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A message from Darren…………………………3Paper 3 Examiners Approach…………….….... 4Extracts from the Examiners report Dec 08…...5Examination Technique……………….…..……..7Background and examination format..…..........10Syllabus Overview………………………...........11Strategic Planning………………………...….....12Mission and Objectives…………………………13Business & Professional Ethics..………….…...14Internal Analysis……………….……………..…15External Analysis……………..………………....16Strategic Options……………………….……….18Method of Growth………………………............19Portfolio Analysis…………………………….….20Strategic Choice & Change Management…....21Marketing………………………………………...22Organisational Structure…………………….….23International Market Place.…………….……....24Business Process Change…….…..…………..25Information Technology……..…….……..........26Quality………………………………….……......27Project Management………………………...…28Role of Finance………………………………...29Review and Control………………………..…..30Strategy and People……………………………31
Thank you for requesting a copy of my ‘SMART Revision Notes’.
The notes act as a learning and memory aid for the core models, theories and academic tools included in the syllabus.However, in order to pass your examination the academic knowledge must be combined with extensive question practiceleading up to the examination.
Your examiner is not interested in the regurgitation of your knowledge but how you APPLY that knowledge to thescenarios provided in order to answer the requirement set.
I suggest that you should practice as many exam standard questions as possible before the examination. Your practiceanswers can be a mixture of answer plans and full written answers to get through as many questions as possible.
However, I would also suggest that it is essential for you to practice at least one full examination to time before enteringthe exam room. It is only by replicating the time pressure in the exam that you can appreciate the importance of timeplanning on the day.
Keep a look out for relevant articles appearing in your professional magazine or on the Institute’s website prior to theexamination, particularly if they are written by the examiner.
I would welcome feedback on the notes.
And remember….
‘Whether you believe you can or you can’t, you’re right.’ (Henry Ford)
Therefore, to pass P3 learn from the examinerscomments:
• Analyse the requirements – verbs and keywords• Planning – think before you write the answer• Application, application, application• Theoretical answers score few marks• You can only apply what you know – learn it!• Use and interpret the numbers (they are usually
easy calculations so it’s the interpretation thatgets the marks)
Examination Technique to give the Examiner what he wants
1. USE 15 MINUTES READING TIME WISELY Examine section B questions and choose the two on which you can MAXIMISE MARKS (not necessarily
those on your ‘favourite’ topics) If you have some time left then analyse Question 1 requirements and skim read the Q1 scenario to get a feel
for the relevant issues and identify where the information is for each part of the requirements.
2. WORK OUT TIMINGS Q1 = 90 minutes. Planning = 20-25 minutes, Writing answer = 65-70 minutes Section B Questions = 45 minutes each. Planning up to 10 minutes, Writing answer 35 minutes. Break down the time required for each part of the requirements using the marks as a guide. 1.8 minutes per
mark in total, 1.4 minutes per mark after planning. I suggest you start with Question 1 as you know you have 90 minutes to complete it.
START PLANNING IN YOUR ANSWER BOOK
3. ANALYSE THE REQUIREMENTS Identify the verb, or verbs, and make it stand out. The verb tells you what the examiner wants you to do, e.g.
evaluate, recommend, analyse, calculate. Be sure to identify all the verbs in the requirement just in casethere is more than one thing to do, e.g. analyse and discuss, evaluate and recommend.
Identify key words. These tell you what to do it on or about, e.g. evaluate what?, recommend what?
