CIPS Exam Report for Learner Community:

Qualification: Professional diploma in procurement and supply

Unit: PD2 - Corporate and business stratergy
Exam series: May 2017

Each element of a question carries equal weighting unless otherwise stated.

Question 1 – Learning Outcome 1 Mark
a) Explain the differences between strategic management decisions and 10 marks
operational management decisions.

b) For each of the following, explain the potential impact on an organisation’s 15 marks
strategy:
(i) The strategic purpose
(ii) The strategic capability
(iii) The organisation’s culture

Learning outcome addressed: 1.1

Command word explanation: Explain – give reasons for or account for something

Examples of good content/good approaches in answers:

Part (a) looked for candidates to explain the differences between strategic and operational management
decisions. Crucial to this question was the aspect of decisions.

It is important always to lay down a context to an answer and here it would have been to say what (a)
strategic management and (b) operations management is. It was also important that recognition should be
given within the response that a strategy will comprise of both levels.

Strategic management is fundamentally concerned with the development of resources and the broad
direction the organisation is going to take and so many of the decisions at that stage need to support these
fundamentals.

Another important consideration that needed to be expressed was that strategic management is about
managing complexity and uncertainty. It deals with non-routine situations, has a scope that extends across
the whole organisation and will consider broad, high-level decision making over a long term horizon.

On the other hand operational management is concerned with the more tactical efficient and effective use of

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 1/9

Leading global excellence in procurement and supply

resources.
It concerns itself with a specific area or areas of the organisation and operates within the boundaries set by
the over-arching strategic direction. Operational management will include detailed planning within short to
medium-term horizons.
Finally, it is concerned with the monitoring and control of resources such as finance, people and equipment.

Examples of content for merit/distinction grade answers:

Good structure to the answer showing clearly, sometimes in a table, types of decisions that will be taken at
the strategic level and then the operational level; solid and appropriate examples to back up the points being
made.

Examples of poorer content/ poorer approaches in answers: Although most candidates passed this question,
fewer marks were accrued when answers paid little attention to depth of response, writing in some instances
a few sentences which did not reflect properly the need to determine what each level of decision was and
putting in sufficient commentary to highlight/reinforce the differences.

Part (b)
Here candidates were required to explain three terms namely:
1. Strategic Purpose
2. Strategic Capability and
3. Organisation Culture

The explanation was in the context of each of the term’s impact on an organisation’s strategy – and this was
very important to secure the marks on offer.
Failure to do so, and not linking that contextualisation, secured much lower marks.

The Strategic Purpose:

This identifies an organisation’s key aims and objectives and is influenced by those who have an interest or
stake in the organisation’s activities.
The strategic purpose will be set by combining the requirements of shareholders, managers, employees,
customers, financiers, government policy, the media and the personal preference of its owners.
Strategy should be considered in light of the strategic purpose in terms of its suitability, acceptability and
feasibility.

The Strategic Capability:

This term identifies the resources and competencies that an organisation possesses.
In general terms they are the internal aspects and will include items such as:
 Physical resources;

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 2/9

Leading global excellence in procurement and supply

  Cash resources;
 Information;
 Human Resources and
 Intangible assets such as brand and image.

The organisation will need to set a strategy consistent with its capabilities or find ways of developing them if it
is to succeed in its endeavours.

The Organisation’s Culture:

This is the collective history, assumptions and norms of the organisation. It may be influenced by:
 The industrial sector;
 The nationality and the personality traits of its founders.

The culture of the organisation can have a strong influence on the strategy and in some instances it may lead
to some strategic options being rejected as inconsistent with the culture of the organisation.

Examples of content for merit/distinction grade answers: High marks were awarded where answers had
comprehensively explained each of the terms in equal measure with credible examples given.

Examples of poorer content/ poorer approaches in answers: Notable concerns came from a lack of
understanding of Strategic Purpose and Organisational Culture, which reduced marks awarded. Uneven
content between each of the three issues which all carried equal marks (5 marks).

Concluding comment:
Some very good responses detailed, informative and cited very good examples reinforcing the points being
made. On the other end of the scale some poor responses lacking strategic understanding; much too short
answers. Part (a); overly tactical responses and limited knowledge being displayed with regard to Part (b).

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 3/9

Leading global excellence in procurement and supply

Question 2 – Learning Outcome 2 Mark
Explain, using examples, THREE generic strategies that an organisation may use 25 marks
to achieve and sustain its competitive advantage.

Learning outcome addressed: 2.1

Command word explanation: Explain – give reasons for or account for something

Examples of good content/good approaches in answers: This was a question that looked to four aspects,
firstly an explanation of THREE generic strategies in the context of, secondly, achieving competitive
advantage, thirdly how they can then go on to sustain that competitive advantage and finally citing credible
examples to reinforce the points being made.

A good way to have begun the answer would have been to provide a demonstration of understanding of
generic strategies likely to address competitive advantage and at this time to define competitive advantage.

