Chapter-1

Strategic Analysis

Strategy is direction and scope of an organization over the long term which achieves advantages in
a changing environment through its configuration of resources and competences, with the aim of
fulfilling stakeholder expectations.
Characteristics of strategic decisions: DC-ICU
1. Strategy is likely to be complex;
2. High degree of uncertainty surrounding a strategic decision;
3. Extensive impact on operational decision-making;
4. An integrated approach is therefore required;
5. Likely to lead to change within the organization.
***Elements of Strategic management: ACI
1. Analysis; Mission, Vision, Strategic intent, Goals, aim, objective, external environment, competences
2. Choice; Strategy, evaluation criteria
3. Implementation, Monitoring and control. Tactics, strategic architecture, strategic business, control
Management by Objectives: SMART
 Specific,
 Measurable
 Achievable;
 Relevant
 Time-related.
Corporate objectives:
 Primary: growth in profits
 Secondary: sales growth, continual technological innovation, customer service, product quality, efficient resource
management, reducing the reliance’s on debt capital
Corporate objectives both financial and non financial
Sacrifice of longer-term objectives/ Trade-offs between long term and short term objectives:
1. Capital expenditure projects
2. Research and development expenditure
3. Decreases quality control
4. Decreases level of customer service
5. Training costs or requirements
Elements of Business strategy/ Strategy elements:
1. Competitive : generates earnings to support →
2. Financial: provides finance to invest→
3. Investment and resources. Obtains resources to implement→
Financial objectives:
- Profitability
- ROI/ROCE
- Share Price, earnings per share, dividends
- Growth
Value Driver: It is crucial organizational capabilities that provide a competitive
advantage to an organizations.
***Rappaport Identified Seven Value Drivers: SOTCWTC
1. Increase sales Growth;
2. Increase Operating profit margin;
3. Reduce cash Tax Rate
4. Reduce incremental investment in capital expenditure
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 5. Reduce investment in working capital
6. Increase time period of competitive advantage
7. Reduce cost of capital.
Financial Management decisions:
 Investment decisions
 Financing decisions
 Dividends decisions
Aspects of Shareholder value:
i) Financial returns in the short term;
ii) Short term capital gain;
iii) Long Term Return on capital gain;
iv) Stability and security;
v) Achievements in products produced or services provided,
vi) Ethical standards.

Value based Management (VBM): a management process which links strategy,

management and operational processes with the aim of creating shareholder value.
Implications of VBM:
 Culture
 Reactions with the market
 Strategic
Elements/process of Value based Management (VBM): I m scope
I= Internal communication
M= Management remuneration
S= strategic planning
C= capital allocation
O=operating budget
P=performance management
E=External communication
Value based Management (VBM) consists of three elements:
Strategy for value creation;
Metrics
Management.
Stakeholders Interests:
Variety of stakeholders likely to have its own interests:
1. Managers and employees
2. Shareholders
3. Lenders;
4. Suppliers;
5. Customers;
6. Government and regulatory agencies;
7. Environmental and social bodies and other non-governmental organizations;
8. Industry associations and Trade Unions;
9. Local Communities.
External business environment
 External environment-environmental analysis
 Environment and market analysis tool-PESTEL, Porters 5 forces & Competitor
analysis

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*** Environmental analysis: BCD-MI
1. Explore basic characteristics of the environment: Market definition and size, Market growth, Market Share.
2. Factors specific to the competitive balance of power in the industry: Porter five forces analysis.
3. Factors specific to the industry; what delivers success: Analyses key factor success (Critical success factor).
4. Factors specific to immediate competitors: Competitor analysis and product portfolio analysis.
5. Factors specific to cooperation in the industry; Analysis of network relationships and co-operation-(Four link
analysis) 1. Government Links and networks 2. Informal co-operate links and networks 3. Formal co-operative
links (joint ventures) 4. Complementors.
6. Factors affecting many organization: PESTEL analysis and scenario planning.
7. Customer analysis; Market and segmentation studies.
8. Consider the degree of turbulence in the environment: Consideration- Change, repeated, predictability, complex.
9. Analysis of market growth: Industry Life Cycle.

PESTEL analysis: (External environment)

The PESTEL framework is used to analyze the macro environment in to the following segments:
10. Political;
11. Economic;
12. Sociocultural;
13. Technological;
14. Environmental protection;
15. Legal.

Porter’s Five forces:

Competitive strategy is shaped by five forces:
1. Threat of new entrants;: capital investment, dominance of BX, recent withdrawals
2. Threat of substitute products or services;: strong competition, market growth
3. Bargaining power of customers;: choice of bank accounts, conservatism
4. Bargaining power of suppliers;
5. Rivalry among existing competitors in the industry.: liberalized market, potential for future profits
6. Complimentors - New Forces companies that produce closely related products or services

Competitor analysis:
Determining how to obtain critical information that is reliable, up to date and available legally
1. Who are the competitors?
2. Then determine:
 What drives the competitor?
-What are the goals or strategic objectives? (Probability, market share/new market, build, hold/ harvest
products/ business units)
-What assumptions does the competitor hold about themselves and the industry?
 What is the competitor doing and what can it do?
-What strategies is the competitor currently pursuing? (Low cost/ product quality/ whole market/ specific
niche?)
-What are the competitor’s strengths and weaknesses?
-what key resources and capabilities do the competitor have (or not have)?
 Competitor response profiles-future goals, assumption, current strategies and capabilities

