Revision 2 Flashcards
(94 cards)
1
Q
What type of external environments are there
A
Country environment (otherwise known as macro environment, general environment)
Industry environment (otherwise known as micro environment, industry/market place environment or competitive environment )
2
Q
What model to use with country environment
A
PESTEL
3
Q
What model to use with industry environment ?
A
Porter 5 forces
4
Q
What does PESTEL stand for
A
Political
Economy
Social
Technological
Ecological
Legal
5
Q
What is covered under political (PESTEL)
A
Government
Government policies
Government subsidiaries/loans
Government approvals/license
Political stability
Taxes
6
Q
What is covered under Economy (PESTEL)
A
Economy
Economic growth
Economic downturn
Recession
7
Q
What is covered under Social (PESTEL)
A
Prosperous developed nation
Standard of living
Educated population
Unemployment
8
Q
What is covered under technological (PESTEL)
A
Plant & machinery
Skilled workers
IT/technology
Internet/online
Roads and infrastructure
9
Q
What is covered under ecological
A
CO2 emission
Carbon footprint
Recycling
Pollution
10
Q
What is covered under legal (PESTEL)
A
Laws
Legislations
Patent/trademark/copyright
11
Q
What are the the 5 forces within porter 5 forces
A
Power of customer
Power of supplier
Threat of new entrants
Threat of competition
Threat of substitute product
12
Q
Elaborate on power of customer with porter 5 forces ?
A
Factors to decide whether high or low
1. Size of customers (eg large global customer )
2. Any brand or uniqueness in our product
3. Customer willing to pay any premium ?
Words to look out for
1. Customers
2. Buyers
3. Consumers
13
Q
Elaborate on power of Supplier within porter 5 forces
A
Factors to decide whether high or low
1. Size of supplier
2. Are we willing to pay a premium ?
Words to look out for
1. Supplier
2. Vendor
3. Manufacturer
14
Q
Elaborate on threat of new entrant within porter 5 forces
A
Look for barriers to entry
1. Patents
2. Government approval
3. Government license
4. Franchise
If barrier is high then threat is low
15
Q
Elaborate on threat of competition within porter 5 forces
A
Words to look out for
1. Competition/rivalry
2. Number of competitors
3. Market share
4. Patents / franchise
16
Q
Elaborate on threat to substitute within ports 5 forces
A
Words to look out for
1. Alternative
2. Substitute
17
Q
What is strategic position analysis
A
If question asks to analyse the strategic position of XYZ company you need to include 3 things
- Macro / country environment - PESTEL
- Micro / Industry environment - P5F
- Internal factors
a. Human Resources (experience, expertise, management competencies)
b. Financial Resources (profitability, financial position, gearing)
c. IT/Brand (goodwill, online, website)
18
Q
When to use SFA framework
A
- To evaluate a “proposed” strategy
- Should only use when we plan to “ACQUIRE” another company either in same country or another country
19
Q
What does SFA stand for ?
A
Suitability
Feasibility
Acceptability
20
Q
Elaborate on suitability within SFA Framework
A
Focuses on the external factors of acquiring Which are:
Home country
Target country
Target company
21
Q
What to include in a briefing paper
A
Briefing paper (header underlined)
TO:
FROM:
SUBJECT:
DATE:
(Opening sentence e.g this briefing paper…)
Blahblah
Sincerely
No need to add conclusions in briefing paper unless specified in question
22
Q
Elaborate on feasibility within SFA Framework
A
Focuses on internal factors of acquiring which include
Human Resources - E.g. do we have acquisition experience from the past? Do we have experience of managing similar businesses? Do we have experience of working in an overseas country?
Financial resources-e.g. do we have funds to acquire another company? Look at the gearing ratios
Technology and brand
23
Q
Elaborate on Acceptability within SFA Framework
A
Focuses on financials of the target company
- Will shareholder accept the proposed strategy?
