and data structures.
• Pre-existing errors in the source code will not be fixed by
the vendor.
• Upgrades issued by the vendor cannot be relied on to work
properly.
• The underlying design may not in fact have the necessary
development potential.
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Advantages of software packages over in-house development
• Cost savings
• Time savings
• Quality
• Documentation and training
• Maintenance support
• Comprehensive package evaluation
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Disadvantages of software packages
• Property rights
– The supplier controls future development of the software
– The supplier controls the support available
– The supplier may sell the product rights to another
supplier
• The financial stability and survival of the supplier is not
guaranteed.
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Disadvantages of software packages (continued)
• Competitive advantage cannot be obtained from standard

software packages available to all
• Inadequate performance is quite likely
• Legal redress for lack of functionality will almost certainly
not be available
• Changing requirements can erode a package's functionality
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Exam focus
• A question in the June 2011 exam asked candidates to

explain the advantages of using a software package and
the implications of using a software package for the
organisation’s redesign process.
• The examining team stressed that too many students
provided answers which were too long and simply
provided general disadvantages of using off-the-shelf
software packages rather than bespoke solutions.
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Establishing software requirements 1
Techniques for fact gathering (Skidmore and Eva)

• Interviews
• Questionnaires
• Written questions
• Observation
• Protocol analysis
• Workshops
• Prototyping
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Establishing software requirements 2
Interviews – Question techniques
• Closed questions
• Open questions
• Anecdotal questions
• Probing questions
• Verification questions
• Sequencing questions
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Choosing research techniques 1
Problems that may occur when choosing research techniques

(Skidmore and Eva):
• Staff may be averse to change and find it difficult to

contribute ideas about future requirements and possible
developments(present orientation).
• Staff may be vague in their responses.
• There may be an element of 'taken for granted' in staff's
approach to existing systems.
• Much knowledge is tacit and is difficult to elicit in words.
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Problems that may occur when choosing research techniques

(Skidmore and Eva) (continued):
• When a largely or completely new system is proposed,

staff may have little concept of what it might achieve,
except in the broadest terms.
• The analyst may be inexperienced in the work context
under investigation and misunderstand or misinterpret
raw information.
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Change Vagueness Taken for Tacit New Inexperience

aversion granted knowledge system
Interview G G G NG G G
Observation NG G VG G NG VG
Protocol NG NG VG VG G VG
analysis
Document G NG G G NG VG
analysis
Workshop VG NG VG NG VG G
Prototype VG NG VG G VG G
good (G), very good (VG), not good (NG)
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Assessing software packages 1
Software packages may be assessed against ten high-level

categories of requirement (Skidmore and Eva):
• Functional requirements
• Non-functional requirements
• Technical requirements
• Design requirements
• Supplier stability requirements
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Software packages may be assessed against ten high-level

categories of requirement (Skidmore and Eva):
• Supplier citizenship requirements

• Initial implementation requirements
• Operability requirements
• Cost constraints
• Time constraints
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Functional requirements
• Functional requirements are the things the new software

must do to support business or operational functions.
• Typical weighting overall: 30
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Non-functional requirements
• They are not non-essential and must be supported by

the package
• Examples are legal compliance, archiving and audit
requirements
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Technical requirements
• Technical requirements relate to the details of IT and might

include preferences such as the hardware platform to be
used, the operating system to be supported and the
software development language to be used.
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Design requirements
Factors that determine flexibility:

• Architecture
• Internal design
• Degree of configurability
• Typical weighting for design requirements overall: 5
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Supplier stability requirements
Factors influencing the decision
• Size and location

• Aspects of financial stability
• Reputation in the industry
• Accreditation of hardware and software
• Quality assurance
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Supplier stability requirements
Factors influencing the decision (continued):
• The use of automated software tools

• Vendors’ insurance cover
• Dispute resolution
• Outstanding issues
• Typical weighting for supplier stability requirements overall:

15
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Supplier citizenship requirements
• Diversity
• Health and safety
• Trade unions
• Charities and donations
• Sustainability and the environment
• Typical weighting for supplier citizenship requirements

overall: 2
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Initial implementation requirements
• It is vital that the installation stage of a new package is

carried out successfully.
• Typical weighting for initial implementation requirements

overall: 10
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Initial implementation requirements

Installation stage processes
• Data migration and file creation

• Software installation
• System implementation
• User training
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Operability requirements
• Documentation should be clear, complete, easy to use,

helpful and kept up to date.
• Continuing support will be required and considerations
will include such matters as helpline availability,
response times and policy on support for superseded
versions of software.
• Upgrade policy includes such matters as cost,
frequency, documentation and method of distribution.
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Operability requirements
• Legal protection is required to cover the possibility of

the supplier's business being wound up. The source
code should be lodged in escrow.
• Typical weighting for operability requirements overall: 2
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Time and cost constraints
• Overall requirements relating to time and, particularly, cost

will almost certainly be imperatives
• Consider time and cost trade-offs against other issues
• Typical weighting for cost constraints: 20
• Typical weighting for time constraints: 2
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Selecting software packages 1
Phases (Skidmore and Eva):
• Obtaining tenders
• First pass selection
• Second pass selection
• Implementation
• The long-term relationship
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The Invitation To Tender (ITT)
• Administrative information
(i) Where, how, to whom and by when the tender should be
submitted
(ii) Procedure for dealing with queries
(iii) Rules about tendering
(iv) Confidentiality arrangements
• Information about the client organisation
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• The project
(i) Objectives
(ii) Scope
(iii) Project imperatives as described earlier
(iv) Project owner
(v) Access to client resources
• The response format
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• Package requirements
• Client project management procedures
• An exposition of the evaluation procedures
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First pass selection
• Functional and non-functional requirements

• Technical and design requirements
• Supplier and implementation requirements
• Cost
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Second pass selection
• A shortlist of candidate packages

• Reference sites and financial investigation
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Managing the long-term relationship
• Risk avoidance involves choosing not to do something that

may bring about risk.
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• Risk mitigation involves taking steps to either reduce the

level of risk, or reduce the impact should the risk occur.
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• Risk mitigation – risk reduction. Reducing the risk by

changing the way that a particular activity is carried out.
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• Risk mitigation – impact reduction. Some risks cannot be

eliminated or reduced to an acceptable level. In these
cases, they should be mitigated by assessing the likely
impact of the risk and taking steps to reduce this impact.
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Escrow agreements
An escrow agreement involves placing the source code of a

computer program into secure storage with a third party agent.
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Risk management: Question 4, December 2012
• A section B question in the December 2012 exam, World

Engines, featured, amongst other areas, risk management.
students/acca/p3/exampapers/p3_2012_dec_q.pdf
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Required
WE executives are concerned about the risk of Topaz, as a
relatively new company, going out of business. They have
also expressed concern about the loss of the evaluation
team in a fatal accident and they believe that this should
lead to a review of the risks associated with employee travel.
Discuss how each of the above risks (supplier business
failure and employee travel) might be avoided or mitigated.
(10 marks)
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• This part of the question focuses on risk and notes two

risks: supplier selection and employee travel.
• The marks are split equally between these two risks, so
ensure you spend a similar amount of time on
addressing each.
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• 1 mark for each appropriate point up to a maximum of 5

marks for software vendor issues
• 1 mark for each appropriate point up to a maximum of 5
marks for employee travel issues
• Maximum of 10 marks for this sub-question
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Solution
Supplier business failure

• Lodging the software as an escrow agreement
• In-house expertise in the Topaz product's programming
language could be established at WE.
• It could consider purchasing Topaz should the company
experience difficulties.
• A contingency plan which could involve switching to a
different software provider
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Solution
Supplier business failure

• A contingency plan which could involve developing their
own in-house team.
• Monitoring Topaz's financial performance
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Solution
Risks associated with employee travel
• WE should develop a policy which prevents key

employees from travelling together.
• WE should ensure that the level of risk involved with
different methods of transport is considered when travel
arrangements are made.
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Solution
Risks associated with employee travel
• WE should establish a method of looking at all journeys

and eliminating any that are found to be unnecessary,
therefore avoiding travel and reducing the risk of travel
accidents occurring.
• WE should establish a method of ensuring that all work
is fully documented, clearly filed and easily accessible.
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Summary
• Managing and measuring processes

• Process redesign patterns
• Standard software packages
• Establishing software requirements
• Choosing research techniques
• Assessing software packages
• Selecting software packages
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Course structure
E Information technology
11 E-business
12 E-marketing
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Chapter 11 • Principles of e-business
• Organisations and their customers
E-business • Hardware and software
infrastructure and controls
• IT and strategy
• Supply chain management
• E-procurement
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Principles of information technology

• Advise on the basic hardware and software infrastructure
required to support business information systems.
• Identify and analyse the general information technology
controls and application controls required for effective
accounting information systems.
• Analyse the adequacy of general information technology
controls and application controls for relevant application
systems.
• Evaluate controls over the safeguarding of information
technology assets to ensure the organisational ability to
meet business objectives.
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Principles of e-business
• 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.
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E-business application: upstream supply chain

management
• 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.
• Assess the potential application of information technology
to support and restructure the supply chain.
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E-business application: upstream supply chain

management (continued)
• 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.
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Exam guide
• We would expect aspects of e-business to be relevant to

many questions both in Section A of your exam and in
Section B.
• We would expect that from time to time there might be
complete questions linked directly to e-business and
e-marketing.
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Key models
The Study Guide refers, in general terms, to business and

marketplace models for delivering e-business, and to push
and pull models of the supply chain.
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Overview
E-business
Supply chain
IT & strategy E-commerce
management
E-procurement
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Principles of e-business 1
E-business – meaning and scope
• E-business is ‘the transformation of key business

processes through the use of internet technologies’. IBM
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E-business is often confused with e-commerce.
• Any transaction with an electronic process using internet

technologies is e-business.
• If there is a financial transaction involved with the electronic
process using internet technologies it is e-commerce.
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E-commerce aspects
• Electronic ordering of goods and services that are delivered

using traditional channels such as post or couriers (indirect
electronic commerce)
• Online ordering, payment and delivery of intangible goods
and services
• Electronic fund transfers (EFT)
• Electronic share trading
• Commercial auctions
• Direct consumer marketing and after-sales service
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Distinctive features of e-business and the internet
• It challenges traditional business models.

