Business Analysis

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Business Analysis SPEAKERS NOTES: TEACHER’S CONFERENCE

Slide 1

• There are no notes to support this slide.

Slide 2

• There are no notes to support this slide. Slide 3


• The relational diagram is explored in detail in the new syllabus guide. Slide 5

• A detailed guide to the Reading List at the end of these notes. Slide 6


• There are no notes to support this slide Slide 8

• The first section of A is a setting of the scene. Strategy “is the direction and scope of an organisation over the long term, which achieves advantage in a changing environment through its configuration of resources and competencies with the aim of fulfilling stakeholder expectations.”(JSW)

• The course uses the JSW model as its basis and its vocabulary, as well as their lenses of

design, experience and ideas. This opening section is also an opportunity to discuss the relational model of the ACCA Business Analysis course.

• The rest of section A is concerned with understanding the forces that influence, or have

to be taken into account, in the development of strategy. A2 is about how managers might make sense of an uncertain and increasingly complex world that surrounds them and their organisation. Its focuses on the macro-environmental forces and how they inter-relate. PESTEL, Porter’s Diamond and scenarios are valuable here. A3 focuses on the competitive forces in a business sector and the need to tailor strategy to address industry

forces. Porter’s five forces model sits in this section, together with an assessment of opportunities and threats (swOT) faced by the organisation. The emphasis of A4 is value – who is the customer and what product features do they value? – in what areas of the business must the organisation excel to outperform its competitors? A5 looks at the organisation’s strategic capability – its ability to perform and prosper. Prosperity may be achieved through exploiting and stretching capabilities in ways in which competitor’s find difficult to match. A5 culminates in an assessment of the strengths and weaknesses (SWot) of the organisation. Finally, A6 looks at the expectations that shape an organisation. It includes corporate governance and ethics (continuing themes in the ACCA scheme) as well as stakeholder issues and cultural influences. The cultural web is particularly significant here.

• The slide recognises the interaction of this section with People (section 1), particularly

with reference to the resource – based view of strategy. Also, although the relational model does not show it explicitly, there must also be a link to financial analysis – because an assessment of an organisation’s strategic position would be partial without such analysis.

• This section is clearly a rich area for examination questions both in terms of section A

(the compulsory case study), but also in Section B – where specific models and approaches might be the focus of a question.

Slide 9

• Strategic choice is concerned with decisions about an organisation’s future and the way it responds to pressures and influences discussed in Section A of the syllabus. B1 is concerned with corporate-level and international strategy. It considers the different strategies of corporate parents and the logic behind their portfolio of companies. It also looks at how parents can add or destroy value, culminating in an examination of a wide range of models which managers might use to make sense of the nature and diversity of the businesses within their portfolio. Clearly these can be usefully applied in a case study scenario concerned with corporate parenting.

• B2 focuses on the strategic choice available to a strategic business unit. It examines the

bases of competition (price, differentiation, hybrid, focus) and achieving competitive advantage through sustainability and collaboration. The strategy clock is a key model here and could be usefully employed by candidates on case study questions. The sustainability (or preservation) of competitive advantage is also extremely important. JSW also discusses the application of game theory – but this is not explicitly required by the syllabus.

• Finally, B3 looks at the alternative directions and methods of strategy development.

Here, the vocabulary used is that of JSW. Directions are the strategic options available to an organisation in terms of products and market coverage (protect/build, product development, market development and diversification). Methods of strategy development are the means by which any strategic direction may be pursued, for example; internal development, acquisition or disposal, joint development or alliances. Strategies can then be assessed in terms of suitability (does it address the situation), acceptability (in a way acceptable to stakeholders) and is it feasible (and hence practical).

• Section B of the study guide is also a rich area for both Section A and Section B

questions in the examination. It relates to people (particularly B2 and B3) and also to financial analysis. One suspects that many people can come up with suitable, acceptable strategies that are not financially feasible!

Slide 10

• Understanding the strategic position of an organisation and considering the strategic choices open to it are of little value unless the preferred strategies can be turned into organisational action. “Such action takes form in the day-to-day procedures and relationships that exist in organisations” (JSW).

• C1 is about organising for success. It reviews the various types of organisational structure

and looks at the advantages and disadvantages of each one. This includes project and team-based structures, explored elsewhere in the syllabus. Organisational processes are concerned with different forms of ‘control’ within organisations – from direct supervision to self-control. This builds on material introduced in the Accountant in Business and also encountered in the People section of the BA syllabus. Organisational relationships concerns both internal relationships (devolution and centralisation) and external relationships through outsourcing, alliances, networks and the “virtual organisation”. Finally; structures, processes and relationships have to work together consistently if the organisation is to organise itself for success. This interdependence is reflected in an organisation’s configuration. Mintzberg has suggested a number of stereotypical configurations. The candidate should be aware of these stereotypes and be prepared to apply them to case study situations. They can be used to think through how well the configuration matches the situation. “Poor performance might be the result of an inappropriate configuration for the situation or inconsistency between structure, processes and relationships”.

