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CIMA E3 Questions with complete solutions
What is strategy? Correct Answer-Strategy "A course of action, including the specification of resources required, to achieve a specific objective." CIMA: Official Terminology Levels of strategy - Johnson and Scholes Correct Answer-Corporate strategy (Where) Business Strategy (How) Functional Strategy (Who) Arguments in favour of a strategic approach Correct Answer-* Strategy helps minimise risk
- Avoids short-term behaviour
- Improves stakeholder perceptions
- Encourages environmental analysis e.g. critical to react to change
- Evidence indicates performance can be improved using strategic approaches
- Integration and coordination of activities and processes Arguments against a strategic approach Correct Answer-Difficult to plan when environment changing, uncertain or complex Encourages 'conformity' stifling innovation e.g. the corporate straightjacket
Infrequently reviewed e.g. chosen long-term strategy may not keep pace with change Implementation often managed poorly Rational planning a complex methodology and costly for small businesses The rational planning process Advantages Correct Answer-For transformational or radical change Copes with the uncertainfuture by providing longterm plans Helps integrate and coordinate complex organisations The rational planning process Disadvantages Correct Answer-Rational planning can be too rigid and bureaucratic e.g. no use for the small business Rational planning can stifle innovation e.g. locked into plans No use for dynamic or uncertain environments e.g. plans quickly become 'out of date' Incremental planning approaches (logical incrementalism) Advantages Correct Answer-Less complex and long winded Better for uncertainty or rapidly changing environments More frequent gradual adjustment e.g. easier to control and manage Greater frequency of planning to adjust plans to environmental change
Disadvantages Correct Answer-Organisation too reactive, 'muddling through' Not suitable for transformational or radical change Lack of long-term direction. Relies heavily of the judgement and experience of the founder e.g. one single individual Emergent strategies Definition Correct Answer-Henry Minzberg, described emergent strategies as 'patterns or consistencies realised despite or in the absence of conscious intention by senior management'. Strategy emerges and is 'unanticipated'. Informal and bottom-up (decentralised approach) allowing strategic courses of action to be developed from both tactical and operational levels within the organisation. Emergent strategies Advantages Correct Answer-· Quicker change or repositioning for the organisation e.g. lower strategic levels 'closer to the customer' · Tactical and operational levels an extensive source of innovative ideas · Greater motivation to other strategic
levels · Supports culture of flexibility, learning and enterprise Emergent strategies Disadvantages Correct Answer-Chaotic organisation that lacks control over planning Lack of long-term direction. Organisation too reactive, 'muddling through' Requires entrepreneurial skills from staff which may not exist Comparing and contrasting RBV to the Positioning Approach Similarities Correct Answer-· Both ideas stem from the rational planning process. · Both can use centralised (rational planning) or decentralised (emergent) approaches. · Both aim to achieve competitive advantage e.g. ways to compete with rivals. Comparing and contrasting RBV to the Positioning Approach Differences Correct Answer-Resource Based View (RBV)
Definition Correct Answer-A mission statement describes in writing the basic purpose of an organisation and what it is trying to accomplish. A mission statement is a brief description of an organisations fundamental purpose. Critical success factors (CSFs) Correct Answer-Key organisational goals that if achieved will make the organisation more successful. Objectives Correct Answer-A measurable goal with a clearly defined timescale to achieve it. Objectives should 'SMART' (specific, measurable, agreed, realistic and time bound. Key performance indicators KPIs (performance measures) Correct Answer-Key performance indicators KPIs (performance measures) Objectives which have measurability and time scale. Game theory Correct Answer-A branch of applied mathematics that can be used in social sciences, in particular it can be applied to the theory of competition in terms of gains and losses amongst opposing rivals. A mathematical framework is used for analysing different choices that rational players can make, when their pay-off depends on the combination of their choices, as
well as all other players choices. PEST - Political Risk Examples of political risk within Countries Correct Answer-· Outbreak of national war, civil war, unrest or riot. · Nationalisation of industries · Enforcement of international trade barriers · New regulations or legislation introduced · Restrictions on dividends or expropriation of assets out of a country. · Political instability PEST - Political Risk Ways an organisation can influence a government Correct Answer-· Political donations · Employment of lobbyists · Appointment of civil servants or politicians as internal directors · Attendance at annual conferences or political meetings · Good relations with government upheld · Advertising or promotion to influence legislation change or sway public opinion · Unite with pressure groups that have common aims to the organisation Position audit Correct Answer-A position audit is a systematic assessment of the current strengths and weaknesses
Benchmarking Process Correct Answer-The process · Selecting what you want to benchmark · Consider benefits against the cost of doing it · Assign responsibilities to a team · Identify potential partners/known leaders · Breakdown processes to complete · Test and measure e.g. observation, experimentation or investigation/interview · Gather information · Gap analysis · Implement changes/programmes/communicate · Monitor and control · Repeat regularly Business process re-engineering (BPR) Definition Correct Answer-Hammer & Champy (1993) defined the process of reengineering as the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed. Business process re-engineering (BPR)
The stages in a BPR exercise Correct Answer-1. Identify processes to be re-engineered
- Understand, break down and analyse the process
- Identify 'change levers'
- Rationalise or eliminate process
- Redesign process to operate in the most cost effective and efficient way
- Reassemble, implement and manage change
- Monitor and review Gap analysis Definition Correct Answer-Gap analysis is a long range and quantifiable planning technique · Where the organisation is now · Where the organisation will be · Where the organisation wants to be Gap analysis Process Correct Answer-1. Set long-term strategic objectives
- Forecast likely performance given its current state of affairs
- Current forecasts are frequently updated
- Periodically compare revised performance to target performance and identify measurable gaps.