• Its benefits are not confined to large (or global)
organisations.
• It offers a new economics of information.
• It gives virtually instant access to organisations.
• It has created new and cheaper networks of
communication.
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Distinctive features of e-business and the internet (continued)
• It stimulates the appearance of new intermediaries and the

disappearance of some existing ones.
• Businesses are finding that they can cut out the middle
man.
• It has led to new business partnerships.
• Work is becoming independent of location.
• The nature of work is changing.
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Adopting e-business
• Increase revenues through optimal customer and partner

management
• Reduce costs through automated sales, administration and
service activities
• Enable greater channel efficiency and effectiveness
• Gain visibility
• Control and automate customer and partner facing
operations
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Adoption pyramid
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Benefits of e-business
• Cost reduction
• Capability
• Communication
• Control
• Customer service
• Competitive advantage
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Exam focus
• A section B question in the December 2010 exam asked

students to evaluate the benefits and costs of adopting
e-assessment.
• There were 15 marks available for providing a balanced
evaluation.
• There was no need to refer to any specific model, students
who kept their answers practical and related the benefits
and costs of the proposal back to the scenario were able
to score well.
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SME Barriers to e-business and e-commerce adoption
• E-business is not relevant to them.

• Staff do not have the required skills and knowledge.
• Their customers do not use e-business.
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Other barriers to e-business and e-commerce adoption
• Country
• Economic Issues
• Culture
• Organisational type
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Question: E-business
• X is a small chain of toy shops, based in different towns in

the same region. It has expanded slowly and organically
for a number of years and built up a good reputation for
providing good advice about what children are likely to
want, and responding quickly to changes in taste. Apart
from spreadsheets and email, little technology is used in
running the business. The owner is now considering
setting aside a budget to invest in e-business.
• What are the likely benefits of e-business for X? Why
might X choose not to invest in e-business?
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Answer: E-business
Benefits of adopting e-business for X could include:

• X may be able to buy goods more cheaply by comparing
suppliers online.
• Access to an increased market by selling online. They
could expand out of their regional base and possibly sell
online.
• They can gain increased sales without having to add
expensive high street space.
• It would open up new marketing channels such as email
and use of social networks.
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Answer: E-business
Reasons why they might not adopt e-business could include:

• The cost involved is likely to be substantial and X may not
have the resources to meet it, or it may not be justified by
the perceived benefits.
• X and their staff may not currently have the necessary
skills and it would be expensive to hire them in.
• X has a good reputation for customer service and advice.
It may be that their customers prefer to deal in person,
viewing toys and talking to a knowledgeable person.
• Dealing with customers and suppliers online significantly
increases the risk of fraud. A small company may not
have the resources to manage this.
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Organisations and their customers 1
Varieties of e-commerce
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Other forms of e-commerce that involve transactions with the

government include:
• G2G (Government-to-Government)
• G2E (Government-to-Employee)
• G2B (Government-to-Business)
• B2G (Business-to-Government)
• G2C (Government-to-Citizen)
• C2G (Citizen-to-Government)
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Market place channel structures
• Disintermediation (direct selling)

• Reintermediation (new intermediaries)
• Countermediation (the creation of a new intermediary by
an established company)
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Publishing – Disintermediation
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Countermediation
Travel Agents
Airlines
Financial Services
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Business models for e-commerce (Rappa)

1 Brokerage model Those that bring buyers and sellers together and
facilitate transactions (often fee based)
2 Advertising model Supported by advertising revenue, a website will
provide content and services together with
advertising (eg banner ads)
3 Infomediary model Collecting data about consumers and their
purchasing habits and selling this information to
other businesses
4 Merchant model Selling of goods and services on the traditional retail
model
5 Manufacturer model Direct selling by the creator of a product or service to
consumers, cutting out intermediaries
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Business models for e-commerce (Rappa)

6 Affiliate model Offering financial incentives to affiliated partner sites
7 Community model Where users themselves invest in a site, eg by the
contribution of content, money or time. This can be
combined with other models, eg advertising or
subscription
8 Subscription model Where consumers (users) pay for access to the site,
usually for high added-value content, eg financial
information, newspapers, journals
9 Utility model A model based on metered usage or pay-as-you-go
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Question: Website
• How many ways are there to make money from a website?
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Answer: Website
• Producing goods and services and selling them direct to

customer over the web (eg dell.com)
• Selling goods and services produced by others online –
the traditional retail model (eg Tesco.com)
• Carrying advertising on the site which others will pay for
(the most spectacular examples are Google’s sponsored
links and social networking sites such as Facebook)
• Bringing together buyers and sellers in exchange for a fee
(eg eBay)
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Answer: Website
• Users pay a subscription for access to the site (eg the

Times is now charging for access to their content). A
common approach is “freemium”, whereby a basic service
is available for free and other features are available if you
upgrade (eg LinkedIn).
• Many sites combine these approaches, eg Spotify provide
online music interspersed with advertisements but if you
pay a subscription you can get the music without the
advertisements.
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Hardware & software infrastructure & controls 1
E-commerce infrastructure
System architecture is the arrangement of software,

machinery and tasks in an information system needed to
achieve a specific functionality.
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Intranets and extranets
• The internet is used to disseminate and exchange

information among the public at large.
• An intranet is used to disseminate and exchange
information 'in-house' within an organisation.
• An extranet is used to communicate with selected people
outside the organisation.
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Client/server architecture
• Internet protocol (IP)

• Open Systems Interconnection (OSI) standard
• Protocol stacks
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Alternative internet access technologies
• Interactive digital television (iDTV)

• Mobile or wireless commerce (m-commerce)
• WiFi internet access
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Information technology controls
• Physical access
• Logical access
• Operational
• Data input
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Advanced physical access controls
In 2013, BiometricsUpdate.com reported that the British

Broadcasting Corporation (BBC) were investigating the
introduction of biometric security measures as part of a
security overhaul.
For more details see the article:
‘BBC mulls biometric access control' by Adam Vrankuli (April
2013) published on the Biometrics Update
http://www.biometricupdate.com/201304/bbc-mulls-
biometric-access-control
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Tackling the exam
• Although the syllabus focus here is on operational controls

within an IT environment, many of these controls will not
be constrained only to an IT context, eg segregation of
duties isn't only an IT related control, as you will recall
from your F8 studies.
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Continuity planning and disaster recovery
• Continuity planning is an umbrella term used to explain

the plans and processes an organisation will follow in the
event of its business operations being disrupted.
• Disaster recovery is devoted to ensuring the continuation
of an organisation’s IT systems in the event of some form
of disaster.
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Contents of a disaster recovery plan
• Definition of responsibilities
• Priorities
• Back-up and standby arrangements
• Communication with staff
• Public relations
• Risk assessment
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IT and strategy 1
Megatrends
• New distribution channels, revolutionising sales and

brand management
• The continued shift of power towards the consumer
• Growing competition locally, nationally, internationally
and globally
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IT and strategy 2
Building an e-commerce strategy
• Suitability
• Acceptability
• Feasibility
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IT and strategy 3
Traditional business strategy and e-business strategy

Traditional business strategy E-business strategy
Planning Predictability and long-term Adaptability and responsiveness
horizons execution plans within a short time period
Process Prescriptive strategy: the three Emergent strategy: the
models elements (analysis, development distinction between the three
and implementation) are linked elements may be less clear and
together sequentially they are interrelated
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IT and strategy 4
Traditional business strategy and e-business strategy
Planning One time development effort Iterative strategic development

cycles because the pace of change is
rapid
Power Positional power and strength in Success based on manipulation
base the market place of critical information
Core Production and factory goods Customer orientation
focus orientation
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IT and strategy 5
Kalakota and Robinson
Step 1 Knowledge building and capability evaluation

Step 2 Develop a comprehensive e-business design
Step 3 E-business blueprint
Step 4 Application development and deployment
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IT and strategy 6
Rayport and Jaworski’s four-stage model
• Emission – Broadcast
• Interaction
• Transaction
• Collaboration
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IT and strategy 7
Rao et al model
Stage 1 Stage 2 Stage 3 Stage 4

