I CAN Statements Flashcards
INVESTMENT DECISIONS
NPV
- Key issues to look for
1. Has inflation been applied?
2. Has tax been included?
3. Has the appropriate discount been used? (Only use WACC if business and financial risk remain the same)
4. Are they all relevant cash flows?
5. Has uncertainty been quantified (expected values)?
6. Have real options been included (wait, abandon, follow-on)?
Real options attached to investment decisions
1. Abandon
2. Wait
3. Follow-on
WACC
* Return required by investors based on current level of risk, which will change if exposed to new or different business or financial risk
* Only use if no change in financial and business risk
* The new investment is marginal. Too large and the cost of equity / debt may change
DISRUPTIVE TECHNOLOGY
Club card
Computer games
Online orders
PROJECT LIFE CYCLES
Gido and Clements
1. Identification of a need
2. Development of a solution
3. Implementation
4. Completion
Maylor’s 4 D’s
1. Define
2. Design
3. Deliver
4. Develop
RISK AND UNCERTAINTY IN DECISION MAKING
Risk
- Frequency distributions (standard deviation)
- Expected Values
- Decision Trees
Uncertainty
- Sensitivity Analysis
- Scenario Planning
- Increase the discount rate subjectively to introduce a buffer
HIGH PERFORMING TEAMS
Peter Vaill 5 Characteristics
1. Clarity of purpose and near term objectives
2. Commitment
3. Teamwork focused on task
4. Strong leadership
5. High levels of creativity
BALANCED SCORECARD
Considerations for a balanced scorecard
* Target setting should be collaborative, not top down.
* Measures specific to Happy Playz
* Measures may conflict so establish the relationships between them
* Number of measures
1. Too many is information overload
2. Not enough would be too simplistic
* Ensure management commitment, set workshops to explain the benefits
Financial - % growth in market share
Customer - Customer complaints
Internal - % of sales from newly launched toys
Innovation and Learning - Investments in new innovative technologies
LEADERSHIP STYLES
Ashbridge Management College
- Tells
- Sells
- Consults
- Joins
McGregor
- Theory X - workers inherently dislike work and need to be constantly managed
- Theory Y - workers can enjoy work and be motivated by job satisfaction
Authoritarian vs Laissez-Faire
COST MANAGEMENT AND COST TRANSFORMATION
Activity Based Costing
* Uses information on what creates overhead costs and allocates them based on their consumption of cost drivers.
* Benefits - gives a more realistic picture of overheads, better understanding of costs can result in better decision making
* Limitations - based on a number of assumptions and will take time.
Activity Based Management - Uses ABC to eliminate non-value adding activities
- 3 steps
1. Identifying the main activities taking place in an organisation
2. Assigning costs to these activities
3. Identifying a cost driver for these activities
Can result in better budgeting, strategic decisions and activity based performance measures
TRANSFER PRICING
Key objectives
- Goal congruence
- Performance measurement
- Maintaining divisional autonomy
METHODS OF COMMUNICATION
Informal/formal face to face meetings
Informal/formal video meetings
Phone calls
Emails
Letters
MANAGING CONFLICT
Thomas and Kilmann
* Avoiding - low assertiveness and cooperation
* Accommodating - low assertiveness with high cooperation
* Cooperating - middle assertiveness and cooperation
* Forcing - high assertiveness with low cooperation
* Collaborating - high assertiveness and cooperation
Alternative strategies
* Conflict stimulation and orchestration - encouraging constructive conflict
* Conflict suppression - short-term approach using the threat of authority
* Conflict reduction - using strategies to bring parties towards shared objectives using compromise and concessions.
* Conflict resolution - eradicated the original cause of conflict using cooperation and collaboration
BENCHMARKING
Comparing performance against the most relevant comparator and then trying to achieve the benchmark
Internal - comparing within the same organisation
* Appropriate between different stores
* Less effective comparing different teams (eg. marketing and buying)
External - comparing with external organisations
* Competitive benchmarking - using a competitor
* Functional benchmarking - using a non-competing business with similar processes
* Strategic benchmarking - using industry average data
* Harder to use as competitors unlikely to share internal information
1. Could use financial statements
2. Industry averages
3. Market price of competitors
