P3 Business Analysis

Critical Success Factors - CSFs are product features that are particularly valued by customersKey Performance Measurements - KPIs are quantifiable measurements that management can use to monitor & control progress towards achieving its CSFs.Balanced Scorecard - is a system for measuring performance based on non-financial as well as financial measures.

Benchmarking - challenging existing processesBenchmarking looks to compare the performance of its own key operations against the "best in class" performers with similar features / processes.Questions - when conducting benchmarking exercise:(a) why are these products / services provided in this way?(b) what are the examples of best practise elsewhere?(c) How could our activities be reshaped in the light of these comparisons?

p-106Illustrates the valuesof the Org & the behaviour it encourages.

--> Relates to "the way things are done around here"--> The daily behaviour & actions of staff signal what the organisation considers to be "acceptable", expectations & management values.

Organisation are controlled through a number of systems include:- Financial systems- Quality systems- & reward systems.The areas that are controlled closest indicate the priorities of an org.

--> Definition of Paradigm: a typical example or pattern of something; a pattern or model--> The paradigm signifies the basic assumptions & beliefs that an organisation's decision makers hold in common & take for granted. --> It summarises and reinforces the rest of the Cultural Web.

--> Power Structures look at who holds the real power within an organisation

--> The structure of the organisation often reflects the power structure.

The Entrepreneurial OrganisationA simple, flat structure.Very few top managers.Unstructured and informalFew standardised systemsAll of these allow the organisation to be flexible, fast & leanThink of a young company closely controlled by its ownerHowever, as the company grows, the owner gets overwhelmed and starts making bad decisions.If a company's success depends on one or two individuals, they may sell up, move on to new entrepreneurial ventures, or retire.

The Machine Organisation (Bureaucracy)Much standardisationWork very formalisedDecision-making is centralisedFunctional departmentsFormal planning with budgets and auditsA tight vertical structureFunctional lines go all the way to the top, allowing top managers to maintain centralized control.This can be very efficient, with large economies of scaleThink large manufacturers & government agencies with routine tasksHowever, the strict functions mean specialisation and they can start having conflicting goals to the overall corporate objectives.

The Professional OrganisationVery bureaucraticHighly trained professionals with controlDecision making decentralisedKnowledge workersComplex, lots of rulesThink  schools & universities, and accounting firms.The efficiency benefits of a machine structure, but with decentralised decision makingIn fact, supporting staff in professional organisations, often follow a machine structure.However, there is a lack of senior control - this makes CHANGE very difficult

The Divisional (Diversified) OrganisationMany product linesA central HQ with many autonomous divisionsDivisions have their own unique structuresDay to day decisions decentralisedOverall, big picture centralisedThink large and mature companies with many different brands in different geographical regions.It allows line mangers more control  than in a machine structure.  However, there is a duplication of resources and activities & divisions can tend to be in conflict, as they compete for HQ limited resourcesAlso inflexible, so they work best in industries that are stable and not too complex.If the company in the exam has a product or market diversification, this structure can work well, particularly when the company is too large for effective central decision-making.

The Innovative Organization ("Adhocracy")Experts from different areasForming a creative teamDecentralised decisions All of the above are best suited to traditional organisations. In new industries, companies need to innovate and function on an "ad hoc" basis to survive. So, bureaucracy, complexity, and centralisation are far too limiting. Think filmmaking, consulting, and pharmaceuticals (research)Basically anything which uses vital individual projectsA very flexible structure which takes advantage of the talent poolResponds very quickly to changeHowever there can be lots of conflict and control difficultiesAlso dealing with rapid change is stressful for workers, making it difficult to find and keep talent.Adhocracy is a common structural choice, and it's popular with young companies needing flexibility

CHP 3, 4 & 5

- Receiving, storing and handling raw inputs.- For example, a JIT stock system could give a cost advantageQ 19 EXAMPLE - Perfect Shopper- Handling the bulk orders delivered by suppliers and storing them in bulk in purpose built regional warehouses.

- Involves transforming the materials into finished goods and services.- For example, using skilled craftsmen could give a quality advantage.Q19 EG.- Dividing the bulk orders into smaller units; re-packaging, sealing and storing these smaller units.

- Storing, distributing & delivering finished goods to customers.- For example, outsourcing delivering could give a cost advantageQ19 EG.- Deliver the smaller units to neighbourhood stores every 2 weeks using specialist local haulage contractors.

- For example, sponsorship of a sports celebrity could enhance the image of the product.Q19 EG.- Provide specially commissioned signs for the shops and personalised sales literature.- Undertake the ordering process based on standing order agreed by sales reps.

- All activities that occur after the point of sale, such as installation, training and repair.- For example; M&S' friendly approach to returns gives it a perceived quality advantage.Q19 EG.- Provide specialist in-store display units for certain goods.- Manage distribution of promotional material and leaflets for all shops.

- How the firm is organised.- For example, centralised buying could result in cost savings due to bulk discounts.

