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Email: darrensparkesnotes@sky.com
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ACCA P3 - Business analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Contents Page no.
A message from Darren…………………………3
Paper 3 Examiners Approach…………….….... 4
Extracts from the Examiners report Dec 08…...5
Examination Technique……………….…..……..7
Background and examination format..…..........10
Syllabus Overview………………………...........11
Strategic Planning………………………...….....12
Mission and Objectives…………………………13
Business & Professional Ethics..………….…...14
Internal Analysis……………….……………..…15
External Analysis……………..………………....16
Strategic Options……………………….……….18
Method of Growth………………………............19
Portfolio Analysis…………………………….….20
Strategic Choice & Change Management…....21
Marketing………………………………………...22
Organisational Structure…………………….….23
International Market Place.…………….……....24
Business Process Change…….…..…………..25
Information Technology……..…….……..........26
Quality………………………………….……......27
Project Management………………………...…28
Role of Finance………………………………...29
Review and Control………………………..…..30
Strategy and People……………………………31
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
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 practice
leading up to the examination.
Your examiner is not interested in the regurgitation of your knowledge but how you APPLY that knowledge to the
scenarios 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 practice
answers 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 entering
the exam room. It is only by replicating the time pressure in the exam that you can appreciate the importance of time
planning on the day.
Keep a look out for relevant articles appearing in your professional magazine or on the Institute’s website prior to the
examination, particularly if they are written by the examiner.
And remember….
‘Whether you believe you can or you can’t, you’re right.’ (Henry Ford)
Regards,
Darren Sparkes
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Approach Required
‘Differentiation is important to individuals seeking to pass a management and
strategy examination.
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Extracts from the Examiners comments December 2008
In general:
• Performance showed an improvement on the previous sitting
• Answers much more within the context of scenarios than previous sittings
• Financial and quantitative data figured more prominently in answers
• The three optional questions were equally popular
• Q1b was biggest problem for candidates where many answers did not address the question
• Q1a (PESTEL) so popular it lead to some candidates over-answering it, leading to time problems
• As a result, answers to the final optional question often appeared rushed
• Vast majority of papers were well written and well presented
• Hand writing still remains a problem for some – it is no use having great ideas if no-one can read them
Section A - Question 1
Q1a – there were plenty of clues in the case study, most of which featured in candidates answers, with the
exception of legal responsibilities
Some candidates strayed onto internal issues (strengths and weaknesses) which were not given marks
Q1b – The case study is rich in material to support the cultural web approach
• Asked to explain the three strategy lenses – Some candidates very well prepared – showed great
understanding and gained full marks - Others showed very little knowledge and only scored two or three
marks.
• Overall many candidates provided good answers to question 1
• Reference to the case study context was much better than on previous papers
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Section B
Many more candidates than before supporting their argument with financial analysis
Many who used financial data in part a failed to do so in part b
The model answer suggests that MMI should not acquire the company – many candidates approved the
acquisition with justification through IT synergies – credit was given for this approach
Candidates do not always have to agree with the examiner’s analysis to gain the marks on offer!
• Question combined the themes of project management, quality and the systems development life-cycle
• Part a relatively straight forward which candidates either knew or did not
• Consequently, some candidates scored very few marks whilst others gained full marks
• Part b answered relatively well – many candidates giving a wide range of options.
• Part c – often overlap with part b
• Many candidates did not clearly justify their answer
• In some cases not enough points made to get the marks on offer
• Part b – relatively difficult in the time-constrained pressurised environment of the examination
• Well answered – many scoring eight or more out of ten.
• This was very heartening!!!
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Therefore, to pass P3 learn from the examiners
comments:
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Examination Technique to give the Examiner what he wants
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
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
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
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
Exercise professional support the organisation’s strategy taking account of customer and other
judgement major stakeholder requirements
Select relevant Integrate appropriate information technology solutions to support the
data organisation’s strategy
Apply appropriate quality initiatives to implement and support the
organisation’s strategy
Advise on the principles of project management to enable the implementation
Determine appropriate of aspects of the organisation’s strategy with the twin objectives of managing
techniques risk and ensuring benefits realisation
Analyse and evaluate the effectiveness of a company’s strategy and the
Candidate Requirements financial consequences of implementing strategic decisions
The role of leadership and people management in formulating and
implementing business strategy
Apply knowledge
and skills
Paper Background
Objectives of the
paper
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
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Governance and Corporate Social Responsibility
Cultural Web
Syllabus Overview SMART
Change Management
International
Trading HRM IT Project Management
Structure Implementation
Incrementalism (Lindblom)
Building block approach
Build strategy through incremental steps not radical
Respond and fit to environment
Rational ‘Top Down’ Approach Utilise scarce resources
shifts
Accepts uncertainty of future Provide direction
Mission & Objectives
Builds commitment Ensure consistent objectives
× May be too slow Monitor progress
× Ideas often compromised Corporate appraisal
Mission
Values ‘… the most generalised type
of objective which can be Objectives
thought of as its raison d’etre.’