If family owned company managed by the owners then it is acceptable
If listed company then shareholders will accept if it has a positive NPV
- If target company is based in another country then we have to consider any cultural differences
- Review financial projections/analysis
24
Q
How to format a report
A
It’s the same as the briefing paper
25
Within professional skills marks, if examiner asks for evaluation what are they actually after
Both the pros and cons I.e give a balanced view
26
5 points to remember when reviewing financial projections
This works throughout different proposals however for example within the SFA framework under ACCEPTABILITY there is a “review financial projections / analysis” paragraph so the 5 points are;
1. Projections should be based on discounted cash flow using a sensible discount rate
2. Calculate simple payback period (using pre-discounted cash flow)
3. Review assumptions for any apparent stupidity (I mention in your answer that the adequacy of the assumptions need to be revalidated)
4. Mention in your answer that tax applications need to be considered if any
Mention in your answer that’s a sensitivity analysis should be performed
27
What is corporate parenting strategy
Corporate parenting looks at the relationship between head office and individual business units. This will become more important if the business follows the root of growth through acquisitions.
Factors to look at when comparing subsidiary business units performance with one another
Remember acronym “b simp” for your parent
Industry status (growth, maturity, decline)
Market share percentage (increasing, maintained, declining)
Profit margin percentage (increasing, maintain, declined)
BCG assessments (star, cash cow, dog, question mark)
Strengths/weaknesses/primary reason for acquisition
28
What is the BCG assessments
The Boston consulting group matrix which incorporates the concept of the product life-cycle is a useful tool which helps management teams to assess existing and developing products and services in terms of the market potential.
Star = high market share + growing market
Cash cow = high market share + mature market
question mark = low market share + growing market
Dog = low market share + mature market
29
How to apply future strategy based on the BCG matrix
Depending on where the company sits within the BCG matrix will determine the next steps the company should make.
Star = expand
Cashcow = harvest
Dog = divest (abandon)
Question mark = invest / improve or divest
30
What is the ansoff matrix
The absoff matrix is a 4 boxed matrix and if you start at the bottom left corner, the further you go from this the more risk you are taking.
Least to high risk
1. Existing market & existing costs products = market penetration
2. Existing market & new product = product development
2. New market & existing product = market development
3. New market & new products = diversification
31
What is the Harmon process matrix
The Harmon process matrix looks at the process complexity on the x axis and strategic importance on the y axis and this determines the steps to take
1. If both low then outsource or automate using off the shelf software
2. If process complexity low and strategic importance high then automate using bespoke software
3. If strategic importance low but process complexity high then outsource to a specialist
4. If both high then automate using bespoke software & hire best resources
32
What is the Mendelow’s stakeholder matrix ?
It’s a 4 box matrix with “power” on the x axis and “interest” on the y axis and determines how we should interact with particular stakeholder groups
1. If low low = minimum effort
2. If power is low but interest is high = keep informed
3. If power is high and interest is low = keep satisfied
4. If high high = key player
33
Where do the stakeholders fall within mendelows matrix
1. Min effort
- minority shareholders
2. Keep informed
- employees
- community
- smaller customers
- trade union (if not powerful)
3. Keep satisfied
- Government
- Major customers / Suppliers
4 key player
- shareholders
- board of directors
34
What is the cultural web model
The cultural web model is like a set of ingredients that we can buy increase the culture of a company which can also give a company competitive edge
1. Power structure
- who has power is it strict or not
- who is leader of organisation, what is CEOs personality, style and habits
2. Organisational structures
- the structure of the board (Ed’s vs Neds)
- is the organisation flat or tall, is there strong hierarchy ?
3. Control systems
- is organisation cost or quality focused
- performance management and reward systems
4. Rituals & routines
- daily routines, opening hours, flexible working, dress code
5. Symbols
- logos, quotes, corporate colours
- fancy cars , lavish benefits
6. Stories & myths
35
What is the context of change model
When you are bringing change into the organisation then it has to be planned thoroughly
Below are the steps for change management
Remember, Scott realised that Carl could probably play really rad
1. Scope aka size is it a big change of small change
2. Reason / justification for bringing the change
3. Timing - when the change will be implemented from ? Immediate or gradual ?
4. Capacity / Resources - does the company have the required resources, human, technological, financial etc
5. Capability - do we have prior experience of making change
6. Power - does the one leading change have sufficient power
7. Preservation - strengths from existing environment need to be retained
8.readiness - are the employees ready to accept the change of will there be resistance
9. Resistance - who will be the people / stakeholder to resist change and how to deal with them
36
What are the types of risk management strategies ?
