CIMA E2 extract - The ExP · PDF fileChapter 1 to 3 extract from our ExPress notes for use...

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CIMA Paper E2 Enterprise Management

Notes

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ExPress NotesCIMA E2 Enterprise Management

Page | 2 © 2011 The ExP Group. Individuals may reproduce this material if it is for their own private study use only. Reproduction by any means for any other purpose is prohibited. These course materials are for educational purposes only and so are necessarily simplified and summarised. Always obtain expert advice on any specific issue. Refer to our full terms and conditions of use. No liability for damage arising from use of these notes will be accepted by the ExP Group.

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Contents

About ExPress Notes 3

1. Strategic Management & Assessing the Competitive Environment

7

2. Developments in Strategic Management 14

3. Project Management 16

4. Project Management Tools 21

5. Project Management – Teamwork & Quality 28

6. The Effective Operation of an Organisation 32

7. Managing People 36

8. Corporate Governance & Ethics 42



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Chapter 1

Strategic Management & Assessing the Competitive Environment

START The Big Picture

This chapter introduces us to a variety of methods of analysing the competitive environment faced by an organization.

KEY KNOWLEDGEPESTEL (or PEST or SLEPT) Analysis

An analysis of the external macro environment. The organisation is unlikely to be able to influence these factors but it should have an awareness of the issues.

Political - global, national and local changes and trends. Taxation policies. Relationships between certain countries.

Economic - global, regional and local issues. Exchange rates. Link to topical issues such as global recession, current interest rates for funding.

Social - changes in behavior and expectations in society. Demographics, lifestyle.



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Technological - changes including hardware, software, e-issues, materials and services. Global communications.

Environmental – what are the environmental considerations such as recycling, pollution, attitude of the media, customers, etc.

Legal - changes and predicted changes to regional (e.g. EU) and national legislation. Regulatory bodies. Changes to employment law.

KEY KNOWLEDGEStakeholder mapping

Stakeholders are individuals, groups or organisations that can impact or be impacted by, an organisation.

Mendelow’s Matrix allocates stakeholders into quadrants according to their level of power and how likely they are to exercise that power (i.e. their interest).

Stakeholder Interest Low High

Stakeholder Power

Low Minimum effort Keep informed

High Keep satisfied Key players

KEY KNOWLEDGESWOT analysis

Strengths (internal) e.g. resources and capabilities

Weaknesses (internal) e.g. lack of certain resources or capabilities

Opportunities (external) e.g. arrival of new technology

Threats e.g. arrival of substitute product



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Threshold resources and competencies: These are the minimum required by an organisation to meet customer’s minimum requirements. In effect, this is what is required to stay in business.

Core competencies: These are processes and activities undertaken by an organisation which are seen as being central to their success. Core competencies are capabilities which are critical to a business achieving competitive advantage.

They provide customer benefits and are difficult for competitors to imitate.

A core competency can take many forms such as technical knowhow or customer relationships.

Amazon.com has a number of core competencies such as reliable and efficient online ordering and delivery system.

KEY KNOWLEDGEPorter’s value chain

SupportActivities

Primary Activities

Technological Development

Human Resource Management

Firm Infrastructure

Procurement

Inbo

und

Logi

stic

s

Ope

ratio

ns

Out

boun

dLo

gist

ics

Mar

ketin

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Sal

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Serv

ice

Supp

ort

Prim

ary

The value chain was introduced by Porter and represents an approach to looking at the development of competitive advantage within an organisation. All organisations consist of activities which “link” together to develop the value of a business. Together these activities represent the value chain.



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The value chain represents a series of activities that both create and build value. Combined they represent the total value delivered by an organisation. The “margin” in the diagram is the added value (the difference between the total value of the activities and the cost of performing them).

Primary activities: related with production. Support activities: provide the background for the effectiveness of the organisation (e.g. HRM)

KEY KNOWLEDGEData for environmental analysis

Data for environmental analysis can be obtained from a number of sources:

Official government sources (e.g. trade reports)

Online – specialist subscription databases (e.g. Reuters)

Online – publically available information (e.g. corporate websites)

Private intelligence agencies (e.g. Dun and Bradstreet)

Tailored research (e.g. market surveys, discussion groups)

Quantitative research

• analysis of numerical data

• more objective

• statistical tests

• e.g. data provided by customers

Qualitative research

• analysis of words

• more subjective

• could use focus groups or interviews

• e.g. opinions of customers



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KEY KNOWLEDGEPorter’s 5 Forces

This model examines the role of 5 forces close to an organisation that impact on its ability to make a profit and hence how attractive a particular market or industry is.

There are 5 forces as follows:

1. Threat of substitute products

If there are similar products, a customer will be more likely to switch rather than stay with a product when there are price rises (elastic demand).

2. Competitive rivalry

The rivalry will depend on the number and strength of competitors, economies of scale and exit barriers.

Competition

Entrants

Customers

Substitute

Suppliers



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3. Threat of new entrants

Markets generating high returns will attract new entrants which in turn could reduce industry profits. Barriers to entry such as government licenses (mobile phone operators) are important in reducing the threat of new entrants.

