Professional Documents
Culture Documents
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EXAM TOPICS
Note: click the hyperlinks below for easy navigation. Click
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KEY TERMS
5
5 Rights .........................................................68
6
6 Is ................................................................65
7
7Ps .................................................................54
8
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Discounted-Pricing ........................................58
Generic Strategies ........................................ 89
Diversification ...............................................81
Goal ............................................................... 26
Diversity ......................................................116
Gross Profit Margin .................................... 163
Dividend Cover............................................184
Growth .......................................................... 85
Dividends Yield............................................184
H
Divisional Structures .....................................97
Heartland Businesses ................................... 79
Dog ................................................................84
Human Resource ........................................ 125
Downstream Supply Chain .........................128
Hybrid Strategy ............................................. 92
E
I
Earnings per Share (EPS) .............................181
Inbound Logistics ........................................ 123
Earnings Yield ..............................................183
Incremental change .................................... 112
E-Business .....................................................61
Independence of Location ............................ 67
E-Commerce .................................................61
Individualism ................................................ 66
EDI .................................................................69
Industry Restructuring .................................. 66
Entrepreneurial Structure.............................98
Information System Software ...................... 62
Evolution .....................................................114
Innovation & Learning Perspective ............ 107
External Benchmarking ...............................155
Integration .................................................... 66
External Growth ............................................74
Intelligence ................................................... 66
F
Interactivity .................................................. 65
Failure Strategies ..........................................92
Interest Cover ............................................. 180
Feasibility ......................................................94
Internal Business Perspective..................... 106
Financial Benefits ........................................156
Internal Development .................................. 73
Financial Gearing ........................................176
Internet ......................................................... 69
Financial Perspective ..................................106
Introduction .................................................. 85
Firm Infrastructure......................................124
Inventory Turnover..................................... 170
Flexibility .....................................................134
Investor ratios. ........................................... 163
Focus .............................................................90
J
Focus-Differentiation ....................................92
Japanese Management .............................. 108
Focused- Differentiation ...............................90
Job Design ................................................... 107
Forward Auction ...........................................64
Job Enlargement ......................................... 108
Franchise .......................................................76
Job Enrichment ........................................... 108
Full Cost Plus Pricing .....................................60
Job Rotation ................................................ 108
Functional Requirements ...........................141
K
Functional Structures....................................97
G
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L
Operating Profit Margin ............................. 164
Operational Gearing ................................... 179
Low Price .......................................................92
Operational Level ......................................... 94
M
Operations .................................................. 123
Machine Bureaucracy ...................................99
Optional Product Pricing .............................. 59
Machinery ...................................................101
Organization Structure ............................... 119
Make Up ......................................................102
Outbound Logistics ..................................... 124
Management ..............................................102
Outline Planning ......................................... 151
Management Information ..........................102
Outsourcing ................................................ 133
Marginal Cost Plus Pricing ............................60
Oversees Acquisition .................................... 74
Market Growth .............................................82
P
Market Share ................................................82
Parental Developer ....................................... 77
Marketing......................................................53
Paul Harmons Process Strategy Matrix ..... 136
Marketing & Sales .......................................124
Payout Ratio ............................................... 185
Marketing Mix (7 Ps) .....................................54
People ........................................................... 56
Markets .......................................................102
Person Culture ............................................ 121
Materials .....................................................102
PESTEL Analysis ............................................. 34
Matrix Structure............................................97
Physical Evidence.......................................... 56
Maturity ........................................................86
Pilot Operations .......................................... 155
Measureable Benefits .................................155
Place.............................................................. 55
Mendelow matrix .........................................49
Portfolio Manager ........................................ 76
Methods ......................................................102
Position Based Strategies ............................. 93
Michael Porters Diamond Model ................44
Post Implementation Review ..................... 156
Michael Porters Five Forces Model .............39
Power .......................................................... 115
Michael Porters Value Chain Analysis .......123
Power Culture ............................................. 120
Mission ..........................................................26
Premium Pricing ........................................... 58
Modelling & Simulation ..............................155
Preservation ............................................... 117
Modem..........................................................62
Price .............................................................. 55
Money .........................................................102
Price Earnings (P/E) Ratio ........................... 182
N
Price Penetration .......................................... 57
Nature of Change ........................................112
Price Segmentation ...................................... 59
Net profit margin ........................................164
Price Skimming ............................................. 58
No Frills Strategy ...........................................92
Primary Activities (Core Activities) ............. 123
No-Frills Pricing .............................................57
Problem Child ............................................... 83
Non Functional Requirements ....................142
Process .......................................................... 56
Procurement ............................................... 124
O
Product ......................................................... 54
Objective .......................................................26
Product Life Cycle ......................................... 84
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Product Line Pricing ......................................61
Routines & Rituals ...................................... 118
Profitability ratios .......................................163
S
Profitability ratios. .....................................163
SAF ................................................................ 93
Project .................................................147, 148
Scientific Management ............................... 107
Project Charter............................................157
Scope .......................................................... 115
Project Initiation Document .......................157
scope of change .......................................... 113
Project Management ..................................152
Seasonal Variations .................................... 200
Promotion .....................................................55
Simplification .............................................. 130
Psychological Pricing .....................................61
Star................................................................ 83
Pull Marketing ...............................................53
Stories ......................................................... 118
Purchasing Mix ..............................................68
Strategic Alliance .......................................... 75
Push Marketing .............................................53
Strategic Capability ..................................... 100
Q
Strategic Clock .............................................. 91
Qualitative Benefits ....................................155
Strategic Success Criteria ............................. 93
Quantifiable Benefits ..................................156
Strategy......................................................... 26
Question Market ...........................................83
Suitability ...................................................... 93
Quick Ratio ..................................................175
Supply Chain ............................................... 125
Supporting Activities .................................. 124
R
SWOT Analysis .............................................. 48
Random Variations .....................................200
Symbols....................................................... 118
Ratio Analysis ..............................................160
Synergy Manager .......................................... 76
Readiness ....................................................116
System Implementation ............................. 143
Realignment ................................................113
T
Reconstruction ............................................113
Reengineering .............................................131
Task Culture ................................................ 121
Reference Sites ...........................................155
Technical Requirements ............................. 142
Related Diversification ..................................81
Technology Development .......................... 125
Residual Income (RI) ...................................191
Time Series Analysis ................................... 199
Resource Audit ............................................101
Trade Payable Turnover ............................. 172
Resource Based Strategies............................93
Trade Receivable Turnover ........................ 168
Resources ............................................101, 116
Transformation ........................................... 113
Return on Capital Employed (ROCE)...........187
Trend........................................................... 200
Return on Equity (ROE) ...............................189
U
Return on Investment (ROI)........................187
Unrelated Diversification ............................. 81
Reverse Auction ............................................64
Upstream Supply Chain .............................. 126
Revolution ...................................................114
V
Risk Analysis ................................................153
Role Culture ................................................120
Value Added Analysis ................................. 131
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Value Trap Businesses ..................................79
Working capital & liquidity ratios. ............ 163
W
Zeus............................................................. 120
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Features &
1) Exam Focused
Study Text Book
These Exam focused study text books are aimed to help you passing
exam with least efforts and time.
These study materials aim to educate you in the way you are expected
to apply your knowledge in the exam.
Length of syllabus areas is adjusted to reflect the importance of each
syllabus area for your exam session.
Therefore, you will automatically spend time and efforts on different
syllabus areas according to their importance for your exam session.
These study materials takes account of examiners comments and
reports, past exam papers, student accountant articles, tips from other
tutors, syllabus areas examined by other professional accountancy
bodies, publications in business magazines etc.
2) Examiner's
Guidance
3) Author's Guidance
5) Exam Support
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context.
Just knowledge is not enough for passing exams rather you have to use
it wisely in limited time available in the exams.
6) Past Paper Analysis Past paper analysis is given at the beginning of the e-book and also
directly below each syllabus area.
Past paper analysis gives an idea about the length and complexity of
requirements and VERBS (Explain, Evaluate, Report etc) in which each
syllabus area can be examined.
It also enables you to practice past exam questions relevant to each
syllabus area on ACCA global website. Therefore, you do not need to
buy expensive practice kit.
