BPP House 142-144 Uxbridge Road London W12 8AA United Kingdom T 0845 075 1100 (UK) T +44 (0)20 8740 2211 (Overseas) E Learningmedia@bpp.com bpp.com/learningmedia • A user-friendly format for easy navigation • Exam focus points describing what the examining team will want you to • Regular Fast Forward summaries emphasising the key points in each chapter • Questions and quick quizzes to test your understanding • A practice question bank containing exam- standard questions with answers • A full index • All you need in one book For exams up to June 2015 Contact us In addition to ACCA examining team reviewed material you get: Study Text Paper P3 Business Analysis This ACCA Study Text for Paper P3 Business Analysis has been comprehensively reviewed by the ACCA examining team This review guarantees appropriate depth and breadth of content and comprehensive syllabus coverage Business Analysis BPP Learning Media is dedicated to supporting aspiring business professionals with top-quality learning material as they study for demanding professional exams, often whilst working full time BPP Learning Media’s commitment to student success is shown by our record of quality, innovation and market leadership in paper-based and e-learning materials BPP Learning Media’s study materials are written by professionally qualified specialists who know from personal experience the importance of top-quality materials for exam success ACCA P3 ACCA approved content provider ACCA APPROVED CONTENT PROVIDER ACCA Approved Study Text Paper P3 Business Analysis Study Text for exams up to June 2015 Free access to our Exam Success site Look inside June 2014 £32.00 ACP3ST14 (HO).indd 1-3 27/05/2014 17:44 S T U D Y PAPER P3 BUSINESS ANALYSIS BPP Learning Media is an ACCA Approved Learning Partner – content This means we work closely with ACCA to ensure this Study Text contains the information you need to pass your exam In this Study Text, which has been reviewed by the ACCA examination team, we: Highlight the most important elements in the syllabus and the key skills you need Signpost how each chapter links to the syllabus and the study guide Provide lots of exam focus points demonstrating what is expected of you in the exam Emphasise key points in regular fast forward summaries Test your knowledge in quick quizzes Examine your understanding in our practice question bank Reference all the important topics in our full index BPP's Practice & Revision Kit and i-Pass products also support this paper FOR EXAMS IN DECEMBER 2014 AND JUNE 2015 T E X T First edition 2007 Seventh edition June 2014 ISBN 9781 4727 1087 (Previous ISBN 9781 4453 9655 2) eISBN 9781 4453 6742 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Published by All rights reserved No part of this publication may be reproduced, stored in a retrieval system or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of BPP Learning Media Ltd We are grateful to the Association of Chartered Certified Accountants for permission to reproduce past examination questions The suggested solutions in the practice answer bank have been prepared by BPP Learning Media Ltd, unless otherwise stated BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www.bpp.com/learningmedia Printed in the United Kingdom by Polestar Wheatons Hennock Road Marsh Barton Exeter EX2 8RP Your learning materials, published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources © BPP Learning Media Ltd 2014 ii Contents Page Introduction Helping you to pass Studying P3 The exam paper Syllabus and study guide v vii xii xiii Part A Strategic position Business strategy Environmental issues Competitors and customers Strategic capability Stakeholders, ethics, culture and integrated reporting 21 61 87 121 Part B Strategic choices Strategic choices 159 Part C Organising and enabling success Organising for success Managing strategic change 217 253 Part D Business process change 10 Business process change Improving processes 273 301 Part E Information technology 11 12 E-business E-marketing 327 369 Part F Project management 13 Project management 413 Part G Finance 14 Finance 477 Part H People 15 Human resource management 527 Part I Strategic development 16 Strategic development 549 Practice question bank Practice answer bank Index Review form 565 579 611 Contents iii A note about copyright Dear Customer What does the little © mean and why does it matter? Your market-leading BPP books, course materials and elearning materials not write and update themselves People write them: on their own behalf or as employees of an organisation that invests in this activity Copyright law protects their livelihoods It does so by creating rights over the use of the content Breach of copyright is a form of theft – as well being a criminal offence in some jurisdictions, it is potentially a serious breach of professional ethics With current technology, things might seem a bit hazy but, basically, without the express permission of BPP Learning Media: Photocopying our materials is a breach of copyright Scanning, ripcasting or conversion of our digital materials into different file formats, uploading them to Facebook or emailing them to your friends is a breach of copyright You can, of course, sell your books, in the form in which you have bought them – once you have finished with them (Is this fair to your fellow students? We update for a reason.) But the e-products are sold on a single user licence basis: we not supply ‘unlock’ codes to people who have bought them second hand And what about outside the UK? BPP Learning Media strives to make our materials available at prices students can afford by local printing arrangements, pricing policies and partnerships which are clearly listed on our website A tiny minority ignore this and indulge in criminal activity by illegally photocopying our material or supporting organisations that If they act illegally and unethically in one area, can you really trust them? iv Helping you to