Revision 2 Flashcards
What type of external environments are there
Country environment (otherwise known as macro environment, general environment)
Industry environment (otherwise known as micro environment, industry/market place environment or competitive environment )
What model to use with country environment
PESTEL
What model to use with industry environment ?
Porter 5 forces
What does PESTEL stand for
Political
Economy
Social
Technological
Ecological
Legal
What is covered under political (PESTEL)
Government
Government policies
Government subsidiaries/loans
Government approvals/license
Political stability
Taxes
What is covered under Economy (PESTEL)
Economy
Economic growth
Economic downturn
Recession
What is covered under Social (PESTEL)
Prosperous developed nation
Standard of living
Educated population
Unemployment
What is covered under technological (PESTEL)
Plant & machinery
Skilled workers
IT/technology
Internet/online
Roads and infrastructure
What is covered under ecological
CO2 emission
Carbon footprint
Recycling
Pollution
What is covered under legal (PESTEL)
Laws
Legislations
Patent/trademark/copyright
What are the the 5 forces within porter 5 forces
Power of customer
Power of supplier
Threat of new entrants
Threat of competition
Threat of substitute product
Elaborate on power of customer with porter 5 forces ?
Factors to decide whether high or low
1. Size of customers (eg large global customer )
2. Any brand or uniqueness in our product
3. Customer willing to pay any premium ?
Words to look out for
1. Customers
2. Buyers
3. Consumers
Elaborate on power of Supplier within porter 5 forces
Factors to decide whether high or low
1. Size of supplier
2. Are we willing to pay a premium ?
Words to look out for
1. Supplier
2. Vendor
3. Manufacturer
Elaborate on threat of new entrant within porter 5 forces
Look for barriers to entry
1. Patents
2. Government approval
3. Government license
4. Franchise
If barrier is high then threat is low
Elaborate on threat of competition within porter 5 forces
Words to look out for
1. Competition/rivalry
2. Number of competitors
3. Market share
4. Patents / franchise
Elaborate on threat to substitute within ports 5 forces
Words to look out for
1. Alternative
2. Substitute
What is strategic position analysis
If question asks to analyse the strategic position of XYZ company you need to include 3 things
- Macro / country environment - PESTEL
- Micro / Industry environment - P5F
- Internal factors
a. Human Resources (experience, expertise, management competencies)
b. Financial Resources (profitability, financial position, gearing)
c. IT/Brand (goodwill, online, website)
When to use SFA framework
- To evaluate a “proposed” strategy
- Should only use when we plan to “ACQUIRE” another company either in same country or another country
What does SFA stand for ?
Suitability
Feasibility
Acceptability
Elaborate on suitability within SFA Framework
Focuses on the external factors of acquiring Which are:
Home country
Target country
Target company
What to include in a briefing paper
Briefing paper (header underlined)
TO:
FROM:
SUBJECT:
DATE:
(Opening sentence e.g this briefing paper…)
Blahblah
Sincerely
No need to add conclusions in briefing paper unless specified in question
Elaborate on feasibility within SFA Framework
Focuses on internal factors of acquiring which include
Human Resources - E.g. do we have acquisition experience from the past? Do we have experience of managing similar businesses? Do we have experience of working in an overseas country?
Financial resources-e.g. do we have funds to acquire another company? Look at the gearing ratios
Technology and brand
Elaborate on Acceptability within SFA Framework
Focuses on financials of the target company
- Will shareholder accept the proposed strategy?
If family owned company managed by the owners then it is acceptable
If listed company then shareholders will accept if it has a positive NPV
- If target company is based in another country then we have to consider any cultural differences
- Review financial projections/analysis
How to format a report
It’s the same as the briefing paper
Within professional skills marks, if examiner asks for evaluation what are they actually after
Both the pros and cons I.e give a balanced view
5 points to remember when reviewing financial projections
This works throughout different proposals however for example within the SFA framework under ACCEPTABILITY there is a “review financial projections / analysis” paragraph so the 5 points are;
- Projections should be based on discounted cash flow using a sensible discount rate
- Calculate simple payback period (using pre-discounted cash flow)
- Review assumptions for any apparent stupidity (I mention in your answer that the adequacy of the assumptions need to be revalidated)
- Mention in your answer that tax applications need to be considered if any
Mention in your answer that’s a sensitivity analysis should be performed
What is corporate parenting strategy
Corporate parenting looks at the relationship between head office and individual business units. This will become more important if the business follows the root of growth through acquisitions.