Slide 11

• This is the first section to look at operational issues – how strategy might be put into action. In the content of JSW’s lenses, business process change may be an important part of a designed strategy. Alternatively, suggestions to changes in business process may lead to strategies emerging from the experience of people who are employed to manage and undertake those processes. Finally, a consideration of processes might be a rich area for new ideas. Certainly, the study of process has been in and out of fashion for at least the last century! D1 reviews the historical perspective, culminating in the contemporary issues of commoditisation and outsourcing. D2 looks at a range of process redesign patterns within an appropriate scope and focus. Candidates may be asked to consider opportunities for redesign within a scenario. An article for the Student Accountant is being written which will illustrate this. Candidates will not be expected to construct process models, but they might be expected to interpret them as a basis for suggesting improvements.

• The implementation of standard processes using software structures is a multi-million

dollar industry. Software giant such as SAP, Oracle, JD Edwards and People Soft

dominate this market. Section D3 looks at the use of such generic software solutions to implement business processes and procedures. There is an important debate here. Should organisations adopt standard processes from software providers or should they tailor software solutions to fit their specific requirements? What are the implications of these two approaches to strategy and the competitive position of the organisation?

• Clearly, there is a huge connection between business process change and people – in

particular job design and reward management. The improvement of quality and the measurement of process and sub-process outcomes is also very significant. Finally, most business change initiatives take place in a project environment.

Slide 12

• Information Technology is the second area of “strategy in action”. Again, it might be viewed through a design, experience or ideas lens. However, the influence of e-business is much greater than that of business process change. E-business opportunities affect the strategic position of the organisation and the choices available to it. The T in PESTEL stands for technological and in contemporary organisations it could be argued that technology is dominated by Information Technology. E1 looks at the principles of e-business and how it changes the market place and the nature of the supplier – customer relationship. There are clear links here back to Sections A and B of the Study Guide, because information technology can fundamentally change how business is conducted. E2 focuses on the upstream supply chain, the relationship of the organisation to its suppliers and distributors and the contemporary growth of procurement and, specifically, e-procurement.

• Section E3 of the study guide focuses on the downstream supply chain, focusing on

marketing and, specifically, e-marketing. It looks at how e-marketing might affect the marketing mix and the growth of branding in a world of increasingly virtual organisation. Sections E2 and E3 are closely related to the value chain and, again, to large areas of Sections A and B of the Study Guide. Finally, E4 looks at Customer Relationship Management. How customers might be acquired and retained through information technology solutions.

• There are clear relationships of this section with business process change – as much of

the re – structuring of the value chain requires process change. Again there are very significant quality and people implications as well as the use of project management to implement these changes. Information Technology is very project driven and is indeed the source of PRINCE2 one of the most widely studied project management methodologies in the world. There is no requirement for candidates to study PRINCE2, just to recognise the project nature of most Information Technology activity.

• It is likely that Information Technology will significantly contribute to answers in case

study questions (section A of the syllabus) as well as being a stand-alone question in section B.

• Quality has been an important theme of the last fifty years, with particular ascendancy in the 1970’s and 1980’s as Western producers attempted to catch up with their Japanese rivals. Threshold values of quality have increased significantly in this period and some organisations continue to use quality as an important differentiator. This section of the Study Guide looks at quality from a number of angles. The first is from a historical and administrative perspective. It begins (F1) with a review of past quality initiatives which helped generate the ISO standards and the push towards certification.

• F2 looks at quality in the perspective of information technology solutions and again

through the certification of the CMMI process. In fact this process is just that – a process, and so can be applied to other process-driven activities in the organisation. Hence F2 interacts significantly with Information Technology Solutions (Section E) and Business Process Change (Section D).

• Finally, F3 focuses on Six Sigma. Six Sigma is much wider in its scope than just quality.

Its focus on measurement cross-references it to Business Process Change (Section D), Reward Management, Job Design and Appraisal (all Section I). It is also related to e-business and the value chain as well as to the fundamentals of project management. In fact, Define (the D in DMAIC) includes many aspects considered in Section G – identifying and initiating projects.