***Position audit: (planning) VVY

Examine the current state of the business entity’s strategic capability, in relation to:-
 Resources of tangible and intangible assets and finance
 Products, brands and markets
 Operating systems such as production and distribution
 Internal organizations
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  Current results
 Return to shareholders
Elements:-
 Resource auditing
 Analysis of limiting factors
 Identification of threshold resources / competences
 Identification of unique resources / core competences

***Resource audit: VVY

Identify the resources available to an organization i.e. financial, human, intangible or physical
Richard Lynch’s organizational internal resources as strength or weakness (competitive resources can be):-
 Market share
 Market growth
 Product quality
 Leadership
 Purpose and objectives
 Management and workers
 Financial position
 Investment practice
 R & D, innovation

Resources and Competencies:

These organizational capabilities could be in a range of different areas:
1. Corporate functions;
2. R&D or innovative and adaptive capability;
3. Product design,
4. Marketing,
5. Operations;
6. Marketing;
7. People and talent management;
8. Sales and distribution;

Product Life Cycle:

Products have a life cycle and that a product demonstrates different characteristics of profit and investment in stage in its
life cycle.
1. Introduction;
2. Development and Growth,
3. Maturity,
4. Decline./ senility

BCG Matrix:
assess businesses in terms of potential cash generation and cash expenditure requirements.
 Stars : Build
 Cash Cow.: hold, harvest
 Question Marks: build, harvest/divest, ;
 Dogs; divest/ hold

Value Chain analysis: (Michael Porter)

Describes those activities of the organizations that add value to purchased inputs. Reviewing all the activities of an
organization and how they interact with each other.
Primary Activities;
1. Inbound logistics,
2. Operations;
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 3. Outbound Logistics;
4. Marketing & Sales;
5. Services.
Support Activities:
1. Firm infrastructure
2. Human Resource Management;
3. Technology Development;
4. Procurement

Ansoff’s product-Market Matrix/gap analysis:

Gap between the profit it expects to generate and its target profit then this may indicate the need to identify new
strategies or initiatives which can help fill that gap.
1. Market penetration;
2. Product Development;
3. Market Development;
4. Diversification.

Benchmarking
It enables organizations to meet industry standards by copying others.

Balanced scorecard:
Kaplan and Norton emphasize the need for a broad range of key performance indicators and build a rational structure
that reflects longer-term prospects as well as immediate performance.
1. Financial
2. Customer
3. Internal Business
4. Innovation and learning

Financial indicators and ratios:

Balanced range perspective
 Growth
 Profitability
 Liquidity
 Gearing
Information regarding competitor financial information
 Total profits; sales and capital employed
 ROCE/profit/sales ratio, cost/sales ratios and asset turn over ratios
 Profit and sales 12 months and prospects in future report’s in chairman’s statement
 Sales and profits in each major business segment that that the competitor
 Dividend per share and earnings per share
 Gearing and interest rates on debt
 Share price and P/E ratio

SWOT analysis:
SWOT is a key technique for analyzing the strategic position of a company.
-Strengths and weaknesses (based on its internal resource and capabilities) [internal to the company]
-Opportunities and threats (identified from environmental analysis) [Exist independently of the company]

Consideration of assertions related to non-financial information:

 Completeness
 Occurrence and accuracy
 Presentation and understandability
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Factors considering assessing could be materially misleading: Misses BOU
Omission on facts
Misstatement of facts
Misrepresentation of trends
Bias in description of position or facts
Unsubstantiated claims

Levels of Strategy: CBO

1. Corporate- Level Strategy;
2. Business-Level Strategy;
3. Operational / Functional Strategy: R & D, Operations, Marketing, Human Resources, Finance , Information
Systems and Information Technology (IS/IT)

Implementing a digital asset management strategy:

1. Infrastructure capabilities and strategic needs
2. Management support
3. Selection of supplier
4. Project team
**Potential benefits of crypto currencies:
1. Frictionless transactions
2. Removes intermediaries
3. Reduce risks
4. Currency management
**Potential disadvantages and limitations of crypto currencies:
1. Multiple currencies
2. Acceptability
3. Volatility
4. Borrowing

Impact of external environment:

1. Opportunities and threats [PEST analysis, Porters Five Forces Model]
2. Impact of deregulation
3. New entrants
4. Telephone networks
5. Overall market growth
6. Customer bargaining power
7. Employees

Chapter -2
Strategic Choice
It is possible to classify strategic choice in to three categories:
1. Competitive strategy;
2. Product-market strategies;
3. Institutional strategies.
Porter’s generic Strategies/ Competitive Strategy:
1. Cost Leadership; economies of scale, technology, minimizing cost, access of source of supply, standard products,
relocate cheaper area
2. Differentiation; build up a brand image, give the product special features, exploit other activities of the value
chain
3. Focus (niche). Cost focus strategy, differentiation focus strategy
Using generic Strategies:
1. Encourage them to analysis competitors positions
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 2. Choose a competitive strategy
3. Analyze the risks of their preset strategy
-Differentiation
- Cost Leadership
- Focus
Limitations of Porter’s Model:
a. Problems with cost leadership:
1. Internal focus;
2. Only one firm;
3. Sustainability of competitive advantage;
4. Higher margins can be used for differentiation;

b. Problems with differentiations:

