ACCA APPROVED CONTENT PROVIDER ACCA Passcards Paper P3 Business Analysis Passcards for exams from September 2015 – 31 August 2016 ACP3PC15.indd 23/03/2015 11:30 (000)ACP3PC15_FP_Ricoh.qxp 3/25/2015 4:45 PM Page i Professional Paper P3 Business Analysis (000)ACP3PC15_FP_Ricoh.qxp 3/25/2015 4:45 PM First edition 2007, Ninth edition Apr il 2015 ISBN 9781 4727 2707 e ISBN 9781 4727 2772 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by BPP Learning Media Ltd, BPP House, Aldine Place, 142-144 Uxbridge Road, London W12 8AA www.bpp.com/learningmedia Printed in the UK by RICOH UK Limited Unit Wells Place Merstham RH1 3LG Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources Page ii All rights reserved No part of this pub lication may be reproduced, stored in a retr ieval system or tr ansmitted, in any form or b y any means, electronic, mechanical, photocopying, recording or otherwise , without the pr ior written permission of BPP Learning Media © BPP Learning Media Ltd 2015 (000)ACP3PC15_FP_Ricoh.qxp 3/25/2015 4:45 PM Page iii Preface Contents Welcome to BPP Learning Media’s ACCA Passcards for Professional Paper Business Analysis They focus on your exam and save you time They incorporate diagrams to kick start your memory They follow the overall structure of BPP Learning Media’s Study Texts, but BPP Learning Media’s ACCA Passcards are not just a condensed book Each card has been separately designed for clear presentation Topics are self contained and can be g rasped visually ACCA Passcards are still just the right size for pockets, briefcases and bags Run through the Passcards as often as you can during your final revision period The day before the exam, try to go through the Passcards again! You will then be well on your way to passing your exams Good luck! Page iii (000)ACP3PC15_FP_Ricoh.qxp 3/25/2015 4:45 PM Page iv Preface Page Contents Page Business strategy 12 E-marketing 135 Environmental issues 13 Project management 151 Competitors and customers 17 14 Finance 167 Strategic capability 27 15 Human resource management 185 Stakeholders, ethics, culture and integrated reporting 16 Strategic development 191 41 Strategic choices 53 Organising for success 73 Managing strategic change 89 Business process change 95 10 Improving processes 105 11 E-business 111 (001)ACP3PC15_CH01.qxp 3/25/2015 6:28 AM Page 1: Business strategy Topic List What is strategy? Levels of strategy in an organisation Elements of strategic management The importance of context The strategy lenses This chapter gives you an overview of the fundamentals of strategy and strategy formulation, and how they relate to business analysis (001)ACP3PC15_CH01.qxp What is strategy? 3/25/2015 6:28 AM Levels of strategy in an organisation Page Elements of strategic management The importance of context The strategy lenses STRATEGY: a course of action over the long term, including identifying the competences and resources required, to achieve a specific objective and fulfil stakeholder expectations Areas for decision making Strategic decisions Long term direction Complex Scope of activities Subject to uncertainty Competitive advantage Impact operational decisions Adapting activities to fit business environment Affect whole organisation Exploiting resources/competences Expectations of key stakeholders Four elements of mission Purpose and planning Values Strategy Policies and standards Lead to change GOALS: General aim OBJECTIVES: SMART and PRIME (001)ACP3PC15_CH01.qxp What is strategy? 3/25/2015 6:28 AM Levels of strategy in an organisation Page Elements of strategic management The importance of context The strategy lenses Three main levels of strategy in an organisation Corporate Overall purpose and scope, and how value will be added Prioritisation and management of stakeholder expectations Allocation of corporate resources Business How to compete successfully in par ticular markets Combines with corporate strategy in a small organisation In larger organisations, strategies for strategic business units must be co-ordinated with corporate strategy, and with each other Operational How the component parts of the organisation deliver the higher-level objectives Largely created and delivered by business functions such as marketing, production, finance, human resources management, and information systems Page 1: Business strategy (001)ACP3PC15_CH01.qxp What is strategy? 3/25/2015 6:28 AM Page Elements of strategic management Levels of strategy in an organisation The importance of context The strategy lenses Johnson, Scholes and Whittington’s model of strategy Strategic position Strategic choices Environment Opportunities Threats Complexity Capability Resources and competences Strengths Weaknesses Stakeholder expectations Purpose of strategy Power/interest Governance Ethics Made at corporate and business levels How to achieve competitive advantage Scope Direction of development Method of development Strategy into action Structuring Processes Relationships Enabling Management of resources Change Change management Position Choice Action is not simply a linear model Need to recognise the interdependencies between position (analysis), choice and action (implementation) (001)ACP3PC15_CH01.qxp What is strategy? 