Presence Portals Transaction integration Company integration
Content Profiles B2B/B2C B2B
Window to the web 2-way communications Communities Full integration
No integration E-mail E-marketplaces E-business
E-mail Order placing Auctions Uses e-commerce
Cookies 3rd party emarketplaces systems to manage
CRM and supply chain
No online financial Low-level collaboration
transactions Vague chain integration
Online financial
transactions High-level collaboration
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Tackling the exam
• Make sure you understand how e-business affects an

organisation's relationships with its customers, and
therefore the implications it can have for restructuring the
organisation's downstream supply chain.
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Useful article – Supply chain management
• An article titled “The strategic use of IT” (October 2010)

written by Ken Garrett was published in Student
Accountant, and is available in the technical articles
section for P3 on the ACCA website. It would be worth
taking the time to study this article.
http://www.accaglobal.com/content/dam/acca/global/pdf/sa_
oct10_p3_IT.pdf
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Supply chain management 1
Features of a push system
• Forecasts of sales drive production and replenishment

• Long term forecasts
• Inventory pushed to next channel level, often with the aid of
trade promotions
• Inability to meet changing demand patterns
• Potential product obsolescence
• Excessive inventory and low service levels
• Bull whip effect
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Features of a pull system
• Demand drives production and replenishment

• Centralisation of demand information and of replenishment
decision-making
• Reduced product obsolescence
• Expanded ability to meet changing demand patterns
• Lower inventories and higher
• Reduced bull whip effect
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The Value Chain (brought forward from earlier studies)
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The Value Network (brought forward from earlier studies)
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Impact of IT on the value chain
• Inbound logistics: Material Requirements Planning (MRP),

Enterprise Resource Planning (ERP) and JIT.
• Operations: robots, process control, and machine tool
control, Computer Aided Manufacturing (CAM), Computer
Integrated Manufacturing (CIM) and Enterprise Resource
Planning (ERP).
• Outbound logistics: IT makes it possible to follow the
progress of goods from pick-up to delivery.
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Impact of IT on the value chain (continued)
• Marketing and sales: EPOS for ordering and

replenishment.
• Service: eg customer databases
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Taking advantage of IT – Porter and Millar
Step 1 Assess information intensity

Step 2 Determine the role of IT in industry structure
Step 3 Identify and rank the ways in which IT might create
competitive advantage
Step 4 Investigate how IT might spawn new businesses
Step 5 Develop a plan to exploit IT
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Porter and Millar's information intensity matrix
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Restructuring the supply chain
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E-procurement 1
The Purchasing Mix
• At the right time

• At the right price
• In the right quantity
• From the right vendor
• In the right quality
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E-procurement 2
Benefits of e-procurement
• Cost reduction
• Reduced inventory levels
• Control
• Wider choice of supplier
• Improved manufacturing cycles
• Intangible benefits
• Benefits to suppliers
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E-procurement 3
Risks of e-procurement
• Control
• Organisational risk
• Data security
• Management loses spending control
• Supply chain problems
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E-procurement: Question 4, June 2011
• A section B question in the June 2011 exam, Cronin Auto

Retail, required students to explain the principles of
e-procurement and evaluate its potential application.
working through the following slides
Required
Explain the principles of e-procurement and evaluate its
potential application to CAR. (9 marks)
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marks
• This requirement is relatively straightforward and a
number of marks can be gained simply from theoretical
knowledge of e-procurement and its general
application.
• However, don't forget that you will gain much higher
marks by keeping the context in mind and tailoring your
answer appropriately.
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• Purchasing mix explanation and e-procurement
• Production related procurement
• E-auctions
• Non-production procurement
• Procurement system – should speed up repairs and

services, reduce cost and lead to an increase in
customer goodwill.
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Non-production procurement
• Facilitate the competitive bidding for the supply of parts
over the internet – lower prices, lower costs of holding
stock
• Lower the costs of the purchasing cycle and so improve
profitability without selling more products
• Provide better information on cheap, standardised
items such as stationery, leading to the easier
identification of cheap suppliers and allowing spot
sourcing to fulfil immediate needs
• Reduce the burden on the procurement manager,
allowing him to focus on more strategic aspects of the
procurement process
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Summary
• Principles of e-business
• Organisations and their customers
• Hardware and software infrastructure and controls
• IT and strategy
• Supply chain management
• E-procurement
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Course structure
E Information technology
11 E-business
12 E-marketing
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Chapter 12 • E-marketing
• Customer relationship
E-marketing management
• Software and CRM
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E-business application: downstream supply chain

management
• Define the scope and media of e-marketing

• Highlight how the media of e-marketing can be used when
developing an effective e-marketing plan
• Explore the characteristics of the media of e-marketing
using the '6I's of Interactivity, Intelligence, Individualisation,
Integration, Industry structure and Independence of
location
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E-business application: downstream supply chain

management
• Evaluate the effect of the media of e-marketing on the

traditional marketing mix of product, promotion, price,
place, people, processes and physical evidence
• Describe a process for establishing a pricing strategy for
products and services that recognises both economic and
non-economic factors.
• Assess the importance of online branding in e-marketing
and compare it with traditional branding
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E-business application: customer relationship

management
• Define the meaning and scope of customer relationship

management
• Explore different methods of acquiring customers through
exploiting electronic media
• Evaluate different buyer behaviour amongst online
customers
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E-business application: customer relationship

management (continued)
• Recommend techniques for retaining customers using

electronic media
• Recommend how electronic media may be used to
increase the activity and value of established, retained
customers
• Discuss the scope of a representative software package
solution designed to support customer relationship
management
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Exam guide
• The material in this chapter could well be examined in a

dedicated question requiring in-depth knowledge, probably
in Section B.
• E-business application is also likely to be relevant to many
questions in Section A of your exam.
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Key models
• '6 I' characteristics of e-marketing

• '7Ps' of the extended marketing mix
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Overview
E-marketing
Downstream supply
CRM
chain management
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E-marketing 1
E-business – meaning and scope
E-marketing is ‘the application of the internet and related

digital technologies to achieve marketing objectives’.
Chaffey in E-business and E-commerce Management
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E-marketing 2
Marketing objectives
• Identifying
• Anticipating
• Satisfying
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E-marketing 3
Key marketing functions the internet can perform
• Creating company and product awareness

• Branding
• Offering incentives
• Lead generation
• Customer service
• E-mail databases
• Online transaction
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E-marketing 4
Specific benefits of e-marketing
• Global reach
• Lower cost
• The ability to track and measure results
• 24-hour marketing
• Personalisation
• One-to-one marketing
• More interesting campaigns
• Better conversion rate
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E-marketing 5
The SOSTAC® planning framework (Paul Smith)
• S = Situation Analysis
• O = Objectives
• S = Strategies
• T = Tactics
• A = Actions
• C = Control
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E-marketing 6
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E-marketing 7
'6 I' characteristics of e-marketing
• Independence of location
• Industry structure
• Integration
• Interactivity
• Individualisation
• Intelligence
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Electronic commerce – book-selling
• Websites such as Amazon.com exploit the web's

interactive nature to allow the customer to search for
books on particular topics, track the status of an order
placed earlier, and ask for recommendations of books
similar to their favourites, read reviews placed by other
customers, and so on.
• The website builds knowledge of the customer which
allows it, for example, to notify them by e-mail if a new
book appears on a topic of particular interest.
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Exam focus
• The June 2008 exam included a Section B question which

asked candidates to identify how electronic media could
provide a training college with different marketing
opportunities to traditional media (such as advertising and
direct mail).
• The '6 I' framework was a particularly effective tool to use
when answering this question, because the marketing
implications of each 'I' for the college could be compared
and contrasted between traditional and electronic media.
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6 Is: Question 4, June 2011
• A section B question in the June 2011 exam featured the

6 Is.
Required
Evaluate how the principles of interactivity, intelligence,
individualisation and independence of location might be
applied in the e-marketing of the products and services of
CAR. (16 marks)
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• Up to 1 mark for each point up to a maximum of 4

marks for each element
• Don't fall into the trap of listing generic points under
each of the 'I' headings, as they may not always apply.
For example, many students failed to notice that
Independence of Location does not really apply to this
organisation.
• It is unlikely that 'global reach' would be achieved
through using e-marketing at CAR. Therefore, always
carefully read the scenario and make sure you correctly
apply your knowledge to the specific situation
described.
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• Interactivity
• Intelligence
• Individualisation
• Independence of location
• Only!!
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E-marketing 8
E-marketing and the 7Ps
• Product
• Price
• Place
• Promotion
• People
• Processes
• Physical evidence
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E-marketing 9
Product (or customer value)
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E-marketing 10
Place (or customer convenience)
Types of marketplaces Set up by Main aim

Controlled by sellers Single vendor seeking To retain value and power in any
many buyers transaction
Controlled by buyers One or more buyers To shift value and power in
marketplace onto the buyer’s side
Buyer intermediaries can also be
there to act as agents
Neutral marketplaces Third party intermediaries To match buyers to sellers at an
to match many buyers to auction
many sellers Commission based
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E-marketing 11
Price and pricing strategies
Price is the value placed on what is exchanged.
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Useful article – Principles of E-marketing
• An article titled “Business strategy and pricing” (February

2011) written by Ken Garrett was published in Student
Accountant, and is available in the technical articles
section for P3 on the ACCA website. It would be worth
taking the time to study this article.
http://www.accaglobal.com/content/dam/acca/global/pdf/sa_f
eb11_P3_strategy_pricing.pdf
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E-marketing 12
Steps in the process of establishing prices:
• Select a pricing objective

