CIMA E3 Flashcards

Corporate governance is a system by which companies are directed and controlled.

‘The continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large’.

• Short-term shareholder interest
• Long-term shareholder interest
• Multiple shareholder obligations
• Shaper of society

This s the concept that many different devices such as room thermometers and motion sensors are connected to the internet and, potentially can then ‘talk’ to each other. Eg tracking the movement of individual components and products through production.

Artificial intelligence (AI) is a general term that uses to a number of technologies to make machines ‘smart’. It can use techniques such as machine learning, image recognition, speech recognition and deep learning, which uses networks capable of learning unsupervised from data that is unstructured.

Additive manufacturing (or 3-D printing) involves adding material layer by layer to gradually built up the required shape of a component. Good for prototypes, complex shapes and short production runs.

DSS = decision support system. Eg a financial model on a spreadsheet.

EIS = Used by top management to help with decision-making. Characteristics include access to external information and a flexible interface.

Blockchain technology allows data to be added to a set of records, but once added it cannot be changed without detection. In blockchain technology information is held simultaneously in many computers and the copies of the information are continually compared and validated. This is known as a distributed ledger and means that the blockchain is secure from attack. If one computer is damaged, there are many copies still left on the network.

• Velocity
• Variety
• Volume
• Veracity (added later)

Extranet = an intranet which can also access external data and other intranets.

Intranet = internal internet which access and presents data through a browser such as Chrome or Internet Explorer

False: cloud-based systems store data and programs remotely

Local area networks (LANs): operate over a restricted area such as an office, hospital or university campus. There is usually a special machine called a file server where shared information is held and there might be a print server which allows a printer to be shared between many users.

Wide area networks (WANs): operate over national and international distances, linking users in different cities and countries. They rely on public networks to transmit information from one local area network to another.

Computer aided design and computer aided manufacturing

• Education and communication
• Collaboration and participation
• Intervention
• Direction
• Coercion or edict

Forces for change are resisted by opposing forces. Rather than go ‘head-to-head’ aim to reduce the resisting forces.

The context of change (time, power, diversity, scope, capability, capacity, readiness, preservation)

Design choices (change path, change start point, change style, change interventions, change roles)

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

• Power
• Role
• Task
• Person

• Organisational assumptions/paradigm
• Symbols and titles
• Power relations
• Organisational structure
• Control systems
• Rituals and routines
• Myths and stories

• Cost v benefits
• Technical feasibility
• Operational feasibility
• Social acceptability feasibility

• People
• Organisation
• Processes
• Information technology

Option to delay. Eg take a purchase option on a piece of land so that it can be bought in the future if the market looks good.

Option to follow on. Eg option to extend a lease or distribution agreement.

Option to abandon. Eg a break-clause in a lease

Scenario planning is “building plausible views about how the business environment of an organisation might develop in the future….based on sets of key drivers about which there is a high degree of uncertainty”.

• The trend – an underlying increase/decrease. Estimated
• Seasonal variations – regular variations with a cycle length of less than a year. Estimated
• Cyclical variations – regular variations with a cycle length of more than a year.
• Random variations – irregular and unpredictable.

r, the coefficient of correlation or

r², the coefficient of determination.

• y = total cost
• x = volume
• a = variable cost per unit
• b = fixed costs

Game theory uses number of players each of who can make their own specific choices in relation to a well-defined scenario. Choices made by one player affect the rewards received by the other players; the other players know this and will act accordingly. Therefore, when making a decision or choosing a strategy firms must take into account the potential choices and payoffs of others and vice versa.

The Delphi Technique is an iterative technique to predict future events in which experts give their opinions, which are then summarised and fed back to the same experts who are encouraged to look critically at the outcomes and, where necessary, modify their opinions. The experts answer questionnaires in two or more rounds.

• Financial perspective: this is the reward of success.
• Customer perspective: the immediate cause of financial success is a happy customer base.
• Internal business perspective: customers are happy when an organisation does well what it purports to do.
• Innovation and learning perspective: this perspective supports and sustains all the other perspectives.