pass BPP Learning Media – ACCA Approved Learning Partner – content As ACCA’s Approved Learning Partner – content, BPP Learning Media gives you the opportunity to use study materials reviewed by the ACCA examination team By incorporating the examination team's comments and suggestions regarding the depth and breadth of syllabus coverage, the BPP Learning Media Study Text provides excellent, ACCA-approved support for your studies The PER alert Before you can qualify as an ACCA member, you not only have to pass all your exams but also fulfil a three year practical experience requirement (PER) To help you to recognise areas of the syllabus that you might be able to apply in the workplace to achieve different performance objectives, we have introduced the ‘PER alert’ feature You will find this feature throughout the Study Text to remind you that what you are learning to pass your ACCA exams is equally useful to the fulfilment of the PER requirement Your achievement of the PER should now be recorded in your on-line My Experience record Tackling studying Studying can be a daunting prospect, particularly when you have lots of other commitments The different features of the text, the purposes of which are explained fully on the Chapter features page, will help you whilst studying and improve your chances of exam success Developing exam awareness Our Texts are completely focused on helping you pass your exam Our advice on Studying P3 outlines the content of the paper, the necessary skills you are expected to be able to demonstrate and any brought forward knowledge you are expected to have Exam focus points are included within the chapters to highlight when and how specific topics were examined, or how they might be examined in the future Using the Syllabus and Study Guide You can find the Syllabus and Study Guide on page xiii of this Study Text Testing what you can Testing yourself helps you develop the skills you need to pass the exam and also confirms that you can recall what you have learnt We include Questions – lots of them - both within chapters and in the Practice Question Bank, as well as Quick Quizzes at the end of each chapter to test your knowledge of the chapter content Introduction v Chapter features Each chapter contains a number of helpful features to guide you through each topic Topic list Topic list Syllabus reference What you will be studying in this chapter and the relevant section numbers, together with ACCA syllabus references Introduction Puts the chapter content in the context of the syllabus as a whole Study Guide Links the chapter content with ACCA guidance Exam Guide Highlights how examinable the chapter content is likely to be and the ways in which it could be examined Knowledge brought forward from earlier studies What you are assumed to know from previous studies/exams FAST FORWARD Summarises the content of main chapter headings, allowing you to preview and review each section easily Examples Demonstrate how to apply key knowledge and techniques Key terms Definitions of important concepts that can often earn you easy marks in exams Exam focus points When and how specific topics were examined, or how they may be examined in the future Formula to learn Formulae that are not given in the exam but which have to be learnt Gives you a useful indication of syllabus areas that closely relate to performance objectives in your Practical Experience Requirement (PER) vi Introduction Question Gives you essential practice of techniques covered in the chapter Case Study Real world examples of theories and techniques Chapter Roundup A full list of the Fast Forwards included in the chapter, providing an easy source of review Quick Quiz A quick test of your knowledge of the main topics in the chapter Practice Question Bank Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation Studying P3 Much of the P3 exam is concerned with business strategy As a Chartered Certified Accountant you are likely to find yourself dealing with matters that are of strategic importance to your organisation It is important, therefore, that you have an understanding of the way business strategy is conducted so that your input is appropriate and properly considered However, the name of P3 is Business Analysis, not Business Strategy Business Analysis is wider than simply strategy and this paper will also draw from your financial and business skills gained during your studies so far It brings these concepts together and encourages you to take a wider view of the organisations you are presented with in order to give your analysis of those organisations as a whole What P3 is about The aim of the syllabus is to develop students’ ability to apply relevant knowledge and skills, and exercise the professional judgement in assessing strategic position, determining strategic choice, and implementing strategic action through beneficial business process and structural change that involve people, finance and information technology This is an advanced level paper which builds on a number of the topics covered in Paper F1 Accountant in Business as well as topics you will have seen in Paper F5 Performance Management However, as an advanced paper it tests much more than just your ability to recall models and theories You must be able to evaluate data, assess the strategic consequences of decisions and advise on alternative courses of action The syllabus is divided into eight main sections, (although the Examiner is keen that you view them as an integrated whole, rather than as a series of unrelated sections) (a) Strategic position The syllabus begins by considering the impact of the external environment on an organisation, and looks at the competitive forces organisations face It then also looks at an organisation’s internal capabilities and expectations, to see how an organisation can position itself to get the most value out of its resources However, an organisation also needs to consider its responsibilities