4. ALLOCATE MARKS TO EACH VERB IN THE REQUIREMENT This can now determine how much to write for each verb in the requirement
5. IDENTIFY RELEVANT MODELS, TOOLS, THEORIES FROM YOUR KNOWLEDGE BANK
6. DEVELOP HEADINGS AND NUMBERS LAYOUT Put key elements of model in plan as headings, e.g. Porters 5 Forces analysis = 5 headings. Headings will
give your answer a framework and structure. Use requirements to develop headings to show marker that you are answering the question asked
7. DISTRIBUTE MARKS ACROSS HEADINGS This can now determine how much you write under each heading
8. ANALYSE THE SCENARIO Make brief notes in your plan under relevant headings from models/tools/theories and requirement Find relevant numbers for calculations
9. WRITE UP YOUR ANSWER TO MAXIMISE MARKS Layout calculations in a logical and easy to mark format – put them in an appendix in your answer plan Add value to calculations by asking ‘SO WHAT?’ Use as many headings as possible to give the answer structure Short sentences in short paragraphs Work on 2 sentences for each mark – 1 sentence making your point/answering the question + 1 sentence for
application A third sentence giving some ‘SO WHAT?’ could get you another mark Leave a blank line between points/paragraphs to make your answer ‘easy on the eye’ Be strict with timings. When time is up on a question, or part of a question, move on. Stick to answering the requirement – use your plan to keep you on track
REMEMBER THE THREE GOLDEN RULES – 1)APPLICATION 2) APPLICATION and 3)APPLICATION
Assess the strategic position of the organisation Evaluate strategic choices available to an organisation Discuss how an organisation might go about its strategic implementation Model and redesign business processes and structures to implement and
support the organisation’s strategy taking account of customer and othermajor stakeholder requirements
Integrate appropriate information technology solutions to support theorganisation’s strategy
Apply appropriate quality initiatives to implement and support theorganisation’s strategy
Advise on the principles of project management to enable the implementationof aspects of the organisation’s strategy with the twin objectives of managingrisk and ensuring benefits realisation
Analyse and evaluate the effectiveness of a company’s strategy and thefinancial consequences of implementing strategic decisions
The role of leadership and people management in formulating andimplementing business strategy
Format of paper
Section A 50% Compulsory Major case study Usually four parts Case will include numbers
Section B 50% Choice of two from three Each question likely to include
two parts Will include short scenario May include numbers
Strategy‘… a course of action, includingthe specification of resources, to
achieve a specific objective
Long-term
Wholeorganisation
Integrates activities
All stakeholders
Competitive advantage
Relationship with environment
Corporate =Strategic level
Business = Tacticallevel
Functional = Operational level
Purpose
Respond and fit to environment
Utilise scarce resources Provide direction Ensure consistent objectives Monitor progress
Advantages
Identification ofstrategic issues
Consistency of goals Improve
performance/survival Pro-active Recognises
environment Optimum use of
resources
Disadvantages× Expensive (time
and money)× Bureaucracy× Stifles creativity× Less relevant in
a crisis
Rational ‘Top Down’ Approach
Mission & Objectives
Corporate appraisal
Strategic options
Strategic choice
Implementation
Review
Emergent Strategy - ‘Bottom up’ (Mintzberg)
IntendedStrategy
UnrealisedStrategy
DeliberateStrategy
RealisedStrategy
Emergentstrategy
E.G. Honda’s entry into the USA, 3M
Incrementalism (Lindblom) Building block approach Build strategy through incremental steps not radical
shifts Accepts uncertainty of future Builds commitment× May be too slow× Ideas often compromised
Freewheeling Opportunism Market Driven – reactive Hands on management Exploit complacent players Relies on leaders vision No formula for success Take advantage of market
of objective which can bethought of as its raison d’etre.’
Purpose
Strategy
Policies andstandards
Values
Advantages Resolve stakeholder conflict Set direction Help formulate strategy Communicates values to
employees Marketing to customers
Criticisms Meaningless terms used Written retrospectively? Not communicated to
employees Ignored by managers
Objectives
S Specific
M Measurable
A Attainable
R Relevant
T Timebound
Critical SuccessFactors
"The limited number of areasin which results, if they are
satisfactory, will ensuresuccessful competitive
performance for theorganization.
They are the few key areaswhere things must go right for
the business to flourish.
If results in these areas arenot adequate, the
organization's efforts for theperiod will be less than
desired."