1. A differentiated product may be sold at the same price;
2. Choice of competitor;
3. Source of differentiation.

Product Market Matrix (Ansoff’s)

Market Product
Present New
Present Market Penetration Product development
New Market Development Diversification
Lynch-Market Option Matrix
Market Product
Present New
Present Market Penetration Product development
New Market Development Diversification
Withdrawal, demerger, Privatization
Product Market Area: Related: Vertical / Horizontal integration ; Unrelated (Conglomerate diversification (Financial
reasons, spread, risk, other)

Method of growth:
1. Develop the business from scratch;
2. Acquire or merge with already existing business;
3. Co-operate in some way with another firm.
The main issues involved in choosing a method of growth are these: (acquisition/ merger)
1. Resources
2. skills
3. Speed;
4. Control;
5. Cultural fit.
6. Risk.

*** Expansion method matrix:

a) Internal development in the home country is simply organic growth.

b) Internal development internationally:

i. Exporting;
ii. Overseas Office;
iii. Overseas manufacture;
iv. Multinational operation;
v. Overseas manufacture;
vi. Global operation.
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 c) External development in the home country or internationally:
i. Merger;
ii. Joint venture or alliance;
iii. Acquisition;
iv. Franchising or licensing.

Reasons for Organic growth:

i. Learning,
ii. Innovation,
iii. No suitable target for acquisition.
iv. Can be planned more meticulously
v. More convenient for managers

Problems with organic growth:

i. Time;
ii. Barriers to entry;
iii. Will have to acquire the resources independently
iv. Too slow for the dynamic of the market.

The purpose of acquisitions and their effect on operations: MP-FRI

i. Marketing advantages;
ii. Production advantage;
iii. Finance and management;
iv. Risk spreading;
v. Independence.

Problems with acquisitions and mergers:

i. Cost;
ii. Customers;
iii. Incompatibility;
iv. Culture;
v. Poor success record of acquisition;
vi. Driven by the personal goals;
vii. Public opinion and reaction.
Joint ventures:
a) Consortia;
b) Joint ventures;
i) Share cost;
ii) Reduce Risk;
iii) Participating enterprises benefit from all sources of profit;
iv) Close control over marketing and other operations;
v) Overseas joint ventures provide local knowledge, quickly;
vi) Synergies.
c) Licensing agreement;
d) Subcontracting.

Disadvantages of Joint Ventures:

a) There may be conflicts of interest between the parties;
b) Disagreement may arise over profit sharing , amounts invested, the management of the joint venture,
c) One partner may be temptation to neglect core competences.

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Advantages of Franchising:
i. Reduce capital requirements;
ii. Reduces managerial resources required;
iii. Improve return on promotional expenditure through speed of growth.
iv. Benefits of specialization.
v. Low head office cost.

Disadvantages of Franchising:
i. Profits are shared,
ii. The search for competent candidates;
iii. Control,
iv. Risk to reputation;
v. Potential for conflict.

Strategic decision making:

i. Suitability; [operational circumstances- SWOT, risk, culture] [Model- Porter’s generic strategies, Value chain, BCG
Matrix, Ansoff’s Matrix]
ii. Acceptability; financial consideration (ROI, Profits, growth, EPS, cash flow, price/earnings. Market capitalization),
Customers, Management, Staff, suppliers, banks, Governments, The Public, Risks
iii. Feasibility; Money, ability, responses that competitors, technology, time
iv. Sustainability. Environmental sustainability, economically and socially sustainable

Useful for assessing the suitability of a strategy:

i. Porter’s generic strategies
ii. Value chain;
iii. BCG matrix
iv. Ansoff’s matrix.

Techniques used for returns on Investment/ Investment decision

i. Net present value
ii. Internal Rate of Return
iii. Payback Period
iv. Return on capital employed
v. Return on Investment
vi. Residual Income

Assess Value for Money:

i. Economy
ii. Efficiency
iii. Effectiveness

Areas of Due diligence: SMMMIL-PP

 Information system;
 Legal status;
 Marketing/ Brand issues;
 Macro-environmental factors;
 Management capabilities;
 Sustainability issues;
 Production capabilities;
 Plant and equipment;

Due diligence:
 Financial due diligence;
 Commercial due diligence;
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  Operational due diligence;
 Technical due diligence;
 IT due diligence;
 Legal due diligence;
 Tax due diligence;

3V characteristics of key elements of big data:

 Volume
 Velocity
 Variety/ Variability

Benefits of big data:

 Faster decision
 Better decision
 Proactive decision

Big Data and competitive advantages: SCCOP

 Customer insight
 Product innovation
 Simulations
 Collecting data
 Operations

Several factors for internationalization: CRIME

 Reduced protectionism leading to liberalization of trade;
 Export-led growth;
 Market convergence;
 Information Technologies and communications;
 Capital mobility;
Key decisions in international expansion Internationalization:
i. Cost or competence-led location;
ii. Market-led location;

Four factors ‘diamond’ are:

 Factor conditions;
 Related and supporting industries;
 Firm strategy, structure and rivalry;
 Demand conditions;

Deciding whether to market abroad:

i. Chance;
ii. Life cycle;
iii. Competition;
iv. Reduce dependence;
v. Economies of scale;
vi. Cheaper sources of raw materials;
vii. Financial opportunities.

