PAGE 3 AIM To ensure that candidates can exercise judgement and technique in strategic business management to enable them to contribute to the formulation of business strategy, the development of products and services and the maintenance of quality throughout the organisation. OBJECTIVES On completion of this paper candidates should be able to: • identify and apply the principal concepts and ideas in the theory and practice of strategic management • understand the internal and external factors affecting an organisation and apply this knowledge to evaluate its strategic position • identify appropriate strategies based on the evaluation of the organisation’s objectives and position • identify the appropriate methods of implementing chosen strategies and evaluate their impact on organisational structures and operations • understand the impact of globalisation on strategic business planning • integrate knowledge effectively and use it creatively in applying concepts and techniques • analyse, interpret and apply data and information and present reasoned conclusions Paper 3.5 Strategic Business Planning and Development • communicate analyses and conclusions effectively and with sensitivity for different purposes and contrasting audiences with due emphasis on social expectations. POSITION OF THE PAPER IN THE OVERALL SYLLABUS Candidates should have a sound understanding of Paper 1.1 Preparing Financial Statements and 1.2 Financial Information for Management, Paper 1.3 Managing People and Paper 2.1 Information Systems. The information in these papers will provide some of the basic material for strategy analysis and development. Paper 3.5 builds upon the knowledge obtained in Paper 1.3 by • reinforcing the importance of recruitment and selection processes and procedures • examining the importance of training and development and motivation within a strategic context • providing a more strategic view of human resource issues • extending the coverage of work organisations. Paper 3.5 develops parts of the knowledge gained in Paper 1.1 and 1.2 by • applying and interpreting financial information for strategy evaluation and strategy recommendation • giving more emphasis on pricing policies and procedures • examining performance measurement criteria. Paper 3.5 develops parts of the knowledge obtained in Paper 2.1 by • reinforcing the knowledge of managing information systems at a strategic level. Although much of the knowledge gained in Part 3 will be specific to the individual papers, Paper 3.5 will, by its very nature, provide integration with most of the other papers at this level. In Paper 3.1 Audit and Assurance Services there will be links with professional and ethical considerations. In Paper 3.3 Performance Management there will be strong relationships with areas on performance measurement and decision-making. In Paper 3.4 Business Information Management there will be related material on information resource management and information systems and competition. In Paper 3.7 Strategic Financial Management there will be relationships with objectives and corporate governance, strategy formulation and the global economic environment. PAGE 4 Paper 3.5: Strategic Business Planning and Development (Continued) SYLLABUS CONTENT 1 Models of strategic management (a) What is strategic management? (i) corporate strategy (ii) business strategy (b) Why is strategic management important? (c) The process, content and context of strategic management. (d) Process of strategy development (i) deliberate or prescriptive strategies (ii) emergent and incremental strategies. (e) Strategic content (i) strategic analysis (ii) strategic choice (iii) strategic implementation. (f) Strategic management in different contexts (i) configuration (ii) culture. 2 External environmental scanning (a) Analysis of the general environment (i) SLEPT analysis (ii) Porter’s diamond (iii) forecasting and scenarios. (b) Analysis of the customers and markets – marketing research. (c) Analysis of the competitive environment (i) five forces model (ii) competition and collaboration (iii) competitor intelligence for business advantage (iv)sustainable competitive advantage and critical success factors. 3 Internal assessment (a) Resource audit. (b) Analysis of capabilities and core competences. (c) Adding competitive value – value chain and value system. (d) Analysis of human resources. (e) Analysis of financial resources. (f) Analysis of operations resources. 4 The nature of strategy analysis and choice (a) The purpose of the organisation (i) stakeholder expectations (ii) cultural context (iii) mission, objectives and strategic intent. (b) Developing the strategy (i) alternative directions for strategy development – resource based – market based – finance based (ii) methods of strategy development – internal development – strategic alliances – mergers and acquisitions. (c) Strategy evaluation and selection (i) analysis of suitability, feasibility and acceptability (ii) corporate/ business strategy selection. 