· Visioning · Morphological analysis Corporate appraisal (SWOT analysis) Definition Correct Answer-A corporate appraisal is a 'critical assessment of the strengths and weaknesses, opportunities and threats (SWOT analysis) in relation to the internal and environmental factors affecting an entity in order to establish its condition prior to the preparation of the long-term plan.' (CIMA) Corporate appraisal (SWOT analysis) The TOWS approach Correct Answer-· SO Strategies e.g. match core competences or Strengths to Opportunities · ST Strategies e.g. use Strengths to avoid Threats · WO strategies e.g. take advantage of Opportunities by addressing Weaknesses · WT strategies e.g. minimise Weaknesses and avoid Threats Michael Porter's competitive generic strategies Dimensions Correct Answer-Competitive Scope / Competitive advantage Michael Porter's competitive generic strategies Broad Target / Low cost Correct Answer-Cost Leadership
Offering a product or service at the lowest price due to having the lowest cost per unit in the industry. Michael Porter's competitive generic strategies Broad Target / Differentiation Correct Answer-Differentiation Offering a product or service with certain characteristics or features that are unique and distinct relative to the competition. Michael Porter's competitive generic strategies Narrow Target / Low Cost Correct Answer-Cost Focus Market segmentation and cost leadership strategy pursued. Michael Porter's competitive generic strategies Narrow Target / Differentiation Correct Answer-Differentiation Focus Market segmentation and differentiation strategy pursued. The Ansoff matrix Dimensions Correct Answer-Products / Markets (Exiting & New) The Ansoff matrix Existing Market / Existing Product Correct Answer-Market Penetration The Ansoff matrix
Business process outsourcing (BPO) Limitations Correct Answer-Loss of strategic control Organisation more vulnerable due to over reliance Loss of competitive advantage Internal redundancy Risk to the security of information Failure of outsourcer to meet service levels Offshore outsourcing Definition Correct Answer-Offshore outsourcing is BPO contracted outside the company's country. Examples from the UK and US, have included overseas development of information technology e.g. programming or software development, customer call centers, processing insurance claims, and even research and development. In either case the process is performed in another country to where the product or service is actually developed or manufactured. Strategic Supply chain management Definition Correct Answer-Strategies to achieve greater integration of the supply chain from raw material to the ultimate final sale and disposal of a finished product or service. Effective supply chain management can be crucial for an organisation to gain competitive advantage e.g. higher quality, lower cost, quicker delivery etc. A supply chain is an example of a supply network, raw materials, components, finished goods and services, are procured as a product passes through a chain of processes
that supply one another and at each stage 'adds value' to the customer in some way. Strategic Supply chain management The strategic supply wheel illustrated by Cousin's Correct Answer-· Portfolio of relationships e.g. high collaboration with suppliers · Skills and competences e g. develop skills internally · Strategic performance measures e.g. monitor and control supply chain · Cost-benefit analysis e.g. over strategic approaches · Organisational structure e.g. support effective supply chain management Strategic Supply chain management Supplier sourcing strategies Correct Answer-· Single sourcing e.g. source from one supplier only. · Multiple sourcing e.g. source service from many suppliers simultaneously. · Delegated sourcing e.g. purchasing decisions are outsourced. · Parallel sourcing e.g. a combination of two or more of the above. Strategic Supply chain management The three elements of supply chain management Correct Answer-· Responsiveness · Reliability
· Economic Evaluating strategic options RACES Correct Answer-· Resources · Acceptably · Coherence · Effectiveness · Sustainability Marketing Definition Correct Answer-The management process responsible for identifying anticipating and satisfying customer requirements profitably. Chartered Institute of Marketing (CIM) Marketing The marketing mix (4+3 Ps) Correct Answer-Product - The 'package of benefits' including guarantees, warranties and after sales service. Price -The pricing element includes price promotions, discounts, and periods of credit, interest free credit and payment terms. Promotion - The promotional mix or promotional plan is comprised of four subcategories: advertising, personal (or direct) selling, sales promotion and public relations. Place -Place is where the product can be purchased from e.g. distribution channels.
People - Often referred to as the 5th P in the marketing mix, because staffs are the essential 'human asset' to support the marketing concept. Process - How the service is delivered or how the sale of the good is managed. Physical evidence - The tangible evidence that exists and that can be identified to the organisation. Market research Definition Correct Answer-'A systematic investigation of markets and accumulation of relevant data' Market research Process Correct Answer-1. Problem recognition
- Define scope of data and information needs
- Collect data and information e.g. sampling, surveys, observation, interview etc
- Analyse and understand information e.g. databases, summarise trends and results
- Report and conclude for new marketing strategies Sales forecasting methods Market forecasting methods for estimating current demand Correct Answer-· Total market or industry potential