International business risk:

i. Political risk;
ii. Business risk;
iii. Currency Risk;
iv. Profit repatriation risk;

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Market analysis:
i. Sub market;
ii. Size and growth;
iii. Profitability;
iv. Cost structure;
v. Distribution channel;
vi. Key success factors.

Suitable/ Choosing modes of entry:

 Among firms in the same industry ;
 According to the market;
 Overtime;
Considerations for choosing modes of entry;
 The firms marketing objectives
 The firm’s size
 Mode availability
 Mode quality
 Human resources requirements
 Market feedback information
 Risks

Advantages of exporting:
a) Exporter can concentrate production in a single location, economies of scale, consistency of product quality;
b) Can start their international marketing plans and strategies;
c) Exporting minimizing cost (operating, administrative and personnel),

Benefits of Overseas production:

 A better understanding of customer;
 Economic of scale;
 Lower production costs;
 Lower storage and transportation cost;
 Outcomes the effects of tariff and non-tariff barriers.

***Outsourcing:
Advantages:
 Economies of scale;
 Can increase effectiveness;
 Own core activities.
 Can deliver benefits and change more quickly;
 Service level agreement.

Disadvantages:
 Finding a single supplier;
 Unwilling to outsource whole process;
 Led to loss of control;
 Inflexible, long term contracts;
 Difficult to switch to a new supplier.

Ways of currency fluctuations:

i. Currency matching;
ii. Foreign currency hedging;
iii. Market entry strategy.
Benefits of big Data:
o Faster decision;
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 o Better decision;
o Proactive decision.
Big data and competitive advantage:
i. Customer insight;
ii. Product innovation;
iii. Simulations;
iv. Collecting data;
v. Operations.

Benefits of chatbots:
i. Always accessible;
ii. Sc alability;
iii. Cost effective;
iv. Customer satisfaction.

Chapter-3
Strategic Implementation
Acquirer attempting evaluation: SSC-RST-G
i) Size & strength of Competitors;
ii) Synergy;
iii) State of the industry and long-term prospects;
iv) Culture.
v) Reaction of Competitors;
vi) Technological change;
vii) Government intervention and legislation;

The mechanics of acquiring companies:

i) Price/earnings ratio;
ii) Accounting rate of return;
iii) Net Assets Value ;
iv) Dividend Yield;
v) Discounted Cash Flows;
vi) Market Prices.

Advantages of acquisition:
i) Speed of growth;
ii) Avoid barriers to entry;
iii) Acquisition of technical expertise and customers contracts.

Dis-advantages of acquisition:
i) Cost and potential over payment;
ii) Potential negative customer reaction.
iii) Incompatibility and lack of cultural fit.

Reasons for strategic alliances: TCL Share recognition requirement

i) Share development;
ii) Regulatory environment;
iii) Complementary markets or technology;
iv) Learning;
v) Technology.

Limitations of alliances: Class

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 i) Core competence;
ii) Lack of integration;
iii) Strategic partners.

Factors for choosing alliance partners:

i) Drivers;
ii) Partners;
iii) Facilities;
iv) Components;
v) Effectiveness;
vi) Market Orientation.

Types of structure: FM2-Http

i) Functional;
ii) Multidivisional;
iii) Matrix;
iv) Holding Company;
v) Transnational;
vi) Team;
vii) Project.

***Choosing a structure: MD PF DRAFT Specialized Culture

Nine tests that may be assess proposed structure:
a) Objectives
i) Market advantage;
ii) Parenting advantage;
iii) People test;
iv) Feasibility Test;

b) Restraints/Design principle
v) Specialized cultures;
vi) Difficult links;
vii) Redundant hierarchy;
viii) Accountability;
ix) Flexibility.
***Process of Change (Balogun and Hope Haiely):
1. Analyze competitive position;
2. Determine type of change needed;
3. Industry desired future state;
4. Analyze the change context;
5. Identify the critical change features;
6. Determine the design choices;
7. Design the transition process;
8. Manage the transition;
9. Evaluate the change outcomes.

Lewins three stage Model:

i) Unfreeze : Removing, consulting, confronting, reinforcing;
ii) Change: Identification, Internationalization.
iii) Refreeze: Habituation effects, positive reinforcement.
Types of change:
i) Speed;
ii) Extent;

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Balgon and Hope:
i) Adaption;
ii) Reconstruction;
iii) Evolution;
iv) Revolution;

Thohnson, Scholes and Whittington strategic changes being:

i) Incremental;
ii) Transformation;
iii) Proactive;
iv) Reactive.

Turn around: C5ap- Organizational change

i) Crisis stabilization;
ii) Critical Change;
iii) Critical Process Improvements;
iv) Communications with stakeholders;
v) Concentration of effort;
vi) Attention to target Market;
vii) Prioritization.
viii) Organizational change.

Implementing Digital strategy: HAULT-Bangladesh Market

i) Have a vision ;
ii) Anticipate costs;
iii) Understand current position;
iv) Look for ideas;
v) Think about culture change;
vi) Build a frame work for change;
vii) Measure success.

Managing change (Kottler’s eight step model): PICCCEE-F

i) Plan for and create short term lines;
ii) Institutionalize new approaches.
iii) Create a vision;
iv) Communicate the vision;
v) Consolidate improvements and produce still more change;
vi) Establish a sense of urgency;
vii) Empower others to act on the vision;
viii) Form a powerful guiding coalition

Drivers of supply chain performances:

i) Facilities
ii) Inventory;
iii) Transportation;
iv) Information;
v) Sourcing
vi) Pricing.