Transference - transfer risk to third party (insurance, outsourcing or franchising)
Avoidance - eliminate risk by totally avoiding activities which causes risk
Reduction - reduce the impact and probability of the risk by implementing controls
Acceptance - accept the consequences of the risk. Normally for small risks
37
3 things to remember with budgets
1. Flexed budget - can’t compare actúale with original budget so do a flexed budget
2. Compare actuals with
- flexed budget
- prior year actuals
3. Reasons for variance should be explained
38
How to track a project
Project measures
1. Quality
2. Time
3. Cost
Post project review - how was project manages
Post implementation review - was objectives achieved ?
39
What is a project initiation document ?
A PID is a planning document that defines;
Background / introduction
Scope / objective
Cost and benefit analysis
Key stakeholders (eg project sponsor, project manager, project team, customers/suppliers/governments)
Project duration / timeline
Project risks
Project constraints (HR / expertise, financial resources etc)
Major assumptions used
Project monitoring and reporting procedures
40
What are advantages of e business
No geographical limitations
More revenue (globalisation)
Lower costs
Customer convenience (buy 24/7)
Improved marketing
41
What are the disadvantages of E business ?
Hardware costs
License costs
Website development
Increasing IT staff
Integration with current systems
Security risks (hacking, virus, cyber fraud, data privacy)
Legal complexities due to globalisation
Redundancy costs
42
What are the advantages of big data
Deeper insight into data
Better marketing and pricing strategy
Improved customer service
Increased competitiveness
Development of customised products
New sources of revenue
43
Disadvantages of big data
Data security
Data storage
Costly
Legal / regulations
44
What is customer relationship management ?
CRM Specialised software to maintain customer relationship through regular communication with customers electronically
45
What are examples of customer acquisition with CRM
Collect email data
Sending relevant emails and articles
Sending demos or videos
46
What are examples of customer retention with CRM
Reminders/notifications
Order placing and tracking
Auto payments
Reports and summarise
47
What are advantages of CRM
Better interaction/communication with customers
Marketing and relationship building (emails – notifications – individualisation)
Sales management (enquiries, order placing, order tracking, order payments)
After sale service (feedbacks, complaints, reminders, FAQs)
Analysis (trend analysis, data mining, intelligence, big data)
48
What are risks to hardware (IT risks and security)
Unauthorised access to service
Damage/ malfunction
Theft
Power failure
Fire/flood/earthquake
49
What are some security/controls regarding hardware (IT risks and security)
Security guards
Biometrics
Swipe cards
CCTV
Fire protection
Generators
50
What are risks regarding data/software (IT security and risks)
Unauthorised access
Hacking
Virus
Cybercrimes/frauds
Date of us
Software manipulation/errors
51
What are some security/controls regarding data/software (IT risks and security)
Logical access controls (passwords)
-at least eight digits
-change regularly
-don’t write or share with anyone
-lockdown at the three incorrect attempts
-OTP (one-time password)
Back ups
Firewall
Audit trails
Antivirus
Segregation of duty
52
What is corporate code of ethics
They are issued by organisations and are applicable to all employees
They are split into three main categories
1. Employees
2. Customers / Suppliers
3. Society / Community
53
Give examples on how corporate code of ethics affects employees
Better pay
Staff turnover
Staff training
Working conditions
Health and safety
Gender equality
No discrimination
Diversity
54
Explain how corporate code of ethics affects customers/suppliers
Product quality
Product safety
Personal data and privacy
Fair business practices
Fair play with suppliers
55
Explain how corporate code of ethics affects society/community
Job opportunities
Corporate social responsibility (CSR)
- Environmental responsibility
-Ethical responsibility
-Philanthropic responsibility
-Economic responsibility
56
How to ensure the independence of non-executive directors
Not an employee of the company for the last five years
No business or financial relationship with company for at least three years
Not a non-executive director in the same company for more than nine years
Don’t have close family/friendships ties with exec directors
No Family member working in the company in senior position
No share in profits or having share options of the company
57
What does the nomination committee do
Firstly they are majority in non-executive directors
Decide the size of the board
Ensure sufficient knowledge, skills and experience is available
Balance between executive directors and non-executive directors
Appointment of new directors
Training and succession planning
58
What are the advantages of having board committees
More focused and specialised
More time can be spent by committees as full board has limited time
Board can focus more on strategic and business matters
High involvement by non-executive directors (e.g. audit or remuneration committees)
Increase shareholder confidence
59
Why insider-trading is not allowed
Directors have to act in the primary interest of shareholders and not to make personal gains