Slide 14

• Most organisations now recognise the importance of good project management. Many of the themes described in other sections of the syllabus (such as business process change, information technology solutions and quality initiatives) take place within a project-based structure. Effective people management within project structures is also essential. This syllabus section looks explicitly at three elements of project management:

Identifying and initiating projects. Managing and leading projects. Monitoring, controlling and concluding projects.

• A 2001 report showed that the United States spends $2.3 million dollars on projects

every year, and the world spends nearly $10.0 trillion on projects of all kinds. Projects, therefore, account for about one-fourth of the world’s gross domestic product.

• However, many projects are doomed from the start because the attributes of a project are

misunderstood and the structures are not in place to achieve successful initiation. The identification and initiation of projects is concerned with making sure that the project delivers business benefits and is understood properly before it commences. Project risks and responses to these risks is part of this initiation. This is the focus of section G1.

• The relationship of the project manager and their team is different to that of a line

manager. This is the focus of managing and leading projects (section G2) and it is related to Section I (People) as well as building on Section E of the Accountant in Business

syllabus. It concerns addressing team and leadership issues in circumstances where there is no line management control of employees who need to be led and motivated.

• Finally (G3), projects are also buffeted by other issues and challenges during the conduct

of the project. For example; slippages occur and changes are requested. The section on monitoring, controlling and concluding projects is concerned with identifying and reacting to the issues. The end-project review is also extremely significant, with particular emphasis on establishing whether the benefits established in the initial business case have actually been realised.

• The syllabus does not expect candidates to draw a project network – critical path etc.

However, the concept of breaking down work into some work or project breakdown structure needs to be understood. So to, are the potential benefits of using project management software to support the planning and monitoring of a project.

• Questions on project management may appear anywhere in Sections A and B. in Kathy

Schwalbe’s introduction to Project Management (Thompson Course Technology, 2006), she identifies nine knowledge areas within a project management framework. These are listed below;

Integration Management

Project selection methods, project management methodology, project management software etc.

BA

Scope Management

Scope statements, work breakdown structures, etc.

BA

Time Management

Gantt charts, project network diagrams etc. Not studied

Cost Management

Net present value, return of investment, payback analysis, earned value management etc.

PM

Quality Management

Quality metrics, checklists, maturity models. BA

Human Resource Management

Motivation, team building, etc. BA/AB

Communications Management

Reporting, conflict management, status reports, etc.

BA

Risk Management

Risk management, risk register, etc. BA/PM

Procurement Management

Make or buy analysis, contracts, RFP, supplier evaluation.

BA/Law

• Hence, overall elements of all these are covered except for Time Management when the

new scheme is considered as a whole. Slide 15

• Paper 3.5 has had a strong tradition of including financial data in case study scenarios and inviting candidates to use this data to either assess the strategic position of the organisation, the strategic choices available to it, or the consequences of particular strategic actions. This tradition will continue, although it may also be supplemented by data related to non-financial performance (for example, pass rates of a particular teaching institution).

• It is likely that the contents of this part of the syllabus will have been taught elsewhere

(particularly in Financial Reporting and Financial Management) and so candidates are asked to bring their knowledge to bear in a particular environment. It is important that candidates recognise that different funding opportunities exist for different types of organisations, and that stakeholder expectations also differ. In our experience, the candidates too readily associate funding opportunities and stakeholder expectations of a plc with a case study scenario which is clearly describing a private limited company. Data will also be available for the candidate to apply selected financial ratios and there will be credit for doing so.

• Finally, candidates would benefit from a knowledge of contemporary influences on

funding. For example, the rapid growth of private equity funding.

• Enabling success relates to chapter nine of JSW. This is the chapter which essentially has been expanded into the previous sections (D, E, F, G) and relates to H and I. JSW’s primary themes are people (Section I),technology (Section E), information (loosely Section D, as well as some aspects of Section E) and finance (Section H).

Slide 16

• A detailed guide to the scope of this section is provided in the Reading List reference. The primary source text is Bratton and Gold – Human Resource Management – Theory and Practise. The advantage of this book is that each chapter is relatively independent. The key chapters are on Work and Work organisation (chapter four), Appraisal and performance management (chapter eight), Reward management (chapter nine) and Human Resource Development (chapter ten). However, chapters one and two (the human resource management arena and strategic human resource management) provide useful background material and an introduction to strategic management from a HRM perspective. Chapter three (the context of human resource development) also provides useful material for the macro-economic strategic perspective. For example “ratifying Kyoto estimated to cost up to 450,000 jobs”.

• There is also a clear connection with the Accountant in Business (AB) paper, particularly

sections E and F of the syllabus. Emphasis will be placed on the context of this knowledge. For example; leadership in a case study section. Lecturers might also like to see the section on The Leader as a Strategic Visionary in Writers on Leadership, John von Maurik, Penguin Business (2001).

