CFAP 3 SPM Complete Summary With Mind Maps - by Muzzammil Munaf (IQSF)

CFAP 3 – STRATEGY AND
PERFORMANCE MEASUREMENT
SUMMARIES AND MIND MAPS
RELEVANT FOR BATCH JUNE 2023 / DEC 2023
By Muzzammil Munaf
Associate Chartered Accountant
IQ SCHOOL OF FINANCE
CFAP 03 – STRATEGY AND PERFORMANCE MEASUREMENT
BY MUZZAMMIL MUNAF | ACA | ADVISOR | TRAINER |
FOUNDATION OF STRATEGY
FOUNDATION OF STRATEGY
Strategy is a pattern of activities that seeks to achieve the objectives of the organisation and adapt its scope,
resources and operations to environmental changes in the long term.
- consist of organised activities - purpose is to achieve an objective
- is always for long term - influenced by the environment
- is always flexible and dynamic - brings optimisation all the time
Corporate Strategy Business Strategy Functional Strategy
For each business function, how

How should we compete in each
What business should we be in? can that function contribute to
selected business?
[Should seek to achieve the overall the competitive advantage of the
[contribute towards the entity?
objective or objectives of the
achievement of the corporate
entity] [contribute towards the
strategy]
achievement of business strategy]
Approach to Strategic Planning
STRATEGIC ANALYSIS STRATEGIC CHOICES STRATEGY INTO ACTION

- macro environment - competitve strategies - Organising/ structuring.
(competitors, markets, - generation of strategic options,
opportunities and threats - Enabling an organisation’s
e.g., growth, acquisition, resources should support the
- strategic capability of the diversification or concentration. chosen strategy.
organisation (resources and - evaluation of the options to
competences), - Managing change. Most
assess their relative merits and strategic planning and
- culture, beliefs and assumptions feasibility. implementation will involve
of the organisation - selection of the strategy or change, so managing change, in
- expectation and power of option that the organisation will particular employees’ fears and
stakeholders pursue. resistance, is crucial.
Mission - purpose of Vision - desired Goals and objectives Intended Strategy (planned
an organisation and optimal future state of SMART (Specific, through formal process)
the reason for its what the organisation Measurable, Agreed, Emergent Strategy (emerges
existence wants to achieve Realistic, Time-bound) without formal planning)
Future Basing [used to create a vision for implementing strategy at any level within an organisation]
Secondly, milestone events and Reality check - the final stage

Firstly, a compelling vision needs dates need to be identified by involves planning and strategising
to be established whilst ‘based in ‘remembering back’ what you how to achieve the milestones
the future’. must have done to get to the through scheduling events and
future-based vision. assessing the resources required.
Always a mentor | Muzzammil Munaf

1/43
STRATEGIC ANALYSIS
STRATEGIC ANALYSIS
STRATEGIC ANALYSIS / POSITIONING [SWOT]
Internal Environment (Strengths

External Environment (Opportunities and Threats)
and Weaknesses)
Strategic Groups
Porter's
PESTEL Analysis Porter's 5 forces and Market Capabilities Value Chain
Diamond
Segmentation
PESTEL ANALYSIS
Ecological/
Technological
Economic Social environmental
[government Legal
Political [interest rates, [population [considers ways
spending on
[consistent inflation, demographics, in which the [taxation,
research, new
policy, business cycles, income organisation employment
discoveries and
government unemployment, distribution, can produce its law, monopoly
development,
stability and disposable lifestyle and goods or legislation and
focus of
foreign trade income and leisure, levels of services with environmental
technological
regulations] energy education and the minimum protection laws]
effort, rates of
availability] consumerism. environmental
obsolescence.
damage]
PORTER's FIVE FORCES
Threat of
Competitive
Bargaining Power Threat of New Substitutes
Rivalry
of Customers Bargaining Power Entrants If an organisation
of Suppliers High levels of
Powerful buyers New entrants can has a lot of
competition can
can demand Powerful suppliers increase the cost of substitutes it will
lead to price wars
discounted prices can demand higher resources as well have to keep its
and high
and extra services prices for their as increasing the prices low to deter
expenditure on
(which add costs to product(s). power of other customers from
marketing and
the organisation). forces moving to these
innovation.
substitutes.

2/43
STRATEGIC ANALYSIS
PORTER's DIAMOND
[Why are firms based in a particular nation able to create and sustain competitive advantage against the world’s
best competitors in a particular field]
Firm strategy,
Factor conditions structure and rivalry
- land, minerals and [organisational goals
weather Demand conditions can be determined by
Related and supported ownership structure.
- capital [strong home market industries
demand for the product Unquoted companies
- skilled and motivated or service] [suppliers and related may have slightly longer
human resources industries] time horizons to operate
- knowledge in because their financial
performance is subject
- infrastructure. to much less scrutiny
than quoted companies]
STRATEGIC GROUPS AND MARKET SEGMENTATION
Strategic Group
[entities that operate in the same industry and that Market segmentation
have similar strategies or that are competing in their A market segment is a section of the total market in
markets in a similar way] which the potential customers have certain unique
and identifiable characteristics and needs.
Strategic Space
Instead of trying to sell to all customers in the entire
When all the companies in an industry are put into market, an entity might develop products or services
strategic groups and are analysed, a strategic space that are designed to appeal to customers in a
might become apparent. specific market segment.
A strategic space is a gap in the market that is not Market segmentation is the process of dividing the
currently filled by any strategic group. market into separate segments, for the purpose of
The existence of strategic space might provide an developing differing products for each segment.
opportunity for a company to make an initiative.

3/43
STRATEGIC ANALYSIS
STRATEGIC CAPABILITIES [COMPETENCES AND RESOURCES]

[Strategic capability is the adequacy and suitability of the resources and competences an organisation needs if it is
to survive and prosper]
THRESHOLD STRATEGIC
1. these are necessary for any organisation to exist 1. these are particular to an individual business
and compete in an industry 2. they will be hard to copy
2. they are likely to be common to most rivals and 3. they will be valued by the customer (CSF)
easily copied
4. they will lead to competitive advantage.
3. they will not lead to success or competitive
advantage Example: A particular newspaper may be able to
stand out from its rivals if it has an exclusive deal
Example: any daily newspaper has reporters, editors, with the country's top sport star who will write a
printing staff etc. daily column on his/her sport.
WHEN DOES A STRATEGIC COMPETENCE BECOME SUSTAINABLE COMPETITIVE ADVANTAGE?
Does your organisation has a unique resource?
No. All other

Yes competitors have
them.
Does your organisation also has a unique competence to use this resource? Threshold resource
Yes No
Threshold
Sustainable core competence?
competence
Yes No
Short term
Durable and very difficult to copy by
competitive
other competitors?
advantage
No. Competitors
Yes will copy in long
run.
Its a Sustainable Short term

Competitive competitve
Advantage advantage

4/43
STRATEGIC ANALYSIS
Sustainable competitive advantages – The capabilities that allow an organisation to beat its competitors.
These capabilities must meet the needs and expectations of its customers. Unique capabilities are not
enough – they must be valued by the customers.
PORTER'S VALUE CHAIN
[identify which activities within the firm are contributing to a competitive advantage and which are not]
SUPPORT OR
SECONDARY
PRIMARY VALUE ACTIVITIES
VALUE
ACTIVITIES
Firm
Service infrastructure
all activities that [structure]
Operations Outbound occur after the
Inbound
transformation logistics point of sale,
logistics Marketing and
of the raw storing, sales such as Technology
[receiving, materials into installation,
distributing and development
storing and finished goods for example, training and
delivering
handling raw and services. sponsorship of repair.
finished goods
material inputs. For example, a sports
to customers. E.g., Marks & Human
For example, a using celebrity could
For example, Spencer’s Resource
just-in-time enhance the
skilled outsourcing friendly Development
stock system image of the
craftsmen could delivering could approach to [people]
could give a product
give a quality give a cost returns gives it
cost advantage]
advantage advantage. a perceived
quality
Procurement
advantage.
[purchasing]

5/43
STRATEGIC CHOICE
STRATEGIC CHOICE
Cost Ledership
Quality
Design
Differentiation
Image
Competitive Support
Strategies
Cost focus
Focus
Differentiation focus Backward (raw

material)
when products become the

Lock in
industry standards (for eg
strategy
Microsoft)
Forward (sales
channels)
Market
Penetration
STRATEGIC
CHOICE Vertical
Ansoff Growth
Matrix integration
Market
Development
Growth Related
Strategies Diversification Horizontal
integration
Product
(related
Development
products)
Greiner's Growth
Model Unrelated
Diversification (Conglomerate)
Strategy
Evaluation
Acceptability Feasibility Suitability

6/43
STRATEGIC CHOICE
SUMMARY OF COMPETITIVE STRATEGIES
Cost leadership Differentiation Focus

Aim To cut costs of production/ To offer a product that can't Position the business in one
purchasing/ service and in be matched by rivals and particular niche in the
turn cut selling prices. charge a premium for this market.
"difference".
How (examples)  economies of scale  Branding  find a segment where

 use of learning effects  quality & design the cost leader or
 large production runs  innovation differentiators have
 using cheaper labour and  knowledge management little or no presence
materials  control over suppliers and build business here
 moving to cheaper  support  reduction in product
premises range
Benefits  high volumes  builds brand loyalty and  develops brand loyalty
 creates a barrier to entry repeat purchases  little competition
 can operate in  higher margins  often a first step
unattractive segments  reduction in power of towards the other
 win price wars customers generic strategies
 reduced power of
substitutes
Threats  no fallback position if  perform badly in a  low volumes

leadership is lost recession  if successful, it attracts
 larger rivals (possibly  often easily copied in the cost leaders and
from overseas) may enter long run differentiators
the market  need to constantly  few barriers to entry
 strong currency makes innovate
imports cheaper  needs much higher
marketing than cost
leadership
 fewer barriers to entry
 smaller volumes
Suitability Large organisations with Innovative companies with Small businesses with
economies of scale large marketing budgets entrepreneurial flair, strong
market knowledge and a
risk taking attitude (often
new starts)

7/43
STRATEGIC CHOICE
STRATEGIC CLOCK
Routes 1 and 2 are price-based strategies.
1 = no frills: Very price-sensitive customers. Simple products and services where innovation is quickly imitated – price
is a key competitive weapon. Costs are kept low because the product/service is very basic.
2 = low price: Aim for a low price without sacrificing perceived quality or benefits. In the long-run, the low price strategy
must be supported by a low cost base.
3 = hybrid strategy: Achieves differentiation, but also keeps prices down. This implies high volumes or some other
way in which costs can be kept low despite the inherent costs of differentiation.
Routes 4 and 5 are differentiation strategies.
4 = differentiation: Offering better products and services at higher selling prices. Products and services need to be
targeted carefully if customers are going to be willing to pay a premium price.
5 = focused differentiation: Offering high perceived benefits at high prices. Often this approach relies on powerful
branding. New ventures often start with focused strategies, but then become less focused as they grow and need to
address new markets.
6, 7, 8 = failure strategies: Ordinary products and services being sold at high prices. Can only work if there is a
protected monopoly. Some organisations try option 8 by sneakily reducing benefits while maintaining prices.

