ACCA P5 flashcards – set 1

Some cash cows to generate lots of cash (but cash cows are heading towards market decline), and some problem children needing investment. The cash generated by the cash cows can be used to build the problem children into star products that will become the cash cows of the future.

The prime purpose of a mission statement is to set out the reason for the organisation’s existence.
The main sections are often taken to be: purpose, position (in the market), culture, ethics and values.

* Cost leadership
* Differentiation
* Focus.

An environmental analysis considering the influences of:
* Politics,
* Economics,
* Social trends,
* Technological changes,
* Ecological (environmental) concerns,
* Laws.

Porter’s five forces should be applied to an industry to judge industry attractiveness

The idea that planning is best done as a series of relatively small adjustments to past strategies rather than trying to plan radical leaps forward.

Any two of:
* fast decisions;
* no time or money spent on planning;
* not committed to one course of action (flexibility).

BCG suggests that only companies with large market shares can survive in the long term so the company has to decide whether to withdraw or to invest to achieve a large market share.
Note that niche or focus companies can survive with what looks like a small market share.

* Development,
* Growth,
* Maturity,
* Decline.

Inbound logistics,
Operations,
Outbound logistics,
Sales and marketing,
Service.

Process specialisation: eg concentrate labour in countries with low wage rates
Product specialisation: eg different national requirements and ‘tastes’
International trade issues: eg exchange rate fluctuations
Political sensitivities: eg particular countries may have particular political risks
Administrative issues: the transfer of profits

Critical success factors (CSFs):
Johnson, Scholes & Whittington:
‘Those product features that are particularly valued by a group of customers, and, therefore, where the organisation must excel to outperform the competition‘
or:
Where an organisation must perform well if it is to succeed.

The performance hierarchy:
* The organisation’s mission
* Strategic plans and objectives
* Tactical plans and objectives
* Operational plans and objectives

The idea that planning can be inhibiting and that you are better grabbing opportunities as they arise.

Market growth rate and relative market share (market share/share of market leader)

* Internal
* External
* Monitoring
* Building

Fierce competition because the market is not growing. This leads to price pressure and the need to improve specifications to sell to an experienced set of customers. Weaker competitors often drop out and many combine (consolidation) to achieve the economies of scale needed. High profits should be possible for efficient producers (great scale, efficiency and well down the learning curve).

* Structure
* Systems
* Strategy
* Style
* Staff
* Skills
* Shared values

S = specific/stated
M = measurable
A = achievable, agreed, accepted
R = relevant (or realistic)
T = time-limited

Problem child (or question mark): high market growth rate, low market share.
Star: high market growth rate, high market share.
Cash cow: low market growth rate, high market share.
Dog: low market growth rate, low market share.

Bounded rationality: we do not know (and cannot know) everything that is important to future plans so what is the point in making ambitious plans that rest on guesswork?
Additionally, managers do not have time to carefully evaluate all possible combinations of events.

Firm infrastructure,
Human resource management,
Technology development,
Procurement

Strategic control: monitors the implementation of the organisation’s strategic plans
Operational control: monitors the use of existing resources and progress towards existing plans. Will not alter strategic direction

Strategic position
Strategic choice
Implementation (or strategy into action)

* Rivalry/competition,
* Threat of new entrants,
* Supplier pressure,
* Buyer pressure,
* Threat of substitutes

Internal: for example, to previous periods or between different branches.
External: to similar businesses or organisations. Can be competitive or non-competitive.
Functional: to specific functions in other businesses such as cost per help-line call
Generic: to different businesses and organisations.

Gap analysis is the difference between what the organisation’s current plans will achieve and what the organisation is required to achieve.

Key player stakeholders can prevent strategies of which they do not approve. The hope is that any strategic plan keeps most of the people happy most of the time (and the key players happy all the time!)

Monitoring: used to monitor current performance
Building: concentrate on what must be achieved in the future