• The sub-sections on performance, rewards, appraisal and human resource development

are very closely related. In fact, the Fombrun, Ticky and Devanna 1984 model HRM can be adapted as a teaching framework. (Slide 16)

• There are also very clear links to measurement (balanced scorecard, benchmarks, quantification, Six Sigma) and to business process re-design. There are also issues to do with corporate fit and corporate culture, for example; the alignment of reward management to organisational strategy. Government intervention influences payment and other rewards as well as the organisation’s attitude to training and development. Hence, there are rich pickings here for questions concerning the macro-environmental issues affecting an organisation (PESTEL etc). Performance management and job design also cross-references quality initiatives. Knowledge work suggests that an organisation’s wealth and ability to compete exists “principally in the heads of its employees” and post-bureaucratic work design blurs the boundaries of an organisation leading to temporary alliances and virtual organisations.

• Although, Human Resource Development (HRD) forms the last section of the syllabus

(although not necessarily the last of the taught course) it is very significant. As Johnson, Scholes and Whittington recognise “since the early 1990s, the resource-based view of strategy has become highly influential”. The growth of HRD recognises that people are an investment – not a cost. There are clear links here to strategic position, core competencies and emergent strategies. “If employees can only see strategies in terms of deliberate planning they not only risk that such strategies go unrealised, but they also waste the learning that can emerge from their employees.” Learning and work become undistinguishable. Proactive HRD suggests that “learning is the way managers cope with change”.

• People issues will be inevitable in most questions set in this examination. Candidates

must remember to explore and indeed exploit this perspective. Furthermore, there may also be significant part questions (or indeed whole questions) on substantial issues covered in this section of the syllabus.

• It is suggested that teaching may now return to the content defined in sections C2 and

C3 of the Study Guide.

• C2 is concerned with the management tasks and processes involved in changing strategies. It begins diagnosing the change situation and the types of strategic change that might be considered. JSW examines four types of strategic change – adaptation, reconstruction, evolution and revolution. The type of change has to be considered in the organisational context and the cultural web might be used to assist in the diagnosis of the organisational context. Blockages and levers of change may emerge from the consideration of the cultural web and perhaps analysed in a force field analysis. Leadership appears (or re-appears!), because “whoever is in the position of managing change needs to consider the style of management they adopt”. Management style again depends upon (amongst other things) the stage of the change process, the structure of the organisation, the personality type of the manager. Candidates can explore this within the context of a case study question. C2 also considers specific roles in management of change.

• Specific levers for managing strategic choice are also examined. Many of these levers

correspond to elements of the cultural web. Here are some examples: • Turnaround strategy – cost reduction, management change, stakeholder support. • Challenging the taken for granted.

• Changing organisational routines. • Symbolic processes – rituals, reward systems, behaviour of leaders. • Power and politics – building alliances, overcoming resistance, commitment. • Communication and Monitoring of change – vision, feedback, reinforcement. • Change tactics – timing, job losses and delayering, visible short-term wins.

• The potential pitfalls of change programmes should not be overlooked. However, issues

to do with managing strategic change are potential areas of case study questions.

• C3, Understanding Strategy Development, rounds off the course as a whole. The contrast between intended and emergent strategies has been re-addressed in HRD. C3 (understanding strategy development) allows reflection on the distinction between intended and emergent strategies and how they relate to the material covered in the syllabus. It concludes with the suggestion that multiple processes of strategy development are likely to be needed if organisations are to “cope with increasingly dynamic and complex environments”.

Slide 17

• The sub-sections on performance, rewards, appraisal and human resource development are very closely related. In fact, the Fombrun, Ticky and Devanna 1984 model HRM can be adapted as a teaching framework.

Slide 18





• There are no notes to support this slide.

Reading List Guide Introduction This document cross-references the main headings in the Study Guide with the primary and secondary texts in the reading list. In general, the four primary texts provide information in sufficient detail for the

candidate to prepare himself or herself for the examination. Sessions where these texts do not provide sufficient detail are marked with an asterisk (*) and the relevant secondary text is referenced. Knowledge brought from other syllabuses in the scheme may be applied in examination answers. Clearly, The Accountant in Business provides a strong under-pinning, particularly the sections on;

• Business organisation structure, governance and management • Key environmental influences and constraints on business and accounting • Leading and Managing individuals and teams • Acquiring and developing effective employees