Directors have to maximise long-term value of the organisation. If insider-trading is allowed, then it is likely that the directors would be tempted to take short-term decisions to make personal gains
Insidertrading can damage the reputation and integrity of the capital markets of the country
60
What are the main differences between family owned versus listed companies
More corporate governance regulations applicable to listed companies
Role of chairman and CEO are split
Sufficient number of non-executive directors
Both committees
Board is accountable to external shareholders
Decisions are based on voting rights (not dominated by one person)
Directors remuneration based on performance
Higher focus on risk management and internal audit
Whistleblowing arrangements
61
What are the differences between financial statements and integrated reports
Financial statements
-focus on financial information
– focus on historic performance
-focus on share capital
-less emphasis on social and environmental aspects
– short-term/annual results
Integrated reporting
– focus on overall business performance
– focus on future strategies
-focus on six capitals
-integrates social and environmental aspects in strategies and decision-making
-long term value creation
62
What is the definition of integrated reporting
An integrated report It’s a concise communication and demonstrating the link between
Governance (mission/objectives)
Strategy
Financial performance
Social and environmental context
63
Thanks What are the contents of an integrated reports
Organisations overview
External environments (PESTEL / porters five forces)
Swot analysis
How organisation create value
Future plans and strategies
Key risks
Six Capitals
Social and environmental initiatives
64
What are the 6 capitals (integrated reporting)
Interestingly Manchester sity need five more Haalands
1. Financial capital
- overall financial performance and position of the company
- sources of funds for future strategies
2. Manufactured capital
- tangible assets eg current or non current
3. Intellectual capital
- R&D
- brand
- parents
- technical
4. Human capital
- Knowledge, skills and experience of employees
– productivity and efficiency
-staff turnover
-staff satisfaction surveys
5. Social capital
(Relationship and trust builds with key stakeholders including)
-customers
-suppliers
-society/communities
-governments
6. Natural capital
-CO2 emissions/carbon footprint
-recycling/disposal of waste products
– pollution/spillage
– use of scarce resources (e.g. oil, trees, etc)
65
What are the advantages of integrated reporting
As integrating reporting is voluntary disclosure, it’s enhances organisations image and reputation for transparency
Effective communication with all stakeholders
Demonstrate how organisation create value
Integrate social and environmental aspects and strategies and decision-making
Focus on six capitals of the organisation
Better understanding and decision-making by shareholders, stakeholders and potential investors
Attracts investments at a lower cost of capital (due to availability of great information)
Gives competitive edge over other companies
66
What are the disadvantages of integrated reporting
Too much commercial information/strategy is disclosed
Valuation of six capitals is subjective nature
67
What type of organisations use Intergrated reporting
As there is so much info commercial companies tend to stay clear as don’t want to give competitors unnecessary info. They are mainly used by charities
68
What are the social footprints
The social footprint relates to 3 categories
Employees
Customers/suppliers
Society/community
69
Elaborate on employees regarding social footprint
Staff turnover
Staff training
Gender equality
No discrimination
Working conditions
Health and safety
Better pay diversity
70
Elaborate on customers/suppliers regarding social footprint
Product quality
Product safety
Personal data and privacy
For business practices
Fair play with suppliers
71
Elaborate on society/community regarding social footprint
Job opportunities
Corporate social responsibility (CSR)
72
What is environmental footprint
Environmental footprint focuses on three categories
Natural resources
Waste products
Pollution
73
Elaborate on natural resources regarding environmental footprint
Depletion of scarce resources
E.g. trees minerals oils
74
Elaborate on waste products regarding environmental footprint
Disposal of waste products
Recycling
Environmentally friendly packaging
75
Elaborate on pollution regarding environmental footprint
Carbon footprints
CO2 emissions
Recycling
Pollution
Green
Spillage
76
What is risk
Risk is any future incident which can cause damage or harm to the organisation
77
What are the key risks which organisations face
Remember acronym “mmh libre clifftop”
market risk
Market share/competitive risk
Health and safety risk
Legal and compliance risk
Intellectual risk
Business/strategic risk
Reputation risk
Environmental risk
Credit risk
Liquidity risk
Interest rate risk
Financial risk
Foreign exchange risk
Technology risk
Operational risk
Political risk
78
How can you diversify risk
Product diversification
Industry diversification
Geographical diversification
79
What is the risk management process
Commitments from top management (board)
Create a formal risk committee at board level
Risk assessment:
