Models / Theories

Question 1

Marketing Mix (4 or 7Ps)

Answer 1

**Product: **
Brand / quality / USPs

**Promotion: **
(Push vs Pull) / Advertising (consumer awareness) / PR / Personal selling (i.e. cold calling) / Sales promotions (buying shelf space)

Place (distribution):
Direct (Retailer, personal selling, internet sales, retailer) vs Indirect (Wholesaler, agent, franchisee)

Price (4C’s) / Pricing strategies

Services: (e.g. apps)
People: Staff appearance, service training, technical knowledge

Processes: Efficiency of the service

Physical evidence: intangible brand on show

Question 2

4C’s of Pricing

Answer 2

Cost

Competitors

Customers

Corporate objectives

Question 3

Pricing strategies

Answer 3

Price skimming - high prices to skim of customers willing to get product early (e.g. Apple)

Premium pricing - for perceived quality (e.g. Nike)

Price discrimination - different prices for different customer segments (e..g flights)

Going rate - match competition (e.g. Aldi & Lidl)

Penetration pricing - low price to increase market share

Question 4

Porter’s generic strategies

Answer 4

3 ways to gain a sustainable competitive advantage:

1) Cost leadership - lowest cost producer

2) Differentiation - create tangible / intangible product diffeatures customers will be willing to pay more for

3) Focus / niche - Either 1 or 2 for a narrow range of market segments

Question 5

Porter’s value chain

Answer 5

Examines how businesses can gain a competitive advantage by breaking it down into primary and supporting activities and looking for cost or /& quality advantages over competitors

The value chain can be used to examine where value can be created using the resources of a business to generate strategic options. It can also help identify the cost drivers / differentiation factors behind the XXX generic strategy.

The primary activities are those that create value and are directly concerned with providing the product/service. The support activities do not create value of themselves but enable the primary activities to take place with maximum efficiency.

Support activities:
Infrastructure
HR Management
Technology development
Procurement

Primary Activities:
Inbound logistics
Operations
outbound logistics
Sales and marketing
Services

Question 6

9M’s of resources

Answer 6

Resources are either a) Threshold or b) Unique

Men - skill/motivation/attitudes
Money - financing/IPOs
Management - leadership team/C-suite
Make-up - culture/attitidues
Machinery - tangible NCA
Methods - processes
Markets - customers/brands/network
Materials - supply chain relationships
Management information systems (MIS)

Question 7

Stages of product life cycle

Answer 7

1) Development

2) Introduction

3) Growth

4) Maturity

5) Decline

Question 8

Market research

Answer 8

1) Desk research - gathering and analysis of existing or secondary data. Usually for background understanding e.g. total size of market in UK/city/region using industry publications, population stats form government

2) Field research - collection of new (primary) information direct from respondents (more expensive so only do if desk research ineffective).
SOurce sinclude surveys of existing / potential customers, samples,

Question 9

Benchmarking Definition

Answer 9

Benchmarking uses comparisons with best practice to encourage improvement and change to achieve sustainable competitive advantage over competitors.

Question 10

Types of benchmarking

Answer 10

Internal - comparison between PY branches / divisions

Competitive - against competitors / sectors / industry (national or international) e.g. Coke vs Pepsi

Activity (best in class) - against company with best practice in same activity (any industry)

Generi - against conceptually similar but not identical process

Question 11

Porter’s 5 Forces

Answer 11

Useful model to determine the level of competition and therefore profitability of the industry.

