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Enterprise Strategy. CIMA Paper E3. 1. Session. CIMA Verb Hierarchy. CIMA verb hierarchy – strategic level. CIMA verb hierarchy – strategic level. at strategic level, you will usually encounter verbs from levels 3, 4 and 5 of the CIMA hierarchy - PowerPoint PPT Presentation
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Enterprise Strategy
CIMA Paper E3
11SessionSession CIMA Verb Hierarchy
CIMA verb hierarchy – strategic level
• at strategic level, you will usually encounter verbs from levels 3, 4 and 5 of the CIMA hierarchy
• you must avoid giving a “level 2 response to a level 5 verb” (common examiner’s comment)
CIMA verb hierarchy – strategic level
CIMA verb hierarchy – levels 3, 4 and 5
Level 3 Level 4 Level 5To applyTo calculateTo demonstrateTo prepareTo reconcileTo solveTo tabulate
To analyseTo categoriseTo compare and contrastTo constructTo discussTo interpretTo prioritiseTo produce
To adviseTo evaluateTo recommend
Learn the meaning of each of these verbs, and follow the instructions in exam requirements specifically
CIMA verb hierarchy – strategic level
22SessionSessionIntroduction to Strategy
Strategy Question and Process
• A means to achieve the objectives…• A basis for competitive advantage…
Where to Compete
Where to Compete
Two BasicQuestions
Two BasicQuestions
How to Compete
How to Compete
Strategic Planning Process
InternalEnv
InternalEnv
Mission and
Objectives
Mission and
Objectives
ExternalEnv
ExternalEnv
PositionAudit
PositionAudit OptionsOptions
Evaluationand
Choice
Evaluationand
Choice
Implementationand Control
Implementationand Control
Strategic Planning Process
Strategic analysis
Strategic analysis
Strategic choice
Strategic choice
Strategy into action
Strategy into action
33SessionSessionMission, Objectives and Stakeholders
Mission
What is our
business?
What is our
business?
MissionMission
What is valued by the
customer?
What is valued by the
customer?
What will our business be?
What will our business be?
What should our business
be?
What should our business
be?
Objectives
Objectives become increasingly SMART•Specific•Measurable•Attainable•Relevant•Time-bound
MissionMission
Strategic plans and objectives
Strategic plans and objectives
Tactical plans and objectives
Tactical plans and objectives
Operational plans and objectives
Operational plans and objectives
Stakeholder Mapping
MinimalEffort
KeepInformed
KeepSatisfied
KeyPlayers
Level of Interest
Power
HighHigh
Low
Low
Ethics and CSR
EthicsEthics
moral duty and obligationmoral duty and obligation
Ethical stances (JSW)•Short-term SH interest•Longer-term SH interest•Multiple stakeholder interest•Shaper of society
Ethical stances (JSW)•Short-term SH interest•Longer-term SH interest•Multiple stakeholder interest•Shaper of society
CSRCSR
exceeding the minimum obligations to stakeholders
exceeding the minimum obligations to stakeholders
Dimensions (Carroll)•Legal •Ethical •Economic •Philanthropic
Dimensions (Carroll)•Legal •Ethical •Economic •Philanthropic
44SessionSessionEnvironmental Analysis
Stakeholder Mapping
Sources of Data
• Primary data collection:
- Observation - Surveys
• Secondary data collection
- Internal sources - accounting / marketing data
- External sources - Periodicals / internet
55SessionSessionExternal Environment
The Pestel Framework
• Political• Economic• Social• Technical• Environmental-social responsibility• Legal
Porter’s 5 Forces
Power of Buyers
Power of Buyers
Power of Suppliers
Power of Suppliers
Threat ofNew Entrants
Threat ofNew Entrants
RivalryRivalry
Threat of Substitutes
Threat of Substitutes
Porters Diamond The Competitive Advantage of Nations
DemandConditions
DemandConditions
Related and SupportingIndustries
Related and SupportingIndustries
FactorConditions
FactorConditions
Strategy, Structure and
Rivalry
Strategy, Structure and
Rivalry
The Life Cycle
Maturity DeclineGrowthIntro
Time
Sales
Competitor Analysis
• Strategy – where and how• Resources and competences• Objectives – are they being met?• Assumptions – culture?• Competitors – who are they?• Predictions – for the future?
– What are they likely to do in the future?– How will they respond to our initiatives?– How can we influence their reactions to our initiatives?
