'strategic plan'?

188 Pages·2016·3.2 MB·English

March/June 2016 Examinations ACCA P3 Business Analysis 1
Paper P3
1. Real life examples 5
2. Strategic planning models 7
3. Advantages and disadvantages of strategic planning 13
4. The rational model in more detail 15
5. Environmental analysis 19
6. Capabilities 25
7. Internal analysis 27
8. SWOT Analysis 33
9. Objectives, critical Success factors and benchmarking 35
10.Determining strategy 43
11.Diversification 49
12.Methods of growth and portfolio management 53
13.Strategic choice 57
14.Implementation 59
15.Corporate culture 61
16.Organisational structure 65
17.Marketing concept 77
18.Pricing 85
19.Process change 91
20.Change management 101
21.Data, Information, knowledge and IT 107
22.The Internet and E-Business 115
23.Acquiring software 121
24.Project management 123
25.Human resource planning - people 135
26.Integrated Reporting 149
27.Forecasting 155
28.Finance 165
29.Budgeting and standard costing 167
30.Capital rationing and sensitivity analysis 175
31.Marginal and relevant costing; ABC 179
32.Ratio analysis 185
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March/June 2016 Examinations ACCA P3 Business Analysis 2
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March/June 2016 Examinations ACCA P3 Business Analysis 3
Syllabus
1. 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.
2. Objectives
2.1. On successful completion of this paper, candidates should be able to:
๏ Assess the strategic position of an organisation
๏ Evaluate the strategic choices available to an organisation
๏ Discuss how an organisation might go about its strategic implementation
๏ Evaluate and redesign business processes and structures to implement and support the
organisation’s strategy taking account of customer and other major stakeholder
requirements
๏ Integrate appropriate information technology solutions to support the organisation’s
strategy
๏ Advise on the principles of project management to enable the implementation of
aspects of the organisation’s strategy with the twin objectives of managing risk and
ensuring benefits realisation
๏ Analyse and evaluate the effectiveness of a company’s strategy and the financial
consequences of implementing strategic decisions
๏ Assess the role of leadership and people management in formulating and
implementing business strategy.
3. Approach to examining the syllabus
The syllabus is assessed by a three-hour paper- based examination.
SECTION A
Section A contains one multi-part question based on a case study scenario. This question is
worth 50 marks .
SECTION B
Section B will consist of three discrete questions each worth 25 marks. Candidates must
answer two questions from this section.
Total: 100 marks
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March/June 2016 Examinations ACCA P3 Business Analysis 4
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March/June 2016 Examinations ACCA P3 Business Analysis 5
Chapter 1
REAL LIFE EXAMPLES
1. Introduction
Before we start looking at the theories of strategic planning, it might be worthwhile looking
at some well-known companies and how they have fared in the past.
2. IBM
In the 1970s, IBM was a very powerful and profitable computer manufacturer. However, by
the mid-1980s it had registered one of the largest corporate losses ever made. In the space of
about five years there was a complete turnaround. How did this happen? With benefit of
hindsight many commentators suggests that IBM hit hard times because it misread the
impact of a change of technology, namely the impact of personal computers. For a company
which had made a success of manufacturing and selling mainframe computers to large
businesses and governments, personal computers might have seemed to be little more than
playthings. A senior executive at the time was rumoured to have commented that he couldn’t
see why anyone would want a computer in their home. IBM had also enjoyed very high rates
of corporate growth for several decades, and once that happens to an organisation it might
begin to believe that those rates of corporate growth are there for the asking. The
organisation can become inward-looking and believe that it is invincible. IBM only managed
to survive. It did make personal computers and laptops for some years, but those products
quickly became commodities subject to very strong competition from manufacturers
established in countries with cheap labour. There was little profit margin left and now IBM has
almost forsaken computer manufacturing. It has become primarily a supplier of consultancy
services. Consultancy services are harder to treat as commodities and have a better chance of
retaining high mark-ups. They are also more difficult to source from cheap operations
overseas.
3. Nokia
Until about 2008, Nokia was one of the most successful mobile phone manufacturers in the
world. However, it was tied to an old operating system (Symbian) and when Apple launched
its iPhone, Nokia rapidly lost market share. Nokia was sold to Microsoft in 2014 and Nokia is
no longer used as a brand name for phones, having been replaced by Microsoft’s Lumia
brand.
Nokia moved too slowly to stay up to date with popular developments
4. Kodak
Kodak is an organisation with almost unrivaled photochemistry. It had a reputation for
excellent color films. Obviously, digital photography has had a huge impact on the
profitability of Kodak. The decline in Kodak’s profits does not necessarily mean that Kodak did
anything wrong. It might simply mean that its but its unique, excellent technology has had its
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March/June 2016 Examinations ACCA P3 Business Analysis 6
day. If you are very good at something, but then no-one wants what you are good at any
more, then success will be damaged. Kodak is trying to change to other areas of the market
such as cameras. However, having had a uniquely strong position in color chemistry it could
be difficult to transfer your reputation and replicate your success even in related industries.