• Assess target market's evaluation of price and its ability to
buy
• Determine the nature and price elasticity of demand
• Analyse demand, cost and profit relationships
• Evaluate competitor's prices
• Determine the basis for pricing
• Select a primary strategy
• Determine the final price
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Exam focus
• The December 2011 exam included a Section B question

which offered 15 marks for identifying and discussing the
factors that need to be taken into consideration when
pricing an e-learning product.
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E-marketing 13
Determining demand
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E-marketing 14
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E-marketing 15
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E-marketing 16
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E-marketing 17
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E-marketing 18
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E-marketing 19
Determine a basis for pricing
• Cost
• Demand
• Competition
• Marketing
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E-marketing 20
Types of pricing strategies
• Differential
• New product
• Product-line
• Psychological
• Professional
• Promotional
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E-marketing 21
Differential pricing
• Negotiated pricing
• Secondary market pricing
• Periodic discounting
• Random discounting
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E-marketing 22
New product pricing
• Price skimming
• Penetration pricing
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E-marketing 23
Product-line pricing
• Captive pricing
• Premium pricing
• Bait pricing
• Price lining
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E-marketing 24
Psychological pricing
• Reference pricing
• Bundle pricing
• Multiple-unit pricing
• Everyday low prices (EDLP)
• Odd/even pricing
• Customary pricing
• Prestige pricing
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E-marketing 25
Promotional pricing
• Price leaders
• Misleading pricing
• Special event pricing
• Comparison discounting
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E-marketing 26
Comparison of traditional and online branding
A brand is a name, symbol, term, mark or design that enables

customers to identify and distinguish the products of one
supplier from those offered by competitors.
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E-marketing 27
• The domain name is a vital element of the brand

• Brand values are communicated within seconds via the
experience of using the brand website
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E-marketing 28
Online brands creation:
• Migrate the traditional brand

• Extend the traditional brand
• Partner with an existing digital brand
• Create a new digital brand
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Customer Relationship Management 1
Customer Relationship Management (CRM) is the

establishment, development, maintenance and optimisation of
long-term mutually valuable relationships between consumers
and organisations.
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Question: CRM
• How many ways can you think of for an organisation to

acquire customers using the internet?
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Answer: CRM
• Use your own website as a “shop front”, using good

design and tools such as videos to differentiate
• Pay search engines to return your organisation as a
sponsored search result
• Design your website to be high in the ranking of
search results (known as search engine
optimisation)
• Send emails to potential customers
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Answer: CRM
• Place banner advertisements and links on sites

where potential customers may be looking (eg
airline sites often have sponsored links to car hire
and hotel companies)
• Tailored advertising on social networking sites such

as Facebook and LinkedIn
• Place videos promoting your product on YouTube
• Use viral marketing to create interest in your

product. For example, some companies send
samples of their products to influential bloggers,
hoping they will write favourably about the product
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Exam focus
• A question requirement in the June 2013 exam asked

students to evaluate how the organisation described in the
case study scenario could use a CRM system to acquire
and retain customers.
• The examining team was disappointed to report that many
students did not appear to be familiar with the use of CRM.
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Differences between transactional and relationship marketing
Transactional Relationship
Importance to single sale Importance to customer relation
Importance of product features Importance of customer benefits
Short time scale Longer time scale
Less emphasis on service High customer service
Quality is concern of production Quality is concern of all
Competitive commitment High customer commitment
Persuasive communication Regular communication
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Methods of acquiring customers through exploiting electronic

media
• Search engine registration and directories

• Newsgroups and forums
• Newsletters
• Link building and partnership campaigns
• Viral marketing
• Banner advertising
• E-mail
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The decision-making process in any purchase
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Types of buying behaviour
• Complex buying behaviour

• Habitual buying behaviour
• Variety seeking buying behaviour
• Dissonance reducing buying behaviour
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Business and consumer markets differences:
• Market structure
• Nature of the buying unit
• Type of purchase
• Type of buying decision
• Communication differences
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Internet consumers:
• Simplifiers – easier than the real world

• Surfers – new experiences
• Bargainers – good deals
• Connectors – chatroom users
• Routiners – news, stock prices, finance
• Sportsters – sports news
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Netpoll typology of internet consumers:
• Gameboy
• CyberLad
• Net Sophisticate
• CyberSec
• Hit 'n' Runner
• InfoJunky
• CyberMum
• Where are you?

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Retaining customers using electronic media
• Personalisation
• Extranets
• Online communities
• Opt-in email
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• Increasing the activity and value of established, retained

customers.
• Customer activity may be enhanced by the use of data

mining and cookies.
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Database marketing techniques (Allen et al)

Project Method
Identify the best Use RFM analysis (Recently of the latest purchase,
customers Frequency of purchases, and Monetary value of all
purchases) to determine which customers are most
profitable to market to.
Develop new Collect lists of potential customers to incorporate into the
customers database
Tailor messages Target mail and e-mail based on the types and frequency
based on customer of purchases indicated by the customer’s purchase profile/
usage
Recognise Reinforce the purchase decision by appropriate follow-up
customers after
purchase
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Database marketing techniques (Allen et al) continued

Cross-sell related Use the customer purchase database to identify
and complimentary opportunities to suggest additional products during the
products buying session.
Personalise Online purchase data can prompt customer service
customer service representatives to show that the customer is recognised,
their needs are known and their time (for example, in
giving details) is valued.
Eliminating Present a coherent image over time to individual
conflicting or customers − however different the message to different
confusing customer groups. (For example, don’t keep sending ‘dear
communications first-time customer’ messages to long-standing
customers!) Remember the Integrated Marketing
communications approach.
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Data mining:
• Predictive
• Descriptive
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Web 2.0 allows internet users (and potential customers for

businesses) to no longer simply be recipients of information,
but to participate in the creation, sharing and evaluation of
content.
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Features of Web 2.0 – Web-based communities
• Social networking
• Blogs
• Wikis
• Instant messaging
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Features of Web 2.0 – Socialisation of knowledge sharing
• Tagging of information
• Mashups
• Feedback
• Promoting collective intelligence
• User generated content (UGC)
• Consumer generated content (CGC)
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Case Study – Second Life
• Second Life is the world's largest 3D virtual environment,

and offers an example of how technologies are allowing
companies to engage with their potential customers.
• Companies can introduce new products and design ideas
on the Second Life Grid and benefit from fast, cost-
effective feedback, as well as planting the seeds of brand
loyalty in consumers' minds.
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Software and CRM 1
Aspects of CRM
• Operational CRM
• Collaborative CRM
• Analytical CRM
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Software and CRM 2
Areas of CRM automation
• Sales – lead management, order tracking, sales support

• Service – help desk, FAQs problem resolution
• Marketing – prospect database, campaign management
• Reporting – presentation of performance data
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Summary
• E-marketing
• Customer relationship management
• Software and CRM
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Course structure
F Project management
13 Project management
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Chapter 13 • The nature of project management
• The project lifecycle
Project management • Building the business case
• Strategic aspects of the project
plan
• Practical aspects of project
planning
• Project management
• Controlling projects
• Project management software
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The nature of projects
• Determine the distinguishing features of projects and the

constraints they operate in
• Discuss the implications of the triple constraint of scope,
cost and time
• Discuss the relationship between organisational strategy
and project management
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The nature of projects (continued)
• Identify and plan to manage risks

• Advise on the structures and information that have to be in
place to successfully initiate a project
• Explain the relevance of projects to process re-design,
e-business systems development and quality initiatives
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Building the business case
• Describe the structure and contents of a business case

document
• Analyse, describe, assess and classify benefits of a
project investment
• Analyse, describe, assess and classify costs of a project
investment
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Building the business case (continued)
• Evaluate the costs and benefits of a business case using

standard techniques
• Establish responsibility for the delivery of benefits
• Explain the role of a benefits realisation plan
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Managing and leading projects
• Discuss the organisation and implications of project-based

team structures
• Establish the role and responsibilities of the project
manager and the project sponsor
• Identify and describe typical problems encountered by a
project manager when leading a project
• Advise on how these typical problems might be addressed
and overcome
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Planning, monitoring and controlling projects
• Discuss the principles of a product breakdown structure