8/43
STRATEGIC CHOICE
THE ANSOFF GROWTH MATRIX
Existing Products New Products
Existing Markets Market penetration/growth Product development
This typically involves the use of a New products could arise from
new/improved competitive R&D, joint ventures, buying in
strategy. Key risks: other people's products, copying
 competitor reaction. innovations of rivals or licensing. It
 can lead to stagnation. might also come from product
augmentation (for
example, by upgrading
software capabilities).
Key risks:
 market size and demand are
unknown
 can lead to cannibalisation of
existing products
New Markets Market development Diversification
This involves finding new markets This involves moving away from
for existing products. These could existing core activities and offer a
be new segments in current new product to a new customer.
markets (e.g., new age groups) or More details are available
overseas markets. Key risks: elsewhere in this chapter. Key risks:
 needs a new external analysis  combines the risks of product
 puts a strain on existing and market development
strategic capabilities  need good corporate
parenting skills.
STRATEGY EVALUATION
Strategy Evaluation
Suitability Acceptability Feasibility
whether the options are considers whether the options assesses whether the
adequate responses to the meet and are consistent with organisation has the resources
firm’s assessment of its the firm’s objectives and are it needs to carry out the
strategic position. acceptable to the stakeholders strategy

9/43
STRATEGIC CHOICE
GREINER’s GROWTH MODEL
Greiner's Growth Model is a framework that describes how organizations evolve over time and identifies five stages of
growth that organizations typically go through. The five stages are:
Growth through creativity: In this stage, the organization is typically small, with a flat organizational structure and an
entrepreneurial culture. The focus is on developing new products or services and establishing a market niche.
Growth through direction: As the organization grows, it becomes more complex, with a need for more formalized
processes and structures. The focus is on creating more efficient operations and developing a more hierarchical
organizational structure.
Growth through delegation: In this stage, the organization becomes even more complex, with multiple layers of
management and a greater focus on delegation of authority. The focus is on developing a more decentralized
structure and improving communication within the organization.
Growth through coordination: In this stage, the organization becomes even larger and more complex, with multiple
business units and a need for greater coordination and integration. The focus is on improving coordination and
communication between different parts of the organization.
Growth through collaboration: In the final stage, the organization becomes highly complex, with a global reach and a
focus on collaboration with external partners. The focus is on developing a collaborative culture and a strategic focus
on innovation.
Greiner's model suggests that each stage of growth is marked by a crisis that must be overcome in order to move to
the next stage. By understanding the challenges and opportunities of each stage, organizations can better prepare for
the future and manage growth more effectively.

10/43
METHODS OF STRATEGIC DEVELOPMENT
DEVELOPMENT METHODS
Organic Growth Mergers & Acquisition Franchising Licensing Business Partnering and Collaboration
Franchises and licenses are both Strategic alliance [a co-operative

The franchiser grants a licence to
An entity can grow quickly by business agreements in which business activity, formed by two or
the franchisee allowing the Joint Venture [two or more
means of mergers or acquisitions. certain brand aspects are shared in more separate organisations for
franchisee to use the franchiser’s companies join together to
An entity might grow its business Acquisitions are more common than exchange for a fee. However, a strategic purposes, that allocates
name, goodwill and systems. The collaborate on a particular project.
with its own resources, seeking to mergers, but large mergers are franchising agreement pertains to a ownership, operational
franchisee pays the franchiser for They share resources, profits, losses
increase sales and profits each year possibly more significant, because business’s entire brand and responsibilities, financial risks, and
these rights and also for subsequent and expense, and form a separate
they can create market leaders in operations, while a licensing rewards to each member, while
support services the franchiser may legal entity]
their industry agreement only applies to preserving their separate identity/
supply.
registered trademarks. autonomy]
Licensing is a limited legal business - can share the set-up and running Alliances can allow participants to
Growth by acquisition or merger is Rapid expansion and increasing
relationship where a specific party costs achieve critical mass, benefit from
much faster than growth through market share with relatively little
is granted rights to use certain other participants’ skills and can
internal development. An equity capital. - can learn from each other
Management can control the rate of registered trademarks of a brand. allow skill transfer between
acquisition can give the buyer The franchisee provides local participants.
growth more easily, and ensure that The business relationship is - can focus on relative strengths
immediate ownership of new knowledge and unit supervision.
the entity has sufficient resources between the licensor and licensee. - may reduce political or cultural The technical difference between a
products, new markets and new The franchiser specialises in
to grow successfully To use the registered trademarks of risks strategic alliance and a joint venture
customers, that would be difficult to providing a central marketing and another brand, the licensee pays is whether or not a new,
obtain through internal control function, limiting the range - it is better than going it alone and
the licensor an agreed-upon royalty independent business entity is
development of management skills needed. then competing
fee. formed.
The biggest disadvantage is The franchiser will seek to maintain In general, licensing agreements are - can often lead to disputes may Less risk – forming the alliance
An acquisition might be expensive. give access to strategic capabilities reduces the risk of the venture.
probably that there is a limit to the some control or influence over most often used by brands that are
The bid price has to be high enough and eventually allow the partner to
rate of growth a business entity can quality and service from the centre highly recognizable and marketable. Co-operative spirit – both
to make the shareholders of the compete in core areas
achieve with its internal resources. but this will be difficult if the For a licensing agreement to be companies must want to do this and
target company willing to sell their
Rival firms might be able to grow franchisee sees opportunities to beneficial to both parties, the - there may be a lack of be willing to co-operate fully.
shares. The return on investment
much more quickly by means of increase profit by deviating from business branding must already be commitment from each party Results, milestones, methods and
for the entity making the acquisition
mergers, acquisitions and joint the standards which the franchiser successful and known by a large - requires strong central support resource commitments must be
might therefore be very low.
ventures has established. portion of buyers. which may not be provided clearly understood.

11/43
BCG Matrix
STAR PROBLEM CHILD CASH COW DOG
[rate of market growth: high] [rate of market growth: low]

[rate of market growth: high] [rate of market growth: low]
[relative market share: high] [relative market share: high]
[relative market share: low] [relative market share: low]
A star has a high relative market share in a high-growth A cash cow has a high relative market share in a low-
A problem child (sometimes called ‘question mark’) is
market. growth market and should be generating substantial cash A dog product has a low relative market share in a low-
characterised by a low market share in a high-growth
This type of product may be in a later stage of its product inflows. growth market. Such a product tends to have a negative
market.
life cycle. cash flow, that is likely to continue. It is unlikely that a dog
Substantial net cash input is required to maintain or The period of high growth in the market has ended (the can wrest market share from competitors.
A star may be only cash-neutral despite its strong increase market share. product life cycle is in the maturity or decline stage), and
position, as large amounts of cash may need to be spent consequently the market is less attractive to new entrants Competitors, who have the advantage of having larger
The company must decide whether to do nothing – but and existing competitors. market shares, are likely to fiercely resist any attempts to
to defend an organisation’s position against competitors.
cash continues to be absorbed – or market more reduce their share of a low-growth or static market.
Competitors will be attracted to the market by the high intensively, or get out of this market. Cash cow products tend to generate cash in excess of
growth rates. Failure to support a star sufficiently strongly what is needed to sustain their market positions. Profits An organisation with such a product can attempt to
The questions are whether this product can compete support the growth of other company products. The firm’s appeal to a specialised market, delete the product or
may lead to the product losing its leading market share
successfully with adequate support and what that support strategy is oriented towards maintaining the product’s harvest profits by cutting back support services to a
position, slipping to the right in the matrix and becoming
will cost. strong position in the market. minimum.
a problem child.
Strategic movements on the BCG matrix

A product’s place in the matrix is not fixed forever, as the rate of growth of the market should be taken into account in determining
strategy.
- Stars tend to move vertically downwards as the market growth rate slows, to become cash cows.
- The cash that they then generate can be used to turn problem children into stars, and eventually cash cows.

12/43

13/43
EFFECTIVENESS OF ICT
E-Business
[E-business includes all aspects of e-commerce, but also includes work flows and movements of information within an entity. Internal processes are driven by e-business methods as well as external
relationships with customers, suppliers and other external stakeholders]
The impact of the internet on business

strategy and competition (Porter) Barriers to E-Business
Main business and marketplace models for delivering e-business [Although many companies engage in some form of e-business,
[Porter argued that two main factors determine the
profitability of a business entity; structure of the [The internet has given companies an opportunity to sell their goods or services to a large number of there are barriers to setting up e-business activities and
industry in which it competes and ability of the customers, and to find new suppliers. Following are the main types of business models] maintaining them so that they remain an effective way of
entity to achieve a sustainable competitive developing the business]
advantage.]
E-
procurement
As well as
Intermediary creating larger Advertising
Competitive Bargaining On-going
Providing companies markets for The internet
rivalry with power of Alliances of Set-up costs. operating
Threat of new electronic Their business consumer has also Customer
existing suppliers Bargaining suppliers It can be fairly costs.
entrants auctions is based on goods and created new relationships
competitors Suppliers are power of In some expensive for A website has No in-house
In many These are acting as services, opportunities Promotion The internet Time to
The internet able to use the customers markets, a small to be updated skills
industries, the E-Shopping websites agents for communicatio for advertising Opportunities provides Type of establish the
encourages internet to Customers are businesses company to business frequently, to system A company
barriers to (customers where selling the ns networks and are provided opportunities
greater increase the able to obtain have created establish a keep it might not
entry have buying goods customers can (similar) and computer marketing. by the chance for companies Some It takes time
competition. number of information alliances with website for interesting employee
been lowered. or services by auction goods products or systems have Companies to send to build products and to establish a
Companies clients or about the rival shared selling its (and accurate), individuals
By using the placing an for sale, and services of a created new can advertise promotional customer services are website that
provide a customers for products of websites for products and and it might with the
internet, new order on put in bids for large number opportunities their products messages by relationships, easier to sell customers
large amount their products. many different selling their taking be necessary knowledge or
competitors company's auctioned of different for business- or services on e-mail to for example by on the internet know about
of information As a result, the competitors products to payment by to keep skills to
can enter the website) items. eBay is companies, to-business search engines potential providing than others. and want to
about bargaining by using customers credit card, making special maintain a
market more perhaps the and attracting purchasing by such as customers. support, user visit.
themselves power of search over a wider debit card, offers to website.
quickly and most well- customers to linking up the Google, or on forums and
and their suppliers is engines. geographical Interswitch or encourage
more cheaply. known their website. computer the websites FAQ
products on likely to area. PayPal. customers to
example. (foodpanda, systems of of other
their websites. increase. revisit the site.
sastaticket.pk) companies companies.
with those of
their main
suppliers.