Stakeholders
Mendelow’s Power – Interest Matrix
InterestLow
Power
High
LowA
Minimal Effort
Give Direction
BKeep Informed
Education /Communication
CKeep Satisfied
Intervention
DKey Players
Participation – KeepClose
Not for Profit Organisations
Features of objective setting Multiple and contradictory objectives Participation in objective setting Providers of funding different to beneficiaries of service Priorities may change frequently Value for money a requirement not an objective Increased role of personal objectives
Efficiency
Effectiveness
Economy
Mission StatementPublished version of the
Mission
Culture‘The way we do things around here’
Cultural Web– cultural paradigm
Routines & Rituals Stories & Myths Symbols Power structure Organisation structure Control systems
Professional Ethics‘Self control, not self interest’
C Competence
O Objectivity
P Professional due care
P Politeness
I Integrity
T Technical Standards
Corporate SocialResponsibility
Issues
Environment
Sustainability
Safety in the workplace
Consumer health and safety
Equal opportunities
Fair Trade
Honesty in Advertising
Views on Business Ethics
‘The business ofbusiness is business’(Shareholder View -
Friedman)
Management to concentrate onmaximising profits andshareholder wealth.
Businesses have no duty tosociety.
Societal benefits will arise as aresult of commercial success.
Conflict of CSR with shareholder wealth Reduced revenues Increased costs Diverts funds from shareholders Distracts management
Long-term Self-Interest /Stakeholder view
Firms should acknowledge their socialresponsibilities.Benefits to Business
Avoid future Government policy
Attract ethicalinvestor funds
Reduced risk
Competitiveadvantage
Recruitment
Innovation &ideas from
close links tocommunity
Reputationand branding Small company
advantage in thesupply chain
Potential problems
Competitive disadvantage
Deciding what is ethical Bad publicity from monitoring and enforcement
Disclosure of business information
No universal acceptance ofmorals & ethics
Johnson, Scholes & Whittington – Ethical Stances
Short-termshareholderinterest
Long-termshareholderinterest
Multiplestakeholderobligation
Shaper ofsociety
Corporate Governance Divorce of ownership and control Separate roles of CEO and Chairperson Audit Committee / Remuneration Committee Directors re-election at least every 3 years Non-exec Directors
o Independento Role on audit / remuneration
committeeso Corporate conscienceo Mentors to inexperienced execso Strategic value through expertise
Knowledge Workers Roving role Temporary roles Selection based on skill & competences Input into own development Separate & relevant incentive schemes Remote locations Flexible working
Income distribution Education levels Population size Age profile Lifestyle changes Fashions and tastes Consumerism
Technological Internet Government
spending on RnD Communications Speed/rate of
change Processes and
methods ofproduction
Porter’s 5 Forces(Competitive,
Industry analysis)
Competitive RivalryGreatest where: Competitors of similar size Slow market growth rate High fixed cost industry Lack of differentiation
Threat from New Market EntrantsBarriers to Entry: Economies of Scale Other cost advantages Capital requirements Access to distribution channels Patents, Government policy Reaction of existing firms
Power of BuyersPower greatest where: Few buyers High number of suppliers available Cost is high proportion of buyers total cost Low switching costs Buyers have low profits Buyers have full information Little product differentiation
Threat from SubstituteTechnologies
Can same features be producedcheaper?
Can new features be provided for samecost?