7) Illustrations (if any) Illustrations are simple numerical examples given to prepare students
for more challenging exam standard questions.
Illustrations depend on the type of ACCA paper. Discussion based ACCA
papers may not include illustrations.
8) Explanations (if
any)
9) Examples
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It will also motivate you to learn harder, as you will understand the
benefit of technical knowledge in your career as chartered accountant.
10) Diagrams
12) Highlighting
Cross references are links to other text inside the e-book. In addition,
Exam topics are
Table of key terms shows important terms across the e-book that you
must understand in order to pass the exams.
It allows you to reach to the place inside an e-book; where you can
develop basic understanding about particular term.
16) Colours
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It will enable you to find required text easily.
Colours also make learning interesting.
17) Annotations
You can highlight text and add comment anywhere in the e-book.
Highlighting will enable you to highlight phrases and sentences you
want to read again.
Commenting will allow you to make a brief note in the e-book. You can
use commenting to:
Save mnemonics.
19) Accessibility
These e-books have legible fonts and high contrast colours to enable
you read easily.
You do not need to zoom and then scroll horizontally
text.
to read
Study planner is a method allows you to plan for study within limited
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time available.
It also allows you to track your progress against plan; therefore, you can
adjust your speed of study and study hours accordingly.
21) Printer Friendly
PDF (Portable document format) files can be viewed using free adobe
reader.
Adobe reader is compatible with most operating systems such as
windows and Mac.
You can also read ACCA exam focused study text e-books on tablets and
cell phones supporting PDF format to take these e-books on the way or
at workplace in your pocket.
Therefore, you also do not need to buy pocket notes too.
However, conversion of PDF into DOC, TXT etc format may distort
structure of e-books.
24) Environment
friendly
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addition to cost.
In addition, it is our moral duty to care for environment and society
who lives in that environment.
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AUTHORS PROFILE
Name: Murtaza Lanewala
Career Status:
Freelance writer & tutor for professional accountancy
qualifications. Professional bodies include ACCA, CIMA
and ICAEW.
Author & CEO of accasupport.com
E-mail:
kabuli_52@hotmail.com or murtaza@accasupport.com
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IMPORTANT!
1 Disclaimer
This study material is sold only through accasupport.com website. However, Clickbank.com is the
credit card processing organization for collecting payments for this study material. This study
material is not available offline (shops, schools etc.) in any form such as DVDs, CDs, Printed books
etc. Study materials purchased from unauthorized source can be out of date and incomplete. In
addition, you will not be able to receive free updates given to the buyers of original material.
Demo version of this material is available free of cost, please take care, not to pay for demo
version of this e-book to unauthorized sellers.
This material is for ACCA examination June 2012 only. Students who are reading out-dated
material are at risk, as it will not be representative of current examination format, terminologies
and syllabus.
Readers of this material will be solely responsible for the consequences of any decisions made in
real life. Author & accasupport.com are not responsible to the readers of this material under any
circumstances.
Recommendations made of any kind are intelligent guesses to the best of authors knowledge.
2 Copyright Notice
This material is subject to copyright protection law. Infringement of copyright law results in
criminal liability (fine or imprisonment or both).
Copyright infringement is effectively theft of intellectual property; therefore, it is unethical from
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Copyright 2012 Murtaza Lanewala. All rights reserved.
2.1 Do
You can make a backup copy of this material.
You can use parts of this material provided you quote the appropriate reference to the author and
material.
2.2 Do Not
You cannot publicly share this material in the form of hard copy or soft copy (physically and over
the internet) for cash or for free.
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You cannot transform this material into other means of communication such as photocopy, video,
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USERS GUIDE
E book features
Past Papers
Highlighting
Bookmarks
Details
Past papers provide a clue about the verbs (Explain, Evaluate etc.) and
marks available in the exams.
It provides list of main headings at the beginning of each exam topic. You
have to click relevant heading in a list to reach there.
It provides broad information on composition (theoretical v
computational) and importance of each paper in exam context.
Exam Support provides detailed information on application of theory and
calculations in exam context.
Example provides practical application of technical theoretical knowledge.
Illustration provides numerical applications of theoretical knowledge.
Explanation provides the reasons for correctness or un correctness of
particular statements and calculation.
Formula is mathematical equation or tabular format.
Diagrams are visual (Graph, Charts, Tree formats etc.) presentations of
theoretical knowledge.
Cross-referencing are hyperlinks to other exam topics. Click previous view
button
to go back or ALT + Left Arrow key.
Highlighting is used show the relationship between words and figures.
Click bookmark icon in the side bar (see below) to jump to specific exam
topic in the e-book.
Screen Shot:
If you not currently using adobe reader, then I recommend you to download adobe reader, to get
most benefits from this e-book. Click http://get.adobe.com/reader/ to download.
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2 Aim
To apply relevant knowledge, skills and exercise professional judgement in assessing strategic
position, determining strategic choice, and implementing strategic action through beneficial
business process and structural change; coordinating knowledge systems and information
technology and by effectively managing processes, projects, and people within financial and other
resource constraints.
Exam Support:
Syllabus areas that are not included in the study guide of previous papers are more likely to be
examined in P3 Business Analysis than those that are already included in pervious papers.
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7 Duration of Exam
Total time: 3 hours 15 minutes
3 hours are writing and reading time.
Additional 15 minutes are reading and planning time. However, you can annotate question paper
only during that time.
8 Resources:
http://www2.accaglobal.com/students/acca/exams/p3/
http://www2.accaglobal.com/students/pass/
http://updates.accasupport.com
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EXAMINER'S GUIDANCE
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AUTHORS GUIDANCE
1 Preparing for Exams
2 Exam Day Guidance
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STUDY PLANNER
Determine number of days available
Formula:
Idle time can be incurred due to sickness, computer crash, social events etc. It depends on your
daily activities and environment.
I recommend you to make a printed copy to read when computer is not available.
Number of pages will include allowance for solving past paper questions, student accountant
articles etc.
Please note that different syllabus areas will take different amount of time. Calculations will take
more time than theoretical areas. Therefore, it will give you only rough idea of your progress.
Tracking progress
Formula:
If revised number of page per day is > than originally planned, then you are lagging behind and
now you have to do more study per day.
Troubleshooting
Study at time of day when you are fresh. This will enable you to learn more in available time.
Consider skip reading examples, if you understood theory by reading main text.
Study in the end sub exam topics, which is less likely to be examined in your exam session. You can
see past paper analysis given below each sub exam topic.
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P/P 12/11 06/11 12/10 06/10 12/09 06/09 12/08 06/08 12/07
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Key Exam Topics
P/P 12/11 06/11 12/10 06/10 12/09 06/09 12/08 06/08 12/07
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Key Exam Topics
P/P 12/11 06/11 12/10 06/10 12/09 06/09 12/08 06/08 12/07
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Exam Topic 1
Exam Awareness
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Duration
Nature
Long term never Narrative
ending.
However, it can
be revised.
Origin
Examples
Top level such as Mission of ACCA is
owner or board to promote
of directors.
Accountancy
profession and safe
guard its members
interest and society
at large.
Dream of
organizational
leader or
founder, CEO or
chairman.
Sets direction.
Motivational.
Specific
Top level
Objectives are
managers as they financial & nonMeasureable
are aware of
financial targets
Attainable external forces "Profitability should
affecting the
be increased two by
Relevant
organization.
20% in 3 years" and
number of services
Timely
provided should be
increased by 30% in
2 years
respectively.
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Breaks strategy
into short term
targets. It
allocates
resources to
implement the
strategy.
Normally 1 yr.
However, it can
be reviewed
quarterly.
Forecasted
Quantitative
& financial
data.
Tactical
managers. It can
also involve
participation of
operational
managers.
Example:
Sales budget,
production budget
and master budget.
2 Strategic Planning
Exam Support:
See student accountant article 07 Feb 2008 Strategic planning
Strategic planning is the step by step formal and documented planning to translate organizational
objectives in actionable components.
It is short term planning takes account all relevant factors like resources, competencies, macroenvironment and expected future changes.
It forms the basis on which operational planning can be made.