For example, camera manufacturing there are powerful, long- established companies such as
Canon, Pentax, Olympus, and Leica. Even though Kodak can make excellent digital cameras, it
is hard to compete against those companies. Kodak might never make again the same high
profits it once did.
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March/June 2016 Examinations ACCA P3 Business Analysis 7
Chapter 2
STRATEGIC PLANNING MODELS
1. What is a ‘strategic plan’?
The term ‘strategic plan’ typically refers to a long range plan (at least three years, and often
for five or longer) affecting the whole of the organisation. It should be addressing the
questions of what the organisation will be doing and what it will look like in terms of size and
structure in, say, five years. Some organisations use the alternative names of ‘long range plan’
or ‘corporate plan’ instead of ‘strategic plan’.
2. The rational model
2.1. Diagram
Strategic
Control
Internal appraisal
Stakeholder Strategic Strategic Strategic
Mission Objectives
appraisal options choice implementation
External appraisal
Position Choice Action
2.2. Position
The rational model is an approach to strategic planning which first of all investigates the
position of the organisation. To establish the organisation’s position means carrying out
of an internal appraisal, an external appraisal, and also an appraisal of stakeholders, that
is, an appraisal of the various parties affected by the organisation and what they want
from it. This stage is information gathering.
2.3. Choice
Once the current position has been established, the organisation can go on to set
objectives. The objectives must take into account, for example, what the economy is
doing, what competitors are doing, and what the organisation’s resources will allow it
to do. The objectives are what you want to achieve; the strategy, or strategic options,
are how you might go about achieving that. For example, if the objective was to
increase profits by 20%, one strategy might be to take over another company. An
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March/June 2016 Examinations ACCA P3 Business Analysis 8
alternative strategy might be to expand abroad. A third strategy which could possibly
generate the required profit growth might be to subcontract much of the production
activities.
Once the strategies have been set out and examined, one can be chosen. This will often
be a compromise, for example, between high risk and high return or lower risk and
lower return.
A powerful method of choosing a suitable strategy is to look at its suitability,
feasibility and acceptability. This will be examined more fully later.
2.4. Implementation
The third stage is the action stage: strategic implementation. Everything up to here has
been investigation and high level planning. Too often, perhaps, organisations feel that
is enough, but without implementation of the plans, strategic analysis is a waste of time
and effort. Strategic implementation is hard, sustained work. As explained above,
usually strategic plans will have planning horizons of five years or so, and look at the
whole organisation. Strategic plans are therefore high-level documents, but
implementation is a matter of detail. The strategic plan has to be broken down by
department and by year. Often these small parts of the strategic plan can be regarded
as discrete projects. The project objectives and constraints can be communicated by
budgets, given to each department or cost centre.
2.5. Control
If every department meets its budget the strategic plan will be realised. However, it
rarely is. Not only are there inherent difficulties in the planning process, but almost
certainly the environment will change, and what had been a good plan will have to be
modified. This is where strategic control comes in. The plan must be continually
reviewed to see if it is still relevant and also we must try to make sure the performance
is appropriate.
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March/June 2016 Examinations ACCA P3 Business Analysis 9
3. Rarely linear
The previous diagram and narrative presented strategic planning as a linear process
beginning with strategic position or analysis, then moving to strategic choice, and then
turning the strategic choice in action. The following diagram simply illustrates that a linear
process may oversimplify matters.
Strategic analysis/
position
Strategic Strategic
choice into action
(implementation)
For example, once you begin implementing a strategy inevitably you find out more
information and this may mean that you go back and review your strategy and make different
choices. The three stages are inevitably linked and inform one another.
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4. Rarely unchanging
Strategies should never be set in a stone. No one is capable of gathering all the relevant fact
and making correct predictions. Random local, national and world events will intervene and
mess up a carefully thought out strategy.
Deliberate strategy
Intended strategy
Realised strategy
Unrealised strategy Emergent strategy
The terminology on this diagram is as follows:
๏ Intended strategy was the original plan.
๏ Usually some parts of that are unrealised. They are abandoned either because there are
changes on the environment, or we find that we don’t have the resources to carry them
out. .
๏ Deliberate strategy is what you intended to do and actually did.
๏ Emergent strategies become apparent as time passes and new opportunities or threats
have to be dealt with. This is the most important term in the diagram.
๏ The realised strategy is therefore the result of some strategies which were planned from
the start, some strategies which were abandoned, and additional strategies which
gradually emerged over the planning horizon.
The fact that the realised strategy will rarely be the same as the intended strategy does not
mean that there must be a fault in the strategic planning process. It simply indicates that,
obviously, the future is not perfectly predictable.
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