14/43
DESIGN OF AN E-COMMERCE WEBSITE
Design features such as The website is an

The system must allow
the ability to enlarge The website must be advertising medium as
The website must be Screens should also be users to interact with it, Website should be System must be
images of products, or kept up to date. For well as an electronic The system must be able
easy to use. The user visually attractive, to so that the users can available all the time integrated with all
obtain additional example, the availability store. It can be designed to reassure users that it
must be able to navigate encourage users to choose their own route with least possible necessary functions of
information about a of products must be kept in such a way that the is secure.
through the site easily. browse through the site. through the website downtime. the department.
product, may also be up to date. user's attention is drawn
easily.
very useful. to additional products.
E-MARKETING AND THE 7 P's OF MARKETING MIX
PRODUCT PRICE PLACE PROMOTION PHYSICAL ENVIRONMENT PEOPLE PROCESS
Some products sold on the Websites and e-mail are

In terms of e-marketing, the Buying goods or services by
internet can be customised This is more transparent on new ways of advertising
design of a website is internet is a process, and
so that they are constructed the internet and users can goods and services. Buying The internet does not
important, because visitors the quality of this process is
to the customer's often compare prices easily. Some goods, such as music, space on the websites of involve people in marketing
will not stay on a website if another element in the
specification. Additionally, video and software can be other companies or on in the sense that customers
Some websites are it is not attractive, difficult marketing mix for e-
products can be bundled, so delivered over the internet. search engines such as are communicating by
specifically designed to to navigate or fails to business. A sale must be
that related products can be Google can provide an computer with a website.
compare prices provide the information that followed up by an efficient
bought at the same time, opportunity for targeted
visitors are looking for. delivery service.
perhaps at reduced prices. promotion.
6 I's OF E-MARKETING
INTERACTIVITY INTELLIGENCE INDIVIDUALISATION INTEGRATION INDUSTRY STRUCTURE INDEPENDENCE OF LOCATION
To interact with the customer

through website. The internet can be used as a The internet introduces the possibility
The internet can lead to a re-
Getting visitors to the site to provide relatively low-cost method of The internet provides scope for of increasing the impact of an entity
structuring of the industry supply
details about themselves (and agree collecting market research data and In traditional media the same integrated marketing on a global market. Users of a website
chain. Disintermediation is the
to receive e-mails from the website data about customers and other message tends to be broadcast to communications. Many companies cannot easily tell from the website
removal of intermediaries such as
owner in the future), perhaps in visitors to a website. This data can be everyone. Communication via the are now considering how they whether it is owned by a small local
distributors or agents: this occurs for
exchange for additional information analysed to produce marketing internet can be tailored or integrate email response and website company or a large multinational or
example when a company starts
or a free service. information about what customers 'personalised' to the individual. call-back into their existing call-centre global company. This gives small
selling directly to end-consumers
Getting visitors to buy a product or buy, and what information on a or customer service operation. companies opportunities to sell into
through its website.
service and pay for it using the website interests them most. global markets.
internet.

15/43
Duplicate its existing brand identity online. However, if the quality of the internet site is poor, the brand could be damaged.
E-Branding
Extend the traditional brand by creating a slightly different version of the brand. For example, in the UK the BBC extended its name
image to its online services, giving the new services the slightly different name of BBC Online. This allowed the useful associations of the
BBC brand name to be retained, but also suggested to the customer that the services offered by BBC Online might be different
When an established company is planning to market

its products by internet for the first time, it has to
consider what to do about its brand identity. There Partner with an existing e-brand. For example, a chain of hotels could market itself online through an airline website and so associate
the hotels with the airline brand name.
are four choices.
Create a new brand for the web. The new brand name allows an entity to break free from the perceptions associated with the old brand
name. The old brand might be perceived by customers as too traditional and if there is going to be a successful, dynamic presence on the
web, a new brand is needed without associations of tradition and conservatism.
CUSTOMER RELATIONSHIP MANAGEMENT
The purpose of customer relationship management (CRM) is to help companies to understand better the behaviour of their customers, and modify their marketing operations to service customers in the best way possible.
Provide customers with a

better experience when they
contact the company.
Collect information for Monitor key customer
Store the customer Access the information, often Use the analysis of customer Customer service staff are able
identifying individual management performance
information and keep it up-to- instantly, whenever it is Analyse customer behaviour behaviour to develop a more to provide this type of
customers and categorising indicators, such as the number
date. needed. effective marketing strategy. experience because they have
their behaviour. of customer complaints.
access to customer's record
and know their previous
requirements.

16/43
BIG DATA
Big Data is the term used to describe huge volume of both structured and unstructured data that is so large it is difficult to process using traditional database and software techniques.
Three V's of Big Data Additional four V's of Big Data
Velocity refers to the incredibly

high speed that data is created, Variety refers to the wide range
stored, analysed and visualised. of data types and sources
- for example when you post a reflected within big data. Big Volume refers to the huge Visualisation is particularly
Variability - whilst big data Value - the huge volume of
photo or comment on social data comprises largely volumes of new data generated challenging as it refers to
Veracity - data needs to be reflects a wide range (variety) data that big data reflects is
media. The post becomes unstructured data which every second. All this new data making the vast amount of
correct and error-free in order of sources its meaning can also capable of creating huge value
immediately available around requires a different approach needs processing, storing and data comprehensible in a
to be reliable and relevant. vary widely depending on the for organisations, societies and
the world to users using the and technique to store raw to be made readily accessible manner that is easy to read and
context. consumers.
same social media platform. data. Furthermore, the wide for searching and analysing. understand.
The speed at which new data is variety of data facilitates new
generated across the globe is ways of thinking and analysing.
incredible.
How Big Data can create value for organisations? Use cases of Big Data
- Finance (bringing value to the

organisation)
Enabling experimentation to - Real-time stock market insights
Replacing/supporting human
discover needs, expose Segmenting populations to Innovating new business models, (algorithm trading)
decision making with automated
variability and improve customise actions products and services.
Creating transparency algorithms - Financial modeling (predictive)
performance Big data enables highly specific Big data enables companies to
Improved accessibility for relevant Sophisticated analytics can - Customer analytics
Organisations are able to collect segmentation to be developed to enhance existing products, create
stakeholders in a timely manner substantially improve decision (understanding customer needs &
and analyse ever more accurate support tailored products and new products and services and
can create value. making, minimise risks and unearth preferences)
and detailed performance data on services that precisely meet those invent entirely new business
valuable insights that would - Risk Management and Fraud
everything from personal sick days needs. models.
otherwise remain hidden. Detection
to product inventories.
- Analysing financial performance
& growth

17/43
MARKETING ESSENTIALS
RESEARCH & DEVELOPMENT STRATEGY
[Every product has a life cycle, and eventually even the most successful products reach the end of their economic life therefore its necessary to perform R&D and innovate]
Methods to innovate R&D Strategy
Product adaptation A decision has to be made R&D strategy must allow for
Product renewal Products can be adapted for Developing new technology about how much in total to failures. Research might not
Developing new products Within the overall spending
Changing the design of a a new market segment. For spend on R&D each year. lead to any specific product
From time to time, new programme for R&D,
product can help to renew example, a product that is New products are The need for R&D spending development. Development
technology becomes decisions must be made to
or prolong its life. Many marketed successfully in the continually being invented will vary between different projects might fail.
available that creates allocate the spending
products therefore undergo US might be adapted by its and developed. Companies industries. High spending is Successful development
opportunities for new between research and more
design changes during their manufacturer for sale into test them and some of them needed in industries that projects might happen only
products and also for new specific project
life, in order to maintain or Europe, where customer are successful are at the leading edge of occasionally, and failures
ways of doing things. development.
increase sales. needs might be different scientific or technological might be much more
from those of US customers. developments. common.
[A ‘life cycle’ is the period from birth or creation of
R&D costs, Capital expenditure decisions Life cycle costing

Introduction
Operating costs , Marketing and advertising This type of costing compares the revenues and costs of the
[some sales demand but total sales are low] product over its entire life. This has many benefits.
Set up and expansion of distribution channels
- The potential profitability of products can be assessed before
an item to the end of its life]
major development of the product is carried out

Growth - Techniques can be used to reduce costs over life of product
Product life cycle
Costs of increasing capacity, learning effect and economies of scale,

[total sales demand in the market grows at a faster rate] increased costs of working capital - Pricing strategy can be determined before market entry.
- Attention can be focused on reducing the R&D phase to get
the product to market as quickly as possible.
Maturity Incur costs to maintain manufacturing capacity
[total annual sales remain fairly stable] Marketing and product enhancement costs to extend maturity Timing market entry and market exit
Entrepreneurial companies – enter during introductory phase
Cautious companies – enter during growth phase
Decline
Close attention to costs needed as withdrawal decision might be expensive Companies are unlikely to enter a market during the maturity
Asset decommissioning costs, possible restructuring costs Remaining phase
[total annual sales in the market will start to fall]
warranties to be supported

18/43
MARKETING MIX
(For offline product or service based businesses. Refer '7Ps of e-marketing mix' for e-businesses)
With the growth in service industries, the 4Ps

Original 4 P's of Marketing Mix
have been extended to the 7P's
PRODUCT PLACE
PRICE
[Product strategy is concerned with designing new [Place strategy is PROMOTION
[Customers expect value for money. Pricing is PHYSICAL
products and designing new variations of existing concerned with getting [Promotion is concerned with making the PEOPLE PROCESS
therefore an important element of the marketing ENVIRONMENT
products, to sell to a different market segment, or products to the places customer conscious of a product and wanting to
mix. In most cases, if the price is too high,
to renew customer interest in a product (if where customers want buy it]
customers will not want to buy it]
demand is falling), or to create new demand] to buy them]
Push vs pull strategy

Core product: first - Advertising The push strategy is
level that reflects core Market Skimming
- Well developed aimed at persuading Physical environment The quality of a
customer value Market Pentration Pricing - Sales promotions
distribution networks distributors to buy the can be an important service often depends
Features of a product Pricing This is a fairly high and discounts
Actual product: (from wholesalers to product for resale in element in the on the people who A customer might be
design: This is fairly a low price. The aim of
second level of the retailer) - Direct selling their supermarkets or marketing mix for provide it: the way attracted or deterred
functions, comfort, product where the price. The aim of market skimming is to through personal other retail outlets. services, including they deal with by the processes that
convenience, quality penetration pricing is maximise the gross - Supermarkets
core benefit is turned brand and network Pull strategy retail services. customers, the he must go through to
of materials, useful into an actual product to build customer profit per unit sold. - Home delivery on friendliness or concern obtain service.
- Sponsorhips and Generating enough Customers can be
life, reliability, safety, demand quickly by Gradually, the price COD basis that they show, and Efficient processes can
Augmented product: influencer marketing likness and demand attracted to a sales
uniqueness, offering an attractive will be reduced and - E-commerce the promptness in help to win business.
additional services - Public relations among consumers location by the
packaging. price so the volumes market demand will (internet shopping dealing with customer
and benefits being that distributors / qualities of the
are high for sales. rise slowly as the price and internet banking) - Telephone or door- requests.
offered along with the retailers themselves environment.
falls. to-door selling
product ask the company for
the product.