3/25/2015 6:28 AM Levels of strategy in an organisation Page Elements of strategic management The importance of context The strategy lenses The context of strategy The organisational setting in which strategy is developed Possible contexts include: Small business Limited product range, markets and resources (especially financial), but significant pressure from competitors Multinational Diverse products, processes and markets, with significant resources and multiple operations The public sector Constraints on funding, commitment to ser vice provision and the need to demonstrate value Not for profit organisation Diverse sources of funds, strong underlying values and purpose Intangible products Product information, after-sales service, brand values, staff performance (for both manufacturing and service companies) Exam focus Context is very important in the P3 exam Question scenarios will provide context for the question requirements You must always consider the context of the question and make your answer directly relevant to it Page 1: Business strategy (015)ACP3PC15_CH15.qxp 3/26/2015 7:56 AM Strategic leadership Page 190 Job design Knowledge work Staff development Human resource development (HRD) can be viewed as an investment in strategic capability, since it improves both skills and commitment Investment in people is akin to investing in any other type of asset – people become 'human capital' This can be either 'top-down' (driven by management) or 'bottom-up' (empowered employees recognise their own skills gaps) Competences The required outcomes expected from the performance of a task in a w ork role, expressed as performance standards with criteria Succession planning Succession planning provides for continuity of leadership and facilitates management development at all levels, by focusing it on objectives that support overall strategy The plan should focus on future requirements Top management should drive the plan, not the HR specialists A pool of talent and trained ability is a more useful asset than simple identification of succession candidates Assessment should be objective and not given precedence over development (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Page 191 16: Strategic development Topic List Realised strategy Developing intended strategies Developing emergent strategies Challenges and implications This chapter is devoted to looking at the wider processes by which strategies come into existence (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Realised strategy Page 192 Developing intended strategies Developing emergent strategies Challenges and implications The 'strategy as design' lens sees strategy as an essentially managerial process Understanding of the strategic position informs strategic choice: and this choice creates intention Strategy into action is about how that intention is realised A fully realised strategy can also arise in the ways illustrated by the two other strategy lenses, experience and ideas Such strategies emerge rather than being the result of any kind of complex, top down management process Also, remember that managers' intentions may not actually be realised: this can happen for a variety of reasons, such as lack of resources, failures of forecasting, lack of control and so on Emergent strategy Realised strategy Intended strategy Unrealised strategy (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Page 193 Formal strategic planning systems The strategic planning approach is formal, logical, detailed and costly It is thorough because it involves a large planning staff However, it is no longer popular, largely because it is unwieldy and slow to respond to changing circumstances Formal strategic planning systems Strategic position Vision mission PESTEL SWOT Position audit An important aspect of the formal approach is its comprehensiveness Even when strategy is not made in this fashion, the rational model of strategy offers a useful checklist of activities and decision areas that may be of value to strategic planners in avoiding obvious errors Strategic choice Generate options eg generic strategies, market based strategies Graduate options See your Study Text for a more comprehensive version of this diagram Strategic implementation Projects Resources Change e-business etc Feedback control Actual performance Page 193 16: Strategic development (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Realised strategy Advantages Identifies risks Forces managers to think Forces decision-making Formal targets enable control Enforces organisational coherence and co-ordination Disadvantages Not proven to bring advantage May become over formal and reduce initiative Assumes internal politics not exist Assumes managers know everything Divorces planning from doing Cannot cope with shocks and discontinuities Page 194 Developing intended strategies Developing emergent strategies Challenges and implications Large scale planning departments were used in the mid 20th centur y to operate the formal approach More recently, other