Differences between responsive vs efficient supply chains:

i) Primary goal;
ii) Product design strategy;
iii) Pricing strategy;
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 iv) Manufacturing strategy;
v) Inventory strategy;
vi) Lead Time Strategy;
vii) Supplier Strategy.

Different component of supply chain management:

Supplier relationship management:
o Sourcing;
o Negotiating contract;
o Buying;
o Design collaboration;
o Supply collaboration.
Internal Supply chain Management:
i) Strategic Chain Management;
ii) Demand Planning;
iii) Supply planning;
iv) Fulfillment;
v) After sales service.
Customer Relationship Management (CRM):
i) Marketing;
ii) Price;
iii) Selling;
iv) Call Center;
v) Order Management.

IT supply chain analyzes information for managers:

i) Electronic data interchange (EDI);
ii) Enterprise resource planning system (ERP);
iii) Radio frequency identification (RFID);
iv) Supply chain management (SCM) software;
v) Block Chain.

Key performance characteristics for evaluating potential suppliers:

i) Speed/Lead Time;
ii) Quality;
iii) Price;
iv) Flexibility;
v) Reliability.

Business Process Re-engineering:

Key words in Definition:
i) Fundamental;
ii) Radical;
iii) Dramatic;
iv) Process.

Implications of BPR for accounting systems:

 Performance measurement;
 Reporting;
 Activity;
 Structure;
 Variances.

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Operations performance objectives:
i) Quality;
ii) Speed;
iii) Dependability;
iv) Flexibility;
v) Cost.
Decision areas:
i) Capacity strategy;
ii) Supply network strategy;
iii) Process network technology strategy;
iv) Development and organization

Operations : The four Vs:

i) Volume;
ii) Variety;
iii) Variation;
iv) Visibility.

Capacity Planning:
i) Level Capacity Planning;
ii) Change demand plan;
iii) Demand management planning;
iv) Mixed plans.

Capacity Controls:
i) Materials requirements planning;
ii) Manufacturing resource planning;
iii) ERO software.

Key Elements of JIT philosophy:

i) Elimination of waste;
ii) The involvement of all staff in the operation;
iii) Continuous improvement (Kaizen).

Cost of quality categories:

Prevention cost;
Appraisal cost;
Cost of Internal failure;
Cost of external failure.

TQM Elements:
i) Customer-centric approach
ii) Internal customers and internal suppliers;
iii) SLA;
iv) Quality Culture within the firm;
v) Empowerment.

Functional Strategy:
i) Marketing;
ii) Production;
iii) Finance;
iv) HR Management;
v) ISs
vi) R&D.
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Functional Strategy:
i) Strategy Data;
ii) Executive Summary;
iii) Marketing;
iv) Product/Service details;
v) Management Team;
vi) Plant and equipment;
vii) Start-up cost;
viii) Business plan;
ix) Summary;
x) Appendices.
Constructing the Business Plan:
a) Cash Inflows: Cash sales, cash from receivables, interest receipts, new finance issues.
b) Cash Outflows: Payment to payables, capital expenditure, Loan repayment, interest payments, Tax Payments,
dividend payments.

Organic Growth:
Advantages:
i) Low Risks;
ii) Growth Stage;
Disadvantages:
i) Speed of Growths;
ii) Nature of growth;
iii) Access.

Advantages of Acquisition:
I. Speed of growth;
II. Acquiring skills.

Disadvantages of Acquisition:
i) Risk;
ii) Post integration issues;

Forces for Change:

External factors:
i) Overseas competitors;
ii) Exchange rates;
iii) Growth in plastic alternatives;
Internal factors:
i) Leadership
ii) Customers;
iii) Shareholders.
Forces against changes:
i) Attitude of Managers;
ii) Attitude of Staff;
iii) Unions.

Managing Changes:
1) Unfreezing: PEST analysis, Forecasts, workshop, consultation and negotiation;
2) Change: New marketing practices, collaboration, change the culture,
3) Refreezing: Reward system, Continual training, Communication.

Purpose and Benefits of due diligence:

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 i) Information collecting;
ii) Verification of specific written representation;
iii) Identification of assets and liabilities;
iv) Operational risk;
v) Acquisition planning;
vi) Management time;
vii) Credibility.

Stakeholders’ reactions:
i) Shareholders: Profitability, Risks of environmental pollution,
ii) Employees: Securing jobs, health care,
iii) Local residents: Conflicting interest
iv) Environmental campaigners: Environmental issues,
v) Regional government; Dividend interest

Alliances:
i) Sharing competences;
ii) Risk sharing;
iii) Goal congruence;
iv) People and culture;
v) Partnership costs;
vi) Business Risk;

Change implementation issues:

i) Cultural issues;
ii) Leadership;
iii) Communication;
iv) External Communication;
v) Management Skills;
vi) Redundancies.

Outsourcing:
Advantages in operational level:
i) More capable;
ii) Reliable;
iii) Faster systems.