The likely strategies that best fits “generic strategies” as the basis of the answer are Michael Porter’s Generic
Strategies as follows:

COST LEADERSHIP STRATEGIES: cost leadership is where an organisation seeks to become the lowest cost
producer in the industry as a whole. This provides a competitive advantage over other members of the
industry and enables the organisation to either charge a lower price than all of its rivals, based on its cost
advantage. Alternatively, the organisation may charge the same price as its rivals but due to its lower cost
base, it will enjoy higher profits than all its rivals. A combination of these approaches is also possible.
Cost leadership is generally based on achieving economies of scale through large volume production. Fixed
costs are spread across a larger number of units of output than with competitor’s and therefore the
organisation enjoys a competitive advantage that others cannot match.

DIFFERENTIATION STRATEGIES: these strategies are based on offering something that is perceived to be
unique in the market. It may be a defensive strategy when an organisation cannot match the cost leadership
generic strategy followed by other organisations in the market.
Differentiation creates brand loyalty providing a barrier to entry for other players in the market. Customer
perception may be of exclusivity and therefore customers may pay higher prices.
Differentiation may be achieved by product specification or features, reputation for quality, CSR record, style,
strong brand identity, unique distribution channels and total supply experience.

FOCUS STRATEGIES: these are strategies that are based on targeting activities on a selected area of the
market. Examples of this type of generic strategy are where an organisation targets a particular buying group
of consumer or customers, or market segment.

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 4/9

Leading global excellence in procurement and supply

The issue with this approach is that the organisation sacrifices economies of scale from serving the wider
market. In addition, if the focus strategy is successful, other providers may attempt to copy the strategy.
Mention could also have been made to the subsets of the focus strategy, namely cost focus and
differentiation focus.

However a range of other possibilities could have been used, more prominently would have been the
“strategy clock” (Bowman).
Ansoff matrices; BCG are other models that may be used; however they are not as widely recognised in this
context as the Porter model.

Examples of content for merit/distinction grade answers:

More detailed and comprehensive responses that inserted credible examples to reinforce the points made.
More importantly dealt with the aspect of sustaining competitive advantage which was part of the question.

Examples of poorer content/ poorer approaches in answers:

Excessive use of bullet points with little or no linkage to their impacts on competitive advantage, let alone
sustaining competitive advantage. Inserting models that had no relevance to the question and as a result
scored zero marks. Lack of detail with poor strategic understanding associated with this question.
Weaker answers confused diversification with differentiation.

Concluding comment: This question provided a variety of responses which leaned more towards poor
answers rather that good or excellent ones. Where candidates did cite Porters Generic Strategies, some
answers failed to accurately explain Focus but had a reasonable understanding of Cost leadership &
Differentiation. A further point worth noting on Focus is that many candidates reflected on focus as “niche”
and then failed to apply it by having a discussion on segmentation.

Question 3 – Learning Outcome 3 Mark

Discuss the features of organisational structure that may be used by an 25 marks
organisation to achieve increased flexibility to match the requirements of a
rapidly changing supply chain.

Learning outcome addressed: 3.1

Command word explantion: Discuss - consider something by writing about it from different points of view

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 5/9

Leading global excellence in procurement and supply

Examples of good content/good approaches in answers:
Candidates might initially consider the rationale behind organisational structures in providing a platform for
an organisation’s activities and how these are related to the supply chain management function (SCM).
They might also provide some insights on why SCM might be changing rapidly, including competitive and
environmental effects.

Candidates should also have considered how the various models of organisational structure (and that is very
crucial to this question) contributes to flexible working and how the adoption of a chosen model might
directly contribute to flexibility in the supply chain (and that was also important in the context of this
question).

To illustrate the point made above with two examples there are many others to choose from:

(1) A divisional structure which allows more devolved decision-making to SCM management or
(2) A cellular structure which decreases centralisation but makes the integration of purchasing more
problematic.

However, crucially, the emphasis in this question is on flexibility, therefore the chosen structure(s) should
emphasise its contribution to this, but should also provide a discussion on relevant limitations for that
balanced response.
Features would include:

(a) Flattening the organisation structure;

(b) Chunked structures;
(c) Project management structures;
(d) Core periphery model;
(e) Network structure;
(f) Boundaryless structures;
(g) Virtual organisation structures and
(h) Outsourcing.

The above is a guide as there is a wide range of potential organisational structure features that could have
been used to match supply chain flexibility.

For rounded responses, candidates might discuss problems in making changes to the organisation’s structure,
from both internal and external perspectives, including the “real time” impact on SCM Stakeholders.

Examples of content for merit/distinction grade answers:

All of the above but further consideration being given on the impact of existing systems such as management
information systems in a supply chain context and the impact of restructuring on informal communications.

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 6/9

Leading global excellence in procurement and supply

Examples of poorer content/ poorer approaches in answers:
Not properly addressing the question and not citing actual features of organisational structures.
Too short responses with few or no examples to back up the points being made, especially in the context of,
as the question demanded, how what was being said contributed to increased flexibility to match the
requirements of a rapidly changing supply chain.