19/43
PERFORMANCE ANALYSIS AND MEASUREMENT
Financial Performance Measurement
[Financial analysis of information in reports or statements covers issues such as profitability, revenue
and costs; investment; cash flow; and funding and capital structure]
Financial Ratios Approach to analysing financial data
Pick available data and think of all

Profitability ratios Efficiency ratios Liquidity ratios Investor and gearing ratios possible ratios that can be applied on
it.
Asset turnover = Sales/Capital Gearing ratios (a) If you are given data for more
Employed than one year, you should measure
D/E ratio = Debt/Equity
ROCE = Net margin × asset turnover changes over time.
ROCE = PBIT / Capital Employed × Financial Gearing = Debt / [Debt +
100 Receivable’s days = Receivables Equity] (b) If you are given financial data
Current Ratio = Current Assets / about a competitor, you should try to
balance/Credit sales × 365
Gross margin = Gross profit/Sales × Current Liabilities Investor ratios make a comparative analysis.
100 Payable’s days = Payable balance /
Quick Ratio (acid test) = [Current Dividend Cover = PAT / Total (c) If you are given information about
Credit purchases × 365
Net margin = Net profit/Sales × 100 Assets – inventory] / Current liabilities Dividend historical performance and targets,
Inventory days = Inventory / Cost of you should try to carry out numerical
ROE = PAT / Net equity × 100 Interest Cover = PBIT/Interest
sales × 365 analysis of the extent to which the
EPS = PAT / Number of shares × 100
Revenue per employee = Sales / organisation is on track for meeting
Number of employees PE ratio = Share price / EPS its targets.

20/43
Non - Financial Performance Measurement
[Although profit cannot be ignored as it is the main objective of commercial organisations, performance analysis should not focus on profit alone. A range of performance indicators should be used and these should
be a mix of financial and non-financial measures.]
Critical Success Factors and Key Performance Indicators
Resource Customer Responsiveness

Competitiveness Quality of Service Quality of work life Innovation Quality of Output Flexibility
Utilisation Satisfaction (lead time)
efficiency product/service
quality measures in order entry delays
measurements of introduction
sales growth by every unit, evaluate and errors, wrong
resources, planned speed of response to proportion of new flexibility,
product or service, suppliers on the basis days absence, labour blueprints or returns from
against consume, customer needs, products and services product/service mix
measures of of quality, number of turnover, overtime, specifications, long customers, reject
measurements of customer feedback to old one, new flexibility, volume
customer base, customer complaints measures of job set-up times and rates, reworking
resources available and reviews, repeat product or service flexibility, delivery
relative market share received, number of satisfaction large lots, high defect costs, warranty costs
against those used, orders sales levels flexibility, time to
and position new accounts lost or count, machines that
productivity respond to customer
gained break down
measurements demands
BENCHMARKING
Internal benchmarking Competitive benchmarking Generic benchmarking
This method examines past performance over a period of time to For some activities, the process might be so unique that there
This method compares performance of the process against other
determine trends and best performance. Alternatively, a range of may not be competitive or activity benchmarks available. In these
firms in the same industry or sector. Major automakers, for
processes might be assessed in order to determine internal best cases, a conceptually similar process is sought as a benchmark
example, will buy cars made by their competitors then reverse
practice, which can then be used as the benchmark for other [for eg tunneling is conceptually similar to explorations into
engineer those cars to see how to improve their own product.
processes. volcanic crusts].

21/43
BALANCED SCORECARD
Internal process perspective
Financial perspective Customer perspective Innovation perspective
[whether the organisation’s processes are
[whether organisation is achieving its financial [whether the organisation is meeting customer [whether the organisation is continuing to
efficient as well as whether employees are
targets and meeting shareholders needs] needs] improve and develop]
satisfied]
How does the organisation create value for its What do customers value? How can the organisation continue to
owners? To achieve its financial and customer
By recognising what customers value most, improve and create value?
objectives, what processes must the
Financial measures of performance in a the entity can focus its performance targets The focus here is on the ability of the organisation perform with excellence?
balanced scorecard system might include on satisfying the customer more effectively. organisation to maintain its competitive
share price growth, profitability and return on Management should identify the key aspects
Targets might be developed for several position, through the skills and knowledge of
investment. of operational performance and seek to
aspects of performance such as cost (value for its work force and through developing new
achieve or maintain excellence in this area.
money), quality or place of delivery. products and services.
THE PERFORMANCE PYRAMID

 Objectives and targets are set from the top level (corporate vision) down to the operational level.
 Performance is measured from an operational level upwards.
 A key level of performance measurement is at the operating systems level achieving targets for customer satisfaction,
flexibility and productivity.
 To achieve performance targets at this level, operational targets must be achieved for quality, delivery, cycle time and waste.
 With the exception of flexibility, which has both an internal and an external aspect, performance measures within the pyramid
(and below the corporate vision level) can be divided between:
o market measures, or measures of external effectiveness, and
o financial measures, or measures of internal efficiency.
 The measures of performance are inter-related, both at the same level within the pyramid and vertically, between different
levels in the pyramid. For example: New product development in a business operating system.
 When a new product is introduced to the market, success depends on meeting customer needs (customer satisfaction),
adapting customer attitudes and production systems in order to make the changes (flexibility) and delivering the product to
the customer at the lowest cost for the required quality (productivity).
 Achieving improvements in productivity depends on reducing the cycle time (from order to delivery) or reducing waste.
 All operational departments need to be aware of how they are contributing to the achievement of strategic goals.
 Performance measures should be a combination of financial and non-financial measures that are of practical value to
managers.
 Reliable information about performance should be readily available to managers whenever it is needed.

22/43
MANAGING STRATEGIC CHANGE
STRATEGIC CHANGE
[Change happens continually within organisations and their markets. Strategic development inevitably results in some change, which needs careful management. Change is either planned or unplanned.]
CHANGES IN BUSINESS STRUCTURE

TRIGGERS FOR CHANGE MANAGING STRATEGIC CHANGE
[When business circumstances change, it is necessary to make big
[reasons necessitating the change] [several models to manage the strategic change]
changes to organisation structures and processes]
Lewin: unfreeze, change,

Lewin: force field re-freeze
analysis Planned process for
[there are two opposing change should begin
forces: the driving forces with
that support the need - identifying the cause of Technological Change
for change; and the The change agent
the problems, and the The Gemini 4Rs [New IT systems and Activity Based
restraining forces that reasons why change is When a transformational methods of Management
oppose and resist the Re-frame [creating change is implemented,
needed, and communication and ABM analyses the Business process re-
change. desire for change and there has to be a 'change
Internal triggers - identifying the processing. management of activities engineering (BPR)
enlighten vision for agent' who drives the
Lewin argued that opportunities of making change] Sales representatives do in order to improve the
External triggers (Change of senior change and is responsibe Fundamental rethinking
change will not occur if improvements through not need an office of value obtained.
management, Re-structure [re-design for successful and radical redesign of
[Political, Economical, the forces resisting the transformational change. their own. They can
acquisitions & mergers, the process to create implementation. Often ABM/ABC 'activity based business processes to
Social & Cultural, change are stronger than receive and send
Demergers and The change process then better value] the change agent is an costing' can help achieve dramatic
Technological, the driving forces for information anywhere
divestments, needs to go through outside consultant. mnagers to improve improvements in critical,
Environmental, and change. Change is only Revitalise [invent new
Reorganisation, three stages: People can share data their understanding of contemporary measures
Legal] possible when the businesses and make use
downsizing, and and work collaboratively the value of what the of performance, such as
driving forces for change unfreeze: persuading of technology] He explains the reasons
rationalisation. organisation is doing, cost, quality service and
are stronger than the employees that change is for change, get involved, Just-in-time purchasing
Renew [develop and whether it is using speed.
restraining forces against necessary movement motivate others for and inventory
change. employees and reward its available resources in
(change): the changes change, and take management. High
them to seek change] the best way.
The best approach is should then be made necessary actions. inventory levels are no
therefore to try to re-freeze: once change longer needed
reduce the restraining has happened,
forces against change employees should be
and strengthen the encouraged to carry on
driving forces for change. with the new way of
doing things.

23/43
The critical path consists of the sequence of

Network Analysis/CPA Network analysis (also called critical path activities that must begin at the earliest
Float is the spare time on activities. If a delay
Project Management Tools
[A network is a schedule of the work for a analysis - CPA) is a technique that is widely possible time (and so must be completed at
occurs which is not greater than the float, the
project, showing all the tasks that have to be used to plan the timing and scheduling of a the earliest possible time) so that the project
overall project duration will not be affected.
completed, the inter-dependencies between project, by drawing the project network and as a whole will be completed in the minimum
There will be no spare time (float) on critical
them and the time-scale for completing them. identifying the activities on the critical path possible time. These activities go through
path activities.
A network is shown as a diagram or chart] and the total duration of the critical path. events where the earliest and the latest event
times are the same.
A Gantt chart is a horizontal bar chart. Each A chart can use colour coding to make it
Gantt Charts activity is shown as a bar, and the length of the The project can be planned in a way that easier to understand. For example, the
[A Gantt chart is another way of scheduling bar represents the duration of an activity (as minimises total employee numbers by making activities making up the critical path can be
the activities in a project, and identifying the shown in the chart below). They are usually use of float times, and delaying the start of shown in a distinctive colour. Activities that
critical path and float times. It is an alternative drawn with each activity starting at its earliest non-critical activities until employees working follow on from each other can be shown as a
to network charts] starting time and ending at its earliest finishing on another activity become free. continuous bar on the chart. This makes it
time. Float time is shown as a dotted line. easier to identify float time.
Example of a CPA chart Example of a Gantt chart

24/43
RISK MANAGEMENT
RISK MANAGEMENT
CATEGORIES OF RISK
Speculative risk (two-way risk) Pure risk (downside risk)