Any four of:

• Takeover/merger
• Joint venture
• Licensing
• Franchising
• Strategic alliance
• Strategic networks

• Market growth rate
• Relative market share

Backward integration = taking over (or establishing) a supplier

Forward integration = taking over (or establishing) a distribution or sales operation.

• Suitability
• Acceptability
• Feasibility

• Withdrawal
• Consolidation
• Penetration
• Efficiency gains/cost savings

It is diversifying, either related or unrelated.

• Cost leadership
• Differentiation
• Focus

By recording web-site visits, each customer’s experience of the web-site and the company’s sales offers can be very precisely to their interests and buying habits.

Build the strategy needed to move from the current to ideal portfolio

The identification of the profits made from each customer or class of customer. Profitable customers should be looked after carefully. Unprofitable ones should be discarded, persuaded to change their buying habits or have the prices charged to them raised.

• Customer acquisition
• Customer retention
• Customer extension

• Internal
• Industry
• Best-in-class

• Internal
• External
• Monitoring
• Building

KPI = key performance indicator.

KPIs measure the extent to which CSFs are being achieved

CSF = critical success factor:

• Where an organisation must perform well if it is to succeed.
• ‘Those product features that are particularly valued by a group of customers, and, therefore, where the organisation must excel to outperform the competition.

• Specific
• Measurable
• Achievable
• Relevant
• Time-limited

• Internal: strengths, weaknesses
• External: opportunities, threats.

Push: make goods for inventory usually according to historical demand.

Pull: make goods to order. Sales orders pull production through the manufacturing process.

• Firm infrastructure
• Technology development
• Human resource management
• Procurement

• Inbound logistics
• Operations
• Outbound logistics
• Marketing and sales
• Service

Position-based = an organisation should adapt its position to suit each environment it finds itself in.

Resource-based = a realisation that an organisation’s resources and competences are often extremely valuable and they were the source of the organisation’s success. Therefore, organisations should not stray too far from their resources and competences but should try to use them in other ways if the environment changes.

Threshold capabilities are the minimum capabilities needed for the organisation to exist at all so that the company just survives. Additional capabilities are then the extra capabilities which give the organisation competitive advantage ie it has strategic capability.

Resources and competences

Resources = things the company y has, like factories, patents, skilled people.

Competences = how the resources are used.

• Collecting information
• Converting the information to intelligence
• Communicating the intelligence to those who need it
• Countering adverse competitor moves

• Brand competitors: Organisations which offer similar products to the same customers and which have a similar size and structure.
• Industry competitors: Suppliers who produce similar goods but who are not necessarily the same size or structure.
• Form competitors: Competitors who compete for the same needs, although they are technically quite different.
• Generic competitors: Competitors who compete for the same income.

Competitor analysis

• Rivalry/competition
• Suppliers
• Buyers/customers
• Substitutes
• Potential entrants

The 5 forces model looks at industry attractiveness ie how easy a business will find it to make reasonable profits

• Factor conditions (basic and advanced)
• Firm strategy structure and rivalry
• Demand conditions
• Related and supporting industries

Porter’s diamond puts forward and explanation as to why certain countries excel at certain activities eg Germany has an excellent reputation for car production.

The application of a PEST(EL) analysis at the local, national and global levels.

Industry convergence is when industries, which had historically been separate, come together so that more diverse others products or services are offered by the same supplier. Examples can be airlines which now offer car hire, hotels, and insurance.

A list of potential environmental influences: political, economic, social, technological, environmental/ecological, legal.

• Institutional and systemic eg Globalisation, geopolitics, regulations
• Social eg demography
• Market eg consumer empowerment
• Technology eg digital technology and automation

Interest and power

• Internal
• External
• Connected

• Purpose
• Vision
• Values

An organisation’s mission is what it perceives its purpose to be.

• Paralysis by analysis
• Lack of flexibility and a reluctance to adapt the plan to circumstances
• Excessive costs in time and money

• Establishes long-term objectives
• Better coordination
• Better focus on long-term change and lengthy projects
• A pro-active approach
• Implies looking ahead

The idea that strategy should consist of small extensions of past policies.

False.

No long-term plan is going to be correct and events will intervene.

The plan must remain flexible.

These were not part of the original plan and become apparent as time passes and new opportunities or threats have to be dealt with.

Position, choice, action