4. Power of customers

The stronger the power of the customer the more pressure it can place on the company. Issues to consider include the size of the customer relative to the firm’s customer base, switching costs and availability of substitute products.

5. Power of suppliers

Suppliers of materials and services can exercise power over an organisation. This depends on the level of differentiation of the product, presence of substitute products, etc. Compare the power of Intel supplying computer chips to the computer industry vs. a sugar producer supplying sugar to a soft drinks manufacturer.

KEY KNOWLEDGEPorter’s Diamond

This is a model outlining the theory why certain industries are competitive in particular locations.

There are 4 broad factors within the diamond.

Factor Conditions

Demand Conditions

Related & Supporting

Firm Strategy & Structure



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Factor conditions include physical resources, human resources and specialised resources.

Demand conditions. A country with sophisticated home buyers who “demand” quality, advanced and innovative products can create international competitiveness

Related and supporting industries can produce inputs for a company which feed into the success of the business.

Firm strategy, structure and rivalry. Competition in the home market drives innovation and quality. Protectionism can weaken a market.



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Chapter 2

Developments in Strategic Management


This chapter identifies various different approaches to strategy that organisations can take.

KEY KNOWLEDGEDifferent strategic models

1. Ansoff’s Rational Model - adapted by Johnson, Scholes and Whittington (JSW): The “Rational Model” which shows the strategic planning process in 3 categories of analysis – choice – implementation.

Analysis Choice Implementation



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2. Mintzberg’s Emergent strategy: Very few strategies will result in outcomes exactly as planned. Instead, strategy will “emerge” and develop over time as the strategy evolves. It will result in intended, realised and emergent strategies.

3. Lindblom’s incrementalism: Supports the view that strategy delivery should be based on small (incremental) changes over time rather than a limited number of extensive planned strategies.

4. Freewheeling opportunism: No planned strategy approach. Grab opportunities as and when they are identified.

5. Positioning view: adapting the organisation so that it “fits” (i.e. is positioned) with the environment it faces. 6. Resource based view: focusing on what works best with the organisation’s resources. Identifying opportunities that work well with their resources.

KEY KNOWLEDGELevels of strategy

Strategy Hierarchy:

Corporate strategy: covers the “big view” of the organisation. It answers the question “What business or businesses should we be in?

Business strategy: the strategy of a single business organisation or the strategies of strategic business units (SBUs)

Functional (or operational) strategy: the functional strategies involving items such as marketing, IT and HRM that support the business strategy.

It is important that the strategies support each other. For example, if the Business Strategy of a SBU revolves around providing high quality consultancy advice on certain areas, a functional strategy for HRM of minimising labour costs would cause problems.

Corporate

Business

Functional



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Chapter 3

Project Management


This chapter looks at the big picture issues surrounding project management and introduces us to some key concepts that underpin the subject.

KEY KNOWLEDGEA project

Unlike ongoing work, a project has a beginning, middle and end.

Beginning Middle End



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KEY KNOWLEDGEThe project life cycle

The project life cycle

KEY KNOWLEDGEThe PMBOK Guide

The Project Management Body of Knowledge (PMBOK Guide) is published by the Project Management Institute (PMI). The Guide identifies processes that fall into 5 groups and 9 knowledge areas:

The 5 process groups are:

1. Initiating

2. Planning

3. Executing

4. Monitoring and controlling

5. Closing

• Process groups5



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The 9 knowledge areas are:

1. Project Integration Management

2. Project Scope Management

3. Project Time Management

4. Project Cost Management

5. Project Quality Management

6. Project Human Resource Management

7. Project Communications Management

8. Project Risk Management

9. Project Procurement Management

KEY KNOWLEDGEAppreciative Inquiry (the 4‐D model)

Appreciative Inquiry (the 4-D model) by Cooperrider and Srivastva is based on the view that an organisation that inquires into problems will keep on finding more of the same whereas one that focuses on what it is good at will discover more that it is good at. It is often used in creative projects.

•Knowledge areas9

•Planning the processes.

• Implementing the design.

• What would work well in the future?

• Identify processes that work well.

1. Discover

2. Dream

3. Design4.

Deliver



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KEY KNOWLEDGEThe Mckinsey 7‐S model

Developed by Peters and Waterman (who wrote “In Search of Excellence”) the core idea is that there are 7 internal aspects of an organisation that should be aligned with each other to maximise the chances of the organisation being successful.

Structure – how the organisation is structured and who reports to whom. Systems – the processes and procedures undertaken by staff. Strategy – the plan to build competitive advantage and achieve objectives. Shared values – (“superordinate goals”) the core values of the company and evidenced by the culture. Style – including the style of leadership. Staff – numbers and categories of employees. Skills – skills and competencies of the employees.



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The 7 aspects are classified as either hard or soft elements:

Management can directly influence these.

Structure

Systems

Strategy

HardLess tangible and more difficult to describe.

Shared values

Style

Staff

Skills

Soft

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