- How the firm uses technology.- For example, the latest computer-controller machinery gives greater flexibility to tailor products to individual customer specifications.

- How people contribute to competitive advantage.- For example, employing expert buyers could enable a supermarket to purchase better wines than competitors.

- Purchasing, but not just limited to materials.- For example, buying a building out of town could give a cost advantage over high street competitors.

Unfreezing - create the initial motivation to change by convincing staff of the undesirability of the present situation

The change process itself - mainly concerned with identifying what the new behaviour or norm should be. This stage will often involve new information being communicated and new attitudes, culture and concepts being adapted.

Refreezing or stabilising the changeImplying reinforcement of the new pattern of work or behaviour by rewards (praise, etc)

Lewin argued that managers should consider any change situation in terms of:--> the factors encouraging & facilitating the change (Driving forces)--> the factors that hinder change (the restraining forces).If we want to bring about change we must disturb the equilibrium by:--> STRENGTHENING the driving forces.--> WEAKENING the restraining forces.--> or BOTH

Q 40 - Shoal PLC

Balogun & Hope Hailey's Matrix

Scope of Change - Describes the extent of a change, whether;** a REALIGNMENT is needed** or a TRANSFORMATIONAL CHANGE is needed

Nature of change - describes whether:** INCREMENTAL or** One-off "BIG BANG" change

p-560 in textbookReasons for Resisting ChangeKotter & Schlesinger 19794 reasons that explain why certain people resist change

There are 4 reasons that explain why people resist change:--> Parochial self-interest (some people are concerned with the implication of the change for themselves and how it may affect their own interests, rather than considering the effects for the success of the business).--> Misunderstanding (communication problems; inadequate information)--> Low tolerance to change (certain people are very keen on security and stability in their work)--> Different assessments of the situation (some employees may disagree on the reasons for the change and on the advantages and disadvantages of the change process)

BCG matrix Johnson, Scholes & Whittington--> advise that the matrix should be used on Strategic Business units, rather than products (Q38)

The Ashridge portfolio display (aka Parenting matrix)by Campbell, Goold & Alexander--> focuses on benefits that Parent Companies can bring to business units.The matrix considers two particular questions:1. How good is the match between perceived parenting opportunities and the parent's skills?2. How good is the match between the CSFs of the business units and the skills and resources that the parent can bring?Axes titles:X axis = Opportunities to add ValueY axis = Ability to add valueKey words:Heartland business unitsEdge of Heartland business unitsBallast businessesValue Trap BusinessesAlien BusinessesUsing the Ashridge portfolio display indicates which types of companies should be divested and why. Businesses that may be candidates for disinvestment are:- alien businesses - the parent can do good to these organisations and they would achieve more in another group- value trap businesses - despite potential, a lack of fit leads to a high possibility of a loss of value- ballast businesses - may do better as the parent has little to offer.

- These are where there is a high degree of match and the parent company has the capabilities & experience to add value by providing the support required by the business unit.- These businesses should be central to future strategy

- These are those where there is a good fit in some areas where the parent can bring particular skills that add value to the business unit, but not in others, where the parent may destroy value.- However, if the parent develops sufficient understanding of the business to avoid this, then the business may move into the heartland.

- These are those where the parent understands the business well but there are limited opportunities to offer help, sometimes because the business has been owned for a long time and has no further support needs- These businesses would do better if left alone or indeed divested.

- These are those where there appear to be many parenting opportunities but there is a poor fit with the critical success factors of the business.- There appears to be a good potential but in practice because of the lack of fit with the strategy there is a high possibility of destruction of value.

- These are those where there is a complete mismatch.-These should not remain part of the corporate portfolio.

Johnson, Scholes & Whittington's Strategy Evaluation Test a decision maker might have the following financial concerns & therefore carry out accompanying financial analysis.

The Acceptability of the strategy is concerned with expected outcomes in terms of return, risk and shareholder reaction.Returns are the benefits which stakeholders would expect to get from the strategy, both in financial and non-financial terms.- Cashflow forecasts- NPV- ROCE- Valuation of Real Options- Cost-benefit analysis- Ratio Analysis- Sensitivity- Break-even

- ROCE = Operating Profit (PBIT) / Capital Employed- Gross Margin = Gross profit / Sales- Net Margin = Net profit / Sales- ROE = Profit after Tax & preference Dividends / Shareholders' funds

- Asset Turnover = Sales / Capital Employed- ROCE = Net margin x Asset Turnover- Receivable days = Receivables / Credit Sales- Payable Days = Payables / Credit Purchases- Inventory Days = Inventory / Cost of Sales- Revenue per employee = Sales / Number of Employees

- Current Ratios- Quick Ratio (Acid Test)

- Financial Gearing = Debt / Equity- Financial Gearing = Debt / Debt + Equity

Dividend Cover = PAT / Total DividendInterest Cover = PBIT / InterestEPS = Profit after Tax & Preference Dividends / Number of SharesPE Ratio = Share Price / EPS