more flexible techniques have been used Workshops and project teams Can be set up at any level to consider problems Can work within overall strategic direction from above Can undertake strategic analysis Can generate new ideas and approaches Can work on strategic change Consultants Can lend authority and credibility to top management Can bring fresh approach to confused situations Can bring wide experience and knowledge Can have wide range of roles in change management May assist with strategic decisions Imposed strategy Powerful external stakeholders can constrain decisions about strategy Very obvious in public sector where government policy sets the framework for decisions (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Realised strategy Page 195 Developing intended strategies Developing emergent strategies Challenges and implications Emergent strategies not arise in a random way: they require extensive management Strategies may emerge through a process of logical incrementalism: ‘the deliberate development of strategy by experimentation and learning from partial commitments' Generalised view of goals Constant environmental scanning rather than firm forecasts Combination of strong core business and experiments with options by project groups Formal and informal processes of development Page 195 Resource allocation routines Strategy can emerge from bids for funds by intermediate level managers: top management set the strategic context and choose from the options presented Political processes within the organisation can have major influence on the negotiation among inter nal and external interest groups These processes can influence both information flows and strategic analysis They can also lead to innovation 16: Strategic development (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Realised strategy Page 196 Developing intended strategies Developing emergent strategies Challenges and implications Danger! Strategy can emerge from the assumptions and pr actices of the paradigm This brings experience of past success to the problem However, this process can lead to strategic drift, especially if major organisational change is required Strategic drift Occurs when strategies progressively fail to address the strategic position of the organisation and performance deteriorates Johnson, Scholes and Whittington suggest that strategic drift arises because organisations prefer small adjustments to large ones (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Realised strategy Page 197 Developing intended strategies Developing emergent strategies Challenges and implications You need to remember that there is no single correct way to develop strategy – an effective strategy may result from the simultaneous working of several processes Strategy development is likely to vary at different times and in different contexts As part of strategic management, an organisation's environment can be analysed in ter ms of complexity and change: Environmental Conditions Simple Complex Static Historical analysis and forecasting Scenario planning Logical incrementalism Learning organisation Decentralisation and specialisation Decentralisation Specialisation Experience Learning Dynamic Page 197 16: Strategic development (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Realised strategy Page 198 Developing intended strategies Developing emergent strategies Challenges and implications At the end of the syllabus, review the subject of strategy as a whole, and think how all the components fit together, using the relational diagram of syllabus capabilities for P3 as a guide: Strategic position (A) Business and process change (D) Strategic action (C) Strategic choices (B) Project management (F) Information technology (E) Financial analysis (G) People (H) Remember the importance of having an overall strategic perspective (position, choice, action) Remember also the need for all the components of an organisation (middle and bottom la yers) to fit with, and suppor t, that overall strategy; and finally remember that sometimes stategy can emerge from those middle and bottom la yers rather than being imposed by the strategic apex (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Page 199 Notes (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Page 200 Notes (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Page 201 Notes (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Page 202 Notes (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Page 203 Notes (016)ACP3PC15_CH16.qxp 3/25/2015 4:49 PM Page 204 Notes ... written permission of BPP Learning Media © BPP Learning Media Ltd 2015 (000)ACP3PC15_FP_Ricoh.qxp 3/25/2015 4:45 PM Page iii Preface Contents Welcome to BPP Learning Media’s ACCA Passcards for Professional... to kick start your memory They follow the overall structure of BPP Learning Media’s Study Texts, but BPP Learning Media’s ACCA Passcards are not just a condensed book Each card has been separately...(000)ACP3PC15_FP_Ricoh.qxp 3/25/2015 4:45 PM Page i Professional Paper P3 Business Analysis (000)ACP3PC15_FP_Ricoh.qxp 3/25/2015 4:45 PM First edition