Enterprise Strategy

1. Enterprise Strategy CIMA Paper E3

2. 1 Session CIMA Verb Hierarchy

3. 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 • you must avoid giving a “level 2 response to a level 5 verb” (common examiner’s comment)

4. CIMA verb hierarchy – levels 3, 4 and 5 CIMA verb hierarchy – strategic level Learn the meaning of each of these verbs, and follow the instructions in exam requirements specifically

5. 2 Session Introduction to Strategy

6. A means to achieve the objectives… A basis for competitive advantage… Strategy Question and Process Two Basic Questions Where to Compete How to Compete

7. Strategic Planning Process Internal Env Evaluation and Choice Implementation and Control Position Audit Options Mission and Objectives External Env

8. Strategic Planning Process Strategic analysis Strategy into action Strategic choice

9. 3 Session Mission, Objectives and Stakeholders

10. Mission What is our business? What should our business be? What is valued by the customer? Mission What will our business be?

11. Objectives Mission • Objectives become increasingly SMART • Specific • Measurable • Attainable • Relevant • Time-bound Strategic plans and objectives Tactical plans and objectives Operational plans and objectives

12. Stakeholder Mapping Low Minimal Effort Keep Informed Power Keep Satisfied Key Players High Level of Interest Low High

13. Ethics and CSR Ethics CSR moral duty and obligation exceeding the minimum obligations to stakeholders • Ethical stances (JSW) • Short-term SH interest • Longer-term SH interest • Multiple stakeholder interest • Shaper of society • Dimensions (Carroll) • Legal • Ethical • Economic • Philanthropic

14. Stakeholder Mapping 4 Session Environmental Analysis

15. Sources of Data • Primary data collection: • - Observation - Surveys • Secondary data collection • - Internal sources - accounting / marketing data • - External sources - Periodicals / internet

16. 5 Session External Environment

17. The Pestel Framework • Political • Economic • Social • Technical • Environmental-social responsibility • Legal

18. Porter’s 5 Forces Threat of New Entrants Power of Buyers Rivalry Power of Suppliers Threat of Substitutes

19. Porters DiamondThe Competitive Advantage of Nations Demand Conditions Strategy, Structure and Rivalry Related and Supporting Industries Factor Conditions

20. The Life Cycle Intro Growth Maturity Decline Sales Time

21. 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?

22. 6 Session Internal Environment

23. 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 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

24. Resources and Competences Same as Competitor Easy to Copy Different and Difficult to Copy Basic Unique Resources Threshold Core Competence

25. Porter’s Value Chain Infrastructure HumanResourceManagement Technology Margin Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

26. 7 Session Position and gap analysis

27. The Position Audit Where are we now? Internal Environment External Environment Weakness Threat Strength Opportunity What happens if we do nothing?

28. Gap Gap Analysis Objective Objective Measure Future operations Current operations Time

29. 8 Session Strategic Choice

30. Porter’s Generic Strategies How Cost Leadership Differentiation Broad Scope Where Focus Narrow Scope

31. Existing Market New Ansoff Growth Strategies Product Existing New Market Penetration Product Development Market Development Diversification

32. High Market Growth Low Boston Consulting Group (BCG) Matrix Market Share High Low Star Problem Child Cash Cow Dog

33. 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

34. Strategy Evaluation • Feasibility • Resources • Competencies • Implementation • Suitability • Objectives • Strengths • Opportunity Acceptability To Stakeholder Groups

35. 9 Session The Performance Measurement Mix

36. Determination of the Measurement Mix Identify Objectives Update the CSF Draft CSF Position Review Draft a Mix Consider Change Implications and Test Deploy and Monitor

37. The Balanced Scorecard Financial Customer Operations IT? Learning HR Research Kaplan and Norton

38. Benchmarking Identification of best practice……. Internal Process Competitor Same Company Different Department Different Company Similar Process Similar Process Direct Competitor

39. 10 Session Business Unit Performance

40. Structure

41. Shareholder Value Shareholder value = Present value of free cash flow from operations plus value of marketable securities - Value of debt

42. 11 Session IT and e-business

43. Earls Three levels of Strategy ISStrategy “What” • Division/SBU/function based • Demand orientated • Business focussed Applications IM Strategy “Wherefore” • Organisation based • Relationship orientated • Management focused Management ITStrategy “How” • Activity based • Supply orientated • Technology focused Delivery

44. McFarlan’s Strategic Grid Strategic Impact of Future Systems Low Support Turnaround Strategic Impact of Current Systems Factory Strategic High Low High

45. 12 Session Information for Advantage and Knowledge Management

46. Information Issues Sources Internal External • Who • When • Why • What Reliability Known Reliability ? • Broader Focus • Less Cultural • Distortion Relevance ? More Relevant

47. Data Warehousing This is a subject orientated, integrated, time variant, non-volatile collection of data in support of management’s decision making process ADatabase A Data Extraction Tool A Decision Support Tool Maintained by constant updates from operational systems

48. Data Mining The analysis of data to unearth unsuspected or unknown relationships, patterns and associations The Warehouse Stores Data The Mining Turns Data into Information • Statistical technique and modelling that gives: • Associations – correlation • Sequences – sequences • Classification – recognition of patterns • Clustering – finding groups of facts • Forecasting – predicting the future

49. Knowledge Management The management of the information, knowledge and experience available to an organisation. Create Capture Store Make Available Utilise To Build a Competitive Advantage

50. Knowledge Management To Build a Competitive Advantage Structural Capital Human Capital • Development • Maintenance • Retention • Innovation – intellectual property • Customer – address lists / records • Organisational – processing systems