- Ability to raise finances- Cashflow forecast- Working Capital- FX implications

Suitability of a strategy addresses the circumstances in which the organisation is operating - its strategic position.- Return on Investment- Comparison of alternatives- Profit Margins

1. Plan2. Analyse3. Redesign4. Development5. Transition

Business Process Change. Exam Q17. Finch Co.Strategic Alignment- ensuring that an org. remains responsive to any opportunities or threats- orgs need to continually scan the external environment- being proactive & adapting = Survival

Upon Identifying the PROCESSES within the business,one needs to assess 2 CRITICAL FACTORS so to DECIDE whether the current process is SATISFACTORY or NOT SATISFACTORY.The 2 factors are:- Complexity of process- Strategic ImportanceAfter categorising the process based on the 2 factors, one can then decide whether to:- Outsource- Undertaking processing re-design- Minimal Effort- Automate

Planning a process redesign effort- Identify goals- Define Scope- Identify personnel- Develop plan & Schedule

Analysis of an Existing Process- Document workflow- Identify problems- Devise a general plan for re-design

Design of a new or improved processExplore alternatives & choose best redesign to achieve goals

Development of resources for an improved process- Make products better, easier to manufacture and maintain- Redesign managerial and supervisory jobs and develop measurement system to monitor new process- Redesign jobs, work environment and incentive systems; develop training; hire new employees if necessary

Managing the implementation of new process- Integrate and test- Train employees and arrange management- Maintain process and modify as needed.

- E-commerce is buying / selling over the internet.- Challenged traditional business models and has the way businesses and their customer's inter-relate.- Also in how information is communicated.

Q4a - Mock Exam 1.Topic = e-Commerce / Downstream Supply Chain ManagementQuestion 4a: Describe the Impact that e-Commerce has had on the way business is conducted (5 marks)

New Business Model - enables suppliers of products / services to interact directly with, for example - overseas holiday makers (instead of travel agents) therefore eliminating Intermediaries.In this way, e-Commerce has enabled business to be highly effective in their downstream supply chain management.

The example of Amazon means that small enterprises can now gain access to customers on a far greater scale than previous.

Efficient online transactions, emails and also access to other customers in product review forums.

Q4c - Discuss how ML might use it's e-Commerce system to increase the volume of business related to Customised Components (5 marks)- e-Commerce results in "standardised" product sales are increased- Complex, one-off nature of customised components means ML could only use e-Commerce as an extra platform to generate extra demand through marketing.

e-Commerce could highlight the whole / full range of services it offers. Standard component buyers may also / or buy customised.

ML could email existing customers.The e-Commerce system should have a database which gathers email addresses of customers which ML could use to send marketing messages.*With an option to opt out of marketing

Q 19 Exam Question - Perfect Shopper, PS- PS's upstream supply chain is relatively short.- It makes bulk purchases of branded goods from suppliers and these are then delivered to Perfect Shopper's warehouses by logistics companies.- However, it is psosible that by re-structuring its logistics arrangements PS could also improve brand recognition which is one of the issues raised by the franchisees.Look to change, the following (to solve Co's problems:- Inbound logistics- Outsourcing warehousing & packaging- Ordering process- Changing product range

Outbound Logistics (and distribution) ArrangementsShop Ordering & delivery system- Inflexible ordering & delivery system"Push Flexible ordering system

Mock Exam 1 - Q3.

Total Control over production, Pricing & Marketing Strategy

Co will not depend on retailer's PROFESSIONAL BUYERS to order / display their products

Companies will acquire a range of High Street properties with Management problems of their own.

There is a higher risk if the company's clothes go out of fashion.This will then be an expensive liability.With higher Fixed Costs depending on the location of the shop.

If the brand of clothes is sold in their own shops, the company would have to give - up sales potentially made in the department stores.

The company may need to produce a wide range of products to encourage and entice customers to enter the department store.The company may have to let-out space to other small companies.

Q43.Many companies may have KPIs relating to the other 3 focuses (of the balanced scorecard).For example:--> Financial: A target Return on Capital Employed, ROCE.--> Internal Business processes: In Q43 example, Target number of trains that should be in use at any particular time (asset usage)--> Learning & Growth: Targets for improving the skills of the workforce via training & development.In practice, organisations tend to overuse the term CSF & it is used to describe a range of elements, not just those that directly impact the customers' buying decision. The problem with this is that , although non-customer focused CSFs may improve internal processes, these will have no bearing over the customer decision to buy.

Chp 15 of study text

Middle Manager - are the linking pin between the senior management team & the rest of the organisation.Responsible for helping their staff through the change process while simultaneously under-taking change themselves.4 Roles of Middle Management:1 - Undertake personal change2 - Help their team through change - facilitating3- Implement necessary changes in their part of the business - encourage individuals to use their initiative & put emphasis on teamwork.4 - Keep the business going in the interim.