[when the actual future event or outcome might be either better or [risk where there is a possibility that an adverse event might occur. Events might turn out to be worse than expected, but they cannot be better than
worse than expected] expected]
Strategic Risk
Tactical Risks
These cannot be avoided because risks must be taken in order to make
Tactical risk refers to the potential for losses or negative consequences Operational Risks
profits.
resulting from a specific tactical decision or action taken by an Pure risks are risks that can often be controlled either by means of
Higher risks should be justified by the expectation of higher profits and
individual or organization. It is often associated with short-term internal controls or by insurance. These risks might be called internal
a company needs to decide what level of speculative risks are
decisions and actions that are taken to achieve a particular objective or control risks or operational risks.
acceptable.
goal.
Speculative risks are usually called business risk, or enterprise risk.
Categories of risk common to many types of business
Market Risk Credit Risk Liquidity Risk Technological Risk Legal Risk Health & Safety Risk Reputation Risk Business Probity Risk Derivatives Risk
Reputation risk is difficult

Health and safety risks are
Risk of losses from bad to measure (quantify). It is
Risk that the company will risks to the health and
debts or delays by Risk that could arise from the risk that a company’s Derivative instruments
Risk from changes in the be unable to make safety of employees, Probity means honesty
customers in the changes in technology (or reputation with the include options, futures
market price of key items, payments to settle customers and the and integrity. Business
settlement of their debts. inadequacy of Risk of losses arising from general public (and and swaps. They can be
such as the price of key liabilities when payment is general public. probity risk is the risk of
All companies that give technological systems in failure to comply with customers), or the used to control risks by
commodities. Market due. It can occur when a Environment risks are risks losses from a failure to act
credit to customers are use). When a major laws and regulations, and reputation of its product ‘hedging’ exposures to
prices can go up or down, company has no money in of losses arising, in the in an honest way.
exposed to credit risk. The technological change also the risk of losses ‘brand’, will suffer price risks (market risks).
and a company can the bank, is unable to short term or long term, Companies in some
size of the credit risk occurs, companies might from legal actions and damage. Damage to On the other hand, they
benefit from a fall in raw borrow more money from damage to the industries might be
depends on the amount have to make a decision lawsuits. reputation can arise in can be used to speculate
material prices or incur a quickly, and has no assets environment - such as exposed to this type of
of receivables owed to the about whether or not to many different ways: on changes in market
loss from a rise in prices that it can sell quickly in pollution or the risk.
company, and the ‘credit adopt the new technology incidents that damage prices.
the market to obtain cash. destruction of non-
quality’ of the customers. reputation are often
renewable raw materials.
reported by the media.

25/43
RISK MANAGEMENT
RISK MANAGEMENT
‘Risk-based approach’ is often used to describe risk management processes. It is an approach to decision-making based on a detailed evaluation of risks and exposures, and policy guidelines on the level of risk that
is acceptable (risk appetite)
Risk assessment as an ongoing process

Concepts in risk management (It is vital that such companies assess the risks faced on an ongoing basis so that they might respond
to changes immediately. Risk assessment should be an ongoing process for these companies)
Assessing the impact of risk on shareholders

Exposure to risk (When a company is exposed to risk, this means that it will suffer a loss if there are
unfavourable changes in conditions in the future or unfavourable events occur) (The process of identifying risks should concentrate on risks to the company, both strategic risks and
operational risks. However, the risks for a company also create risks for its stakeholders)
Assessing the risks - impact and probability

Residual risk (Companies control the risks that they face. Controls cannot eliminate risks completely, and even after
taking suitable control measures to control a risk, there is some remaining risk exposure. The remaining exposure to a The assessment of risk is sometimes called ‘risk profiling’ or ‘risk mapping’. To assess each risk, it is necessary to
risk after control measures have been taken is called residual risk) consider the likelihood that losses will occur as a consequence of the risk, and the size or amount of the loss when
this happens.
A simple approach to risk mapping involves taking each risk that has been identified and placing it on a map. The
Risk appetite (Risk appetite is concerned with how much risk management are willing to take. Management might
map is a 2 × 2 matrix, with one side representing the frequency of adverse events or the probability that the risk will
be willing to accept the risk of loss up to a certain maximum limit if the chance of making profits is sufficiently
materialise and an adverse outcome will occur, and the other side representing the impact (loss) if an adverse event
attractive to them)
occurs or adverse circumstances arise.
A risk map can help management to identify risks where immediate control measures
are required, and where the need for control measures should be considered or
reviewed periodically.
High impact, low probability’ risks might include the risks of damage to assets from
fire or flooding, the risk of a terrorist attack or the risk of major legislation that will
affect the company’s business.
Some of these risks, such as risks of fire, theft and criminal damage, can be insured.
Insurance reduces the residual risk by the amount of the insurance cover obtained.

26/43
RISK MANAGEMENT
A risk dashboard can be used to identify which risks need further control measures.
On a simple dashboard, each risk that has been identified is represented by a ‘coloured light’.
These are usually green, amber and red, representing the colours of traffic signals.
When a risk has a red light, this indicates that further risk measures are needed.
A green light indicates that the risk is under control. An amber light indicates that the risk needs to be
kept under review.
ALARP [As low as reasonably practicable] principle
This does not mean that all risk should be avoided.
It suggests rather that there is an acceptable level of risk in a given circumstance to achieve a
given objective.
It is important to remember that risk and return are usually linked in a positive way so that higher
return is often associated with higher risk.

27/43
RISK MANAGEMENT
MITIGATION AND CONTROLLING OF RISK

[There is no widely-accepted approach to the management of risk. Each business and non-business entity develops its own risk management structure according to its own needs and perceptions]
Risk retention [means accepting the risk, in the expectation of making a return. When risks are retained, they should be managed, to ensure that unnecessary risks are not taken and
that the total exposure to the risk is contained within acceptable limits]
Risk appetite and Risk Retention [The choice between avoiding risks and accepting risk depends on risk appetite. Risk appetite is the amount of risk that an entity is willing to
accept by investing in business activities, in order to obtain the expected returns from the business. Risk appetite varies from one company to another. Some companies are willing to
take fairly large risks whereas others are ‘risk averse’. In general, companies expect higher returns by taking larger risks.
MONITORING RISK METHODS OF CONTROLLING RISK
TARA Framework of Risk

Risk Avoidance Risk Committee Diversification Risk Transfer Risk Sharing Hedging Risks
Management
[means not having any
exposure to a risk. A
business risk can only be
avoided by not investing
in the business. Risk - Committee of from the
avoidance therefore BoD, responsible for Diversification is called
means staying out of a reviewing the ‘spreading risks’. The
business, or leaving a effectiveness of the purpose is to invest in Hedging risk means
business and pulling out and build a range of Risk transfer involves Risk sharing involves creating a position Transferring Risk (eg
system of risk
of the market] different business passing some or all of a collaborating with (making a transaction) insurance)
management
activities. Since some risk on to someone else, another person and that offsets an exposure Avoiding Risk (withdraw
- Embedding risk
businesses might perform so that the other person sharing the risks jointly. to another risk. from risky activity)
management in the
better than expected. has the exposure to the Common methods of risk Risks can be hedged with Reducing Risk (system of
culture of the
Diverisication is risk. sharing in business are a variety of derivative internal control)
organisation through
awareness appropriate when A common example of partnerships and joint instruments, such as Accepting risk (as per the
management of a risk transfer is insurance. ventures. futures, options and risk appetite)
- Appointing risk
company have the skills swaps.
managers
and experience to
- Getting risk audits manage the portfolio.
performed

28/43
MANAGEMENT APPROACHES AND EMPLOYEES RECRUITMENT
THEORIES OF MANAGEMENT
Fayol’s 14 Principles of
Scientific Management of Principles of organizations Rosemary Stewart on McGregor’s Theory X and Management Theory of
Administrative Weber’s Ideal Bureaucracy Peter Drucker
Taylor – Lyndall Urwick Bureaucracy Theory Y William Ouchi (Theory Z)
Management
- Specialization increases - Every organization must be

output an expression of the purpose
- Managers must be able to of the undertaking concerned.
give orders and have - Setting objectives.
- The activities of every - Specialization. There is - Douglas McGregor
authority Managers set objectives for
member should be confined specialization of work, but suggested that there are two the organization, and decide
- Employees must obey and to the performance of a this applies to the job, not the different approaches to on targets for the
Taylor’s Four Principles of respect rules. single function. individual who does the job. managing people. He called
There should be a hierarchy - Collective decision-making. achievement of those
Scientific Management - The purpose of organizing is This means that there is the two management
- Every employee should of authority, from top - Long-term employment and objectives.
- There should be a science of receive orders from only one to facilitate co-ordination and continuity. When one person approaches Theory X and
management down to leaves the job, the job Theory Y. job security. - Organizing work. Managers
work, based on the analysis of superior. thus unity of effort.
workers at the bottom. continues, and another - Job rotation, generalization organize the work that is
work methods and work - In every organized group - This management theory
- The organization should - An ideal bureaucracy should person fills the same position. and overall understanding of done, by dividing it into
times, with a view to finding the supreme authority must stipulates that the manager’s
have a single plan of action. operate in an impersonal and company operations, replace activities and jobs. They
the most efficient way of rest somewhere. There should - Hierarchy of authority. There perception of an individual
- Subordination of individual impartial way. There should job specialization as a key integrate the jobs into a
carrying out tasks. be a clear line of authority to is a distinction between needs to be understood. This
interests to interest of be a clear statement of duties, component of the model. formal organization structure
- Workers should be selected every individual in the group ‘management’ and ‘workers’. would in turn decide the and select and appoint
organization. responsibilities, standardized Within management, there is leadership style in order to - Slow
carefully. They should have - The responsibility of the people.
- Workers must be paid a fair procedures and expected a hierarchy with clearly- get the work done. advancement/promotion.
the skills and abilities that are superior for the acts of the
wage. behavior. defined levels of authority - Motivating and
well-suited to the work. They subordinate is absolute. - As a manager, if you believe - Emphasis on training and
- There should be written and ‘ranks’ of managers. communicating. Managers
should also be trained in how - Centralisation that your team members continual improvement of
- The content of each position rules of conduct. need to motivate their
to do the work efficiently. - A system of rules. The rules dislike their work and have product and performance.
- The line of authority from should be clearly defined in employees. They must also
- The scientifically-selected top management to the - There should be promotion of a bureaucracy provide little motivation, then it is - Holistic concern for the communicate with their
writing and published to all
and trained workers and the lowest ranks is the scalar of individuals within the impersonal and efficient rules likely that you will use an worker and his or her family employees so that they can
concerned.
science of work should be chain. organization, based on their and procedures. Individuals authoritarian style of further personalize do their work.
brought together for the best - In every position, the achievement. within a bureaucracy must management and micro-
- People and materials should management. - Measuring. Managers
results and greatest efficiency. responsibility and the know what the rules are to do manage tasks.
be in the right place at the - There should be division of - Explicit, formalized measure performance,
authority should correspond. their job successfully.
- There should be an equal right time. labor and specialization of - Alternatively, if you believe measures, despite implicit, perhaps by comparing it
division of work between the - No person should supervise work. - Impersonal. In a that your team members are informal control, ensure against a target or yardstick
- Managers should be kind more than fiveor six direct bureaucracy, the exercise of interested in their work and
workers and management, - The ideal bureaucracy will efficiency of operations. (benchmark). They analyze
and fair to their subordinates. subordinates whose work authority and the system of would be happy to accept
and workers and managers achieve efficiency in and assess performance, and
- Management should ensure interlocks. privileges and rewards are challenges you would be a - Individual responsibility for
should operate closely operations. communicate their findings.
together. that replacements are based on a clear set of rules. more participative manager shared accomplishments.
- It is essential that the
Stewart also suggested and reward your team - Developing people.
available to fill vacancies. various units of an
reasons for the growth of members well. This is called Managers need to develop
- Employees who are allowed organization should be kept their employees and also
in balance. bureaucracy. Theory Y.
to originate and carry out themselves.
plans will exert high levels of - Re-organization is a
effort. continuous process: in every
- Promoting team spirit. undertaking.