to differing stakeholder groups, and how the expectations of stakeholders, alongside ethics and culture, help shape organisational purpose (b) Strategic choice Once an organisation has established its current strategic position it can start thinking about the direction it wants to take in the future This section looks at the decisions which have to be made about an organisation’s future and the way an organisation can respond to the influences and pressures which it identified while assessing its strategic position (c) Strategic action This section deals with the implementation of strategic choices, and the transformation of these choices into organisational action This action takes place in a context of operational processes and relationships, which need to be managed in line with the intended strategy, and involves the effective coordination of business processes, information technology, people and finance You will be expected to identify problems and issues in an organisation which prevent it from achieving its strategies, and make recommendations about how these problems can be resolved Introduction vii (d) Business and process change This section is the first considering how organisational elements support business strategy, and it highlights that business process redesign can lead to significant organisational improvements Again, you will be expected to identify problems or inefficiencies with existing processes and make recommendations as to how they can be made more effective (e) Information technology The application of information technology is often one of the ways that business processes can be redesigned This reflects the fact that many existing processes are less efficient than they could be, and that new technology and the application of e-business models make it possible to design those processes more efficiently (f) Project management In (c) above we noted that effective strategic action requires the coordination of a number of operational processes This coordination can be facilitated through effective project management (g) Financial analysis Strategic planning and strategic implementation should be subject to financial benchmarks Financial analysis explicitly recognises this, reminding you of the importance of focusing on key ratios and measures that can be used to assess the viability of a strategy and to monitor or measure its success (h) People Human resource management plays a vital role in underpinning strategy Successful strategic planning and implementation require the effective recruitment, training, and organisation of people, coupled with strong leadership As with so many other areas of the syllabus, it is crucial that an organisation’s personnel resources are appropriate for the strategy it is pursuing Skills you have to demonstrate • An ability to integrate knowledge and understanding from across the syllabus • Application of your knowledge to the specific circumstances described by the question • An ability to make reasoned judgements and give practical, commercial advice based on the facts presented in the question scenario • Careful reading and analysis of the question scenarios, and the question requirements • If you read the main capabilities listed by ACCA that students are expected to have on completion of P3, you will find continued reference to the verbs ‘evaluate’, ‘assess’, ‘advise’ and ‘explain’ – make sure you can all of these in relation to the different aspects of the syllabus How to pass viii Introduction Study the entire syllabus – questions may span a number of syllabus areas and you must be prepared for anything! Practise as many questions as you can under timed conditions This is the best way of developing good exam technique Make use of the Question Bank at the back of this study text, and, more importantly, BPP’s Practice and Revision Kit The Kit contains numerous exam standard questions (many of them taken from past exam papers) as well as three mock exams for you to try P3 questions will be scenario-based and all the information given in the scenarios will be relevant to the questions set Make sure you relate your answers to the scenario rather than letting them become generic Answers that are simply regurgitated from texts are unlikely to score well Present your answers in a professional manner – there are marks available for coherent, well structured arguments and for making recommendations when required You should be aiming to achieve all of these marks Manage your time in the exam hall carefully Answer plans will help you to focus on the requirements of the question and enable you to manage your time effectively Also, not waffle Make your answers complete, but brief Answer the question that you are most comfortable with first – it will help to settle you down if you feel you have answered the first question well Answer all parts of the question – leaving out a five mark discursive element for example may mean the difference between a pass and a fail Read the financial press and relevant web sites (for example, the BBC business website) for real life examples The examination team is specifically looking for evidence of wider reading They have repeatedly stressed the importance of reading the finance section of a good quality newspaper so that you can draw on real-life situations to help inform your answers This does not, of course, mean you should simply quote real life examples in your exam just to show you have read widely Instead you should use the real life examples to help inform your answers to the questions set Check the P3 section of the ACCA website regularly – it often contains technical articles written either by, or on the recommendation of, the examination team which can be invaluable for future exams Brought forward knowledge As mentioned previously, this paper builds on knowledge brought forward from Paper F1, Accountant in Business and F5 Performance Management If you have not studied F1 or F5, or were