• Assess the importance of developing a project plan and
discuss the work required to produce this plan
• Monitor the status of a project and identify project risks,
issues, slippage and changes
• Formulate response for dealing with project risks, issues,
slippage and changes
• Discuss the role of project management and project
gateways in project monitoring
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Concluding a project
• Establish mechanisms for successfully concluding a

project
• Discuss the relative meaning and benefits of a post-
implementation and a post-project review
• Discuss the meaning and value of benefits realisation
• Evaluate how project management software may support
the planning and monitoring of a project
• Apply ‘lessons learned’ to future business case validation
and to capital allocation decisions
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Exam guide
• The examining team has indicated that the importance of

project management will be recognised both by Section B
questions which deal with it explicitly and also through
issues in the Section A scenario.
• You should also remember that project management is

also linked very closely to the business process change
and IT issues dealt with by your syllabus.
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Key models
• The Study Guide for this chapter does not refer to any
specific models of project management, and so no
specific models will be explicitly required by a
question.
• However, note the way the Study Guide emphasises

the practical aspects of project management,
suggesting that these practical applications will be
important in answering exam questions on project
management.
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Not so dull after all!
Although project management may at first glance seem

rather dull many of the techniques in this chapter were
developed as a direct result of the space race in the 1960s
and beyond.
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Overview
Nature of projects
Project Project
Project initiation Project planning
execution & completion
control
Business case
Dealing
Gateways
with issues
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Overview
Post-implementation Post-project
Benefits Costs
review review
Software
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The nature of project management 1
A project is 'an undertaking that has a beginning and an end

and is carried out to meet established goals within cost,
schedule and quality objectives' (Haynes, Project
Management).
Resources are the money, facilities, supplies, services and

people allocated to the project.
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Projects Processes
Defined beginning and end Iterative in nature, i.e. on-going
Resources specifically allocated Resources used ‘full-time’
Generally one off A mixture of many recurring tasks
Follow a plan towards a clear Goals and deadlines are more general
intended end-result
Often cut across organisational and Follow the organisation or functional
functional lines structure
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Triple constraints
• Scope The actual work to be done, deliverables

required and necessary quality
• Time The agreed date for delivery
• Cost The agreed spending on the project
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Projects management challenges
• Teambuilding
• Expected problems
• Unexpected problems
• Delayed benefit
• Specialists
• Potential for conflict
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Project managing strategy
• Strategic planning
• Strategic implementation
• Wider strategic awareness is vital
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Project management maturity model (Kerzner)
• Level 1 Common knowledge

• Level 2 Common processes
• Level 3 Singular methodology
• Level 4 Benchmarking
• Level 5 Continuous improvement
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Strategic project management is the process of managing

complex projects by combining business strategy and project
management techniques in order to implement the business
strategy and deliver organisational breakthroughs.
Grundy and Brown
A breakthrough project is a project that will have a material

impact on either the business's external competitive edge, its
internal capabilities or its financial performance.
Grundy and Brown
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The project lifecycle 1
Four stage project lifecycle (Maylor)
• Definition
• Design
• Delivery
• Development
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Defining the key issues – fishbone analysis
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Gap analysis
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Initiating a project
• Limits to resource availability mean that not all potential

projects will be undertaken; rational methods are used to
select projects.
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Project initiation tasks include:
• The appointment of project manager and sponsor

• Stakeholder analysis
• The definition of project scope
The business case explains why the project is needed, while

the project charter gives authorisation for it to be undertaken.
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Building the business case 1
A business case is a key document for a project. It is used to

propose a course of action to senior management for their
consideration.
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The purpose of a business case is to:
• Secure funding for significant financial investment.

• Provide information to decide whether or not to make the
financial investment.
• Enable the organisation to plan, manage and successfully
complete the project so that the benefits which underpin the
rationale for both the investment and the business changes
are achieved.
• Provide, where appropriate, arguments that define how the
project will contribute to enhancing existing capabilities or
create new ones.
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The purpose of a business case is to (continued):
• Help ensure the effective coordination and management of

the activities and resources involved.
• Ensure the investment is understood from the viewpoints of
both what benefits can be expected and how feasible it is to
achieve those benefits, in comparison with alternative uses
of funds and resources.
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Structure of a business case:
• Introduction
• Management summary
• Description of the current situation
• Options considered
• Analysis of costs and benefits
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Structure of a business case:
• Investment appraisal
• Impact assessment
• Risk assessment
• Recommendations
• Appendices and supporting information
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Benefits management (Ward and Daniel)
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Project benefits:
• Observable
• Measurable
• Quantifiable
• Financial
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Useful article – Project management
• An article “Project management – business cases and

gateways” (April 2011) written by Ken Garrett was
published in Student Accountant, and is available in the
technical articles section for P3 on the ACCA website. It
would be worth taking the time to study this article.
http://www.accaglobal.com/content/dam/acca/global/pdf/sa_
apr11_p3_projectmgt.pdf
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Question: Project Benefits
A supermarket has 20 checkout points and most of the

time not all are manned, but at peak times all are manned
and there are significant queues, prompting customer
complaints. The number of complaints is tracked, but the
supermarket does not otherwise measure customer
feedback. The supermarket is considering improving the
scanning technology at its tills. Based on the experience of
other users of the technology, this will cut the average time
taken to process a customer’s shopping from 4 minutes to
20 seconds.
Required
Can you identify and classify the benefits that are likely to
result from this project?
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Answer: Project Benefits
• Observable benefits: improved staff morale due to

shorter queues, less stress and fewer complaints at
peak times.
• Measurable benefits: Customer satisfaction is

likely to improve due to less queuing time but it is
not possible to say by how much as this is not being
tracked at present. Increased revenue might also
fall into this category – more customers may choose
to shop at the supermarket, but it would be very
hard to estimate how many, or how much they might
spend.
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Answer: Project Benefits
• Quantifiable benefits: The improvement in

processing time is a benefit that can seemingly be
estimated reliably.
• Financial benefits: The faster processing will

presumably mean fewer checkout staff are required
at nonpeak times. It should be possible to estimate
the impact of this fairly accurately and so the
reduction in staff costs.
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Exam focus
• A section B question in the June 2012 exam required

candidates to categorise and critically evaluate four
proposed benefits given in the scenario. This required the
application of the four types of benefit identified:
observable, measurable, quantifiable and financial.
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Identifying the costs
• Purchase costs
• Internal systems development costs
• Infrastructure costs incurred for the new system such as
upgrades
• Costs of carrying out the business changes
• Ongoing costs
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Cost-benefit evaluation
• Accounting rate of return

• Payback period
• Net present value
• Internal rate of return
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Question: Investment Appraisal
What are the key strengths of each of these techniques:
• Accounting rate of return

• Payback period
• Net present value
• Internal rate of return?
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Answer: Investment Appraisal
Accounting rate of return:

• Consistent with wider ROCE measures
• Expressed as percentage which is easy to understand
Payback period:
• Quick and easy to calculate
• Easy to understand as a concept
• Reduces risk
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Answer: Investment Appraisal
Net present value:

• Considers all costs and benefits, including long term
• Factors in the timing of cashflows, which takes
account of risk and liquidity
• Directly links to generating shareholder wealth
• Can compare projects of different size directly
Internal rate of return:
• As with NPV, takes all cashflows into account and
allows for timing
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Strategic aspects of the project plan
• Many large-scale projects, particularly those involving major

change, are strategically significant and project
management can merge into strategic management.
• Force field analysis identifies enablers, constraints and
showstoppers.
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Practical aspects of project planning 1
Work breakdown structure
• Work breakdown structure (WBS) is fundamental to

traditional project planning and control.
• Its essence is the analysis of the work required to complete
the project into manageable components.
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• Project budget is the amount and distribution of resources

allocated to a project.
• The project budget plans the allocation of resources to the

project and forms a basis for their control.
• Budgeting may be top-down or bottom-up.
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A Gantt chart shows the deployment of resources over time
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• Network analysis illustrates interactions and

dependencies. It is used to plan the sequence of tasks
making up project scope and to determine the critical path.
• PERT uses probabilities to make estimates of likely

completion and milestone dates.
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Exam focus
Critical path analysis is employed in most complex projects

but it is a specialised process and you will not be required to
use it in the exam.
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• A resource histogram shows a view of project data in

which resource requirements, usage, and availability are
shown against a time scale.
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A resource histogram
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Project management 1
• The project sponsor provides and is accountable for the

resources invested into the project and is responsible for
the achievement of the project's business objectives.
• The project manager takes responsibility for ensuring the
desired result is achieved on time and within budget.
• The Project Board (PMBOK: project steering committee) is
the body to which the project manager is accountable for
achieving the project objectives. It represents the interests
of the project sponsor.
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• Project champion. Sometimes a project champion is

appointed. This is a senior manager whose role is to
represent the project to the rest of the organisation,
communicating its vision and objectives and securing
commitment to them.
• Project owner. The project owner is the person for whom
the project is being carried out and as such they are
interested in the end result being achieved and their needs
being met.
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Duties of the project manager include:
• Planning
• Teambuilding
• Communication
• Co-ordinating project activities
• Monitoring and control
• Problem-resolution
• Quality control
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Project managers require the following skills:
• Leadership and team building

• Organisational ability
• Communication skills (written, spoken, presentations,
meetings)
• Some technical knowledge of the project area
• Inter-personal skills
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The project team – Tuckman’s stages in team development.
• Forming
• Storming
• Norming
• Performing
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• The project team – Belbin’s roles played by team members:
• Co-ordinator
• Plant
• Resource investigator
• Team worker
• Specialist
• Shaper
• Monitor-evaluator
• Implementer
• Finisher
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Exam focus
• Project management has been examined fairly regularly

and is a core part of the P3 syllabus.
• Make sure you are able to identify the application of
elements of good project management in practice.
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Project management: Question 3, December 2009
• A section B Question, Lowlands Bank, in the December