It is also assumed that candidates will be familiar with the content of section H of this syllabus (The role of finance in formulating and implementing business strategy) from their studies elsewhere. Hence preparation for this examination should concentrate on the application and implications of financial issues to formulating and implementing business strategy. It is also suggested that topics C2 and C3 are studied at the end (after section I). Key to texts JSW: Johnson G, Scholes K and Whittington R, Exploring Corporate Strategy (seventh edition), Prentice Hall (2005) PH: Harmon P, Business Process Change, Morgan Kaufman Publishers (2003) DC: Chaffey D, E-business and E-commerce management (second edition), Prentice Hall (2004) BG: Bratton J and Gold J, Human Resource Management, Palgrave-Macmillan (2003)

A The strategic position of an organisation 1. The need for, and purpose of strategic and business analysis JSW Page 1 – 58 2. Environmental issues affecting the strategic position of an organisation JSW Page 59 – 77 3. Competitive Forces affecting an organisation JSW Page 77 – 95; 98 - 114 4. The value of goods and service JSW Page 96 – 98; Page 136 – 141; Page 144 – 148 (benchmarking) 5. The internal resources and competencies of an organisation JSW 5 – 136; Page 148 – 162 6. The expectations of stakeholders and the influence of ethics and culture JSW Page 163 - 214 B The strategic choices available to an organisation 1. The influence of corporate strategy on an organisation JSW Page 280 - 337 2. Alternative approaches to achieving competitive advantage JSW Page 223 – 264, 272 - 274 3. Alternative development directions and methods of development JSW Page 340 - 381 C Strategic Implementation 1. Organising and enabling success JSW Page 382 – 410; Page 421- 444, Page 446 - 447 (introduction) 2. Managing strategic change JSW Page 504 – 549 3. Understanding strategy development JSW Page 550 – 609 D Business process change 1. The role of process and process change initiatives JSW Page 410 – 420 PH Page 19 – 41, 80 – 84, 209-234

2. Improving the processes of an organisation PH Page 235 – 256 3. Software package solutions* PH Page 281 – 297 Skidmore S and Eva M, Introducing Systems Development, Page 73 – 98, 279 – 319 E Information Technology solutions 1. Principles of e-business JSW Page 457 - 466 DC Page 1 – 67, Page 68 – 133 (background on technology) 2. E-business application: upstream supply chain management DC Page 245 - 314 3. E-business application: downstream supply chain management DC Page 315 -365 4. E-business application: customer relationship management DC Page 366 – 421 F Quality initiatives to implement and support the organisation’s strategy 1. Quality control, quality assurance and quality management systems* JSW Page 246 – 248 BG 8 – 131, 361 – 363, 435 – 436 PH Page 179 – 181 Tricker R and Sherring-Lucas B, ISO 9001:2000, page 1 - 78 Schwalbe K, An Introduction to Project Management, Page 141 - 144 2. Quality in the information systems development lifecycle* DC Page 538 – 540 Skidmore S and Eva M, Introducing Systems Development, Page 259 – 278 3. Quality initiatives: Six Sigma* PH Page 179 – 205 Pande P and Holpp L, What is Six Sigma? Page 1 - 41

G Project Management 1. Identifying and initiating projects* JSW Page 408 – 410 Schwalbe K, An Introduction to Project Management, Page 1 - 29, 59 - 90 2. Managing and leading projects* Schwalbe K, An Introduction to Project Management, Page 91 – 103, 150 – 162, 181 - 223 3. Monitoring, controlling and concluding projects* Schwalbe K, An Introduction to Project Management, Page 225 - 285 H The role of finance in formulating and implementing business strategy 1. The link between strategy and finance JSW Page 361, 364 – 369, 371 – 376, 467 - 470 2. Finance decisions to formulate and support business strategy JSW Page 369 – 371, 470 - 477 3. Financial implications of making strategic choices and of implementing strategic actions JSW Page 370 I The role of leadership and people management in formulating and implementing business

strategy 1. Strategy and people: leadership JSW Page 447 – 457 (managing people) JSW Page 415 – 416, 515 – 522, 606 - 607 BG Page 60, 319, 360 2. Strategy and people: Performance management BG Page 221 - 275 3. Strategy and people: Reward management BG Page 276 - 315 4. Strategy and people: Job Design BG Page 113 – 148 PH 3 – 155 5. Strategy and people: Staff development BG Page 316 - 355

Session suggestion: based on thirty sessions

Session Syllabus cross-

reference 1 A1 2 A2 3 A3 4 A4 5 A5 6 A6 7 B1 8 B2 9 B3 10 C1 11 D1 12 D2 13 D3 14 E1 15 E2 16 E3 17 E4 18 F1 19 F2 20 F3 21 G1 22 G2 23 G3 24 H1, H2, H3 25 I1,I2 26 I3 27 I4 28 I5 29 C2 30 C3

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