Disadvantages in operational level:

i) Reliability and efficiency of the contractors and their staff;

Advantages in Strategic Level:

i) IT Competences;
ii) Skills and Techniques of a higher order;
iii) Suppliers economies of scale;
iv) Reduce the risk level involved;
v) Complete strategic reappraisal;
vi) Transformational;
vii) Delayering and empowerment.
Dis-advantages in Strategic Level:
i) Risk of losing internal IT capability;
ii) Risk of losing control of internal IT function;
iii) Exploit its position by raising changes unreasonably;
iv) Routine (operational) level of management.
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Advantages at the tactical level:
i) Reliability and continuity;
ii) IT staff of high quality for advice and assistance.

Dis-advantages at the tactical level:

Experienced by junior managers;
Significant change;
Possibly less able to adjust

Chapter-4
Strategic Performance management
Control model (strategic and operational control):
Step-1 : Goals are set (for individuals)
Step-2 : Performance is measured and compared with target
Step-3 : Control measures are undertaken in order to correct any shortfall
Step-4 : Goals are adjusted in the light of experiences

Budgetary control systems:

 Compel
 Coordinate
 Communicate
 Provide
 Motivate
 Evaluate

Traditional budgeting vs Beyond budgeting:

SL# Topic Traditional Budgeting Beyond budgeting process
1 Goals Short Term focus Long Term focus
2 Rewards Focus on individual Team based recognition
3 Plans Predict and control Unpredictable and continuously improved
4 Controls Primarily on financial indicators Based on multi level and multi-faceted and multilevel

Strategic information:
Strategic information Management Information Operational Information
Internal and External Sources Internally Internal Sources
Summarized at High Level Lower Level Raw data
Prepared on adhoc basis Short term and medium term Immediate term
Not predictable Routinely and regularly Very frequently
Qualitative and quantitative quantitative Largely quantitative
Focus on planning Greater focus on control Focus on control
EIS: Definition
Features of EIS:
Flexibility; Quick response; Sophisticated data analysis.
MIS: Definition:
Characteristics of MIS:
 Support structure;
 Reports on existing operations
 Little analytical ability;
 Internal focus.
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DSS:
VANs:
The challenges for accountants:
1) Direction Towards financial reporting;
2) Misleading Information;
3) Neatness rather than usefulness;
4) Internal focus;
5) Inflexibility and inability to cope with the change.

Objectives of management accounting information:

1) To measure performance;
2) To control the business;
3) To plan for the future;
4) To make the decision.

Financial modeling and performance measurement:

Financial modeling might assist in performance evaluation in the following ways:
1) Identifying the variables;
2) Setting targets for future performance;
3) Monitoring actual performance;
4) Co-ordinating long term strategic terms with short term operational actions.

Points of reference for measurement:

 Profitability
 Activity
 Productivity

Financial performance measures:

 Budgeted sales, costs and profits;
 Standards in costing;
 Trend;
 Results of others business;
 Economy in general;
 Future potential.

Non-financial performance measures:

1) Service quality;
2) Production performance;
3) Marketing effectiveness;
4) Personnel;

Value for money audit:

1) Economy;
2) Efficiency and
3) Effectiveness.

The Balanced scorecard:

 Financial:
 Customer
 Internal Business
 Innovation and learning

Conflicts with using the balance scorecard:

 Conflicting measures;
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  Selecting measures;
 Expertise;
 Interpretation;
 Management Commitment.

Six stages of strategy maps:

 Mission and objectives
 Value creation
 Financial perspective
 Customer perspective
 Internal processes
 Innovation and learning

FIVE KEY ELEMENTS of CSR (Identified by CISCOs CSR review):

1) Governance and Ethics;
2) Supply Chain;
3) Our People;
4) Society;
5) Environment.

Four categories of responsibility centers:

 Cost centers;
 Revenue centers;
 Profit centers;
 Investment centers.

SIX CAPITALS:
 Financial;
 Manufactured;
 Human;
 Intellectual
 Natural;
 Social.

Aspects of an integrated Report:

1) Organizational overview and external environment;
2) Governance;
3) Business model;
4) Risk Opportunities;
5) Strategy and resource allocation;
6) Performance
7) Future Outlook.

Implication of IR for accountants in business and management accountants:

1) Forward-looking information
2) Long-term performance
3) Non-financial information
4) Strategy, not just reporting
5) Focusing on key aspects of performance

Natural Capital: air, water, land, habits.

UN agenda for sustainable development:

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Which includes following 17 global goals:
1) No poverty;
2) Zero hunger;
3) Good health and well being;
4) Quality education;
5) Gender equality;
6) Clean water and Sanitation;
7) Affordable and clean energy;
8) Decent work and economic growth;
9) Industry, innovation and infrastructure;
10) Reduced inequality;
11) Sustainable cities and communities;
12) Responsible production and consumption;
13) Climate action;
14) Life below water;
15) Life on land;
16) Peace, justice and strong institutions;
17) Partnerships for the goals.

‘Compass’ identifying five steps to maximize their contribution to Sustainable Development Goals (SDGs):
Identified five steps to maximize their (business) contribution to the society:
1) Understanding the SDGs;
2) Defining priorities;
3) Setting goals;
4) Integrating ;
5) Reporting and communications.
Benefits of the SDGs:
1) Identify the future business opportunities:
2) Enhancing the value of corporate sustainability;
3) Strengthening stakeholder relations;
4) Stabilizing societies and markets;
5) Using a common language and shared purpose.