2009 exam featured, amongst other areas, the elements of
good project management.
students/EC/2012-d/dec2009ques.pdf
Required
• Identify and analyse the elements of good project
management that helped make the branch rationalisation
project successful. (12 marks)
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• Up to 1 mark for identifying an element of good project

management (for example the allocation of a sponsor)
• Up to 2 marks for describing the significance of each of

these elements within the context of the scenario up to
a total of 12 marks
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• This question should not be too difficult if you have

studied the material carefully.
• As always, it is really important to use the material you
are given and produce an answer that is specific to the
LDB bank.
• Don't write everything you know about good project
management in the hope you will gain some marks.
• Refer back to the material in your answer and provide
specific quotes from the material to back up the points
you make.
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Examiner's comments.
• Part (a) was poorly answered in two ways.
• Firstly, too many candidates developed answers that
discussed project management in general and did not
apply them to the scenario.
• Second, a significant number of candidates seemed to
answer a different question – identify the principles of
good project management – to the one set in the
examination.
• Project management appears to be a significant area of
weakness despite its relevance to accountants and real
world businesses.
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Suggested answer
• Experienced project manager

• Dedicated team
• Mix of team
• Project sponsor
• Defined objectives
• Defined constraints
• Potential slippage identified
• Formal review
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Controlling projects 1
• A gateway is a project review point at which certain criteria

must be met before for the project can pass through the
gateway and proceed to the next stage.
• Scope creep relates to uncontrolled changes in the scope

of a project.
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• A progress report shows the current status of the project,

usually in relation to the planned status.
• A milestone is a significant event in the life of the project,

usually completion of a major deliverable.
• Slippage takes place when a project is running behind

schedule.
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Dealing with slippage
• Do nothing
• Add resources
• Work smarter
• Replan
• Reschedule
• Introduce incentives
• Briefings and motivation
• Change the specification
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Exam focus
• One of the question scenarios in the December 2008

exam described a software implementation project which
was slipping behind schedule, and appeared unlikely to
meet its target delivery data.
• The question asked candidates to evaluate a range of
options available to the project manager to deal with the
slippage.
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Risk management
Stage 1 Plan the risk management approach

Stage 2 Identify and record risks
Stage 3 Assess the risks
Stage 4 Plan and record risk responses
Stage 5 Implement risk management strategies
Stage 6 Review the risk management approach and
actions for adequacy
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Project completion
• Completion report
• Post-implementation review
• Post-project review
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Completion report
• Outcomes of the project compared to objectives

• Final cost compared to budget
• Time taken compared to schedule
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Post-implementation reviews are assessments of the

completed working solution.
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Post-project review is a formal review of the project that

examines the lessons that may be learned and used for the
benefit of future projects.
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Case Study: BBC and DMI
• For a couple of interesting articles on failures in project

management with in the BBC see online articles:
• 'Mark Thompson apologises over project failure at
BBC', (February 2014) published on the BBC website:
http://www.bbc.co.uk/news/entertainment-arts-26016820
• 'BBC's Digital Media Initiative failed because of more

than poor oversight', by Steve Hewlett (February 2014)
published on the Guardian website:
http://www.theguardian.com/media/media-
blog/2014/feb/03/bbc-digital-media-initiative-failed-mark-
thompson
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Exam focus
• In December 2011 where six marks were available for

explaining the purpose of each of a post-project review, a
post-implementation review, and a benefits realisation
review.
• A further twelve marks were then on offer for applying this
knowledge to the scenario in order to identify the problems
and lessons that should be learnt from a post-project
review and a post-implementation review of the system
implemented in the scenario.
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Project management software 1
• Project management software can be used to produce

detailed project planning documentation, to update plans
and to produce reports.
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Project management software
Specialised software (eg Microsoft Project, DotProject) may

be helpful on large projects.
• Constructing Gantt charts and other plans

• Scenario analysis when planning
• Updating plans as the project progresses
• Monitoring time and cost against budget
• Producing reports through and after the project
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Summary
• The nature of project management

• The project lifecycle
• Building the business case
• Strategic aspects of the project plan
• Practical aspects of project planning
• Project management
• Controlling projects
• Project management software
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Course structure
G Finance
14 Finance
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Chapter 14 • Finance and strategy
• Financial management decisions
Finance • Financing requirements
• Obtaining equity funds
• Bank loans
• The budgetary process
• Standard costing and variance
analysis
• Probability, expected values and
decision trees
• Evaluating strategic options using
marginal and relevant costing
techniques
• Full costing
• Ratio analysis
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The link between strategy and finance
• Explain the relationship between strategy and finance

(i) Managing for value
(ii) Financial expectations of stakeholders
(iii) Funding strategies
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Finance decisions to formulate and support business

strategy
• Determine the overall investment requirements of the

business.
• Evaluate alternative sources of finance for these
investments and their associated risks.
• Efficiently and effectively manage the current and non-
current assets of the business from a finance and risk
perspective.
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The role of cost and management accounting in

strategic planning and decision making
• Explain the role, advantages and possible limitations of a

budgetary process.
• Explain the principles of standard costing, its role in
variance analysis and suggest possible reasons for
identified variances.
• Evaluate strategic and operational decisions taking into
account risk and uncertainty using decision trees.
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strategic planning and decision making (continued)
• Evaluate the following strategic options using marginal and

relevant costing techniques.
(i) Make or buy decisions
(ii) Accepting or declining special contracts
(iii) Closure or continuation decisions
(iv) Effective use of scarce resources
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strategic planning and decision making (continued)
• Evaluate the role and limitations of cost accounting in

strategy development and implementation, specifically
relating to:
(i) Direct and indirect costs in multi-product contexts
(ii) Overhead apportionment in full costing
(iii) Activity based costing in planning and control
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Financial implications of making strategic choices and

of implementing strategic actions
• Apply efficiency ratios to assess how efficiently an

organisation uses its current resources.
• Apply appropriate gearing ratios to assess the risks
associated with financing and investment in the
organisation.
• Apply appropriate liquidity ratios to assess the
organisation's short-term commitments to creditors and
employees.
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Financial implications of making strategic choices and

of implementing strategic actions (continued)
• Apply appropriate profitability ratios to assess the viability

of chosen strategies.
• Apply appropriate investment ratios to assist investors and
shareholders in evaluating organisational performance and
strategy.
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Exam guide
• P3 is not a strategic financial management paper and we

do not expect the examining team to present technically
difficult questions on finance.
• Nonetheless, the evidence of the papers to date suggests
you are likely to encounter numerical analysis of some
kind in Question 1 and the examining team has indicated
that there will continue to be opportunities for calculation.
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Overview
Finance
Role of Financial
Finance and Finance
management implications of
strategy decisions
accountant strategic
actions
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Finance and strategy 1
Financial analysis may form part of dealing with issues.
• Assessing an acquisition target

• Assessing performance of a company from a shareholder’s
or manager’s point of view
• Evaluating a budgeting process
• Interpreting variance analysis
• Strategic decisions such as outsourcing, shutting down
operations or launching a project
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Finance and strategy 2
• Issues of finance (JS&W)
• Managing for value

• Funding
• Financial expectations of stakeholders
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Financial management decisions
• Investment
• Financing
• Dividends
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Cash forecasts
• Cash forecasting should ensure that sufficient funds will be

available when needed, to sustain the activities of an
enterprise at an acceptable cost.
• A cash budget (or forecast) is a detailed budget of

estimated cash inflows and outflows incorporating both
revenue and capital items.
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Financing requirements
• Cash deficits will be funded in different ways, depending on

whether they are short or long-term.
• Businesses should have procedures for investing surpluses
with appropriate levels of risk and return.
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Obtaining equity funds
• Companies seeking extra equity finance can obtain it by

retaining cash in the business for investment or by issuing
shares.
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Bank loans 1
Advantages of an overdraft over a loan
• The customer only pays interest when it is overdrawn.

• The bank has the flexibility to review the customer's
overdraft facility periodically, and perhaps agree to
additional facilities, or insist on a reduction in the facility.
• An overdraft can do the same job as a loan: a facility can
simply be renewed every time it comes up for review.
• Being short-term debt, an overdraft will not affect the
calculation of a company's gearing.
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Bank loans 2
Advantages of a loan over overdraft
• Both the customer and the bank know exactly what the
repayments of the loan will be and how much interest is
payable, and when.
• The customer does not have to worry about the bank
deciding to reduce or withdraw an overdraft facility before
being in a position to repay what is owed.
• Loans normally carry a facility letter setting out the precise
terms of the agreement.
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Bank loans 3
Advantages of bank loan over other forms of loan capital
• Flexibility
• Confidentiality
• Speed
• Costs
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Bank loans 4
Disadvantages of bank loan over other forms of loan capital
• Restrictions
• Financial information
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Loan capital
Loan capital (or loan stock) is made up of debentures and

other long-term loans to a business.
Stock is an amount of fully paid up capital, any part of which

can be transferred.
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The budgetary process 1
Benefits of budgets
• Promotes forward thinking

• Helps to co-ordinate the various aspects of the organisation
• Motivates performance
• Provides a basis for a system of control
• Provides a system of authorisation
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The budgetary process 2
Making budgetary control effective
• Senior management take the system seriously

• Accountability
• Targets are challenging but achievable
• Established data collection, analysis and reporting routines
• Targeted reporting
• Short reporting periods
• Timely reporting
• Provokes action
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Question: Budgets
• What might cause budgets to be ineffective?
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Answer: Budgets
• Performance against budget is not monitored, or not

taken seriously by senior management, so there is no
follow-up action
• Targets are set too high (why bother?) or too low (don’t
encourage good performance)
• The data used to monitor performance is inaccurate
• Results are analysed too late to have an impact on

operations
• Data is presented in a way that is not easily understood

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Standard costing and variance analysis 1
• A standard cost is an estimated unit cost.