Threat of new entrants - industry growth, profit margin, competitors. consumer switching, EoS, brand loyalty, capital requirements, distribution, patents, gov. subsidies

Power of suppliers - few large suppliers, product differentiation, other buyers

Power of consumers - smaller no of large customers, competitors, product differentiation, switching costs, price transparency

Threat of substitutes - availability, likelihood (price, performance)

Competitive rivalry - no. of firms, Fixed costs, exit barriers, strategic importance, industry growth, switching costs

Try to conclude on the extent of the threat of each

Question 12

Marketing Strategy for new markets

Answer 12

3 Key steps:
Segmentation, Targeting, Positioning

1) Segmentation: divides the market into sub-units to help targeting

2) Targeting: involves evaluating the attractiveness of each segment and selecting consumers to target

3) Positing: Requires a detailed marketing mix to be developed

Question 13

Balanced Scorecard (KPIs)

Answer 13

Ensures that a mixture of financial & non-financial perspectives are considered when selecting KPIs

Financial perspective
Internal business perspective
Innovation and learning perspective
Customer perspective

Question 14

Strategy Evaluation

Answer 14

SFA - Suitability / Feasibility / Acceptability

S: Is it consistent (both internally and externally)
F: Firm has appropriate resources and capabilities
A: Appropriate risk & return for key stakeholders

Question 15

Big Data (4V’s)

Answer 15

Volume - enough resources / appropriate IT to manage data
Velocity - Systems able to capture and process date in ‘real time’?
Veracity - Reliability of data - is it fully representative?
Variety - Systems capable of accepting formats? Legal ownership over data.

Question 16

Cyber Security

Answer 16

Protection of systems, networks and data from cyber risks (financial loss / disruption or damage to reputation of firm)

Human threats - hacking to steal data / damage system
Fraud - e.g. theft of funds
Deliberate sabotage - malicious damage, espionage etc
Viruses / corruptions in network
DoS - attempt to overload system and prevent legitimate use

Question 17

Cyber risk management

Answer 17

Think about IT controls

3rd party pen tests
Data back-ups to cloud/physical servers
Appropriate system development and maintenance occurs
Access controls / data encrypting / firewalls
Quality controls - e.g. over sharing of information
Hire specialist individuals
BCP
Cyber security training for all staff

Question 18

Types of transfer pricing

Answer 18

Cost plus (e.g. VC + 25%)
Market price less discount (fair value exchange as no selling costs required for an internal sale)
2 part - VC pu + cost to cover FC
Dual pricing - internal suspense account for the difference between manufacturing revenue and sales expense

Question 19

Identifying risks

Answer 19

Consider PESTEL
Porter’s five forces

Focus on the scenario!!!
Mitigating factor links to each risk - make sure they are appropriate and relate to organsiation

Question 20

JV’s & Strategic alliances

Answer 20

• Joint Ventures – contractual agreement between companies, often setting up another
• Strategic Alliances – looser agreement to share knowledge, tech, or opportunities

Question 21

Pros / cons of JV’s / strategic alliance

Answer 21

Advantages
o Access to local resources/expertise/brands
o Shared risks and finances
o Attractive to smaller/risk-averse companies – may be able to share risk
o Benefit from economies of scope and economies of scale (sharing fixed costs)

Disadvantages
- Shared profits
- Disagreement over decision making
- High exit costs / uncertainty over viability if one party wishes to terminate agreement
- May have to share trade secrets
- Governance may be contractual / through JV entity – impact on risk sharing, exist costs, control and cost sharing. This must be clearly defined
- If one party is larger than the other – gains may benefit one company more

Question 22

Franchising / Licensing

Answer 22

• Licensing – right to exploit an invention/resource in return for a share of profit
• Franchising – right to exploit a business brand in return for capital

Question 23

Pros & cons of franchising / licensing

Answer 23

Advantages
o Increases the number of distribution outlets without capital investment
o Local expertise and access to enthusiastic entrepreneurs
o Rapid expansion

Disadvantages
- Share profit
- Successful franchisees may set up on their own
- Conflicts over operating decisions

Question 24

Organic growth Pros & cons

Answer 24

Advantages
o Acquisition costs might be too high
o Costs/risks can be spread over time
o Control over change management
o Control over which products develop
o Easier to finance
o Maintain reputation

Disadvantages
- May be too slow
- No access to proprietary knowledge, brands, customer base, dist channels
- Risk of failure
- May intensify competition