29/43
RECRUITMENT AND SELECTION PROCESS
Reasons for Poor recruitment

- The requirements of the job are not properly considered
- There is a failure to agree the minimum acceptable requirements for the job
- The job itself is not attractive enough, or the pay is too low
- The job vacancies are advertised in an unsuitable way.
Reasons for Poor selection

The reasons for poor selection could be any of the following.
- The application form for the vacancy is badly-designed.
- The selection techniques are inappropriate.
- The individuals making the selection are not trained in selection.
- The effectiveness of the selection process is not monitored and reviewed regularly.
EFFECTIVE RECRUITMENT
Advertise the vacancy Provide a job application

Job Analysis Person Specification
Job Description [internally or externally form for filling in
[document the requirements [produce a specification of thorugh recruitment agencies,
[produce a detailed [personal and educational
of a job and the work the qualities needed from the media advertising, internet
specification of the job] details, experience and
performed within it] individual who will do the job] etc] hobbies/interests]
References:
On a job application form, applicants for a job are often asked to provide the name and address of one or two ‘referees’.
The main problem with references is that the referee may not give an honest opinion about the individual.
In particular, a referee may be reluctant to write anything critical about the individual, not wanting to damage his or her chances of getting the job.

30/43
SELECTION METHODS

31/43
LEARNING ORGANISATIONS
Learning styles: Honey and Mumford
Theorist These individuals like to understand the theory that Theorists learn best when they are put into complex situations where they have Theorists do not learn well when they are required to
supports the practice. Theorists learn with facts, concepts to use their skills and knowledge; and they have an opportunity to look at the participate in situations where emotions and feelings are
and models. ideas involved in a problem. important; and take part in an unstructured activity.
Reflector This individual learns by observing and thinking about what Reflectors learn best when they can watch others at work, when they are not Reflectors do not like learning when they are given tasks
he has seen. Reflectors prefer to avoid ‘jumping in’ to a given tight deadlines for writing reports when they have time to think and reflect. to do and complete without time to plan or think.
task, and prefer to watch.
Activist This individual learns by doing and acting. Activists like to Activists learn best when they are involved in new experiences and opportunities; Activists do not learn well when they are required to listen
‘get their hands dirty’. they work with others in team tasks: in a training situation, they enjoy role play; to lectures and long explanations; read, write and think
they are ‘thrown in at the deep end’ and are expected to get on with a task; and on their own; and follow precise instructions about what
they are leading discussions or chairing meetings. to do.
Pragmatist This individual like to see how theory is put into practice in Pragmatists learn best when they have an opportunity to apply ideas and Pragmatists do not learn well when there is no obvious
the ‘real world’. Pragmatists find abstract theories and techniques in practice, and are then given feedback on how well they have done; immediate purpose to what they are learning, and so no
concepts of no use unless they can see their relevance to and there is a model that they admire and can copy (such as a boss who acts as immediate benefit; the learning is ‘all theory’; and there
practical action. a ‘role model’). are no practical aspects or practical guidelines in the
learning.
The learning curve

According to learning curve theory, when an individual begins a new task, he
or she will do the job more quickly with each repetition of the task.
Well-motivated individuals also learn through training and development.

32/43
The training and development process
Methods of training
- Formal training in a training room environment.
- Computer-based training (CBT) where trainees work at their own pace
- Training in the work place.
- In-house training may be provided by the organisation’s own trainers.
- Formal training may end in an examination, leading to a qualification.
Methods of development
Job rotation: means moving an individual from one job to another at fairly
regular intervals, so that the individual gains familiarity with other roles also.
Secondment: An individual might be ‘seconded’ to work somewhere else for a
period of time.
Deputising for a manager or supervisor. An individual may be given the
opportunity to deputise for his or her boss when the boss is absent from work.
Delegation, mentoring and appraisal.
Job enrichment means making the job ‘richer’ by building more responsibility
into it. When a job is enriched, the job holder is given more authority.
‘Self development’ is a term for the activities and learning that provide lifelong personal development, and at the same time contribute to the individual’s professional competence or the achievement
of the organisation’s goals.
The goal of self-development is to increase your readiness and potential for a position of greater responsibility.
Enhancing self-development
There are several ways in which individuals can try to achieve more self-development:
- They should use the staff appraisal system to agree targets for achievement and initiatives for training and development.
- They should follow up on their appraisal interview. They should try to achieve the objectives they have been set, or try to ensure that they get the training or development that they want.
- If they do not get the training they want from their employer, they could arrange for some training in their own out-of-work time.

33/43
MANAGEMENT CHALLENGES
Peformance Appraisal
[formal process for reviewing and assessing the competence of individual employees, and considering what might be done to develop them]
The following are ‘common sense’ requirements for good Barriers to effective performance appraisal
interviewing: - It has no purpose. Employees see the appraisal interview as
- Ask questions that allow the employee to give full answers. nothing more than an informal chat with the manager.
A staff appraisal may have three different components. - Give the employee time to ask questions and give opinions. - Employees see the appraisal interview as an occasion for
- A reward review: opportunity for the employee and his or her criticism from the manager.
- Don’t ask complicated questions.
manager to discuss pay and other rewards. - The interview is one-sided.
- Ask follow-up questions to clarify answers to initial questions.
- A performance review: assess the performance of the - The appraisal process might be seen as an annual event.
- Listen. Don’t talk too much.
employee since the previous appraisal. - Lack of training in appraisal interview techniques. A system
- Keep the discussion focused on relevant issues.
- Potential review: discuss the employee’s potential for career might be ineffective because managers are not given proper
development and promotion. - Handle difficult areas with sensitivity and consideration. guidance or training in what they should be doing.
- Let the employee know that you are listening - There must be formal records for an appraisal system.
- Look for constructive solutions to problems, and look for ways - An appraiser should be objective when appraising employee
to develop the employee. performance.
Techniques of assessment:
Examples of appraiser bias:
Approaches by management to the appraisal interview - Ranking. When employees are interviewed by the same
manager, the manager can rank them in order of competence. - The halo effect – this involves overly-focusing on one positive
1. Tell and sell method - The interviewer tells the employee how area to the detriment of being objective about other areas in
the assessment will be made. - Scoring. An organisation may use rating scales to score the need of development.
competence of an employee.
2. Tell and listen method – The interviewer invites the employee - Central tendency bias – this type of bias occurs when the
to respond to the assessment. - Grading. A similar approach to appraisal is to give the reviewer groups the bulk of employees into mid-level grades
employee a grade or rating on a nonnumerical scale – such as meaning that most employees are considered ‘average’.
3. Problem-solving method – The interviewer and the employee excellent, very good, good, satisfactory, below average and
must agree in advance as to what the appraisal interview poor. - Recency bias – this describes biasing the review towards more
should try to achieve, and how it should be conducted. recent events to the detriment of objectively appraising
- Critical incident method. Another method of appraisal is to performance over the whole review period.
4. 360-degree approach – interview is based on an assessment focus on any critical incident that has occurred during the time
of the individual by a number of other people (‘raters’) who are since the previous appraisal interview. - Personal bias describes the situation where a reviewer favours
familiar with the individual’s work, and a self-assessment by the certain employees and discriminates against others for personal
individual. - Performance-related assessment. The competence of an (subjective) reasons rather than objective performance-driven
employee may be based on a comparison between the targets reasons.
or objectives.

34/43
Disciplinary alternatives
Establish the facts of each case 1. Oral warning – for the first transgression the employee should receive an oral warning.
2. Written Warning: If an oral warning was issued and problem area still persisted, next alternative may be a written warning. The
letter at the outset must state that it is a written warning and must mention the respective personnel policy and/or contract provision.
Disciplinary process
Inform the employee of the problem 3. Suspension without Pay. Suspension is normally the next level after written warning(s). It is meant to suspend the employee for a
certain number of working days and the pay is docked for the number of days suspended.
4. Reduction of Pay within a class. At times when the management do not wish to remove the employee from the site but feel
Allow the employee to be accompanied
important to take a corrective measure then this alternative might be opted for in lieu of suspension without pay.
at the meeting
5. Demotion to a Lower Classification. The employee may be demoted temporarily or permanently depending upon the seriousness
of the problem area.
Decide on appropriate action 6. Dismissal: Generally, when all other progressive disciplinary actions fail to get the employee’s attention, dismissing him/her is the
action of last resort.
Provide employees with an opportunity

to appeal.
LINKING REWARD SCHEMES TO PERFORMANCE MEASUREMENT
Advantages Disadvantges
Attract
Employees encouraged to
Motivate Encourage talented
help think more Meeting the Earning the
individuals to employees to employees, Meeting only Using more
organisations about the long- budget target, bonus –
achieve their focus on and make the lowest resources than Avoiding risks Taking risks
achieve their term prospects but not beating whatever it
performance continuous them want to targets necessary
strategic of their it takes to do this
targets improvement work for the
objectives. company.
entity

35/43
BUSINESS OPERATIONS
BUSINESS OPERATIONS
Operations Management [involves planning and controlling day-to-day activities in the operations department]
Production planning and control involves reconciling demand for Capacity planning and control aims to achieve a suitable balance
Inventory management involves making decisions about how much
resources and outputs with their supply [avoding stockouts and between the demand for production capacity and the provision of that
inventory to hold including buffer inventory
overholding of inventory]. capacity.
SUPPLY CHAIN:
There is a value chain within every business entity. There is also a supply chain from the producers of raw
materials and equipment through to the entities that sell the end consumer product to customers.
The four main characteristics of a product supply chain are:

- the location of each link in the chain
- manufacturing
- inventory management
- distribution
Procurement and vendor development
Negotiating and managing supply