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Choice
Action
Choice
Position
Action
Traditionally, it was suggested that rational planning is the only best approach for strategic
planning. However, subsequent writers on strategic planning have proposed different approaches.
These are effectively variations of the rational approach.
Mintzberg argued that performing accurate strategic analysis in advance is impossible. It is not
possible to anticipate all the factors affecting organization. He believed that strategies emerge
while performing organization activities.
Experience enables senior manager to understand the macro-environment in which organization
operates and competencies & resources required by the organization. In the light of experience
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Example:
Change in foreign exchange rates can decrease demand for exports. As a result, production
schedule may need to be changed.
Mintzberg argued that strategic planning should be performed on concurrent basis rather than
pre-planned basis.
Action
Plan
Lindblom argued that managers may not have sufficient time and energy to consider every
possible course of action. Managers usually prefer to start with good strategy rather than perfect
strategy.
He believed that best strategy is the extension of past practices. Organizations should adopt
strategy in light of previous experiences rather than from 0.
In addition, strategies decided by top level management without facing challenges from lower
levels (tactical and operational) of organization are unlikely to happen in practice.
Example:
Sales manager at operational level may believe that resource available for achieving particular
level of sales are insufficient.
Managers should negotiate strategies with lower levels of management and employees.
For strategy to be successful, they should be at least acceptable to employees expected to carry
out that strategy.
Feedback from lower level managers can help deciding feasible strategies as they are better aware
of technicalities involved in implementing strategies and day to day operations.
Lindblom argued that strategic planning should be performed on incremental basis. It means
taking account of previous strategies and their effect on organizational performance.
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Past strategy
Intended strategy
Unrealised strategy
Realised strategy
Emergent strategy
Others argued that strategic planning is not necessary. Opportunities can be exploited whenever it
comes. Rigidly following strategy may lead to loss of opportunities which would be uncovered if
organization is actively looking for improvement. Strategic planning as periodic exercise will not
help uncover new opportunities.
They consider strategic planning as the time consuming process and against the entrepreneurs
attitudes that means enjoying risk taking and problem solving as the business grows.
Particularly, small and medium size organizations may not have enough time and resources to
devote to strategic planning.
Newly established organizations may not have enough resources, experience and information
available to implement strategic planning process. Strategic planning will waste lot of managerial
time and resource that can be used to promote growth.
According to them, no strategic planning should be performed at all.
However, it represents extremely opposite viewpoint to rational approach to strategic planning.
Organization select can approach to strategic planning somewhere in between those two end
points. Organization should consider its external environment, resources, knowledge, skills and
experience in reaching a decision.
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Exam Topic 2
Exam Awareness
Strategic position and choices can be examined in combination with other exam topics such as
process, project and information technology etc.
See past paper analysis24 to explore relationships between exam topics. You can use this
relationship to gather relevant points across the exam topics that can be used to answer
questions.
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12/09
06/08
Q.no
Requirement
Analyse the industry or marketplace environment that NMS is
Q1:b
competing in.
Xenon usually analyses an industry using Porters five forces
framework.
Q1:a Using Porters framework, analyse the business analysis
certification industry (BACTI) in Erewhon and assess whether it is
an attractive market for ABCL to enter.
Using an appropriate model or models, analyse the competitive
Q1:a environment of AutoFones retail shops division.
Note: requirement (a) includes 2 professional marks.
Marks
16
20
20
Exam Support:
Five forces model can be used alone or in combination with PESTEL framework to analyse
organizations strategic position in the macro-environment.
Exam question can also use market, external environment instead of macro-environment.
You should be familiar with different technical jargons used to address the same situation.
Porters five forces model can be used to determine competitive position or strategic position in
market or macro environment.
Forces given below are inter-related. Therefore, information used to assess one force can be used
to assess other forces as well.
BARRIERS TO ENTRY
BARGAINING POSITION
OF CUSTOMERS
COMPETITION &
RIVALRY
PORTERS
FIVE
FORCES
MODEL
BARGAINING POSITION
OF SUPPLIERS
THREAT FROM
SUBSTITUTE PRODUCTS
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1)
Example:
Large companies contract with suppliers by inviting tenders. Tender document lists the terms &
conditions which must be agreed by suppliers to supply goods or services.
Availability of goods (raw materials or finished goods) and services used by the organizations,
shortage of raw material and services required by the organization gives strong bargaining position
to suppliers. In times of excess demand for goods or services, suppliers may consider selling first to
their goods or services to their key customers. Therefore, organization has to maintain
relationships with suppliers to be able to ensure continuity of goods or services.
Competition among suppliers also influences bargaining positions of organization. If competition
among suppliers is fierce, then organization has strong bargaining position than suppliers. It will be
easy for the organization to switch to different supplier. Therefore, organization can negotiate bulk
purchase discounts, trade discounts and favourable credit terms etc with suppliers easily.
Area of organizational activity dependent on supplier affects position of organization. If supplier is
providing goods or services to the core activity of the organization such as production, sales &
marketing, then bargaining position of supplier is stronger than the organization. Contrarily, if
supplier is providing goods or services to the supporting (non-core) activity of the organization
such as accounting, information technology etc, then bargaining position of organization is
stronger than suppliers. Organization can discontinue or automate that supporting activity or
switch to different supplier as strategic position of organization will not be affected seriously by
discontinuing or switching to different supplier.
Complexity of goods or services provided by the supplier also affects bargaining position of
organization in comparison with supplier. If goods or services are of complex nature, then
bargaining position of supplier is stronger than organization. Organization may not be able to
provide those goods or services in-house due to lack of resources (man, materials, money, and
machinery), competencies (knowledge, skills & experience), licence etc.
2)
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3)
Competition and rivalry affects the strategic position of organization in following ways.
Competition and rivalry increases costs to the organization, as more marketing expenditure will be
required to create brand loyalty and reputation of organization among customers to stand out
from competitors.
Prices may have to be decreased to maintain and increase market share (number of customers in
existing market).
Research and development expenditure have to be increased to devised new products to cope
with products offered by competitors.
Competition and rivalry also forces organization to work more efficiently and provide better
quality product to obtain an advantage over competitors. Managers will be forced to reduce
unnecessary costs such as wastage and idle time to increase profit margin, because profit making
through increasing selling prices may not be possible.
Competition and rivalry affects the generic (original) strategy and subsequent strategies followed
by the organization.
Example:
Presence of intense competition in the market may force organization to adopt differentiation
strategy (generic strategy) and may force organization to expand overseas or acquire existing
competitor organization (subsequent strategy).
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4)
Barriers to Entry
Barrier to entry is favourable force for organization already operating in particular industry.
However, it is adverse force for organization considering entry in particular industry.
Exam Support:
Look for information in the scenario whether organization is already operating particular industry
or considering entry in particular industry.
Barriers to entry can be assessed in terms of:
Legal environment such as licensing requirement can act as barrier to entry.
Example:
Membership required of a recognized accounting body to act as tax consultant.
Tax rules for organizations considering expanding to foreign market.
Economic environment can act as barrier to entry. Initial capital expenditure required to initiate
the investment project and ability of the organization to raise capital.
Example:
Some industries, such as telecommunication require significant initial capital expenditure to install
communication networks.
Above barriers provides affects more significantly to small & medium sized organizations (SMEs)
which do not have know-how of legal requirement and do not have enough money to invest in
such resources.
Fierce competition can also act as barrier to entry because the potential competitors will finds it
difficult to create market share to achieve enough return of capital employed (ROCE).
Political environment can act as barriers or facilitator to entry.
Example:
Government trying to develop particular industries can attract organizations by providing grants
and loans.
Technological environment such as complex/knowledge intensive/high-tech goods or services also
act as barriers to entry in particular industry can act as barriers to entry.
Example:
Education industry has barriers to entry because of having qualifications requirements such as
ACCA.
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Example:
People may not want to risk their money by buying cloths of new fashion house.
5)
Example:
It can be Glass mugs and steel mugs, if glass mugs are getting higher in prices than customers can
use steel mugs.
Another thing to consider is switching cost of the product to the customer.