• Standard costing involves the establishment of
predetermined estimates of the costs of products or
services, the collection of actual costs and the comparison
of the actual costs with the predetermined estimates.
• The predetermined costs are known as standard costs and
the difference between the standard and the actual cost is
known as a variance.
• The process by which the total difference between standard
and actual results is analysed is known as variance
analysis.
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Variance analysis
• Sales variances
• Materials variances
• Labour variances
• Fixed overhead variances
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Investigating variances
• Significant adverse variances should be investigated as

if it continues to occur it could become very costly.
• Significant favourable variances should be investigated
but with lower priority than for adverse variances.
• Insignificant variances should be kept under review.
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Limitations of control through variances and standards
• Standards can quickly become out of date.

• Regularly monitoring and updating standards can be costly
and time consuming.
• Variances for which a manager is held accountable can be
influenced by factors that are out of the control of that
manager.
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Limitations of control through variances and standards
• Lines of responsibility between managers can be difficult to

define.
• Once a standard has been met there is no incentive to
improve.
• May encourage undesirable behaviour.
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Question: Variance
• Any variance may be caused by a budget that was

unrealistic or is out of date, but there will also be other
possibilities.
• What other reasons might cause an adverse variance in
materials price?
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Answer: Variance
• Buying department did not negotiate well
• Due to change in the production process, higher quality

material was used than envisaged in the plan
• A general unexpected increase in prices since the

budget was set
• Failure of a supplier, with the only available replacement

being more expensive
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Probability, expected values & decision trees 1
• Probability is a measure of likelihood
• Mutually exclusive outcomes are outcomes where the

occurrence of one of the outcomes excludes the possibility
of any of the others happening.
• Independent events are events where the outcome of one

event in no way affects the outcome of the other events.
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• Dependent or conditional events are events where the

outcome of one event depends on the outcome of the
others.
• Risk involves situations or events which may or may not
occur, but whose probability of occurrence can be
calculated statistically and the frequency predicted.
• Uncertainty involves situations or events whose outcome
cannot be predicted with statistical confidence.
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Expected values
• An expected value (or EV) is a weighted average value,

based on probabilities.
• The expected value for a single event can offer a helpful
guide for management decisions.
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Useful article – unpredictable environments
• An article “Strategic planning in an age of turbulence”

written by Ken Garrett and updated February 2014 was
published in Student Accountant, and is available in the
technical articles section for P3 on the ACCA website. It
would be worth taking the time to study this article.
http://www.accaglobal.com/gb/en/student/acca-qual-student-
journey/qual-resource/acca-qualification/p3/technical-
articles/strategic-planning-in-an-age-of-turbulence.html
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Exam focus
A Section B question in the December 2012 exam required

students to develop a decision tree from the information
provided and discuss the implications and shortcomings of
using decision trees in strategic decision making.
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Marginal and relevant costing techniques 1
Breakeven analysis
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Marginal and relevant costing techniques 2
Relevant costs are any cost that is relevant to a particular

decision.
All fixed costs are irrelevant to the decision because they will
be the same whatever decision is made.
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Question: Relevant costs
BF Ltd can manufacture a component for $25, of which $10

are fixed production costs and $5 are head office allocations.
It has no spare capacity and is therefore facing unmet
demand for a product that earns a contribution of $5. It can
purchase the component from a supplier for $18.
Required
(a) Based on this data, should BF manufacture the
component or purchase it?
(b) Would your answer change if the contribution from the
product was $10?
(c) What other factors should BF take into account in making
its decision?
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Answer: Relevant costs
(a) BF should manufacture the component. The marginal

benefit from buying the component externally is:
Variable cost of manufacture (25-10-5) 10
Contribution gained 5
Total 15
This is lower than the cost of $18
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Answer: Relevant costs
(b) BF should now buy the product as the marginal benefit

is now $20 ($10 + $10)
(c) By making the product themselves, BF will have
greater control over quality and reliability of supply. On
the other hand, if their supplier is a specialist
manufacturer of the components, it may be easier for
them than for BF to keep up to date with technology
and improved techniques.
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Full costing 1
• Full cost is the total amount sacrificed to achieve a

particular objective.
• All running costs of a particular facility are part of the cost of
output of that facility.
• Where there is more than one product, costs are split into
direct and indirect costs.
• The direct costs are easily assigned to products.
• To determine the full cost a fair proportion of the indirect
costs, or overheads, must also be allocated to each product.
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Full costing 2
• Activity based costing (ABC) involves the identification of

the factors which cause the costs of an organisation's major
activities.
• Support overheads are charged to products on the basis of

their usage of the factor causing the overheads.
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Ratio analysis 1
Broad categories of ratios
• Profitability and return

• Debt and gearing
• Liquidity: control of cash and other working capital items
• Shareholders' investment ratios (or 'stock market ratios')
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Ratio analysis 2
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Question: Ratio analysis
What are common problems or limitations with ratio

analysis?
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Answer: Ratio analysis
• In practice it is very difficult to identify companies that

are similar enough to be really comparable
• Financial data may be very out-of-date, particularly if a
business has changed significantly
• There is no “ideal” ratio in practice
• Ratios may be distorted by accounting policies or timing
issues (eg large sale made just before year end,
resulting in high receivables)
• Figures may be influenced/distorted by inflation
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Exam guide
• Ratio analysis is highly examinable.

• Try not to be too mechanical when working out ratios, and
think constantly about what you are trying to achieve.
• You will only obtain credit in the exam for calculating ratios
that are relevant.
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Ratio analysis: Question 3, June 2009
• A section B Question, One Energy plc, in the June 2009

exam featured, amongst other areas, ratio analysis.
students/acca/p3_2009_jun_q.pdf
Required
W&P concluded in their report ‘that there were clear signs
that the company (RiteSoftware) was in difficulty and this
should have led to further investigation’.
Assess, using the financial information available, the validity
of W&P’s conclusion. (13 marks)
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• Up to 1 mark for each non-ratio based observation up

to a maximum of 5 marks
• Up to 1 mark for each ratio based observation up to a
maximum of 5 marks
• Up to 3 marks for summary and integration of answer
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• Although the question scenario provided a range of

financial information, you should not simply have used
this to calculate ratios.
• To score well in this question, you needed to assess
what the ratios (and the financial information more
generally) could tell you about the company's
performance.
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Causes for concern
• Goodwill
• Increase in trade payables
• Increase in cost of sales
• Retained profit
• ROCE
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Comparison of accounting figures
Useful comparisons over time for the same company include:

• Percentage growth in profit (before and after tax) and
percentage growth in turnover
• Increases or decreases in the debt ratio and the gearing
ratio
• Changes in the current ratio, the inventory turnover period
and the receivables' payment period
• Increases in the EPS, the dividend per share, and the
market price
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Summary
▪ Finance and strategy

▪ Financial management decisions
▪ Cash forecasts
▪ Financing requirements
▪ Obtaining equity funds
▪ Bank loans
▪ Loan capital
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Summary
▪ The budgetary process

▪ Standard costing and variance analysis
▪ Probability, expected values and decision trees
▪ Evaluating strategic options using marginal and relevant
costing techniques
▪ Full costing
▪ Ratio analysis
▪ Comparison of accounting figures
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Course structure
H People
15 Human resource management
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Chapter 15 • Strategic leadership
• Job design
Human resource • HRM and knowledge work
management • Staff development
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Strategy and people: leadership
• Explain the role of visionary leadership and identify the key

leadership traits effective in the successful formulation and
implementation of strategy and change management.
• Apply and compare alternative classical and modern
theories of leadership in the effective implementation of
strategic objectives.
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Strategy and people: job design
• Assess the contribution of four different approaches to job

design (scientific management, job enrichment, Japanese
management and re-engineering)
• Explain the human resource implications of knowledge
work and post industrial job design
• Discuss the tensions and potential ethical issues related to
job design
• Advise on the relationship of job design to process
re-design, project management and the harnessing of
e-business opportunities
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Strategy and people: staff development
• Discuss the emergence and scope of human resource

development, succession planning and their relationship to
the strategy of the organisation
• Advise and suggest different methods of establishing
human resource development
• Advise on the contribution of competency frameworks to
human resource development
• Discuss the meaning and contribution of workplace
learning, the learning organisation, organisation learning
and knowledge management
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Exam guide
• There is considerable practical detail in this chapter and it

is easy to envisage a complete question covering these
principles and how to embody them in a work situation.
• You may also face a scenario where process redesign or

information technology have an impact on job design. Be
aware of the implications of different organisational
structures for job design.
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Key models
The Study Guide for this chapter indicates you need to be

able to apply and compare alternative classical
and modern theories of leadership in the effective
implementation of strategic objectives.
However, the guide does not explicitly reference any

individual theories, so you will not be specifically required
to use any single leadership theory to answer a question.
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Key models
The Study Guide also refers explicitly to four approaches