6 6 Session Session Internal Environment
Resource-based view of strategy
Strategic analysis•Internal analysis to identify strengths and weaknesses by looking at the firm’s resources and competences•External analysis to identify CSFs in markets
Strategic analysis•Internal analysis to identify strengths and weaknesses by looking at the firm’s resources and competences•External analysis to identify CSFs in markets
Strategic choice•Select strategies where the firm has or can acquire the core competences to meet the CSFs in the markets concerned
Strategic choice•Select strategies where the firm has or can acquire the core competences to meet the CSFs in the markets concerned
Strategic implementation•Formulation of detailed plans and budgets•Target setting for KPIs•Monitoring and control – especially of core competences
Strategic implementation•Formulation of detailed plans and budgets•Target setting for KPIs•Monitoring and control – especially of core competences
Resources and Competences
Resources
Competence
Basic Unique
Threshold Core
Same as Competitor Easy to Copy
Different and Difficult to Copy
Porter’s Value Chain
Inbound Logistics
Operations ServiceMarketingand Sales
OutboundLogistics
Procurement
Technology
Human Resource Management
Infrastructure
Margin
77SessionSessionPosition and gap analysis
The Position Audit
Where are we now?
External EnvironmentExternal EnvironmentInternal EnvironmentInternal Environment
What happens if we do nothing?
WeaknessWeakness
StrengthStrength
ThreatThreat
OpportunityOpportunity
Gap Analysis
Time
Objective
Future operations
Current operations
Ob
jectiv
e Me
asu
re
Gap
88SessionSessionStrategic Choice
Porter’s Generic Strategies
Broad Scope
Where
CostLeadership
Differentiation
FocusNarrow Scope
How
Ansoff Growth Strategies
MarketPenetration
ProductDevelopment
MarketDevelopment
Diversification
Existing NewProduct
Existing
Market
New
Boston Consulting Group (BCG) Matrix
Star Problem Child
Cash Cow Dog
Market ShareHigh Low
High
MarketGrowth
Low
Methods of expansion
Acquisition v organic growth
• Speed• Cost• Economies of scale• Risk• Synergy• Implementation issues
Joint methods• Sharing of costs • Sharing of benefits • Sharing of risks • Ownership of resources • Control / decision
making
Strategy Evaluation
Feasibility• Resources• Competencies• Implementation
Suitability• Objectives• Strengths• Opportunity
AcceptabilityTo Stakeholder
Groups
99SessionSessionThe Performance Measurement Mix
Determination of the Measurement Mix
Identify ObjectivesIdentify Objectives
Draft CSFDraft CSF
Position ReviewPosition Review
Update the CSFUpdate the CSF
Draft a MixDraft a Mix
Consider Change Implications and TestConsider Change Implications and Test
Deploy and MonitorDeploy and Monitor
The Balanced Scorecard
FinancialFinancial
OperationsOperationsCustomerCustomer
LearningLearning
Kaplan and Norton
HR Research
IT?
Benchmarking
InternalInternal ProcessProcess CompetitorCompetitor
DifferentCompanySimilar Process
SimilarProcessDirect
Competitor
SameCompanyDifferent
Department
Identification of best practice…….
1010SessionSessionBusiness UnitPerformance
Structure
Type Advantages DisadvantagesEntrepreneurial Fast decision making
More responsive to market Good control Close bond to workforce
Lack of career structure May be too centralised Cannot cope with
diversification / growth
Functional Economies of scale Standardisation Specialists more comfortable
Empire building Slow Conflicts between functions Cannot cope with
diversificationDivisional Enables growth
Clear responsibility Training of general managers
Loss of control Lack of goal congruence Duplication Specialists feel isolated
Matrix Advantages of both functional and divisional structures?
Flexibility
Dual command Dilution of functional
authority Time consuming meetings
Shareholder Value
Shareholder value = Present value of free cash flow from operations plus value of marketable securities - Value of debt
1111SessionSessionIT and e-business
Earls Three levels of Strategy
IS Strategy
IM Strategy
IT Strategy
• Division/SBU/function based• Demand orientated• Business focussed
• Activity based• Supply orientated• Technology focused
• Organisation based• Relationship orientated• Management focused
“What”
“How”
“Wherefore”Applications
Delivery
Management
McFarlan’s Strategic Grid
Support Turnaround
Factory Strategic
Strategic Impact of
CurrentSystems
High
Low
HighLow
Strategic Impact of Future Systems
1212SessionSessionInformation for Advantage and Knowledge Management
Information Issues
Internal Internal ExternalExternal
Reliability Known
Reliability Known
Reliability ?
Reliability ?
1. Who2. When 3. Why 4. What
1. Who2. When 3. Why 4. What
More Relevant
More Relevant
1. Broader Focus2. Less Cultural
Distortion
1. Broader Focus2. Less Cultural
Distortion
Relevance
?