Example:
If buses fare increases it will be difficult for travellers to switch to different mode of transport like
purchasing their own vehicle because it will involve substantial invest which everyone cannot
afford.
Some products are like above can be easily switched but some products which require training and
have lack of resale value are difficult to switch.
Example:
If electricity gets expensive, customer normally have no alternative but to reduce electricity
consumption.
Q.no
Requirement
Examining using Porters Diamond the factors which could
Q2:b influence organizations decision to move a large part of its logistics
business.
Marks
10
Exam Support:
You can use this framework to identify reasons for success or failure of organization in the
scenario.
Porter's diamond is the framework explains the reasons behind the competitiveness of nations in
particular industry.
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Example:
Japan is well-known for consumer electronics, Germany is well-known for Cars and United
Kingdom is well-known for financial service provision.
These elements are inter-related and overlapping in nature.
FACTOR
CONDITIONS
Resources &
Opportunities
FIRM STRATEGY,
STRUCTURE &
RIVALRY
Competition, Policies
& Work Practices
MICHAEL
PORTERS
DIAMOND
MODEL
RELATED &
SUPORTING
INDUSTRIES
Supply chain
effectiveness
DEMAND
CONDITIONS
Customer Attitudes
& Cleverness
1)
Factor Conditions
Example:
Natural resources such as flowers helped France to become leading quality fragrance supplier in
the world.
Atmosphere such as hot climate helped Saudi Arab to grow quality dates.
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Example:
Organization can relocate itself in particular country ideal for growth of organization in the long
term.
Government can develop infra-structure to help growth of organizations in home country.
Factors such as skilled labours, machinery, investment etc necessary for organizational growth can
be arranged to achieve competitive advantage but these can also be obtained by other
organizations in short term. Therefore, it can no longer be used to achieve competitive advantage.
2)
Demand Conditions
Customer having cleverness and knowledge of the industry and products will force organization to
focus on quality and cost reduction.
Customers demand and attitude regarding ability to try new products force organization to
develop innovative products to achieve competitive advantage over local and foreign suppliers.
Early maturity of markets in home country than other countries forces organization to expand in
foreign markets where demand for organizational products is still in growth phase.
Educated and demanding customers motivate organization to research and develop new products,
which can be sold to local and foreign markets.
All these ultimately help to achieve competitive advantage in foreign markets.
Background of the people in a region and education level of the people all influence demand
conditions. Demand conditions cannot be changed in short term but it may be changed in long
term.
Organization cannot do much about changing demand conditions. However, it can be changed by
politicians by raising education and employment level in the long term.
3)
It means market condition i.e. monopoly or perfect competition. Having monopoly in the market
gives no incentive to organization to gain efficiency. On the other hand, presence of successful
competitors in the industry encourages organization to improve to efficiency.
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Example:
Giving subsidies and tax relief for organizations operating in underdeveloped industry.
It cannot be controlled by organization. However, government can attract new entrants to
encourage efficiency.
Firm (sound) strategies help organizations to operate effectively and grow without any
interruption.
Example:
Pricing strategy based on marginal cost helped automobile manufacturers in Japan to build largest
market share in US.
Adoption of generic strategies (cost leadership, differentiation and focus) also influences the
success or failure of organizations in international markets.
Example:
Adoption of cost leadership strategy by manufacturers in china helped them to achieve economies
of scale and efficiency which provided competitive advantage and large market share in
international markets.
Ferrari Company is the adopter of focus-differentiation strategy which enabled them to become
leading manufacturer of high quality sports cars in the world.
Sound organizational structure established by considering social and cultural factors leads to fluent
and efficient operations. Some nations have inherent social and cultural advantages, which leads
to sound organizational structures.
Example:
In Japan ability to work in teams, flexible timings, no retirement age limit helped organizations to
become leading consumer electronics supplier by achieving economy and quality as compared to
European organization.
These factors can be changed by organizations through learning from already successful
organizations in that industry.
4)
Organizations require upside and downside supply chains to operate successfully. Availability of
efficient suppliers helps the organization to focus on core activities while outsourcing its
supporting activities. Efficient suppliers will provide quality service at lower cost than organization.
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Example:
Natural juices manufacturer requires fruit pulp, but they may not have competencies in farming. If
agriculture and farming industry is strong in that country they can buy fruits from farming
organizations and concentrate on its core competencies such as extraction of juices from pulps.
Similarly, availability of efficient distributors helps organizations to offer its products to remote
and foreign markets. Efficient distributors will deliver products at low cost and in timely manner.
Competitors also support organization to acquire necessary knowledge and skills. Employees
changing their employer can transfer knowledge, skills and experience related to industry to other
organizations.
Supporting and related industries can be encouraged and developed by government in the long
term. However, it is beyond the reach of organization.
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Exam Topic 3
Exam Awareness
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1 Marketing
Marketing is the process of creating awareness for organizational products, persuading customers
to buy them and maintaining relationships with customers to encourage repeat purchases.
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Q.no
Requirement
Marks
ATL needs to determine the price (or prices) of its e-learning
product:
12/11
Q4:a
15
Identify and discuss the factors that need to be taken into
consideration when pricing the e-learning product.
Evaluate how e-business might help TMP exploit each of the
five elements of the marketing mix (price, product, promotion,
12/10
Q2:b
20
place and physical evidence) identified by the marketing
director.
Sheila Jenkins sees customers as both prospective and
existing members, volunteers and donors of WET. She also
wishes to gain increased revenue from each member and
donor.
E v al u a t e h o w e m a il an d
06/10
Q1:c
10
w e b sit e t e c h n o l o g y m i g h t
f a cilit a t e th e ac q u isiti o n a n d
r e t e n t i o n o f W E T s customers and support
WETs aim to gain increased revenues from members and
donors.
AutoFones CEO is anxious to develop a rational and wellargued case for retaining the retail shops division.
Write a briefing paper for the CEO to submit to the strategy
06/08
Q3:b planning committee explaining why the retail shops division
15
should continue to form a key part of AutoFones future
strategy.
Note: requirement (b) includes 3 professional marks.
Marketing mix includes elements that affect customer perception regarding product quality when
it first becomes aware of the organization or its product.
Sometime customer purchases products with reference to brand name rather than name of the
organization.
Example:
Customers usually purchase washing power with reference to brand name rather than
manufacturer name.
Marketing mix is tool for differentiating products of the organization from products offered by
competitors.
1)
Product
Product (good or service) is the package of benefits that customer expects (needs or desires) to
receive from the purchase.
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Example:
Customer may prefer hair dressing saloon which has air conditioner rather than fan.
The buying experience can be regarded as supporting product which influences customers
decision to buy main product.
Example:
Air conditioning in saloon is the supporting product as it provides comfort to customer.
Product is very strong element in marketing mix. There is little chance to persuade customers if
the product offered by the organization is not according to expectations of the customer towards
satisfying their needs or desires. Even if customer may buy it once, it is very unlikely that they will
buy it again. However, good product requires less promotional expenditure and can be sold till
longer period.
Product should be frequently evaluated for its effectiveness towards customer satisfaction or at
least when indicators of changing customer needs, desires, taste, fashion and behaviours are
available.
2)
Price
Price is the most powerful element in marketing mix to influence market share (demand) of the
organization in short term.
Price is major element in marketing mix. There is little chance that customers will buy a product,
which is beyond their budget no matter how much customers value your product.
Price of the product should not be greater than the Quality (benefits) perceived by the customer
from its use.
Pricing strategy adopted by the organization should be take account of market segment to which
organization is trying to sell its goods.
Various pricing strategies might be adopted some of these include; price penetration, price
skimming, market segmentation, captive product pricing, full cost plus pricing, marginal cost plus
pricing, target pricing, product life cycle pricing, premium pricing and discounted pricing.
3)
Place
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Example:
If product is intangible in nature such as E-book then internet may be the best option and pricing
must be set to attract customers targeted around the world.
However, if product is perishable in nature.
Example:
Fruits and vegetables are usually delivered directly to retail shops by removing intermediaries and
they are priced by keeping product quality in mind and delivered to place (small shops or
supermarkets) targeted by the organization.
4)
Promotion
Promotion refers to the medium chosen to increase public awareness of the product or to increase
brand image of the product.