Mission Statement
Published version of the
Culture
‘The way we do things around here’
Mission
Mission and
Stakeholders Objectives Cultural Web
– cultural paradigm
Routines & Rituals
Stories & Myths
Symbols
Power structure
Mendelow’s Power – Interest Matrix Critical Success Organisation structure
Interest Factors Control systems
Low High
"The limited number of areas
in which results, if they are
Not for Profit Organisations
A B satisfactory, will ensure
Low Minimal Effort Keep Informed successful competitive
Features of objective setting
performance for the
Give Direction Education / organization. Multiple and contradictory objectives
Communication Participation in objective setting
They are the few key areas Providers of funding different to beneficiaries of service
Power Priorities may change frequently
where things must go right for
the business to flourish. Value for money a requirement not an objective
Increased role of personal objectives
C D
If results in these areas are
Keep Satisfied Key Players
High not adequate, the
organization's efforts for the Efficiency Economy
Intervention Participation – Keep
Close period will be less than
desired."
Effectiveness
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Equal opportunities
Corporate Governance C Competence
Divorce of ownership and control Consumer health and safety
O Objectivity
Separate roles of CEO and Chairperson Bribes
Audit Committee / Remuneration Committee P Professional due care
Safety in the workplace
Directors re-election at least every 3 years P Politeness Issues
Non-exec Directors I Integrity
Sustainability
Fair Trade
o Independent T Technical Standards
o Role on audit / remuneration Honesty in Advertising
committees Environment
o Corporate conscience
o Mentors to inexperienced execs
o Strategic value through expertise
Professional Ethics Corporate Social
‘Self control, not self interest’ Responsibility
Johnson, Scholes & Whittington – Ethical Stances
Innovation &
Reputation
and branding Small company
advantage in the
Ethics (Shareholder View -
Friedman)
ideas from supply chain
close links to Management to concentrate on
community
Avoid future Government policy Long-term Self-Interest / maximising profits and
Competitive shareholder wealth.
Stakeholder view
advantage Firms should acknowledge their social
Businesses have no duty to
Recruitment responsibilities.
Benefits to Business society.
Porter’s 5 Forces
(Competitive,
Threat from New Market Entrants Threat from Substitute
Barriers to Entry: Industry analysis)
Technologies
Economies of Scale Can same features be produced
Other cost advantages cheaper?
Capital requirements Can new features be provided for same
Access to distribution channels cost?
Patents, Government policy Competitive Rivalry Level of danger may be influenced by
Reaction of existing firms Greatest where: barriers to entry and/or power of buyers
Competitors of similar size
Slow market growth rate
High fixed cost industry
Power of Buyers Lack of differentiation Power of Suppliers
Power greatest where: Power greatest where:
Few buyers Few suppliers
High number of suppliers available Few substitutes
Cost is high proportion of buyers total cost High switching costs
Low switching costs External Analysis Threat from forward integration
Buyers have low profits (Opportunities and Threats) Customer not significant to supplier
Buyers have full information Supplier has differentiated product
Little product differentiation
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Problems:
No common shape
Unpredictable
Self-fulfilling Firm structure, strategy, rivalry
prophecy
Product orientated –
ignores market
Porter’s
Factor Diamond Demand
conditions ‘National conditions
Product Life-cycle Competitive
Stages: Advantage’
Introduction: high risk, little competition, low volume, high advertising = losses + negative cash
Growth: increased competition, growing volumes, EOS, high advertising = losses to profits + negative Related and supporting industries
to positive cash
Maturity: steady repeat sales, high volumes, EOS, low level advertising = profits + positive cash
Decline: falling volumes, falling prices = profits to losses + positive to negative cash, divest
External Analysis
(Opportunities and Threats)
Corporate Appraisal
Internal + External Analysis
= Corporate Appraisal = Position
Appraisal= SWOT Analysis
Strengths Weaknesses
INTERNAL Internal Analysis
Factors specific to the organisation
EXTERNAL
External Analysis Opportunities Threats
Factors open to all in the industry
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ACCA P3 – Business Analysis TOWS
These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
To beat the five
High Hybrid Differentiation Focused Porters Five forces
Differentiation Forces
PESTEL
Porter’s Generic Strategies
Benefit
Strategically develop
Low Price Strategic Fail
Clock
organisation in line Overall Cost Leadership
with environment (better margin, potential price cuts, entry
barrier, reduce supplier power)
Differentiation
Low No Frills Fail Fail Market Facing (Premium price, better margin, barrier,
reduce buyer power)
Focus (Niche)
Low Price High Positioning view (Cost or Differentiation, focus on market
needs, develop core competencies)
Method of Growth? (See next page) Resource Based View What Basis?