Question 25

M&A pros and cons

Answer 25

Advantages
o Quicker than organic growth
o Synergies: cost savings and efficiencies resulting from combination (2+2=5)
o Lower risk as the target already has goodwill, brands and a customer base
o Circumventing barriers to entry
o One less competitor
o Target may be undervalued

Disadvantages
- Possible lack of strategic fit
- Lack of understanding of business/management being acquired
- Paying too much for expected efficiencies that do not materialise
- Failure to retain key staff/customers
- Lack of governance and control over businesses being acquired

Question 26

FF as a business partner

Answer 26

Delivers service of finance function by providing advice/insight/recommendations but as an integrated member of the management team

Provide ‘real time’ support in data and info e.g. best performing products / margins / sales / market data etc.
Cash & treasury management (CF projections)
Help with budget preparation / sensitivities to budgets
Understand performance e.g. cost savings
Advice on funding structures
Create credible business plans - e.g for procurement team to purchase assets

Question 27

Porter’s Diamond

Answer 27

Analysis tool to understand the competitive advantage of a country / industry e.g. Japanese cars / US fast food

Factor conditions - factors of production - HC, physical, knowledge, capital, infrastructure
Demand conditions - local consumers encourage firms to innovate, trends setting consumers help firms anticipate future growth areas
Related & supporting industries - knowledge sharing, easy access to components (reduced lead times)
Strategy, structure and rivalry - efficiency generate dby strong domestic rivalry, specific advantages of nations e.g. technology sharing platform in Switzerland for watches

Question 28

ETHICS must state

Answer 28

ALWAYS STATE PROFESSIONAL SCEPTICISM
Always investigate any claim and ESTABLISH THE FACTS
Seek legal advice where possible - especially relating to ML or Bribery
Consult any policies / code of conducts
Consider the need for disciplinary action
Develop an effective communication strategy for staff/media/customer
Look out for ICAEW accountant scenarios - follow ethical code, duty of care etc.

Question 29

Critical Success Factors

Answer 29

Consider:

Reputation

Resources of the business - intellectual property, physical assets,

Relationships with customers / suppliers / employees / other firms in network

Question 30

Sustainable competitive advantage

Answer 30

Sustainable competitive advantage is obtained by the exploitation of unique resources.

Question 31

Competitive advantage

Answer 31

Competitive advantage is anything that gives one organisation an edge over its rivals both now and in the
future

Question 32

Outsourcing vs Robotics

Answer 32

Consider the following factors:
- cashflow
* strategic fit
* impact on stakeholders - staff and customers
* speed/timing of response
* short v long term factors.

Question 33

Pros / cons of outsourcing

Answer 33

Pros:
Maintain human element - favourable for some business, may fit with brand
Transfer of risk to outsourcer
Often will become specialist in service - implement KPIs into contract to ensure quality

Cons:
May loose experienced staff who are replaced
Time zones / capacity issues
Risk that outsourcing individuals not trained / skilled enough / have no knowledge of business
Dependence on outsourcing provider - hard to reverse
Change management problems?

Question 34

Pros / cons of AI / RPA

Answer 34

Pros:
Efficiencies - especially relating to repetitive tasks, free up skilled individuals to focus on more complex work
24 hour , 7 days a week - no timezone / language issues
Removes human error
No capacity issues

Cons:
Likely upfront investment
Increased reliance on technology systems vulnerable to cyber security threats
FIt with brand?
May impact quality of responses

Question 35

Decentralisation: Pros / Cons

Answer 35

(De)centralisation refers to the degree of autonomy/decision making ability diffused through the organisation.

Pros:
Senior management free to focus on strategy
Better local decisions due to local expertise
Better motivation for middle management - can see their impact clearer and feel more valued
Quicker responses & improved flexibility of org
More effective training / exposure / experience for staff - clearer career path

Cons:
Loss of control by senior management
Dysfunctional decisions due to a lack of goal congruence
Poor decisions made by inexperienced managers
Training costs
Duplication of roles and resources
Extra costs for information e.g multiple management accounts