Promotion can be done through appropriate promotional mix (various combinations of
promotional techniques) such as internet, television, radio, banners and hand-outs.
Promotional mix should be compatible with marketing budget of the organization, product, price
and place.
Below elements of marketing mix are specifically related to service industries.
5)
Process
Process is the buying experience (air conditioning, security guards & politeness of salesman or
service provider) of goods or services of the organization. In other words, process is the supporting
product.
Process is particularly important in service industries, as service itself cannot be inspected in
advance before making purchase.
However, quality of service can be determined from process. In service industries, customers are
goes through lengthy process from obtaining information to duration of service provision.
Example:
In insurance industry, customers are exposed to obtaining knowledge on insurance policies,
submitting documents, claiming insurance and receiving proceeds.
Insurance companies managed to increase efficiency of these processes by scanning documents to
quickly store, retrieve and electronically transfer information from one person to another. It has
decreased the time taken in providing service to customer.
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6)
Physical Evidence
This is an important element of the marketing mix particularly in the service sector where
customer usually unable to judge the quality of service in advance.
Example:
In Travel industry, passenger cannot judge the safety and comfort of travel in advance.
There some other ways by which quality of service can be estimated. These can be
Packaging.
Office interior decoration.
Quality of advertisement materials (glossy or rough papers).
Websites design and graphics (statics or dynamic).
7)
People
People are the most important element of marketing mix for long term performance of the
organization.
This is particularly important in service sector where customer perception regarding the integrity,
knowledge and experience of personnel involved in the provision of services is key factor
determining service quality.
Example:
In health and care industry, patients choose hospital according to perception on competency of
doctors.
4 Pricing Strategies
Exam Support:
Pricing strategies are highly relevant topics for exam purpose. As a management accountant, you
should know the relationship between strategy and pricing. Management accountants are
involved in pricing of products in organizations. Therefore, you should be able to recommend an
appropriate pricing strategy to management.
See student accountant article 09 Feb 2011 Business strategy and pricing
Pricing strategies adopted should be consistent with business objectives. Price strategies are used
to control market share, stakeholders (customer and government) etc. Organization may have
cultural and ethical viewpoints; pricing strategies should be adjusted for such things. Below
strategies do not consider these values and beliefs on their own.
Pricing Strategies are as follows:
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4.3 Discounted-Pricing
Discounted pricing seems similar to price penetration. However, prices are decreased to less
extent in discounted- pricing than price penetration.
Example:
Giving discounts to customers for purchasing in bulk to encourage more purchases.
Price discounting is a short term strategy may be adopted due to seasonal fluctuations in demand
or in order to respond to actions of the competitors.
Example:
Selling of winter goods at discounted prices to empty the stock before season is off.
Reduction in selling price to prevent market share to respond to entry of new competitor in the
market.
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Example:
Blackberry mobile phones are relative expensive than other cell phones because of its unique
features and high quality,
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Example:
Selling cars at lower profit margins and selling spare parts such as gear boxes, ring piston etc at
higher profit margins.
Selling desk jet printers at lower profit margins and selling cartridges at higher profit margins.
Once the customer has brought the main product, they have no option except to replace the main
product.
However, replacing the main product would require sufficient investment, which may not be
acceptable to customer as having low resale value, which is true in case of printers.
Or customer may not have enough cash in the short term, which is possible in case of cars.
Example:
Selling CPU to customers at low price in expectation, that customers will buy peripherals such as
monitor, keyword, mouse etc also from same organization.
Example:
Bpp and Kaplan charges lower prices for its learning materials in developing countries.
Some restaurants sell food at reduced prices after 12 am.
Example:
Blender and juicer.
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Example:
Combined cost of audit and tax will be lower due to not having to do tax calculations from begin;
work already performed for audit can be used to provide tax service.
Blender & juicer as a package can be sold at reduced price than selling price of sum of individual
products, as components for blender can also be used for juicer. Customer would prefer to buy
blender and juicer in a single deal than individual deals in order to save money.
Example:
Bidding for the contract of building construction based on full cost plus pricing as each
construction contract is different (non-repetitive) from others.
Example:
Customer has made an offer to buy a product in large quantity at reduced price.
It is not suitable for long term pricing as it does not ensures recovery of fixed cost by absorbing
fixed costs into product cost.
Example:
Peanut cookies and coconut cookies.
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Example:
Retailer selling pens recognizes that customer may buy refills too, so retailer might attempt to
increase the combine revenue from each separate sale of products.
Example:
Cosmetics have more packaging cost than the cost of ingredients (chemicals).
Educational institutes such as LBSF charge high prices for its services to make an impression of
quality.
5 E-Commerce Vs E-Business
E stands for electronic.
E-commerce involves carrying out organizational activities through the use of electronic
communication media such as EDP (electronic data processing), hypertext transfer protocol (http),
e-mail, file transfer protocol (FTP), SMS, internet telephony, instant messaging etc.
Organizational activities include promotion, after sales service, sending & receiving other
information such as policy manuals, financial statements etc from inside & outside the
organization.
E-business involves buying and selling goods or service through the use of electronic
communication media.
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6 Basics Terminologies
Exam Support:
Below terminologies are unlikely to be examined directly. However, it is useful for understanding
information given in the scenario and for effective discussion.
Internet is the major enabler of E-business and E-commerce.
Internet is collective term used for http, ftp, email, SMS, internet telephony, instant messaging etc
Hypertext transfer protocol is used by websites and blogs. Each website and blog has unique URL
(universal resource locator). By default URL starts with server name www (World Wide Web).
However, organization may choose different server name.
Example:
ACCA official website has server name www2.accaglobal.com
Server name is host computer name from which client computers connected to internet can
retrieve information.
Example:
If you are downloading past papers from ACCA official website then your computer is client.
If website is secured via encryption, then it uses https extension before URL where s denotes
secured.
FTP is used for transferring data in large memory size.
If FTP is secured via encryption, then it uses ftps extension before URL.
7.1 Computer
At least one computer should have high performance and storage capabilities to use it as server.
Other computer(s) may contain regular performance and storage capabilities. These computers
are referred to as work station.
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7.3 Modem
Modem converts analogue signals into digital data. Computers can only process data in digital
form.
Example:
Modern information system has enable management accountants to implement ABC costing due
to reduction in information capturing cost. ABC requires detailed information on each activity
performed by the organization.
7.7 Security
Anti-spy and anti-virus software are used for reducing threat of information being accessed,
modified, deleted and copied in unauthorized manner.
Storage devices, such as data traveller (flash drive) and external hard drive with encryption facility.
Encryption is scrambling information into format which cannot be processed by computers.
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Example:
The e-book you are reading currently is encrypted.
Exam Support:
Use below stages to identify the current and proposed stage of e-business for the organization in
the scenario.
If you are running lack of time you may postpone this topic.
8.1 Communication
Organization uses e-business as a means to communicate with shareholders and communicate
their product related to customers.
It can involve the use of emails and organizational website. Or
Organization may consider using CMS (content management system) to manage its contents over
the website. See http://www.joomla.org for demo.
8.2 Conversation
Organization allows customers to make inquiries through e-mail or on their website and receive
replies for inquiries and also allows customers to give their feedback.
It can be the use of blogs and forums (notice board or discussion groups) in addition to email and
websites.
8.3 Transaction
Organization sells its goods or services and receives payments online.
It can involve the use of its own shopping cart software (os commerce), internet merchant
accounts and payment gateways (authorized.net) for credit card possessing. Or
Outsource its payment processing function to external supplier that offers complete solution for
selling goods or services and receiving payments online such as www.clickbank.com .
8.4 Integration
Information system in organization is linked to suppliers and customers in the supply chain (value
network). Value network is different from value chain. Value network includes all the suppliers till
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9 E-Commerce Models
9.1 Business To Business (B2B)
Under this model, one organization purchases from other organization.
It is applicable in organization selling goods or services of capital nature.
Capital goods or services are used as input to the buyer organization rather than brought for
satisfaction of needs.
Example:
Alibaba.com
Example:
www.accasupport.com
Example:
Priceline.com
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Example:
Online auction sites such as ebay.com (intermediary) allow customers to interact with each other.