Acquisition Organic
Acquisition versus
Porter’s 3 Tests for Growth
Organic growth
Acquisitions Divestment
The attractiveness test Possible synergies Quick
The cost of entry test Market Higher price due to
The better off test Economies of scale strategic value
Shared activities
Surplus assets
Vertical integration
Skills transfer
Method of Withdrawal
Demerger
Gives shareholders
Dilution of risk
Reduced power of Growth?
an exit route
Management can
focus on core areas
buyers/suppliers
Tax advantages Two companies can
develop separate
identities
Joint Venture
Separate business entity
with equity form two or
more businesses
Joint Development
Methods Management Buyout
(MBO)
Strategic Alliance Quick growth Consider
Access to competences On-going involvement of
Long-term agreement to Licensing
share knowledge, Less financial risk/outlay holding company
Giving the right to
competences, technology Overcome product, market, Why is holding company
exploit brand, recipe,
for mutual benefit operational risk selling?
process etc for a
share of the profits × May lose competences Loss of Holding company
× Train future competitors help, e.g. technical support,
Franchising × Brand infection finance services
Giving the right to exploit a business × Operational and contractual Quality of management team
method/model in return for a capital sum disputes Price
plus a share of the profits. Franchisor × Ownership of assets Personal risk, e.g. home at
usually provides support e.g. marketing, × Sharing of profits risk?
training, technical
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Problems:
Definition of axes
Definition of market
Directional Policy Matrix Business Sector
No account of complimentary goods Prospects
Assumes high market share = advantage
Unattractive Average Attractive
BCG Matrix
Phased
Relative market Withdrawal withdrawal Double or quit
High share Low Weak
Proceed with
STAR PROBLEM CHILD care
High Build then Hold Build or Divest Proceed with
Losses to profits, negative Losses, negative cash Company’s Phased care Try harder
Market to positive cash Competitive Avge withdrawal
growth capabilities Growth
CASH COW DOG
Hold then Harvest Harvest then Divest Growth
Low Profits and positive cash Profits to losses, positive Cash Leader
to negative cash Strong
Generation
Leader
Strategic
Risk Choice Cost/Benefit
`
Strategic Drift
Strategy Environment
Job Factors
Lewin’s Force
Field Analysis
Types of Change Personal
Extent of change Factors
Transformation Realignment
Driving Forces Restraining Forces
Social
Incremental Evolution Adaptation Factors
Speed Change
of Management Strengthen Weaken
Organisational
Change Factors
Revolution Reconstruction
Big Bang
Unfreeze Change Refreeze
Supporting
Time Power Mechanisms
Change Participation
Kaleidoscope Education & communication
Scope Readiness Facilitation & support
Negotiation
Preservation Capacity Manipulation
Diversity Capability
Coercion
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Coordinated marketing
Implementation Issues
Customer needs
Profitability Analyse environment
Marketing and competitors – PEST
Target Markets Strategy / Porter’s five forces
Kotler’s Four
Pillars
Market Segmentation and
Marketing Target Market
A Awareness …identify, anticipate and satisfy …division of the market into
homogenous groups of potential
I Interest customer requirements customers who may be treated
D Desire similarly for marketing purposes
A Action Product Sales
Production Geographic
Demographic
Communications Mix: o Age
Physical Advertising Firm’s orientation o Gender
Evidence Sales promotion o Income
Public relations o Family life-cycle
Personal selling Social class
Processes Marketing
Psychological
Education
Hobbies
People
Promotion Distribution
channels Marketing Research Undifferentiated
Market coverage …systematic gathering,
Place Outlet locations recording and analysing of data
7 P’s about problems relating to the
Differentiated
Warehousing
marketing of goods and services
Marketing Mix – 4P’s Concentrated
…set of controllable
marketing variables used to Field Research Desk research
Price produce desired response in Product qualities (Primary data) (secondary data)
the target market Features, options,
range, warranty, Interviews, focus groups, External
branding, packaging questionnaires, Internal CSO reports,
Price levels experiments, Test Accounts, Sales Business
Discounts monitors, Trade
Product marketing reports, Customer
journals,
Allowances complaints
Product Life Cycle newspapers
Payment terms
Delivery options
Product
to meet Product
needs mix
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Implementation Issues
Divisional
Multiple products &
Entrepreneurial markets
Functional Matrix
Fast decisions Autonomy for SBU
Responsive to market Economies of scale managers Breakdown of silo’s
Congruence Specialists with some autonomy Training of SBU managers Shared knowledge
× No career structure Career structures Frees up senior managers Skill development