Level of danger may be influenced bybarriers to entry and/or power of buyers
Power of SuppliersPower greatest where: Few suppliers Few substitutes High switching costs Threat from forward integration Customer not significant to supplier Supplier has differentiated product
Legal Health And Safety Employment Consumer protection Monopoly legislation Industry watch dogs
Ecological Globalisation Pollution Energy usage Disposal of waste Sustainability of
Advantages Quick Lower risk Overcomes barriers to entry Same number of competitors Can block a competitor Possible synergies Possible under-valuation of
target
Disadvantages Purchase premium Integration issues
o Systemso Peopleo Culture
Synergies do notmaterialise
Reputation of target
OrganicGrowth
Advantages No premium for assets People development Staged investment Established culture Introduction of new
technology and systemseasier
Possibility of grants
Disadvantages Slow Increases number of
competitors Overcoming barriers to
entry No opportunity for
synergies Higher risk
Porter’s 3 Tests forAcquisitions
The attractiveness test The cost of entry test The better off test
Possible synergies Market Economies of scale Shared activities Surplus assets Vertical integration Skills transfer Dilution of risk Reduced power of
buyers/suppliers Tax advantages
Joint DevelopmentMethods
Joint VentureSeparate business entitywith equity form two ormore businesses
LicensingGiving the right toexploit brand, recipe,process etc for ashare of the profits
FranchisingGiving the right to exploit a businessmethod/model in return for a capital sumplus a share of the profits. Franchisorusually provides support e.g. marketing,training, technical
Quick growth Access to competences Less financial risk/outlay Overcome product, market,
operational risk× May lose competences× Train future competitors× Brand infection× Operational and contractual
disputes× Ownership of assets× Sharing of profits
Withdrawal
Divestment Quick Higher price due to
strategic value
Demerger Gives shareholders
an exit route Management can
focus on core areas Two companies can
develop separateidentities
Management Buyout(MBO)
Consider On-going involvement of
holding company Why is holding company
selling? Loss of Holding company
help, e.g. technical support,finance services
Quality of management team Price Personal risk, e.g. home at
Entrepreneurial Fast decisions Responsive to market Congruence× No career structure× No autonomy× Single product & market
Functional Economies of scale Specialists with some autonomy Career structures Frees up entrepreneur× Slow decisions (bureaucratic)× Functional silo’s× Few products & markets
Divisional Multiple products &
markets Autonomy for SBU
managers Training of SBU managers Frees up senior managers Focus on specific
products/markets× Loss of congruence?× Duplication of effort× Isolation of SBU
managers
Implementation Issues
Matrix Breakdown of silo’s Shared knowledge Skill development Innovation and creativity× Dual command× Dilution of functional
authority× Time consuming meetings
Mintzberg’sStructural
Strategic Apex
Middle Line
Operating core
Techno-structure
SupportStaff
Simple structure =entrepreneurial
Machine bureaucracy= functional
Professionalbureaucracy =decentralised
Divisional form
Adhocracy = matrix
Planning and control
Direct supervision
Planning processes
Performancemanagement
Internal market
Culture
Self-control
StrategicPlanning co.s
FinancialControl co.s
StrategicControl co.s
ManagingBusiness
Units
ParentalDeveloper
SynergyManager
PortfolioManager
Types of Structure
ExternalRelationships
Outsourcing
NetworkOrganisation
VirtualOrganisation
Reduced cost Skill shortages Flexibility Focus on core business× Loss of control× Supplier dependency× Confidentiality× Loss of in-house skills
Decentralisation
Advantages: Frees senior
management Better local decisions Better motivation Flexibility Training/career path
Disadvantages: Loss of control Loss of congruence Duplication of effort Extra costs of control
Foreign Direct Investment Closer to market Retain profits More control Reduced operational conflicts× High financial risk× Staffing decision× Integration difficulties
Methods of International Expansion
Global Multi-Domestic Hybrid
Perceives foreign markets assimilar to domestic market
Products & marketing mixconstant
Standardisation to save time andmoney
Supply-driven policy
See overseas market as distinctive Customised products and
marketing mix Increased overseas sales volumesBUT Fewer EOS giving higher costs, so
volumes not turned into profits
Standardise wherever possible,e.g. RnD, Branding
Market convergence may allowstandardised product
BUT Demand-driven Customised marketing mix
where necessary = GLOCAL
STAFFING
Overcomes lack of host skills,unified culture, Transferscompetencies
× Resentment by host, singlecultural view
Multi-cultural view, inexpensive× Limits career mobility, isolates HQ
from subsidiaries
Efficient use of HR, builds strongculture and managementnetwork
× Subject to National immigrationpolicies, expensive