It gets a commission whenever transaction takes place between customers.
People selling their mp3 players to other people for money.
10 Benefits of E-Business
Past paper
Q.no
Requirement
Marks
HomeDeliver does not have a benefits management process
and so a benefits realisation review is inappropriate.
However, it does feel that it would be useful to retrospectively
12/11
Q4:a define the benefits to HomeDeliver of the new electronic
7
ordering system.
Identify and discuss the potential benefits to HomeDeliver of
the new electronic ordering system.
Improved cash flows as payment is immediately transferred to internet merchant account of
organization (Bank account) through payment gateway rather than receiving payments by posts.
Security of cash receipt also increases as it is directly credited to the bank account of organization.
Reduction in information processing cost for various processes (activities) such as accounting,
human resource, purchases, sales, marketing etc.
Increase in revenue by selling directly to customers by removing intermediaries (distributors,
whole sellers and retailers).
Increased customer care and after sales service by the use of CRM (customer relationship
management) software. CRM softwares are available free of cost on the internet. These are called
open source softwares. However, organization may use paid software or design its own software
to meet its organization specific needs.
Detailed information is available for planning and control by using web analytics tools such as
Google analytics and keyword tools.
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Example:
Website for ACCA study materials such as www.accasupport.com only attracts those students that
are searching for study materials on search engine, forums, social networking sites etc.
E-business allows getting real time information on demand and prices. It enables organization to
implement pricing differentiation strategy according to different timings and market segments etc.
Example:
Airline Company may charge less on earlier booking and more on late booking.
Charging less to customers situated in developing countries using country specific web pages.
E-business can enable organization to choose from wide range suppliers around the world.
Q.no
06/11
Q4:a
06/08
Q3:a
Requirement
Evaluate how the principles of interactivity, intelligence,
individualisation and independence of location might be applied
in the e-marketing of the products and services of CAR.
Explain, in the context of AEC, how the marketing
characteristics of electronic media (such as the Internet) differ
from those of traditional marketing media such as advertising
and direct mail.
Marks
16
10
Exam Support:
You can use these characteristics as an advantage of internet marketing over traditional marketing
media.
1)
Interactivity
As opposed to traditional communication media such as TV, radio, banners etc which provide only
one way communication; internet marketing provides two-way communication.
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2)
Intelligence
Internet based marketing provides opportunity to gather relevant information free of cost by using
webmaster tools (many of them available for free) which is unlikely to possible with traditional
approach to marketing.
Information may be about number of new visitors and re-visitors, how often they visit, how long
they stay on each product page, what are the most popular product pages.
Information gathered from these sources can also be used for traditional marketing as well.
3)
Integration
4)
Individualism
Websites can have additional functionality to allow visitors to customize website according to their
needs such as changing font size, language etc.
It can save the time and effort of visitors to navigate through goods or services offered by the
organization. Thus, it will help to attract new customers and retain existing customers.
It may require initial input of some details, which is used to setup their account with the
organization. Each visitor is recognized by details such as username and password, address and eDownload Full Version at: www.accasupport.com. Full version may have different formatting & Pages (220)
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5)
Industry Restructuring
Example:
It is very common for informational products such as e-books, CDs and DVDs etc to remove
publisher from the supply chain. Author directly sells to end user or through resellers such as
amazon, scribd etc.
While at same time some intermediaries such as courier companies are of increased importance in
the supply chain and cannot be removed easily.
Example:
It is very common for selling tangible products which delivery is outsourced to shipping company.
Online marketplaces such as Clickbank.com have become an integral part of the supply chain.
These marketplaces bring buyer and selling together and administers buying and selling process
for commission.
6)
Independence of Location
E-business can operate from any geo-location and around the clock (24/7).
It can give organization an impression of large entity depending on the design of the website. As
customers rarely look for profile of the organization, unless large sum of money is involved.
It gives flexibility to the organization to re-locate its office to any part of the world. Ideally where
administration cost is low, knowledge, skills and resources are easily available.
Organization can work flexibly at any time of the day while pursuing other commitments to due
reduced physical interaction with suppliers & customers.
Organization has access to wider knowledge, skills and experience. Working at home is common
for e-business. Organization can attract talent across the whole world. In addition, organizations
situated in high wage rate jurisdiction can hire employees from low wage rate jurisdiction to
reduce remuneration expense. It also leads to overhead savings such as power, rent, depreciation
of equipment etc.
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Exam Topic 4
Exam Awareness
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High
Low
Ballast
Business
Heartland
Business
Alien Business
Value Trap
Business
This matrix has following two variables according to which the attractiveness of each SBU can be
judged.
Benefit
Feel
In practice, other variables, such as previous experience, management attitudes and culture,
stakeholders expectations, may also influence the decision regarding potential acquisitions to be
included in the portfolio of the group.
All the relevant factors need to be considered while taking the investment/divestment decision.
Let discuss each of the above variables.
3.1 Benefits
It is the value, which business can add to existing or potential SBUs (acquisition target) by utilizing
their resources and competencies.
Parent may have many resources and capabilities. However, only those resources and
competencies are considered as benefits which the SBU needs to grow and add value.
In other words, benefits are the opportunities (competences and resources) of the parent to help
SBU. More the parent can help, more it can add value.
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Example:
If parent has strong finance department then it can add value by help SBU having weakness in
finance department.
3.2 Feel
Feel is the similarity (overlap) between critical success factors (CSFs) of the Parent and the existing
or potential SBU.
Example:
Parent ability to provide better financial service to SBU will be considered as high feel, if financial
services are CSF for SBU in particular industry.
CSFs depend on the industry in which SBU operates.
In addition, feel is capability to achieve CSFs of the SBU by the parent.
If the parent knows the CSFs of the SBU in particular industry and has capability, then it can use its
capabilities more effectively toward CSF achievement of CSFs of SBU.
Example (continued):
Parent needs to know what financial services are critical to the success of SBU in particular
industry and have capability to provide those financial services.
However, parent having strong financial department will be considered as low feel, if financial
department is not a critical success factor for SBU.
Combinations of Benefits and Feels give the following types of strategic positions to the SBUs in
parent portfolio of investments.
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4 Ansoffs Matrix
Exam Support:
Use this frame work to determine organizational strategy, so that relevant comments can be made
regarding its pros and cons. See student accountant article 07 Apr 2010 takeover, mergers and
managing business units
Ansoffs matrix describes various possible combinations of product and market strategies.
New
Products
Product
Development
Diversification
Penetration
Market
development
Existing
Markets
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Example:
Supplier may provide discount for purchasing materials above certain quantity.
Penetration does not change organization risk and culture.
Penetration is usually considered as low risk strategy.
Penetration is suitable for:
Small organizations;
Organizations still in growth stage;
Risk-averse organization.
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Exam Support:
Recall business risk definition from F9 Financial Management which you have probably calculated
as beta asset (a).
Diversification is suitable for organizations operating industry having maturity or decline stage of
its life cycle.
Diversification can be related or unrelated.
Exampl e:
Organization selling cement is diversifying paint into industry; in expectation that customer who
will buy cement will also buy the paint from the same organization.
Organization diversifying into complementary industry such as in above example is called
horizontal integration of supply chain.
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Example:
Organization selling ice creams is diversifying into winter goods industry.
Unrelated diversification may not achieve economies of scale or scope.
12/08
Q.no
Requirement
In the context of Shoal plcs corporate-level strategy, assess the
contribution and performance of ShoalFish, ShoalPro and
Q1:a
ShoalFarm. Your assessment should include an analysis of the
position of each company in the Shoal plc portfolio.
Assess the extent to which the proposed acquisition of InfoTech
Q2:b
represents an appropriate addition to the MMI portfolio.
Marks
15
10
Exam Support:
BCG can be used in combination with product life cycle, PESTEL and five forces model.
BCG matrix is used for assessing the portfolio of investments (SBUs and products).
High
Market growth
Low
PROBLEM
CHILD OR
QUESTION
MARK
STAR
DOG
CASH COW
Market share
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5.2 Problem Child or Question Market (High Market Growth/Low Market Share)
Problem child is the product or SBU operating in industry having growth potential but cannot
compete for gaining new customers in the market.
