Topic 5 & 8

Both topics start off with the basic requirement:

Analyse and evaluate the business and financial performance over a three year period of an organisation….. [but then they deviate in their focus]

Topic 5 continues…which has performed exceptionally well over a three-year period with a critical analysis of the reasons for its success.
So in dealing with the reasons for its success you would need to look at the organisation’s business environment and see how the organisation has capitalised on these. This means showing how the Board has harnessed the PESTLE factors and managed its SWOT factors to produce that success. These factors would have influenced the management strategic decisions and ultimately have impacted in its successful performance. The marker would expect to see very strong linkages between the strategic decisions [often set out in the CEO or Chiarman’s written report in the Annual Reports] and the evaluation of the ratios.

Whereas Topic 8 stipulates an organisation operating in a sector that has faced strategic and operational challenges with an emphasis on how management have addressed these challenges. The clue to doing this topic is to focus on the words ‘strategic and operational challenges’. This implies a sector that has undergone many changes emanating from the environment [the challenges would normally come from the external environment – so PESTLE factors again – these might be changes in customer preferences, new legal and regulatory requirements, technological changes and the like]. Sectors might be for example the car industry where there is move to electric cars, or the hospitality and travel industries which are now having to adapt to a post-pandemic world, retail and banking organisations that have had to move online as customer preferences change. As with the topic title you need to look at both the operational impact and financial consequences the organisation has faced in order to cope with the new challenges as well as a summary of its overall financial performance over the period. As with Topic 5 the CEO / Chairman’s reports over the period will help shed light on how the company has dealt with the challenges via its strategic decisions

I hope that sets out the differences. As for which is easier – that is something I cannot comment on as it comes down to individual preference and interests and information sources regarding particular companies/industries

Do plenty of research before you start on both organisations so that you can ascertain how much info there is and then do a PEST(LE). Selecting the appropriate organisation on the basis of this should ensure that you make the choice and avoid running out of steam part way through.

Consider the organisation’s business model and how the strategy supports this and v.v. Take a look at page 43 of the June 2022 Information Pack as it sets out some relevant models. A PEST(LE) and Porter’s 5 Forces are probably the best ones to go with and don’t forget to link your evaluation of the ratios to these.

Good luck!