Concluding comments:
This was a question that did provide the biggest spread of quality in responses and as a result spread of marks
awarded. Where it was definitive in what it asked, too many answers did not demonstrate the strategic
knowledge and understanding required.

Question 4 – Learning Outcome 4 Mark

(a) Outline the main elements of a plan for the implementation of 15 marks
fundamental change in the strategic direction of a procurement
function.
(b) Assess ways in which internal and external commitment to this 10 marks
implementation plan can be achieved.

Learning outcome addressed: 4.2

Command word explanation: Outline – give the main features, facts or the general idea of something For Part
(a)
Assess – evaluate or judge the importance of something For Part (b)

Examples of good content/good approaches in answers (Part a): The answer called for candidates to plan
their response around the key stages of the implementation of a new strategy for the procurement function
but a sequential approach was not mandatory.
Compared with strategic analysis, there is a dearth of theory related to the implementation of strategy.
However, a number of process models have been developed.

In the case of Lynch (2005), the strategic implementation process would include:

(a) The main strategic objectives, both quantifiable and non-quantifiable;

(b) Foundations of specific plans – tasks, deadlines and responsibilities;
(c) Resource allocation and budgeting;
(d) Monitoring and control procedures including objectives, resources and validity of planned

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 7/9

Leading global excellence in procurement and supply

 environmental project.

Key elements for such a plan for the procurement function would include:

(a) The setting of procurement-specific objectives commensurate with corporate and business strategies;
(b) The sequencing of activities and identification of timescales for critical activities;
(c) Resource allocation issues – people, equipment and financial resources;
(d) Designing information flows and requirements, links with other functions;
(e) Managing and promoting the change both internally and externally;
(f) Managing the integration of new and existing systems and routines;
(g) Control and evaluation of the implementation process

There are several contextual aspects that should also be considered when planning a shift in strategic
direction of the procurement function. These include:

(a) Vision and mission Statements;

(b) Corporate, business and functional plans;
(c) Strategic leadership qualities;
(d) Communication policies;
(e) The cultural context of the organisation;
(f) The location of the procurement function in the organisational hierarchy;
(g) Informal links between the procurement function and other parts of the organisation;
(h) External collaboration links

Other models may be used as the basis for a plan for the implementation of strategic change and these if
contextualised well were considered.
Examples include:
(a) Lewin’s Force Field Model
(b) Further developed by French, Kast and Rosenzweig’s Eight Components Model
(c) Kotter’s Eight Step Model for implementing transformational change

Finally the essence of strategic implementation is one of the integration of many diverse activities and roles.
This could have been elaborated around a discussion of the McKinsey 7S Framework discussing strategy,
structure and systems alongside other key factors such as style, staff, skills and shared values.

Examples of content for merit/distinction grade answers: Understanding fully the depth and scope
associated with this question, with some candidates going that bit further giving a brief discussion on what
might cause the need for a strategic directional change and what strategic direction means in such a scenario.

Examples of poorer content/ poorer approaches in answers: No justifications on points made; little or no

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 8/9

Leading global excellence in procurement and supply

examples cited. No contextualisation – this latter point being the more prevalent in the cases of marginal pass
answers as well as answers that clearly failed this part of the question. Those answers that did not achieve a
pass mark on this question, did so by failing to focus on implementation.

Examples of good content/good approaches in answers (Part b):

It was important for candidates to get across the importance of commitment as an essential feature of
strategic implementation and associated strategic change. Further that commitment should be visible,
consistent and comprehensible.
Taking each aspect to the question in turn starting with:

Internal Commitment:

The following points are important:

(a) Timing and nature of communication – may include special events, hand-on demonstrations, use of
prototypes etc.;
(b) Promoting the need for change commensurate with the vision and mission of the organisation;
(c) Using internal informal channels of communications to meet the challenge of resistance to change;
(d) Assigning implementation roles and responsibilities, engaging middle managers in the process of
planning and implementation;
(e) Providing adequate support for implementation – relevant training, personal development
opportunities etc.;
(f) Providing people, technological and financial resources for effective implementation of the change;
(g) Promoting ownership of change through involvement in new process design etc.

External Commitment:

(a) Enhanced contact with suppliers and other external stakeholders to explain rationale for change;
(b) Promoting benefits and identifying win-win opportunities;
(c) Promoting mutual learning and knowledge transfer opportunities;
(d) Providing the possibility of new opportunities for coloration with suppliers such as information
exchange and systems integration.

Examples of content for merit/distinction grade answers:

Good clear and precise structure to the answer with credible examples to illustrate the points being made.

Examples of poorer content/ poorer approaches in answers:

Poor structure, imbalanced approach to the question (each aspect was for 5 marks each); lack of strategic
understanding with overly tactical responses, with little or no differentiation between internal and external
considerations.

MAY 2017 PD2 SERIES EXAM REPORT LEARNER COMMUNITY FV 9/9

Leading global excellence in procurement and supply