Problem child can require turnaround strategies, process re-engineering and change management
skills.
All above activities can require sufficient investment and managerial time to make problem child a
star (high market growth/high market share).
Problem child is unlikely to provide sufficient cash flows to finance above activities due to having
low market share (low sales volume). Therefore, these activities must be financed from cash
inflows generated by cash cow.
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Exam Topic 5
STRATEGIC CHOICE
Sub Exam Topics
S.no
1
2
3
4
Exam Awareness
Strategic choice can be examined with portfolio management requiring evaluation of various
strategic options or plans available to an organization in the scenario.
See past paper analysis24 to explore relationships between exam topics. You can use this
relationship to gather relevant points across the exam topics that can be used to answer
questions.
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1 Generic Strategies
Exam Support:
It can be used to determine reasons for organizational success or failure.
It can also be used to evaluate subsequent strategies for consistency with generic strategies as
inferred from the case.
Michael Porter has identified three generic (original) strategies that organizations can adopt for
entering a market. It gives the initial strategic direction to the organization.
Adoption of generic strategies leads organization to strategic position which gives them
competitive advantage in the industry.
Generic strategies should be adopted taking account of size of investment, competition, market
size and life cycle, resources, knowledge, skills and experience, macro-economic factors.
All subsequent strategies to be successful should be consistent with the generic strategies.
1.2 Differentiation
Differentiation strategy aims to distinguish their goods or services from competitors on the basis
of product quality, price, place and promotion.
Fortunately, this strategy can be adopted by every organization with success.
This strategy is suitable for selling product having different features than competitors. High selling
price can be charged, as the product is of unique nature that customers cannot find elsewhere.
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1.3 Focus
Focus means concentrating on a particular market segment (niche) or customer group rather than
market in general.
Example:
Organization (Ferrari) trading in automobile industry manufacturing sports cars.
Focus defines human beings while differentiation defines product and other elements of
marketing mix (place, price, promotion).
Firstly, organization should decide which areas they want to focus (target) on, and then it has to
decide whether to follow cost-leadership or differentiation strategy.
It is unlikely to achieve economies of scale in focus strategy by following it in combination with
cost leadership strategy due to small size of the market segment.
This strategy is suitable for small organizations which do not sell range of products and cannot
operate in multiple market segments at once. Therefore, they have to strategically position (focus)
themselves to particular market segment. That, market segment may not be attractive to large
organizations, because of not having enough demand (market size) to make suitable use of their
resources.
In addition, there can be mix of above strategies such as
Example:
It can be news channel (focus on news readers) broadcasting business news (differentiation on
product) in the telecommunication (market) industry.
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Broad Market
Scope
COST
LEADERSHI
DIFFERENTIATION
Cost
Efficiency
FOCUS
Narrow
Market Scope
FOCUSED
DIFFERENTIATION
Uniqueness
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2 Strategic Clock
Past paper
12/07
12/07
12/07
Q.no
Requirement
Q1:b(i) Explain the key features of a no frills low-cost strategy.
Q1:b(ii) Explain the key features of a no frills low-cost strategy.
Identify and evaluate other strategic options ONA could consider
Q1:c to address the airlines current financial and operational
weaknesses.
Marks
4
16
10
Differentiation
Hybrid
Focused-differentiation
Quality
Low price
Failure strategy
No frills
Failure strategy
Failure strategy
Price
2.1 Quality
Quality is the value of product in the eyes of customer.
2.2 Price
Price is the consideration paid by the customer in cash or kind.
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2.5 Differentiation
It is the same as porters differentiation strategy.
Example:
Dell computers provide quality by enabling customers to be able to order computer of their own
specification from their website and cost savings are achieved through integrating their
information systems with suppliers to save ordering and holding costs.
Suppliers immediately supply spare part and production department is simultaneously notified
each time customer order is received to quickly deliver computers to customers.
2.7 Focus-Differentiation
Same as porters focused differentiation strategy.
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12/11
06/10
06/09
Q.no
Requirement
GETs proposed strategy is firstly to acquire SOFR and then the
franchise to run the rail network of Raziackstan. You have been
asked to provide an independent assessment of this proposed
Q1:b strategy.
Write a report evaluating GETs proposed strategy.
Professional marks will be awarded in part (b) for appropriate
structure, style and fluency of the report. (4 marks)
Assess, using both financial and non-financial measures, the
Q2:a attractiveness, from Swifts perspective, of EVM as an acquisition
target.
The panel selected the proposal of Professor Ag Wan as the
winning proposal.
W r i t e a b rie fi n g p a p e r
e v al u a ti n g t h e t h r e e p r o p o s als
Q1:b a n d j u s t i f y i n g t h e s e l e c t i o n o f
t h e p r o p o s al of Pr o f e ss o r
A g W a n as t h e b es t str a t e gic
o p t i o n f o r greenTech t o p u r s u e .
Note: requirement (b) includes 2 professional marks.
Marks
20
15
20
Exam Support:
Question Q2: a, 06/10 emphasis the interrelationships between exam topics. You should
relationships between exam topics in practical context.
Strategic success criteria are used to evaluate strategies (existing or potential) for the ability to
achieve organizational objectives.
Strategies are likely to achieve organizational objectives if all the following criteria are met.
Success criteria is interrelated and overlapping in practice.
4.1 Suitability
Suitability is the effectiveness of strategy in fulfilling organizational objectives.
Organizational objectives at following levels.
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Exam Support:
Recall Source of finance & Cost of capital from F9 Financial Management
4.2 Acceptability
Acceptability is concerned with the effectiveness of strategy in receiving agreement of key
stakeholders.
Key stakeholders depend on the strategy pursued or to be pursued by organization.
Agreement can be achieved if strategy can satisfy stakeholders objectives and ethical viewpoints.
Example:
Shareholders acceptability will be acquired if strategic decision will lead to maximizing profits or
minimizing risks.
4.3 Feasibility
Feasibility is concerned with organizations ability to implement strategy in practice.
Strategy is feasible if organization has strategic capability (resources and competencies).
Legal requirement such as licensing can be included in feasibility as well as acceptability.
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Exam Topic 6
Exam Awareness
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Exam Topic 7
Exam Awareness
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Q.no
Requirement
Marks
Identify and analyse, using an appropriate model, the contextual
factors that will influence how strategic change should be
managed at Captain Haddock.
12/10
Q1:b(i)
15
Professional marks will be awarded in part (b) (i) for the
identification and justification of an appropriate model.
(2 marks)
The success of any attempt at managing change will be
dependent on the context in which that change takes place.
I d e n tif y a n d a n al ys e, u si n g a n
06/08
Q4:b a p p r o p r i a t e m o d e l , t h e internal
15
contextual features t h a t c o u l d i n f l u e n c e
t h e s ucc ess or fail u r e of t h e
c hi ef e x e c u ti v es p r o p o s e d
st r a t e gic ch a n g e f o r PSI.
Balogun and Hope Hailey give 8 contextual factors are relevant for the determination of success or
failure of proposed strategic change in the organization.
These contextual factors or features are interrelated improvement/un-improvement in one factor
can lead to improvement/un-improvement in others.
5.1 Time
Time is need for any strategic change to take place. Sufficient time needs to be available to devise
sound strategies. Strategies made under time pressure are venerable to weaknesses that can
ultimately lead to failure.
If change is urgently required it will become more difficult to successfully implement proposed
change.
5.2 Scope
This is defined by the degree of strategic change needed or coverage of organizational areas to be
change.
Clearly defined scope is prerequisite for successful implementation of proposed change.
Vaguely defined and communicated scope can lead to confusion over impact of change on
organization and employees and other stakeholders which can impede change.
Scope should be properly defined and communicated to avoid resistance from inside and outside
the organization.
Scope helps in planning time resources and capabilities needed for proposed change. More radical
(basic) change needs more time, resources, and capabilities.
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5.3 Power
Power means ability to influence others views and judgements.
Power can result from having particular position (Chairman or CEO) and having expert knowledge
or skills (engineers).
Proposed change is likely to be more successful if person proposing the strategic change has
sufficient power or personnel having sufficient power are supporting him/her.