Procurement as a strategic positioning tool Supply networks and sourcing strategies
relationships
Network sourcing
Long-term strategic Parallel sourcing
Independent describes the situation [Network sourcing is
Competitive relationships founded on a tiered
[Improved Supportive in larger companies
relationship [this is where Passive Integrative Traditional sourcing network of small
professionalism and [Purchasing where each plant/
[this is where buyers organisations [Purchasing reacts to [Significant reliance on include a large number business suppliers.
attempt to formalise department is viewed factory/ location
negotiate hard to collaborate with key requests from other purchasing for of suppliers for each Network members
communication links as essential by top operates single
achieve the lowest suppliers and form departments] competitive success] major raw material tend to form long-term
with technical management] supplier sourcing but
possible price] long-term strategic from different relationships founded
functions]
partnerships] suppliers. on co-ordination and
mutual trust]

36/43
BUSINESS OPERATIONS
E-Business and the Supply Chain
[think of a Pakistani having an account on amazon, sourcing goods from China, and selling in US, UK, and Canadian markets]
The push and pull models of the

The virtual supply chain E-Procurement
supply chain
With a push strategy, a company

tries to persuade customers to buy
its products or services. To use a
makes use of web-based technology push strategy, a company needs to
and facilities such as the internet, identify customers or potential E-Payment
intranets and extranets, e-mail, e- E-Purchasing
customers, and send out a marketing E-Sourcing [E-payment is the use of electronic
purchasing and electronic order- communication. [E-purchasing is the process of
tracking systems; and improves the [use of electronic methods for methods for payment, such as
finding suppliers through the
efficiency and effectiveness of the Selling goods through the internet, finding new suppliers and electronic invoicing and self-billing.
internet, getting quotations and
physical supply chain, by improving particularly to consumers, is largely a negotiating terms for purchase Many companies also arrange to pay
making purchase orders
the information flow from customers pull strategy. This is because a agreements] suppliers by sending electronic
electronically]
back through the supply chain to company relies on customers payment instructions to their bank]
suppliers coming to its website (or to the
websites of intermediaries) and
asking for product information
and/or placing an order.
Just-in-time (JIT) Systems

[Items should be produced just in time to meet customer orders, and not before (just in time production). Purchases should be delivered by external suppliers just in time for when they are needed in production (just in time purchasing)]
Practical Implications of JIT Wastes to be eliminated to implement a successful JIT system JIT techniques
- Over-production: Producing items is wasteful if the items go into

- Production times must be very fast and inventory of finished goods inventory or are held in production. - The layout of the factory floor should be designed in a way that
should not be held. - Waiting time. Time spent waiting for work is wasteful, and creates minimises waste of transportation and waste of motion.
- Production must be reliable, and there must be no hold-ups, stoppages inefficiency in both labour and machine usage. - Set-up activities do not add value. The aim should therefore be to reduce
or bottlenecks. - Transport (movement of materials). The layout of the factory floor should set-up times.
- Deliveries from suppliers must be reliable and quick. Must be excellent therefore be designed in a way that minimises movement of materials. - Prevent breakdowns in equipment that cause an unscheduled hold-up in
relationship with key suppliers. - Waste in the process. Waste in the process results in lost materials. production.
- The production system must be flexible (switch immediately) and batch - Motion. Simplify work procedures by eliminating unnecessary - There should be clear signs in the workplace that indicate when more
sizes should be short. movements by people. production is required.
- Defective goods are ‘quality waste’.

37/43
BUSINESS OPERATIONS
PRODUCTION MANAGEMENT SYSTEMS
Materials requirements planning (MRP I) Manufacturing resource planning (MRP II) Optimised production technology (OPT) Enterprise resource planning (ERP)
The purpose of an MRP I system is to plan Optimised production technology or OPT is a

An ERP system performs similar functions to an
purchasing and production scheduling exactly, computer system that provides a different
MRP II systems extend MRP I systems by MRP II system, but in addition it integrates
so that: approach to production planning and capacity
adding other planning processes, such as: data from all operations within the
management. The OPT approach is based on
- all the raw materials and components are organisation. This should improve the co-
- financial requirements planning his Theory of Constraints.
purchased and available in time to ordination and integration of planning and
manufacture the sub-assemblies or finished - labour scheduling The Theory of Constraints is that production control decisions throughout the organisation.
products, and - equipment utilisation scheduling. output is optimised by focusing on the
constraints that restrict production activity.
- the finished products are manufactured on MRP II has been defined as ‘a game plan for An ERP system might provide an integrated
time to a planned production schedule. planning and monitoring all the resources of a An OPT computer system schedules
database for manufacturing, purchasing,
manufacturing company: manufacturing, production in a way that produces the
The MRP I system therefore produces a finance and accounting, HR, sales and
marketing, finance and engineering’ (Wight). maximum output possible within the
detailed schedule of external purchases and marketing, logistics, customer services,
limitations imposed by the existing key
internal production activities. strategic reporting.
constraint.
QUALITY MANAGEMENT
[quality related costs]
Prevention Costs Appraisal Costs Internal Failure Costs External Failure Costs
Incurred when the quality problem arises after

Prevention costs are the costs of action to the goods have been delivered to the
Appraisal costs are the costs of checking the Incurred when defective production occurs.
prevent defects (or reduce the number of customer.
quality of work that has been done. They includethe cost of scrapped items, the
defects). They include the costs of dealing with
Appraisal costs include inspection and testing cost of re-working items, and the cost of
They are costs incurred to prevent a quality customers’ complaints, costs of carrying out
costs. production time lost due to failures/defects.
problem from arising. repair work, costs of recalling and potential
legal implications.

38/43
SUSTAINABILITY REPORTING
[a report published by a company or organization about the economic, environmental and social impacts caused by its everyday activities; synonymous with other terms for non-financial reporting; triple bottom line reporting, corporate social
responsibility (CSR) reporting]
Why finance department plays a vital role in

Three dimensions of sustainability reporting [per
Benefits providing and supporting sustainability
IFAC Framework 2.0]
leadership
Internal - The finance function influence behavior and

- Increased understanding of risks and opportunities. External outcomes affecting strategic decisions.
- Influencing long term strategy and policy. - Mitigating or reversing negative environmental, social Economic viability (shareholders’ wealth) - Providing insight and analysis to support decision
and governance impacts; gaining reputation and brand making bringing sustainability perspectives.
- Streamlining processes and improving efficiency. Social responsibility (impact on society)
loyalty - Improving the quality of stakeholder communications
- Benchmarking and assessing performance Environmental responsibility (impact of environment) and the reporting of sustainability information.
- External stakeholders understand the organization’s
- No environmental & governance failures. true value, and tangible and intangible assets. - Accountants in audit and advisory roles, can consider
- Comparing performance between organizations how they could embrace sustainability issues
IFAC Sustainability Framework: Business Strategy perspective (bringing sustainability into strategy, governance and values of business)
Key theme Key considerations for professional accountants
Defining Establishing an understanding of sustainability; by  Create awareness of how the finance function can get involved.
sustainability and developing a strong business case.  Ensure clarity on uses of the business case
business case  Identifying significant, material, and relevant environmental and social issues.
 Putting forward impacts of activities on society/environment
Vision and Requires change and leadership from senior  Integration of sustainability into the key business drivers requires leadership and ownership within the governing body.
leadership management.  Managerial and operational structures deliver the vision.
Stakeholder Stakeholder engagement develops an  Reinforce the importance of stakeholder engagement.
engagement understanding of what sustainability means.  Dialogue with stakeholders is necessary.
 Build the knowledge and professional skills needed to deal with the challenges of understanding and balancing stakeholder
expectations
Goals and target Develop goals and targets to facilitate the delivery  Establish goals, targets, and performance measures
setting of high-level vision and strategy.  Engage employees involved in executing strategy
 Link to rewards
 Establish a baseline against which progress can be monitored
Integration with Risk management approach identifies opportunities,  Integrate sustainability issues into risk management and other management systems
risk management risk factors, and causation.  Gather information and assess cost benefit
 Assess potential impact
Engagement of Working closely with suppliers.  Identify opportunities linked with sustainable procurement.
suppliers  Communicate how an organization builds relationships.

39/43
IFAC Sustainability Framework: Operational perspective (putting sustainability considerations in operations and functions)
Cost cutting by Clearly understanding the possibilities for better  Identifying large environmental costs and changing processes.
minimizing waste environmental performance  Monetizing procedures for costs and savings.
 Spreading awareness and minimizing materials waste
 Changing processes
Carbon foot printing Using carbon accounting to calculate  Moving beyond a GHG inventory
organizational carbon footprint  Determine how to manage carbon emissions data
 Establish principles of a carbon audit report.
 Greenhouse gas inventory audit.
Improving information Social and environmental performance requires  Working across organizational functions, particularly integrating accounting, procurement and operations.
to support decisions information flows.  Accounting for social costs and valuing social impacts.
and reporting  Using environmental and social cost and other non-financial information for project appraisal and capital budgeting.
Performance Using strategic performance measurement  Consider how sector or industry norms can influence KPI selection
measurement and systems, and KPIs to achieve the sustainability-  Develop and use eco-efficiency indicators to link monetary and physical information for decision making.
KPI’s related objectives.  Develop and use socio-efficiency indicators.
 Consider how to report metrics and KPIs.
IFAC Sustainability Framework: Reporting perspective (report the results accordingly)

Developing An Using GRI’s Reporting Framework for internal and  Determine the range of users and their needs.
Organizational external reporting.  Project planning and management, and structured processes.
Reporting Strategy  Break down functional silos to facilitate effective integrated reporting. Use reporting frameworks and guidelines;
Reflecting Incorporating environmental and social issues into  Establishing how to reflect environmental liabilities and costs in financial statements prepared under IFRSs.
sustainability impacts financial statements.  Determining specific sustainability disclosure requirements.
in financial statements  Considering additional information and disclosures and determining materiality.
Narrative reporting for Using narrative reporting to provide greater  Avoiding over-disclosure and clutter
enhanced transparency transparency on business performance.  Ensuring a forward-looking orientation
 Viewing narrative reporting as a fair reflection of the management information used internally
Determining Understanding and reconciling approaches to  In defining report content, materiality should be considered.
materiality applying materiality.  Accountability for materiality thresholds and judgments.
 Linking the determination of materiality to strategy, risk management, and sector benchmarks.
 Determining a process for resolving different expectations regarding materiality.
External review and Establishing an approach to external assurance that  The quality of external assurance is directly linked to stakeholder inclusiveness.
assurance of adds credibility to an organization’s reporting.  Clarifying the purpose and scope of the assurance.
sustainability  The choice of service provider.
disclosures  Establishing the type of engagement and enhancing the assurance statement.