Financial performances:
1) Revenue growth
2) Operating profit margin
3) Profit and loss per department
4) Variance analysis (expenditure on wages, power, catering, bedrooms)
5) Revenue available room
6) Profit available room

Non-Financial performances:
1) Resource utilization: occupancy rate (room occupied, room available), energy, water usage per room.
2) Quality service guest satisfaction scores (results of questionnaires, trip advisors, score)’ level of repeat bookings,
number of customer complaints,
3) Competitive Performance: market share, competitor occupancy, competitor prices.

Factors/ Characteristics of appropriateness of KPIs:

1) Link to strategy:
2) Communication;
3) Clarity;
4) Consistency;
5) Reliability;
6) Neutrality;
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 7) Comparability
8) Completeness.

Factors for reward scheme for hotels:

1) Room occupancy rates:
2) Broker sales
3) Group sales
4) Manipulation of rates
5) Cutting costs
-cheap ingredients
Repairs and maintenance
Low capital investment
No investment in staff
High prices on ancillary services

Considering factors for auditor deciding whether or not to the assurance engagement:
1) Knowledge and skills required in the engagement team
2) Evidence required
3) Type of assurance required
4) Subject matter
5) Independence

Strategic management accounting helps it manage the performance of trading company:

External factors, non financial and financial information:
1) Competitors costs
2) Market growth
3) Analysis of current performance
4) Forecasting

Considering factors for withdrawing from trading company in foreign:

1) Sales potential
2) Impact of environmental factors
3) Long term and short term impact
4) Alternative business structures
5) Strength of competition
6) Exit barriers
7) Wider implications
8) Business portfolios
9) Fit with strategic aims

Reasons for failure of companies:

1) Sales and profitability
2) Gearing and liquidity
3) Suppliers and customers
4) Management.

Weaknesses of control system:

1) Only focuses on financial performance
2) Not aligned to customer requirements
3) Lack of integrated control
4) Incomplete cost control
5) Age of system

Growth and survival of the company evaluation for increasing the company’s profitability:
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  Cutting costs
 Increasing efficiency
 Shareholder value
 Revenue enhancement
 Risk

Chapter-5
Strategic marketing and Brand Management

Five aspects of Marketing Audit (Jobber):

1. Marketing analysis-marketing size, customer analysis, competitor analysis, distribution channels, supplier analysis
2. Strategic issues analysis
3. Review of marketing mix effectiveness
4. Marketing Structure
5. Marketing Systems

Corporate Strategy Vs marketing strategy:

 Set objectives
 Internal appraisal
 External appraisal
 Gap analysis
 Strategy
 Implementation
 Control

Competitor Analysis:
i. Who are the competitors?
ii. Identify:
 What are the goals or strategic objectives? (probability, market share/new market, build, hold/harvest
products/business units)
 What assumptions does the competitor hold about themselves and the industry?
 What are the strategies are the competitors currently pursuing? (low cost/ product quality/ whole market/
specific niche?)
 What are the competitor’s strengths and weaknesses what key resources and capabilities do the competitor
have (or not have)?
Understanding competitor’s strengths and weaknesses include
o Financial performance (profitability, profit margin)
o Funding and availability of funds for future investment
o Relative cost structure
o Brand strengths, customer loyalty
o Market, share
o Quality of management team
o Distribution networks
o Product and service quality

Product-Market strategy
1. Market penetration
2. Market development
3. Product development
4. Diversification

Market analysis
o Submarkets
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 o Size and growth
o Profitability
o Cost Structure
o Distribution channels
o Key success factors

Bases for behavioral segmentation

 Benefit sought
 Purchase occasion
 Purchase behavior
 Usage
 Perceptions, beliefs and values

Generic marketing strategies

1) Undifferentiated marketing
2) Differentiated marketing
3) Focused marketing

Steps in positioning
 Identify differentiating factors
 Select the most important differences
 Communicate and deliver [tactical marketing mix decision to be made]

Issues with positioning

 Clarity
 Consistency
 Credibility
 Competitiveness

Bases for repositioning

 Real
 Psychological
 Competitive
 Change emphasizes

Five Step model of revenue recognition

Step-1 : Identify the contract with the customer
Step-2 : Identify the separate performance obligation in the contract
Step-3 : Determine the transaction price
Step-4 : Allocate the transaction price to the performance obligations
Step-5 : Recognize revenue when a performance obligation is satisfied
Elements of the marketing mix
 Product
 Price
 Place
 Promotion
 Processes
 Physical evidences

Service marketing
 Intangibility
 Inseparability
 Heterogeneity / verifiability
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  Perish ability
 Lack of ownership
 Critical moments of truth

Global Marketing
 Coordinating its marketing activities
 Find global customer needs
 Satisfy global customers
 Being better than the competition

Reinforcing the importance of te customer / customer-centric process (4P’s named to 4 C’s)

 Product → Customer Value
 Price → Customer Cost
 Place → Customer Convenience
 Promotion → Customer Communication

Big Data Three key Areas

1) Customer engagement
2) Customer retention and loyalty
3) Marketing optimization

Customer Relationship Management (CRM)

Meanings- use of database technology ICT systems to help an organization develop, maintain and optimize long term,
mutually valuable relationships between the organization and its customers.

CRM systems involves a comprehensive database that can be accessed from any of the points of contact with the
customer including website contacts, field sales teams, call centers and order processing functions.