Example:
Strategy proposed by CEO is more influential than strategy proposed by operational manager
which can be disregarded easily on the grounds of lack of authority no matter how feasible it may
be.
For successful implementation of change powerful personnel needs to be tackled or convinced
first.
In addition the person expected to execute the proposed change need to be powerful too.
5.4 Resources
Resources are the economic factors of production (employees, machinery, material, money). To
make proposed change feasible sufficient resources needs to be present.
5.5 Capability
It means knowledge, skill, expertise and experience needed to successfully implement the strategic
change. Having all the resources available without the ability to use them will not lead to
successful implementation of change.
Training can overcome this problem but it takes time and money.
5.6 Readiness
It refers to the state of mind, how motivated your workforce is to accept the strategic change.
Persuading the key personnel can help achieve readiness in the workforce but persuading key
personnel is itself a challenging task and needs exceptional persuasion skills.
Any reservations and fears on the effect of proposed strategic change needs to be overcome
through communication.
5.7 Diversity
How dispersed are your workforce?
Whether, they have different views for the current and future prospects of the organization?
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Example:
It is easier to implement change if workforce is divided into five groups each having different
viewpoints because each have 20% representation than if workforce is divided into two groups
having different viewpoints because each have 50% representation.
5.8 Preservation
What standards, values, attitudes, beliefs, skills and expertise we want to retain or maintain while
implementing change.
It is necessary to retain, motivate and tackle such aspects of culture and personnel with care.
There retention in organization is vital to the success current and proposed strategies and
objectives.
Q.no
Requirement
Marks
Analyse the culture of iCompute, and assess the implications of
12/11
Q2:a
13
your analysis for the companys future performance.
Analyse Frigate Ltd using the cultural web or any other appropriate
12/10
Q3:a
15
framework for understanding organisational culture.
Assess the underlying organizational cultural issues that would
explain the failure of the Director Generals strategy at the
12/08
Q1:b
20
National Museum.
Note: requirement (b) includes 2 professional marks.
Cultural web paradigm (model) is collection of factors which shapes (defines) organizational
culture.
The following are the six interrelated (like web) factors.
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POWER
ROUTINES
&
RITUALS
CULTURAL WEB
PARADIGM
STORIES
CONTROL
SYSTEMS
ORGANIZATIONAL
STRUCTURE
Exam Support:
Think of possible interrelationship between various components of cultural web paradigm.
Example can be, changing personnel having power to change internal control system.
6.1 Power
Power is ability to change or resist change (cultural, strategic or operational) in the business
organization. Power can be driven from occupying particular position, specialist knowledge etc.
Who is/are powerful depends on the situation to situation.
Example 1:
A decision by board of directors to Change Financial reporting framework from local accounting
standards to international accounting standards. This decision must be acceptable to chief
financial officer (CFO). In this case CFO is more powerful because having technical knowledge of
financial reporting even she/he is lower in position than the board of directors.
Example 2:
A decision by board of directors to buy raw material from different supplier. If the purchase
manager resent this decision he/she is unlikely to resist change due to the board to directors are
senior in position and the decision does not depends on technical knowledge for its
implementation.
6.2 Stories
Facts or fiction about the organization which people inside and outside the organization used to
tell each other.
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Example 1:
Co-workers telling a new comer how they are used to help each other in performance of their
duties.
Example 2:
Employee making personal call from companys telephone interrupted by fellow employee by
telling him/her that boss gets annoyed when anyone makes personal calls during working hours
from companys telephone.
Example 1:
Daily signature on attendance registers by employees is the routine.
Example 2:
Chairman distributing Easter eggs to employees on religious occasion Easter.
6.4 Symbols
Symbols are the logos, uniforms, internal and external decorations. These are used to define
corporate values.
Example 1:
Uniforms are used to draw distinctions among different grade of workers.
Example 2:
Paintings of successful persons are used to convey message to employee about what kind of
behaviour is expected of them.
Example 1:
Tall organizational structure suggests close control while flat organizational structure suggests
autonomy given to operational managers.
Example 2:
Organization if, arrange it works projects or products wise, it could be deduced that products are
the key to success for the organization.
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Exam Support:
For concluding on control systems, observation is essential for determining actual compliance with
internal controls by employee, in addition to inspecting documentations on internal control.
Example 1:
Preparation of budget is an establishment of benchmark against which performance can be
measured and rewarded or penalized.
Example 2:
Segregation of duties for manufacturing and storekeeping process between number of employees.
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Exam Topic 8
Exam Awareness
Process change may be conducted as project. You can apply project management knowledge to
answer requirements on process change.
Information technology is of primary importance in process redesigning. Be prepared to use
knowledge on information technology to suggest process redesign changes.
Strategic planning can be the reason for conducting process redesign. Be prepared to relate
process redesign to strategy.
Process redesign involves cultural and structural change in organization. Be prepared to discuss
issues regarding cultural and structural change.
See past paper analysis24 to explore relationships between exam topics. You can use this
relationship to gather relevant points across the exam topics that can be used to answer
questions.
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Q.no
P/P
Q4:a
12/09
Q2:a
12/07
Q3:a
Requirement
Draw the primary activities of DRB on a value chain. Comment on
the significance of each of these activities and the value that they
offer to customers.
Analyse the primary activities of the value chain for the product
range at IL.
Describe the primary activities of the value chain of Perfect
Shopper.
Marks
9
10
5
Porters value chain is the framework used for determining primary and supporting activities of the
organizations.
Secondary
PROCUREMENT
FIRM INFRA STRUCTURE
SERVICE
& SALES
MARKETING
LOGISTICS
OUTBOUND
OPERATIONS
LOGISTICS
Primary
INBOUND
HUMAN RESOURCE
PROFIT
TECHNOLOGY DEVELOPMENT
1.1.2 Operations
Operations include all the processes which are conducted inside the production department.
These processes can include assembling, packaging and inspection.
Operations are responsible for converting materials in finished goods of merchantable quality.
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1.3 Profit
Profit is reward for adding value to the goods or services by performing above primary and
supporting activities.
Cost of primary activities are charged to customer as cost of sales and cost of supporting activities
are charged to expense for the period as operating expenses.
2 Supply Chain
Supply chain is the sequence of value chain from suppliers of raw materials to end consumers.
In between it may include suppliers of semi-finished goods, manufacturers, distributors, whole
sellers and retailers in most supply chains.
It may also involve industry specific intermediaries such as stock broker between seller and buyer
of securities.
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Q.no
Requirement
Marks
Eventually, the IAA decided not to develop a bespoke solution but
to use an established software package to implement its multiple
choice question management and examination requirements. The
selected package, chosen from a shortlist of three, includes the
delivery of tests, question analysis, student invoicing and student
06/11
Q3:b
10
records. It is already used by several significant examination
boards in the country.
Explain the advantages of fulfilling users requirements using a
software package solution and discuss the implications of this
solution for process re-design at IAA.
Skidmore & Eva suggest the software packages may be evaluated for the following requirements.
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Example:
Organization can provide time and cost constraints 10 points while provide supplier reputation 2
points.
Software scoring higher should be selected.
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Q.no
Requirement
Examine FOUR ways in which OneEnergy failed to follow a
proper evaluation procedure in the selection of the RitePay
06/09
Q3:b
software package. Include in your examination a discussion of
the implication of each failing.
The project plan shows a number of planned activities. Explain
how each of the following three activities contribute to the
testing and quality of the software for CaetInsure:
12/08
Q3:a
(i) System testing;
(ii) Acceptance testing;
(iii) Data migration.
Skidmore and Eva suggest the following procedure for purchasing software.
Marks
12
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Example:
Software having best operability features may be given 8 out of 10.
Software having good operability feature may be given 5 out of 10.
Where 10 is the standard weight for operability requirement.
4.4 Implementation
See implementation requirements above.
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Exam Topic 9
PROJECT MANAGEMENT
Sub Exam Topics
S.no
1
2
3
4
5
6
7
Exam Awareness
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Exam Topic 10
FINANCE
Sub Exam Topics
S.no
1
2
3
4
5
6
7
Exam Awareness
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