Relevance
?
SourcesSources
Data Warehousing
This is a subject orientated, integrated, time variant, non-volatile collection of data in support
of management’s decision making process
A Data Extraction Tool
A Data Extraction Tool
A Decision Support Tool
A Decision Support Tool
Maintained by constant updatesfrom operational systems
A DatabaseA Database
Data Mining
The analysis of data to unearth unsuspected or unknown relationships, patterns and associations
Statistical technique and modelling that gives:
• Associations – correlation
• Sequences – sequences
• Classification – recognition of patterns
• Clustering – finding groups of facts
• Forecasting – predicting the future
The Warehouse
Turns Data into Information
Stores Data
The Mining
Knowledge Management
The management of the information, knowledge and experience available to an organisation.
CreateCaptureStoreMake AvailableUtilise
CreateCaptureStoreMake AvailableUtilise
To Build aCompetitiveAdvantage
To Build aCompetitiveAdvantage
Knowledge Management
To Build aCompetitiveAdvantage
To Build aCompetitiveAdvantage
Structural CapitalStructural Capital Human CapitalHuman Capital
• Innovation – intellectual property
• Customer – address lists / records
• Organisational – processing systems
• Development
• Maintenance
• Retention
1313SessionSessionCustomers, suppliers and SCM
Supplier strategy
Key factors• Sources• Number of suppliers• Cost, quality and speed of delivery• Make or outsource?• Antagonism or partnership?
E-procurement
Benefits of e-procurement Risks Reduced labour costs Reduced inventory holding
costs Fewer stock-outs due to
more accurate monitoring of demand
Higher production / sales Quicker ordering making it
easier to implement JiT Wider choice of suppliers
Technology risks Organisational risks Cost savings not realised
Customers – relationship marketing
Transaction marketing Relationship marketing
concentrates on products
concentrates on retention and loyalty
little knowledge of customer
considerable customer commitment
product quality a key issue
considerable customer contact
little effort on customer retention
emphasis on quality service
Six markets model (Payne)
• Customer markets • Referral markets • Supplier markets • Recruitment markets • Influence markets • Internal markets
Customer account profitability (CAP)
• ‘The total sales revenue generated from a customer or customer group, less all the costs that are incurred in servicing that customer or customer group’.
• CAP focuses on profits generated by customers and does not automatically equate increases in sales revenues with increases in profit.
Customer lifetime value (CLV)
• CLV is the PV of the future cash flows attributed to the customer relationship.
• Use as a marketing metric places greater emphasis on customer service and long-term customer satisfaction, rather than on maximizing short-term sales.
• In theory CLV represents exactly how much each customer is worth in monetary terms, and therefore exactly how much a marketing department should be willing to spend to acquire each customer.
1414SessionSessionLean systems and innovation
Lean systems
• Minimise waste• Perfect first time quality• Flexible production• Continuous improvement
BPR
The fundamental rethinking and radical redesign of business processes to achieve dramatic and sustainable improvements in critical measures of performance such as cost, quality, service, and speed.
1515SessionSessionChange Management I
Triggers for change
• External– General (PEST)– Task (P5F)
• Internal• Problem identification as a precursor to change
Classifying change
Evolution Adaptation
Revolution Reconstruction
Speed of change
Discontinuous
Continuous
RealignmentTransformationExtent of change
Organisational culture
The concept of the cultural web is a useful device for mapping out change but its real worth is in the fact that we can identify which elements of culture need to change.
Culture
Resistance to change
Reasons for resisting change
Reasons for resisting change
Personal factorsPersonal factors
Social factorsSocial factors
Job factorsJob factors
1515SessionSessionChange Management II
Lewin’s ice cube model
• Unfreeze• Change behaviour / attitudes• Refreeze
Lewin’s Force Field Analysis
Objective of the Change Process
Driving Forces Restraining Forces
Gemini 4R
Strategic transformationStrategic transformation
RestructuringRestructuring
RevitalisationRevitalisation
ReframingReframing
RenewalRenewal
Leadership (Kotter and Schlesinger)
• Participation• Education and communication• Power / coercion• Facilitation and support• Manipulation and co-optation• Negotiation
Change Agents
• define the problem and its cause • diagnose solutions and select appropriate
courses of action • implement change • transmit the learning process to others and
the organisation overall.
Ethical aspects of change
• Is the change justified?• Consider impact on different stakeholders –
e.g. redundancies• Management motivation / approach used –
e.g. acting out of personal interests?• Release of information
Continuous change
Change adept organisations (Kanter)• The imagination to innovate• The professionalism to perform• The openness to collaborate