Factors to look at when comparing subsidiary business units performance with one another
Remember acronym “b simp” for your parent
Industry status (growth, maturity, decline)
Market share percentage (increasing, maintained, declining)
Profit margin percentage (increasing, maintain, declined)
BCG assessments (star, cash cow, dog, question mark)
Strengths/weaknesses/primary reason for acquisition
What is the BCG assessments
The Boston consulting group matrix which incorporates the concept of the product life-cycle is a useful tool which helps management teams to assess existing and developing products and services in terms of the market potential.
Star = high market share + growing market
Cash cow = high market share + mature market
question mark = low market share + growing market
Dog = low market share + mature market
How to apply future strategy based on the BCG matrix
Depending on where the company sits within the BCG matrix will determine the next steps the company should make.
Star = expand
Cashcow = harvest
Dog = divest (abandon)
Question mark = invest / improve or divest
What is the ansoff matrix
The absoff matrix is a 4 boxed matrix and if you start at the bottom left corner, the further you go from this the more risk you are taking.
Least to high risk
- Existing market & existing costs products = market penetration
- Existing market & new product = product development
- New market & existing product = market development
- New market & new products = diversification
What is the Harmon process matrix
The Harmon process matrix looks at the process complexity on the x axis and strategic importance on the y axis and this determines the steps to take
- If both low then outsource or automate using off the shelf software
- If process complexity low and strategic importance high then automate using bespoke software
- If strategic importance low but process complexity high then outsource to a specialist
- If both high then automate using bespoke software & hire best resources
What is the Mendelow’s stakeholder matrix ?
It’s a 4 box matrix with “power” on the x axis and “interest” on the y axis and determines how we should interact with particular stakeholder groups
- If low low = minimum effort
- If power is low but interest is high = keep informed
- If power is high and interest is low = keep satisfied
- If high high = key player
Where do the stakeholders fall within mendelows matrix
- Min effort
- minority shareholders - Keep informed
- employees
- community
- smaller customers
- trade union (if not powerful) - Keep satisfied
- Government
- Major customers / Suppliers
4 key player
- shareholders
- board of directors
What is the cultural web model
The cultural web model is like a set of ingredients that we can buy increase the culture of a company which can also give a company competitive edge
- Power structure
- who has power is it strict or not
- who is leader of organisation, what is CEOs personality, style and habits - Organisational structures
- the structure of the board (Ed’s vs Neds)
- is the organisation flat or tall, is there strong hierarchy ? - Control systems
- is organisation cost or quality focused
- performance management and reward systems - Rituals & routines
- daily routines, opening hours, flexible working, dress code - Symbols
- logos, quotes, corporate colours
- fancy cars , lavish benefits - Stories & myths
What is the context of change model
When you are bringing change into the organisation then it has to be planned thoroughly
Below are the steps for change management
Remember, Scott realised that Carl could probably play really rad
- Scope aka size is it a big change of small change
- Reason / justification for bringing the change
- Timing - when the change will be implemented from ? Immediate or gradual ?
- Capacity / Resources - does the company have the required resources, human, technological, financial etc
- Capability - do we have prior experience of making change
- Power - does the one leading change have sufficient power
- Preservation - strengths from existing environment need to be retained
8.readiness - are the employees ready to accept the change of will there be resistance
- Resistance - who will be the people / stakeholder to resist change and how to deal with them
What are the types of risk management strategies ?
Transference - transfer risk to third party (insurance, outsourcing or franchising)
Avoidance - eliminate risk by totally avoiding activities which causes risk
Reduction - reduce the impact and probability of the risk by implementing controls
Acceptance - accept the consequences of the risk. Normally for small risks
3 things to remember with budgets
- Flexed budget - can’t compare actúale with original budget so do a flexed budget
- Compare actuals with
- flexed budget
- prior year actuals - Reasons for variance should be explained