× No autonomy Frees up entrepreneur Focus on specific Innovation and creativity
× Single product & market × Slow decisions (bureaucratic) products/markets × Dual command
× Functional silo’s × Loss of congruence? × Dilution of functional
× Few products & markets × Duplication of effort authority
× Time consuming meetings
× Isolation of SBU
Centralised vs Decentralised managers
Virtual
S Strategy Types of Structure Network Organisation
Organisation
T Technology
O Objectives Outsourcing
P People Reduced cost
T Tasks
Planning and control Organisational External
Skill shortages
Flexibility
Relationships Focus on core business
I
E
Ideology
Environment Direct supervision
Structure ×
×
Loss of control
Supplier dependency
× Confidentiality
S Size Planning processes × Loss of in-house skills
Performance Mintzberg’s
management Structural
Decentralisation Internal market Managing Simple structure =
Culture Business Strategic Apex entrepreneurial
Advantages: Self-control Units Techno- Support
Machine bureaucracy
Frees senior = functional
structure Middle Line Staff
management Professional
Better local decisions bureaucracy =
Better motivation decentralised
Operating core
Flexibility Strategic Synergy
Training/career path Planning co.s Manager
Divisional form
Adhocracy = matrix
Exporting
Low capital outlay
Low risk
The International
×
Can learn about market
May not meet customer needs
Market Place
× Perceived lack of commitment
× High distribution costs
Methods of International Expansion
Joint Venture &
Franchising
Access to local resources Global Multi-Domestic Hybrid
Reduced national sentiment
Shared capital input
Perceives foreign markets as See overseas market as distinctive Standardise wherever possible,
Access to competences and similar to domestic market Customised products and e.g. RnD, Branding
knowledge
Products & marketing mix marketing mix Market convergence may allow
× Shared profits
constant Increased overseas sales volumes standardised product
× Lose competences
Standardisation to save time and BUT BUT
× Train competitor
money Fewer EOS giving higher costs, so Demand-driven
× Operational disputes
Supply-driven policy volumes not turned into profits Customised marketing mix
where necessary = GLOCAL
Foreign Direct Investment
Closer to market
Retain profits
More control STAFFING
Reduced operational conflicts
× High financial risk Overcomes lack of host skills, Multi-cultural view, inexpensive Efficient use of HR, builds strong
× Staffing decision unified culture, Transfers × Limits career mobility, isolates HQ culture and management
× Integration difficulties competencies from subsidiaries network
× Resentment by host, single × Subject to National immigration
cultural view policies, expensive
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Transition
Implementation Issues
Strategic Development
Low Importance High Process Re-engineering
Information
Customer
Relationship Technology Push vs Pull
Management
Customer Life
Cycle
Downstream
Supply Chain E-sourcing
Reactive
Compare PID
ends
Management Cost
to Outcome Ensure
Completed
(IPECC) Breakdown
Structure
Debt
Grants
ROCE
Payback
Role of Finance
Debentures
Loans
Traditional HP/Leasing
Methods Investment Overdraft
Appraisal Trade Creditors
Ratios
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Problem:
no account taken of invested Return On Residual
capital used to generate Investment Income (RI)
profits
Examples (ROI)
Gross margin
Net margin PBIT
Cost % sales PBIT X 100 = % (CE x imputed interest rate)
Profit CE RI
Profit Related Measures
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009
Implementation Issues Exploitative autocratic
Current & future
Benevolent authoritative
HR needs
Participative
Democratic
Trait
HR Gap Labour supply Style
Contingency Charismatic Communication
Situational Transformational Teamwork
Transactional Delegation
Current HR Motivation
position Trust
Classical
Likert's
Management Performance
HR Planning Styles Potential
Strategic and
Leadership Training
coherent
Recruitment
approach
Purpose
Learning
organisation
Assessment
Workplace
Strategy and & Appraisal
Knowledge
Management
Learning People Barriers
Confrontation
Competency Performance
Judgement
Job design Measurement
Frameworks Reward Chat
Management Bureaucracy
Event
TARA Motivation Unfinished
Scientific Mgt business
Job enrichment Categories
Japanese Mgt Levels
BPR Design Issues
Analyse behaviour Employee ranking
Teamwork Techniques
Recruitment Rating scales
Succession Strategic alignment
Training needs Checklists
Manage planning Critical incident method
performance Free reporting
Benchmarking Considerations: Performance contract
Fair & consistent BARS
Motivation Appraisal interviews
Reward performance
Recognise job factors
Control salary costs
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ACCA P3 – Business Analysis These notes are not intended to cover the whole of the ACCA P3 syllabus © Darren Sparkes, 2009