5 The nature of strategy implementation (a) Marketing issues (i) segmentation, targeting and positioning (ii) strategies for market leaders, followers, challengers and nichers (iii) development and application of marketing mix strategies. (b) Finance issues (i) performance evaluation (ii) funding the implementation and the resource allocation. (c) Research and Development issues (i) management of innovation (ii) management and control of quality. (d) IS/ IT issues (i) IT/ IS as a strategic resource (ii) the management of information systems development. (e) HR issues (i) recruitment and selection (ii) motivation and discipline (iii) appraisal and performance evaluation (iv) staff training and development. (f) Project management issues (i) the project life cycle (ii) objectives of project management (iii) estimation of resource requirements (iv)tools and techniques of project management. (g) Management of change issues (i) understanding the types of strategic change and their causes Strategic Business Planning and Development (Continued) PAGE 5 (ii) development of a strategic change programme – power influence – culture influence (iii) management roles in the strategy change process (iv) managing the strategic change process. 6 Matching structures with strategy (a) Types of organisation structures (i) simple (ii) functional (iii) divisional (iv) matrix (v) multinational (vi) global (vii) strategic business unit. (b) Centralisation versus decentralisation. (c) Organisational configurations. 7 The nature of global competition (a) The role of traditional international marketing. (b) The development of the global business (i) market convergence (ii) cost advantages (iii) government pressures (iv) currency volatility and trade barriers (v) the emergence of global competition. (c) Global strategies (i) standardisation versus customisation (ii) product positioning (iii) channel management (v) the development of global brands. (d) Managing a global company (i) ethnocentric, polycentric or geocentric orientation (ii) cross cultural management and leadership. (e) Reaching global customers (i) international marketing research (ii) international market segmentation. 8 Outcomes of the strategic management process (a) Corporate versus business performance (b) Sustainable competitive advantage (c) A learning organisation (d) Alternative performance measures: (i) financial (ii) non financial (iii) strategic. 9 Ethical considerations (a) The importance of social responsibility. (b) Corporate governance. (c) The attitude towards ethics on national and global scales. EXCLUDED TOPICS The syllabus content outlines the areas for assessment. No areas of knowledge are specifically excluded from the syllabus. KEY AREAS OF THE SYLLABUS Although all the syllabus will be examined in some form, the core areas will be focused on the strategy formulation process. This comprises the identification of corporate objectives, strategic analysis, including internal and external reviews, strategy development, evaluation and implementation. APPROACH TO EXAMINING THE SYLLABUS Primarily the subject – Strategic Business Planning and Business Development – will be considered at the strategic level. All aspects will be considered in terms of practical application. Wherever possible the subject will be integrated and not considered as a collection of isolated topics. Operational activities will only be introduced where they impinge upon strategic considerations. The examination is a three hour paper in two sections. Section A will be in the format of one major case study, usually with four question parts. This will be compulsory and will focus on the core material, previously described, although other aspects of the syllabus could be introduced here. Questions will be mainly discursive but there will usually be some financial or other quantitative data included here to be analysed. Candidates are expected to closely relate all their answers to the case scenario. Section B will consist of a choice of two questions, each of two parts, from a total of three available. Strategic Business Planning and Development (Continued) PAGE 6 They will not be linked to the compulsory case scenario, but may include short scenarios to be discussed in context. Number of Marks Section A: One compulsory question 60 Section B: Choice of 2 from 3 questions (20 marks each) 40 100 ADDITIONAL INFORMATION The Study Guide provides more detailed guidance on the syllabus. RELEVANT TEXTS There are a number of sources from which you can obtain a series of materials written for the ACCA examinations. These are listed below: Foulks Lynch – ACCA's official publisher Contact number: +44 (0)20 8831 9990. Website: www.foulkslynch.com Accountancy Tuition Centre (ATC) International Contact number: +44 (0)141 880 6469. Website: www.ptc-global.com BPP Contact number: +44 (0)20 8740 2211. Website: www.bpp.com Strategic Business Planning and Development (Continued) STUDY SESSIONS OVERVIEW OF STRATEGIC MANAGEMENT 1 Introduction to strategic management (a) Strategic managment defined (i) corporate strategy – understand the strategic perspective – evaluate the overall purpose and scope – describe the expectations of owners – describe the expectations of stakeholders – explain the concept of added value (ii) business strategy – be aware of the role of business units – identify market competition (b) The importance of strategic management (i) define strategy and strategic thinking (ii) differentiate between policy, strategy, tactics (iii) understand the need for a long term view (iv) define long term objectives (v) explain controlling the future (vi) understand long term efficiency The Financial Training Company Contact number: +44 (0)174 785 4302. Website: www.financial-training.com Candidates may also find the following texts useful: Johnson and Scholes Exploring Corporate Strategy (6th edition) Prentice Hall Europe Grant Contemporary Strategy Analysis: Concepts, Techniques, Applications (4th Edition) Brackwell Publisher ISBN 0631207 805 Other texts which may be useful to candidates: Joyce and Woods Strategic Management Kogan Page ISBN 0749435836 Wilson and Gilligan Strategic Marketing Management: Planning, Implementation and Control (2nd edition) Butterworth-Heinemann ISBN 075062244X Keegan Global Marketing Management Prentice Hall (6th edition) ISBN 0139030239 Wider reading is also desirable, especially regular study of relevant articles in ACCA's student accountant. PAGE 7 Strategic Business Planning and Development (Continued) (c) The process, content and context of strategic management (i) describe the present position of the organisation (ii) understand the external environment (iii) understand the organisation at present (iv)evaluate where does the organisation want to be (v) demonstrate how is the organisation going to get there (d) The process of strategy development (i) identify deliberate strategies (ii) identify prescriptive strategies (iii) identify emergent and incremental strategies (iv) understand strategic planning and strategic management 2 The rational model (a) strategic analysis (i) assess the strategic position (ii) evaluate expectations and influence of stakeholders (b) strategic choice (i) define underlying influences which guide strategy (ii) evaluate strategic options (iii)understand evaluation and selection procedures (c) strategic implementation (i) define resource planning (ii) define corporate strategy (iii) define business strategy (iv) define operational and financial strategy 3 Strategic management in context (a) Strategic configuration (i) understand logical incremental model (ii) understand rational command model (iii) understand cultural political influences (iv) understand political choice 4 Culture (a) Define the meaning of culture (b) Understand the determinants of culture: Schein (c) Describe the cultural web: Johnson and Scholes (d) Link culture with structure (e) Discuss models of culture: Handy, Miles and Snow, Peters and Waterman, Mintzberg (f) Understand changing organisational culture: Kanter, Lewin (g) Evaluate the link between culture and strategic leadership (h) Identify regional and national culture 5 External environmental scanning (a) Analysis of the general environment (i) SLEPT analysis – be aware the social impact on the organisation – be aware of the legal issues and implications – be aware of the role and influence of the economy – be aware of the political environment – be aware of the impact of technology – be aware of complexity, dynamism and uncertainty – understand systems thinking – analyse the organisation as an open system – understand the focal zone analysis (ii) Porter’s diamond – explain firm strategy, structure and rivalry – explain demand conditions – explain factor conditions – explain related and supporting industries (iii) forecasting and scenarios – understand strategic life cycles – understand statistical forecasting techniques – understand the delphi technique – understand scenario planning 6 Analysis of customers, markets and marketing research (a) Explain aggregate and sectoral concentration (b) Understand customer behaviour (c) Understand the principles of marketing research (d) Explain market research as a component of marketing research (e) Discuss social change and social trends (f) Discuss demographic factors (g) Discuss population size (h) Discuss demographic change (i) Discuss social structure PAGE 8 (j) Discuss economic change (k) Analysis of the competitive environment (i) the five forces model – understand the general model – discuss intensity of rivalry among existing competitors – discuss bargaining power of suppliers – discuss bargaining power of buyers – discuss the threat of new entrants – discuss the threat of substitutes – evaluate the weaknesses of the model – explain the threat of potential entrants – understand the connection with market structure – discuss the role of government and regulation (ii) competition and collaboration – review government regulation – discuss the competition commission – compare different market environments – discuss cartels, oligopolies 7 Competitor intelligence for business advantage (a) Understand the portfolio analysis approach (b) Describe the Boston Consulting Group model (c) Describe the Shell directional policy matrix/nine cell grid (d) Understand the importance of understanding portfolio analysis (e) Understand the product life cycle (f) Explain competitor benchmarking (g) Explain competitive positioning grid (h) Sustainable competitive advantage (i) define competitive advantage (ii) explain competitive advantage (iii) discuss generic strategies (Porter) (iv)understand different approaches by management (v) evaluate branding, patents, copyrights and trademarks (vi) identify national advantage (Porter) (vii) evaluate the strategic role of the marketing mix (i) Critical success factors (i) define how to measure success (ii) compare actual and relative success factors (iii) compare efficiency and effectiveness (iv) evaluate financial measures (v) contrast the expectations of stock holders and shareholders (vi)discuss quality issues (vii) evaluate success measurement for non profit making organisations 8 Internal assessment (a) Resource audit (i) identify the quality, nature and extent of available resources (ii) identify physical, human and financial resources (iii) identify intangible resources (iv) understand unique resources and competitive advantage (v) evaluate internal control systems (vi) analyse departmental organisation (b) Analysis of capabilities and core competencies (i) formulate a SWOT analysis (ii) interpret a SWOT analysis (iii) describe the product life cycle (iv) understand the seven ‘S’ approach (v) demonstrate threshold competencies (vi) demonstrate core competencies (vii) identify appropriate markets (viii) review quality and reliability (ix) explain product attributes 9 Adding competitive value (a) Understand the value chain (i) link the value chain with organisational structure (ii) explain the value system (iii) discuss product and market differentiation (iv) identify sources of differentiation (v) assess innovation (vi) understand technical development (vii) identify new target markets (viii) identify new distribution channels (ix) identify new market segments Strategic Business Planning and Development (Continued) PAGE 9 (x) be aware of sudden environmental shocks 10 Human resource management (a) Analysis of human resources (i) understand skills and competencies (ii) discuss workforce adaptability (iii) assess innovative capability (b) Analysis of operations resources (i) evaluate the availability of resources (ii) understand management information and control systems (iii) understand production control systems (iv) understand process control (v) describe resource utilisation and costs 11 Finance resource management (a) Analysis of financial resources (i) understand financial control systems (ii) understand capital structure (iii) understand liquidity and gearing (iv) define the “balanced scorecard:” Kaplan and Norton PURPOSE OF ORGANISATIONS 12 The nature of strategy analysis and choice (a) Stakeholder expectations (i) understand stakeholder power and influence (ii) be able to carry out stakeholder mapping: Mendelow (b) The cultural context (i) identify national and local culture (ii) understand organisational culture and objectives 13 Corporate mission and strategic objectives (a) Mission, objectives and strategic intent (i) define policy, strategy and tactics (ii) define strategic vision (iii) define the mission statement (iv) define strategic intent: Hamel and Prahalad (v) define strategic scope (vi) state implicit and explicit objectives (vii) evaluate the prime organisational objective (viii) evaluate the organisation’s policy (ix)understand marginalist theories of organisational objectives (x) explain the accounting concept of profit (xi) explain the economist concept of profit (xii) explain behaviourist theories of organisational (xiii) identify the expectations of the owners (xiv) evaluate the role of stakeholders 14 Developing the strategy (a) Alternative directions for strategy development evaluate PIMS analysis (i) understand resource based (ii) understand product value and development (iii) explain withdrawal strategy (iv)explain consolidation strategy (v) explain market based strategy (vi) explain market development and extension strategy (vii) explain market penetration strategy (viii) explain market positioning strategy (ix) understand growth vector analysis: Ansoff (x) define the planning gap (xi) define finance based strategies (xii) understand the role of the budgetary process 15 Methods of strategy development (a) Ccompare level one and level two strategies (b) Evaluate internal development (c) Evaluate organic growth: Greiner’s growth model (d) Analyse joint ventures and strategic alliances (e) Review mergers and acquisitions (f) Define concentric and conglomerate diversification (g) Define forward and backward integration Strategic Business Planning and Development (Continued) PAGE 10 (h) Be aware of the problems of diversification and acquisition 16 Strategy evaluation and selection Analysis of Suitability, feasibility and acceptability suitability (a) Suitability (i) understand life cycle analysis (ii) understand life cycle/portfolio matrix (iii) assess resources and competencies (iv) discuss business profile analysis (v) understand strategy screening (vi) be aware of decision trees (b) Feasibility (i) explain funds flow analysis (ii) explain break even analysis (iii) explain resource deployment analysis (c) Acceptability (i) identify and justify expected performance outcomes (ii) review profitability analysis (iii) review cost-benefit analysis (iv) review risk analysis (v) evaluate shareholder value (vi) assess expectation of stakeholders (d) Corporate and business strategy selection (i) formulate the role of planning (ii) carry out a formal evaluation (iii) analyse enforced choice (iv) differentiate learning from experience (v) be aware of dominant stakeholder selection 17 The nature of strategy implementation (a) Marketing issues (i) segmentation, targeting and positioning (ii) understand strategic group analysis (iii) define strategic groups and strategic space (iv) describe market segmentation analysis (v) explain segmentation by factor, market or organisation (vi) describe targeting (vii) distinguish between product and market positioning (b) Strategies for market leaders, followers, challengers and nichers (i) understand the strategic clock: Bowman (ii) understand the market options matrix (iii) understand price based strategies (iv) understand added value and differentiation strategies (v) explain hybrid strategy (vi) define focused differentiation 18 development and application of marketing mix strategies (a) Discuss product strategy (b) Discuss price strategy (c) Discuss place strategy (d) Discuss promotion strategy 19 Strategic support functions (a) Finance issues (i) performance evaluation – explain ratio analysis – be aware of financial measures – understand ROCE, ROI, profitability – apply balanced scorecard (ii) funding the implementation and allocation resources – explain financial sources – explain capital allocation – explain shareholders' funds (b) Research and Development issues (i) management of innovation – assess the role of research and development in strategy – evaluate acquisition of new technologies – discuss exploitation of existing technologies – discuss innovation and existing products – discuss innovation and new products – explain innovation and intrapreneurship (ii) management and control of quality – discuss the role of quality in strategy – describe quality procedures – explain quality assurance – explain total quality management Strategic Business Planning and Development (Continued) PAGE 11 (c) IS/IT issues (i) IS/IT as a strategic resource – understand organisation and control of the information strategy – define usefulness and application of information technology – assess monitoring advances and changes in information technology – describe current good practice – describe costs and benefits – discuss information and organisational structure (ii) the management of information systems development – be aware of information as a strategic device – assess project selection criteria – understand the use, planning and control of information technology – evaluate the application of information technology 20 Human Resource management (a) Recruitment and selection (i) define the strategic role of human resources (ii) formulate the human resource plan identify and evaluate appropriate recruitment methods (iii) advise on succession planning (b) Motivation and discipline (i) understand the appropriate motivational and supportive policies (ii) describe the links between objectives, appraisal, reward and motivation (c) Appraisal and performance evaluation (i) assess organisational and individual objectives (ii) assess appraisal methods (iii) discuss appraisal and competence assessment (iv) staff training and development (v) understand the importance of the management of change (vi) describe the management of diversity (vii) evaluate the role of teamworking and empowerment 21 Project management (a) Define the project life cycle (i) understand the objectives of project management (ii) make an estimation of resource requirements (iii) assess the efficient use of resources (iv) understand operational research procedures (b) Tools and techniques of project management (i) understand statistical approaches (ii) describe statistical process control (c) Operations management (i) assess the strategic significance of operations (ii) link operations management and strategy (iii) understand purchasing and inbound logistics (iv) evaluate the manufacturing processes (v) understand distribution and outbound logistics (vi) describe quality and quality regimes (vii) have knowledge of just-in-time supply management (viii) discuss business process re- engineering 22 Management of change (a) Assess the motivation to change (b) Evaluate attitudes to change (c) Link together culture and change (d) Understand the managing of change: Lewin, System Intervention Strategy (e) Process of understanding types of strategic change and their causes (i) identify external environmental change and shocks (ii) identify internal environmental change (iii) understand business relationships (iv) understand transformational change (v) discuss enforced change (vi) identify technological change Strategic Business Planning and Development (Continued) PAGE 12 (vii) evaluate people issues (f) Development of a strategic change programme (i) describe the Gemini 4Rs framework (ii) describe force field analysis (iii) describe power influence (iv) understand culture influence (g) Management roles in the strategy change process (i) understand the importance of communication and education (ii) evaluate collaboration (iii) evaluate intervention (iv) assess the importance of direction (v) describe routine change (h) Managing the strategic change process (i) evaluate changing identity of the organisation (ii) understand co-ordination and transition (iii) appreciate the need for control (iv)describe the role of change strategists (v) describe the role of change implementers (vi) describe the role of change recipients ORGANISATIONAL STRUCTURE 23 Matching structures with strategy (a) Types of organisation structures (i) understand the determinants of structure (ii) evaluate the meaning of structure (iii) describe the simple organisation (iv) describe the entrepreneurial organisation (v) describe the functional organisation (vi) describe the divisional organisation (vii) describe the matrix organisation (viii) describe the multinational (ix) describe the global (x) understand the holding company (xi) evaluate the role of the strategic business unit (xii) assess intermediate and variations in structure (xiii) discuss advantages and appropriateness of different structures (xiv) understand the process stage towards globalisation Kenichi Ohmai, Keegan (b) Centralisation versus decentralisation (i) evaluate issues in organisational structural change (ii) understand organic and mechanistic structures: Burns and Stalker (iii) describe contingency theory (iv) describe the virtual organisation (c) Organisational configurations (i) compare structural configurations: Mintzberg (ii) make a comparison of organisational types INTERNATIONAL BUSINESS 24 The nature of global competition (a) The internationalisation of business (i) understand the motivations behind internationalisation (ii) be aware of the concept of globalisation as distinct from international marketing (iii) discuss the competitive advantage of nations: Porter (iv) understand absolute advantage and comparative advantage (v) evaluate implications for organisational success (vi) explain internationalisation strategies (vii) understand single markets and trading blocks (viii) explain multinational organisations: Bartlett and Ghoshal (b) The development of the global business (i) discuss market convergence (ii) explain cost advantages (iii) explain government pressures (iv) understand currency volatility and trade barriers (v) understand purchasing power parity (vi) understand the emergence of global competition Strategic Business Planning and Development (Continued) [...].. .Strategic Business Planning and Development (Continued) 25 Global strategies (a) Evaluate market entry strategies (i) Compare standardisation versus customisation (ii) Understand product positioning (iii) Discuss international channel management (iv) Analyse the development of global brands (b) Managing a global company (i) describe the international planning process (ii) assess... Alternative performance measures (i) understand performance standards (ii) utilise financial indicators (iii) utilise non financial indicators (iv) formulate strategic success measurements (d) Strategic failure (i) assess strategic drift: the Icarus Paradox (v) understand the role of executive and non-executive directors (vi) differentiate between functions of a chairman and those of a chief executive officer... ethics on national and global scales (i) the ethical stance (ii) discuss at the national and international level (iii) explain at the corporate level (iv) explain at the the manager level (v) evaluate the cultural context 28 Revision (ii) understand indicators of failure (iii) analyse weak or inappropriate strategic leadership (iv) discuss Z scores: Altman discuss comparability and reliability of data... process (ii) assess ethnocentric, polycentric and geocentric orientation (iii) explain cross cultural management and leadership (c) Reaching global customers (i) international marketing research – be able to assess value of published statistics – (ii) evaluate critical success factors (b) A learning organisation (i) assess shared purpose and vision (ii) understand challenging experiences (iii) explain... capability (b) Corporate governance (i) assess corporate conduct (ii) assess the governance framework 26 Outcomes of the strategic process (a) Corporate and business performance (i) discuss sustainable competitive advantage (iii) discuss governance change (iv) distinguish between rights, duties and expectations of stakeholders PAGE 13 ... comparability and reliability of data – assess national and local information sources – evaluate field sales force (ii) international market segmentation understand the following: 27 Ethical considerations (a) The importance of social responsibility (i) evaluate the meaning of social responsibility (ii) discuss corporate social responsibility – geographic (iii) review business ethics – ethnic (iv)review ethical . resource requirements (iv)tools and techniques of project management. (g) Management of change issues (i) understanding the types of strategic change and their causes Strategic Business Planning and Development. ventures and strategic alliances (e) Review mergers and acquisitions (f) Define concentric and conglomerate diversification (g) Define forward and backward integration Strategic Business Planning and. objectives and corporate governance, strategy formulation and the global economic environment. PAGE 4 Paper 3.5: Strategic Business Planning and Development (Continued) SYLLABUS CONTENT 1 Models of strategic management (a)