40/43
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY

CSR refers to the responsibilities that a company has towards society. It can be described as decision-making by a business that is linked to ethical values and respect for individuals, society and the environment.
THE EFFECT OF CSR ON COMPANY STRATEGY: CSR and competitive advantage

The significance of CSR probably varies between different countries, but in some countries, particularly Europe and North America, companies are waking up to the strategic possibilities and strategic advantages of being
an environmental-friendly company. Customers might be willing to pay more for environment-friendly and for ‘healthy food’.
Formulating a CSR policy

The following steps might be taken by a company to implement a CSR policy:
 It should decide its code of ethical values, and possibly publish these as a Code of Ethics. It should establish the company’s current position with regard to its CSR values, and decide the position it would like to reach.
 The company should develop realistic targets and strategies for its CSR policies. These strategies should be implemented.
SOCIAL AND ENVIRONMENTAL FOOTPRINTS

Environmental footprint (ecological footprint)
 An environmental footprint, also called an ecological footprint, means the impact that an entity has on the environment, in terms of raw materials, non-renewable resources that it uses to make its products or services
and the quantity of wastes and emissions that it creates in the process.
 There have been attempts to measure environmental footprint, using a common measure for all activities. It can be measured in terms of the area of productive land and aquatic ecosystems that have been used.
 An environmental footprint for any economic activity or any company can therefore be measured in terms of hectares of productive land or aquatic ecosystems.
Carbon neutrality
The effect on the environment of economic activities by individual companies may be measured in terms of emissions of carbon-based pollutants.
Carbon neutrality exists when a company is able to counterbalance its use of carbon products, and particularly its carbon dioxide emissions, with activities that reduce the amount of carbon dioxide in the atmosphere.
Example: Environmental conscience: There are many examples of large environment conscious companies. One company has listed some of the initiatives it has taken to create a sustainable business as:
- Setting a target of zero waste generation and zero waste emissions. - Conserving energy and resources such as oil, coal, natural gas, water and minerals
- Recycling materials to reduce the need for disposals - Reducing packaging waste and developing new products and processes that reduce the environmental risks
- Managing land efficiently to increase habitats for wild life - Making, using, handling and transporting materials safely and in an environment friendly way
Social footprint
A social footprint is the effect of economic activity on society and people. In general, economic activity is seen as providing benefits for society, although some companies are much more ‘people-friendly’ than others.
Companies might seek to measure the contribution of their activities towards society in terms of:
 Total numbers employed or increase in the total number of employees
 The proportion of the total work force employed in different parts of the world
 The proportion of the total work force that is female or from different ethnic groups
 Health and safety at work (for example, numbers of employees injured each year per 1,000 of the work force).

41/43
ETHICS AND ETHICAL CONSIDERATIONS
CONTENT OF A CORPORATE CODE OF ETHICS
There is no standard format or content for a code of ethics, but a typical code contains general statements about ethical conduct by employees, and specific reference to company's dealings with each stakeholder
group, such as employees, customers, shareholders and local communities.
Shareholders
Employees Customers
A code of ethics might not include much
- human rights, including the right of all A code of ethics might include statements Competitors about shareholders, because the
General statements about ethical conduct employees to join a trade union about: relationship between a company and its
A code of ethics might include statements
A code of conduct should specify that - equal opportunities for all - fair dealing with customers about: shareholders might be contained in a code
compliance with local laws is essential. In of corporate governance that the company
- refusal to tolerate harassment - product safety and/or product quality - fair dealing with competitors
addition, employees should comply with the follows.
policies and procedures of the company. - concern for the health and safety - the truthfulness of advertisements - the use of techniques for obtaining The key issue with shareholders is to
- respect for the privacy - respect for the privacy of confidential information about competitors maintain and develop trust and confidence,
- company policy on bribes information about each customer. which might be achieved through disclosure
of information (openness and transparency).
WHISTLEBLOWING
[means reporting illegal or improper behaviour]
An employee considering 'blowing the whistle' should consider these before deciding to actually blow the whistle Problems with whistleblowing
Some individuals
make allegations
Is there an internal When an
Are all the facts They should about colleagues
Establish whether audit department individual reports
correct? Could double-check they Consider Double-check or managers that
there is scope to who could be concerns about
they have Is there sufficient have thought discussing events Think about the company policy are unfounded.
discuss events made aware of Consider if there is illegal or unethical
misinterpreted evidence to justify about the in confidence with impact on the and The allegations
confidentially with relevant events a legal obligation conduct, the
something or blowing the situation an independent person's career whistleblowing might be made for
the human and take to report individual is often
mistakenly drawn whistle? objectively and confidential third and job procedures in the reasons of malice
resources ownership of victimised, by
the wrong with neutral party staff handbook. and dislike, or
department. reporting any colleagues and
conclusion? emotion because there has
issues? management.
been an argument
at work.

42/43
The IESBA (IFAC) Code of Ethics for Professional Accountants
Ethical threats to
A model for resolving
Fundamental principles compliance of Nature of ethical safeguards Mirror Test
ethical conflicts
fundamental principles
- integrity (an accountant must be - Self-interest threats, or conflicts of

honest and straightforward in his interest (when personal interests
professional and business of accountant or close family Safeguards created by legislation,
dealings) member could be affected by regulation or the accountancy When an ethical issue is involved,
- objectivity (an accountant must accountant's the decisions or profession Stage 1. Recognise and define the an accountant should carry out a
not allow his professional or actions) Safeguards in the work ethical issues. mirror test.
The requirements for individuals to
business judgement to be affected - Self-review threats (responsible have education and training for environment Stage 2. Identify the threats to To carry out a mirror test, you have
by: bias (personal prejudice), for reviewing some work or a membership of the professional a code of ethics for the company compliance. to answer basic questions about
conflicts of interest or undue judgement that he was responsible body. and suitable ethical leadership the ethics of a course of action.
Stage 3. Assess the significance of
influence from others) for originally.) from senior management
The CPD requirements for the threats. 1. Is it legal? If it is not legal, you
- professional competence and due - Advocacy threats (when an qualified members, to ensure that a sound system of internal control, should not be doing it.
Stage 4: If the threats are 'not
care (duty to maintain his accountant promotes the point of they maintain a suitable level of with strong internal controls significant', consider additional 2. What will other people think?
professional knowledge and skills view of a client. Acting as an competence.
the application of appropriate safeguards that could be used Think about the opinion of people
at a level that enables him to advocate for the client can reach
Corporate governance regulations, policies and procedures Stage 5. Re-assess the threats to whose views matter to you, such
provide a competent professional the point where the objectivity of
particularly those relating to compliance after additional as close family members or the
service to his clients or employer) the accountant is compromised) procedures for identifying
auditing, financial reporting and safeguards. Do the additional media.
- confidentiality (must respect the - Familiarity threats (knowing personal interests and family
internal control. safeguards
relationships 3. Even if the action is legal, it is
confidentiality of information someone very well, possibly
Professional standards, such as eliminate the risk or reduce it to an ethically correct?
obtained in the course of their through a long association in whistle blowing procedures for
IFRSs and auditing standards. insignificant level?
work) business. The risk is that an reporting illegal/unethical A problem for accountants is often
accountant might become too Monitoring procedures and behaviour Stage 6. Make the decision about that an action is legal (or not
- professional behaviour
familiar with a client disciplinary procedures. what to do. illegal) but is nevertheless
(accountants are required to
External review by a legally- unethical and should be avoided.
observe relevant laws and - Intimidation threats (objectivity
regulations, and to avoid any and independence is threatened empowered third party.
actions that would discredit the by intimidation, either real or
accountancy profession) imagined)

43/43

CFAP 3 SPM Complete Summary With Mind Maps - by Muzzammil Munaf (IQSF)

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CFAP 3 SPM Complete Summary With Mind Maps - by Muzzammil Munaf (IQSF)

Uploaded by

Copyright:

Available Formats

CFAP 3 – STRATEGY AND

Corporate Strategy Business Strategy Functional Strategy

For each business function, how

Approach to Strategic Planning

STRATEGIC ANALYSIS STRATEGIC CHOICES STRATEGY INTO ACTION

Secondly, milestone events and Reality check - the final stage

Always a mentor | Muzzammil Munaf

STRATEGIC ANALYSIS / POSITIONING [SWOT]

Internal Environment (Strengths

PORTER's FIVE FORCES

Always a mentor | Muzzammil Munaf

STRATEGIC GROUPS AND MARKET SEGMENTATION

Always a mentor | Muzzammil Munaf

STRATEGIC CAPABILITIES [COMPETENCES AND RESOURCES]

WHEN DOES A STRATEGIC COMPETENCE BECOME SUSTAINABLE COMPETITIVE ADVANTAGE?

Does your organisation has a unique resource?

No. All other

Its a Sustainable Short term

Always a mentor | Muzzammil Munaf

Always a mentor | Muzzammil Munaf

Differentiation focus Backward (raw

when products become the

Acceptability Feasibility Suitability

Always a mentor | Muzzammil Munaf

SUMMARY OF COMPETITIVE STRATEGIES

Cost leadership Differentiation Focus

How (examples)  economies of scale  Branding  find a segment where

Threats  no fallback position if  perform badly in a  low volumes

Always a mentor | Muzzammil Munaf

Routes 1 and 2 are price-based strategies.

Routes 4 and 5 are differentiation strategies.

Always a mentor | Muzzammil Munaf

THE ANSOFF GROWTH MATRIX

Existing Products New Products

Existing Markets Market penetration/growth Product development

New Markets Market development Diversification

Suitability Acceptability Feasibility

Always a mentor | Muzzammil Munaf

GREINER’s GROWTH MODEL

Always a mentor | Muzzammil Munaf

Franchises and licenses are both Strategic alliance [a co-operative

Always a mentor | Muzzammil Munaf

STAR PROBLEM CHILD CASH COW DOG

[rate of market growth: high] [rate of market growth: low]

Strategic movements on the BCG matrix

Always a mentor | Muzzammil Munaf

Always a mentor | Muzzammil Munaf

The impact of the internet on business

Always a mentor | Muzzammil Munaf

Design features such as The website is an

E-MARKETING AND THE 7 P's OF MARKETING MIX

PRODUCT PRICE PLACE PROMOTION PHYSICAL ENVIRONMENT PEOPLE PROCESS

Some products sold on the Websites and e-mail are

INTERACTIVITY INTELLIGENCE INDIVIDUALISATION INTEGRATION INDUSTRY STRUCTURE INDEPENDENCE OF LOCATION

To interact with the customer

Always a mentor | Muzzammil Munaf

When an established company is planning to market

CUSTOMER RELATIONSHIP MANAGEMENT

Provide customers with a

Always a mentor | Muzzammil Munaf

Three V's of Big Data Additional four V's of Big Data

Velocity refers to the incredibly

- Finance (bringing value to the