to job design – scientific management, job enrichment,
Japanese management and re-engineering – so an
assessment of any of these approaches could be
specifically required in a question.
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Overview
People
Staff
Leadership Job design
development
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Strategic leadership 1
Leadership theories
• Trait theories
• Behavioural theories
• Contingency theories
• Transformational theories
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Tannenbaum and Schmidt
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Blake and Mouton's Managerial Grid
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Theory X and Theory Y (Douglas McGregor)
• Theory X suggests that most people dislike work and

responsibility, and will avoid both if possible
• Theory Y suggests that physical and mental effort in work is

as natural as play or rest
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Adair's action-centred model
• Task needs
• The individual needs of group members
• The needs of the group
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The extent to which the situation favours the leader depends

on three things (Fiedler)
• Position power
• Task structure
• Leader-subordinate relations
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Themes within the transformational theories of leadership:
• Teams
• Vision
• Change
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Bill Gates and Microsoft
Bill Gates founded the Microsoft Corporation in 1975, with

his childhood friend Paul Allen. Gates correctly identified
that as computer hardware became increasingly powerful
there would be a gap in the market for computer software.
Over the years since it was founded, Gates’ foresight,

vision and leadership have been drivers for change,
development and success in the Microsoft Corporation. On
the one hand, Gates has continually strived to
advance software technology with a view to making
computing more accessible and fun for people; on the
other, he has strived to make Microsoft an attractive and
exciting place to work.
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Question: Leadership
• Think of three people you consider effective leaders, past

or present. What qualities do they have in common?
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Answer: Leadership
Answers will vary but may include:
• Charisma – “star quality”
• Good communication skills, whether written and/or

spoken
• Seen to live in line with their message – “walk the talk”
• Expertise in their field
• Willingness to take risk, including the risk of

unpopularity
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Question: Leadership
• What factors will affect the type of leadership style that

would be appropriate?
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Answer: Leadership
• Size of the organisation – can’t run a large multinational

the same way as a start-up
• Context, for example in a crisis a very authoritarian style

of leadership may be necessary
• Type of organisation – public vs private sector, industry
• Personality of the leader
• Nature of the followers – level of motivation, skills etc
• Prevailing national and organisational culture

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Leadership across the globe
• For an interesting article on how leadership styles vary

across the globe see the article ‘How Does Leadership
Vary Across the Globe’ (October 2012) by Josh Bersin on
http://www.forbes.com/sites/joshbersin/2012/10/31/are-
expat-programs-dead/2/
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Job design 1
Job design is the process of combining tasks and

responsibilities to form complete jobs and the relationship of
jobs in the organisation. Bratton
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Useful article – Job design
• An article “Strategy and People” (March 2011) written by

Ken Garrett was published in Student Accountant, and is
available in the technical articles section for P3 on the
ACCA website. It would be worth taking the time to study
this article.
http://www.accaglobal.com/content/dam/acca/global/pdf/sa
_mar11_p3.pdf
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Job design 2
Principles of Scientific Management (Taylor)
• The development of a true science of work

• The scientific selection and progressive development of
workers: workers should be carefully trained and given jobs
to which they are best suited
• The bringing together of the science and the scientifically
selected and trained men
• The constant and intimate co-operation between
management and workers
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Job design 3
Job enrichment
• Job rotation, or periodic movement around a group of

different de-skilled tasks, can go some way towards
reducing monotony and boredom, but offers little extra
satisfaction.
• Job enlargement reverses the process of de-skilling by
combining a number of linked processes together in one
job.
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Job design 4
Core characteristics required in enriched jobs

(Hackman and Oldham)
• The job requires the use of a range of skills and talents

• Task identity (sometimes called closure)
• Task significance
• Autonomy
• Feedback
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Job design: Question 4, June 2013
• A section B Question, Academic Recycling Company, in

the June 2013 exam featured, leadership styles, and the
principles of job enrichment.
• Ensure you have the June 2013 exam paper to hand
students/acca/p3/exampapers/p3_2013_jun_q.pdf
Required
• Describe the principles of job enrichment and evaluate its
potential application in the Contracts Office at ARC.
(10 marks)
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marks for the principles of job enrichment and up to 5
marks for its application at ARC
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• Presuming you are familiar with this area of the

syllabus, you will be able to earn a number of easy
marks here by simply explaining the principles of job
enrichment.
• Ensure you apply your knowledge to the particular

scenario given.
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Examiner's comments
• This part question was answered less well.

• Although a particular concept may generally be
perceived as a good thing (job enrichment in this
question), it may not necessarily be so within the
described case study scenario.
• Candidates must always reflect the context of the
scenario in their answers.
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Job design 5
The Japanese model
• Flexible manufacturing
• Minimisation of waste
• Quality methods
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Job design 6
Approaches to job design

Features Assuraptions about Job design
motivation
Scientific Prescribed standard methods Pay − piecework Extreme specialisation
Management Split of planning and
doing
Human Work groups Social needs Less extreme, with
relations/job Combination of tasks Achievement, growth, some control tasks
enrichment responsibility shifted downwards
Some control over planning
Japanese JIT, TQM, consensus, lifetime Social processes of clan Multi-skilling to
model employment, loyalty control achieve flexibility
Re-design Strong leadership from the top Emphasis on market Process teams
Exploitation of IT discipline and serving Empowerment
the needs of the
Abandonment of traditional Multidimensional jobs
customer
structures and methods
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Exam guide
• Your syllabus specifically mentions the relationship of job

design to process design, project management and
e-business. You should be aware that these elements of
strategic implementation are likely to involve a need for
some degree of job redesign.
• You should bear this in mind when answering questions
that deal with those elements.
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HRM and knowledge work 1
The move to knowledge work

From To
Type of work Individual Project teams

Focus Task performance Customers, problems, opportunities
Skills and Narrow Specialist but with the wide interest
knowledge
Feedback and Rapid Slow
results
Employee loyalty Organisation and Peers, profession
career within it
Contribution to Individual support to A few major successes
success the wider strategy
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Organisations evolve to account for the move to knowledge

work:
• Organisational dialogue and trust reduces the scope for

managerial control and direction and enables a wide range
of bottom up and lateral inputs.
• Sharing of information about the organisation's operations,
problems and opportunities.
• Principle-based management replaces management
based on formal rules and procedure and leads to greater
flexibility and adaptation.
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Organisations evolve to account for the move to knowledge

work:
• Communication flows and decision-making are built around

projects and problem-solving rather than hierarchical routine
• Peer evaluation of performance replaces formal credentials
and supervisor opinion
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Staff development 1
Human resource development (HRD)
• HRD is an investment in strategic capability.

• Investment in employee learning and recognition of the
competitive advantage conferred by upgraded skills triggers
the creation of an internal market in such qualities with
consequent implications for other HR activities.
• Organisations seeking to benefit from employee loyalty and
commitment find that HRD can enable employees to
contribute to the development and success of strategy and
operations.
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Staff development 2
Competencies are ‘the required outcomes expected from the

performance of a task in a work role, expressed as
performance standards with criteria’.
Gold
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Staff development 3
Application of competencies
• Recruitment
• Managing performance
• Benchmark for rewards and promotion
• Training and development
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Staff development 4
Workplace learning
• Organisational learning
• Knowledge management
• The learning organisation
• E-learning
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Staff development 5
Succession planning is undertaken in order to ensure

continuity in the organisation's leadership. It involves the
systematic identification, assessment and development of
managerial talent at all levels.
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Staff development 6
Benefits of succession planning
• The development of managers at all levels is likely to be

improved if it takes place within the context of a succession
plan
• Continuity of leadership is more likely, with fewer dislocating
changes of approach and policy
• Assessment of managerial talent is improved by the
establishment of relevant criteria
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Staff development 7
Features of successful succession planning
• Focus on future requirements

• Driven by top management
• Management development is as important as assessment
and selection
• Assessment should be objective
• Aims to identify and develop a leadership cadre
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Summary
▪ Strategic leadership
▪ Job design
▪ HRM and knowledge work
▪ Staff development
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C Organising and enabling success

7 Organising for success

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Organising and enabling success

• Advise on how the organisation can be structured to

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Organising and enabling success (continued)

• Discuss how organisational structure and external

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• Questions on structure were fairly uncommon under the

• JS&W's fresh approach, emphasising processes and

• You cannot afford to neglect this chapter.

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Mintzberg's organisational configurations are explicitly

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Organising for success

Structure Process Relationships Configurations

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Challenges for 21st century organisation structures:

• Flexibility of organisational design

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An organisation's formal structure shows:

• Who is responsible for what

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JS&W’s basic 'self contained' structural types

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• Students need to be aware of the clear distinction between

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Advantages of functional departmentation

• It is based on work specialism and is therefore logical

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Disadvantages of functional departmentation

• It does not reflect the actual business processes by

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Problems in divisionalisation (Mintzberg)

• A division is partly insulated

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Problems in divisionalisation (Mintzberg) continued

• It may be impossible to identify completely independent

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The holding company (group) structure

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• It focuses the attention of subordinate management on

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A matrix organisation is most suitable when:

• There is a fairly large number of different functions, each of

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A matrix organisation is most suitable when (continued):

• There is a need to carry out uncertain, interdependent

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Advantages of a matrix structure

• Greater flexibility – people, task and structure

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Disadvantages of a matrix structure

• Dual authority threatens a conflict between managers

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