Chaffey’s three Phases of Customer Relationship Management (relation to e-business and e-commerce management)
1) Customer acquisition: (new customers) promotion, incentives, services, profiles, customer service, direct email.
2) Customer retention: (existing customers) extranets, personalization, community, promotions, loyalty schemes
3) Customer extension: (increasing the range and no of products and services by through cross –selling or up-
selling) direct email, learning, on-site promotions

Customer life cycle value (CLV) two key assumption

1) Churn Rate
2) Retention Cost

CRM Strategies
1. Develop appropriate staff incentive schemes
2. Provide consistent standards
3. Obtain Senior Management buy-in
4. Monitor customer relationships and act appropriately
5. Obtain detailed customer information
6. Develop specific loyalty-focused strategies
7. Implement procedures to monitor and influence all aspects of the customer relationships
8. Implement systems that can support CRM

Digital Marketing
Application of the technologies which form online channels-such as the internet, email, smart phones, tablets, digital
televisions and games consoles to achieve marketing objectives.

E-marketing

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 Is the application of electronic communication technologies such as internet, smart phones, tablet and digital televisions
to achieve marketing objectives.

Objectives of digital technologies

1. Identifying
2. Anticipating
3. Satisfying

Key marketing functions the internet can perform

1. Creating company and product awareness
2. Branding
3. Offering incentives
4. Lead generation
5. Customer service
6. Email databases
7. Online transaction

Specific benefits of digital marketing

I. Global reach
II. Lower cost
III. The ability to track and measure results
IV. 24-hour marketing
V. Personalization
VI. One to one marketing
VII. More interesting campaigns
VIII. Better conversion rate

Characteristics of e-marketing 6 ‘I’ characteristics

6 ‘I’ characteristics developed by McDonald and Wilson
1. Independence of location
2. Industry Structure
3. Integration
4. Interactivity
5. Individualization
6. Intelligence

Internet offers a number of methods for acquiring customers

1. Search engines
2. Pay per click
3. Affiliate marketing
4. Comparison sites
5. Virtual marketing
6. Business blogs
7. Retention
8. Online communities
9. Extension

Web-based communities enhanced by

1. Social networking
2. Blogs
3. Wikis
4. Instant messaging

Socialization of knowledge sharing

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 1. Tagging of information
2. Mashups
3. Feedback
4. Promoting collective intelligence

Reasons for branding dram self prem

1. Differentiation
2. Advertising
3. Readier acceptance
4. Self-selection
5. Reduces the importance of price differentials
6. Manufacturer more control over marketing strategy
7. ‘Piggy Back’ brand extension strategy
8. Eases the task f personal selling
9. Market segmentation easier

Factors determining brand’s strength

Internal
Clarity
Commitment
Protection
Responsiveness
External
Authenticity
Relevance
Differentiation
Consistency
Presence
Understanding

Sources of brand value

1. Experiences
2. User Associations
3. Belief
4. Appearance
5. Manufacture’s name

Kotler identified five strategies its brand

1. Line extensions
2. Brand extensions
3. Multi-branding
4. New brands
5. Co-branding

Strategic planning and brand development stage

1. Differentiation
2. Advertising
3. Readier acceptance
4. Self-selection
5. Reduces the importance of price differentials
6. Manufacturer more control over marketing strategy
7. ‘Piggy Back’ brand extension strategy
8. Eases the task f personal selling
9. Market segmentation easier
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Online brand options
1. Migrate traditional brand online
2. Extend traditional brand
3. Partner with an existing digital brand
4. Create a new digital brand

Problems with valuing brands

1. Lack of active market
2. Research based approaches
3. Cost based approaches
4. Premium Price
5. Economic use approach
6. Marketing principle
7. Financial principles

Bases of valuation
1. Marketing approach
2. Cost approach
3. Income approach

Benefits of brand valuation

1. Making decisions on business investments
2. Organizing and optimizing the use of different brands
3. Making decisions about licensing the brand to subsidiary companies
4. Transfer pricing
5. Acquisition

Intellectual capital
1. Human resources
2. Intellectual assets
3. Intellectual Property

Measurement of intangible assets of an enterprise

1. Market to book values
2. Tobin’s ‘q’
3. Calculate intangible value

Valuation of individual intangible assets

1. Relief from royalties method
2. Premium profits method
3. Capitalization of earnings method
4. Comparison with market transactions method
5. Compliance with IFRS 13

Advantages of competitor analysis

1. Understand the basis of competitive advantage
2. Understand competitors strategies
3. Identify risk of new entrants
4. Develop future strategies
5. Improve forecasting

Key financial reporting issues affected consolidated FSs acquisition of the company
1. Consolidation
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 2. Brand valuation
3. Amortization
4. Goodwill

Detailed knowledge regarding competitors help the directors

1. Strategy development
2. Basis of competitive advantage
3. Increased profitability
4. Responding to competitors strategies
5. Competitors responses

Use electronic marketing to vary the marketing mix

Product: sample products, online courses, product size, product updates

Price: bulk discounts, pay per access, price transparency, dynamic pricing

Promotion: search online optimization, click throughs, and banner advertising

Place: Global reach

Process: website functionality, online queries

Importance of brand awareness

1. Competitive market
2. Customer loyalty
3. Comparison of financial performance
4. Product mix
5. Brand awareness
6. Quality and trust
7. Differentiation
8. Premium price

Importance of external information to increase prices of the product

1. Demand for product
2. Amount of increase
3. Competitors pricing policies
4. Competitors plan
5. Input prices

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