1. Make a list of risks which organisation faces
2. Analyse the impact and likelihood
3. Prioritise the risks based on above
4. Plan mitigation actions (one can use the heat map and TARA model)
5. Prepare risk register
6. Regular monitoring of risks an keeping update of risk register
Staff training
Appointment of risk manager
Risk audits
80
What is a risk register
It is a formal document in which organisations mention all the key risk faces along with its mitigation strategies. This is a live document which is updated regularly as risk or dynamic and changing
81
Advantages of risk committee
More focused and specialised
More time can be spent
Board can focus more on strategic matters
Higher involvement of non-executive directors
Higher shareholder confidence
82
What are the four lines of defence regarding risk
First line of defence - employees
1. Proper policies and procedures
2. Training
3. Regular performance evaluation
4. Reward or punishment
Second line of defence - managers
1. Supervise employees
2. Review and monitor their performance
3. Risk and compliance departments
Third line of defence - internal audit
1. Objective review and assessment of risk management activities
2. Having good knowledge of organisations internal controls and systems
3. But may not be 100% independent
Forth line of defence - External Audit
1. External audit or bodies
2. More independent than internal audit
3.fresh pair of eyes
4. Have wider industry knowledge
5. However less knowledge about the organisations internal controls and structures
83
What are the roles of internal audit
Reviewing risk management procedures
Evaluating internal control systems
Reviewing accounting controls and reporting
Reviewing operational effectiveness and efficiency
Reviewing legal compliance
Special investigations or assignments (eg fraud investigation)
84
What are the factors to decide whether an organisation needs an internal audit
Any legal requirements
Size, complexity and growth of organisation
Risk levels
Number of employees
Geographical dispersion (multiple/overseas locations)
Centralised or decentralised set up
Quality of systems and internal controls
High frequency of breaches or frauds
Cost benefit considerations
85
What are the roles of the audit committee
Audit committee is responsible to ensure that auditors remain independent and financial reporting is accurate and reliable
Its roles are
Accuracy of financial statements
Timely regulatory reporting
Monitoring internal audit function
Managing external auditors
Provide whistleblowing arrangements to prevent fraud and misposting
86
What does a responsible leader focus on ?
Traditionally only shareholders (profitability) however now:
Multiple stakeholders (and not to shareholders) while making strategies
Social responsibility/contribution (e.g. employee health and safety, job opportunities, corporate social responsibility etc)
Environmental sustainability (e.g. pollution, recycling, scarce resources, waste management)
Ethical and moral behaviour (e.g. honest and truthful, pay for taxes, miss mistakes, et cetera)
87
What are the benefits of responsible leadership
Enhance reputation
Improved staff morale leading to increased efficiency and greater staff retention
Military to attract good talent/resources
Customers, suppliers and investors would like to associate with such organisations
Long-term growth in profitability and value of company
88
What are the risks relating to environmental sustainability issues
Operational risk (business disruption)
Regulatory risk (legal fines and penalties)
Reputational risk (bad publicity)
Business risk (loss of customer and market share)
Financial risk (Losses)
89
What are the four cultural stereotypes for businesses
Power culture
This is where power is concentrated in one person usually the founder but as the business grows this can become more dangerous as his power grows, actions such as splitting the CEO and chairman can reduce this problem
Role culture
This is traditional organisation where everyone knows their roles it’s as good in a stable market however does not lead to much flexibility or innovation
Task culture
Emphasis is getting the job done so flexibility is encouraged
Person culture
Where the employee is following a personal ambition in the context of the organisation interacts with the organisation as little as possible. Such as barristers or architects, it’s like they are individuals clustered together, a small galaxy of stars
90
What are two models relating to ethical decision making
For example accepting a bribe on an audit
1. The American Accounting Association
2. Tuckers 5 question model
91
What are advantages of two tiered board structure ? (Eg board of trustees/ NEDs and management board / EDs)
Segregation of duties
Supervisory role (safeguard) to ensure management don’t act in own interest / fraud
Board consider needs of all stakeholder (inc external ) whereas management tend to look internally
Transparency
92
How best to set up slides
Pick a topic and then used to headers (features & benefits) and put brief notes on each e.g
Social media presence
Benefits
- two way communication
- highly interactive
Benefits
- global communication
- reach wider demographic
93
What to do if states “Analysis Skill”
Identify reasons for variance / issue e. If revenues has fallen then what are reasons
94
When is revenue recognised
When a performance obligation is satisfied