exempt, you should spend some time considering the syllabus and study guide to identify any gaps in your knowledge You must ensure you cover any areas you are unsure of before your exam, so that you would be comfortable referring to them as necessary The syllabus information is available on the ACCA website, www.accaglobal.com Introduction ix Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Notes Review Form – Paper P3 Business Analysis (06/14) Please help us to ensure that the ACCA learning materials we produce remain as accurate and user-friendly as possible We cannot promise to answer every submission we receive, but we promise that it will be read and taken into account when we update this Study Text Name: Address: During the past six months you recall seeing/receiving any of the following? (Tick as many boxes as are relevant) How have you used this Study Text? (Tick one box only) Home study (book only) On a course: college Our advertisement in ACCA Student Accountant With 'correspondence' package Our advertisement in PQ Other Our brochure with a letter through the post Our website www.bpp.com Why did you decide to purchase this Study Text? (Tick one box only) Which (if any) aspects of our advertising you find useful? (Tick as many boxes as are relevant) Have used BPP Texts in the past Recommendation by friend/colleague Prices and publication dates of new editions Recommendation by a lecturer at college Information on Text content Saw information on BPP website Facility to order books off-the-page Saw advertising None of the above Other Which BPP products have you used? Text Passcards Kit i-Pass Home Study Package Your ratings, comments and suggestions would be appreciated on the following areas Very useful Useful Not useful Good Adeqate Poor Introductory section Chapter introductions Key terms Quality of explanations Case studies and other examples Exam focus points Questions and answers in each chapter Fast forwards and chapter roundups Quick quizzes Question Bank Answer Bank Index Overall opinion of this Study Text Excellent Yes No Do you intend to continue using BPP products? On the reverse of this page is space for you to write your comments about our Study Text We welcome your feedback The BPP Learning Media ACCA Range Manager of this edition can be e-mailed at: pippariley@bpp.com Please return this form to: Pippa Riley, ACCA Range Manager, BPP Learning Media Ltd, FREEPOST, London, W12 8AA TELL US WHAT YOU THINK Please note any further comments and suggestions/errors below For example, was the text accurate, readable, concise, user-friendly and comprehensive? [...]... The importance of context A1(d) 5 The strategy lenses A1(e) Introduction This Study Text concerns the ACCA examination called Business Analysis Analysis, of various kinds, forms an important element of the wider activity of strategic management Despite its name, your syllabus deals with the full scope of strategic management and we will provide you with complete coverage in this Text Section A of your... hence the examination team's instruction that candidates should read the financial sections of a good quality newspaper or other business material regularly xii Introduction Syllabus and Study Guide The P3 syllabus and study guide can be found below Introduction xiii xiv Introduction Introduction xv xvi Introduction Introduction xvii xviii Introduction Introduction xix xx Introduction Introduction xxi... Developing strategies Introduction xi The exam paper Format of the paper Section A: Section B: One compulsory case study Choice of two from three questions, 25 marks each Number of marks 550 50 100 Time allowed: 3 hours (plus fifteen minutes reading and planning time) Section A will be a compulsory case study question with several requirements relating to the same scenario information The question will usually... choice (two from three) reinforces the importance of covering all areas of the syllabus P3 is designed to be a global paper, meaning that the case studies and the scenarios will focus on an industry of global significance, which should be known to candidates wherever they live or work Although a lot of the examples in this text are based in the UK, they are designed to illustrate points which could apply... how strategic management is affected by different organisational contexts 3 (e) Compare three different strategy lenses (Johnson, Scholes and Whittington) for viewing and understanding strategy and strategic management 3 (f) Explore the scope of business analysis and its relationship to strategy and strategic management in the context of the relational diagram of this syllabus 3 A6 The expectations... be relevant to any exam question They could be examined directly, or they could be used in the context of a scenario If a strategy is to be successful, it must be appropriate to the organisation or situation described in the scenario Models Two models from this chapter are explicitly referenced in the Study Guide: Johnson, Scholes and Whittington (JS&W's) model for defining elements of strategic... conclusions and make reasonable suggestions To be successful in the P3 exam, it is very important that you realise that models and theories are only useful to you if you apply them appropriately It is worth reviewing at this point the view of the relationship between strategy and accountancy taken by a former member of the examining team under the old P3 syllabus, who commented that '… accountants, with their... of resources and competences with the aim of fulfilling stakeholder expectations If you look at this definition alongside the top layer of the relational diagram describing the P3 syllabus you should get some idea of the context of strategic decisions: Strategic position Strategic choices Strategic action Part A Strategic position 1: Business strategy 5 ... strategies 6 Product-market strategy C O BCG 6 Methods of growth 6 Corporate parents 6 SAF C C O C C C ORGANISING AND ENABLING SUCCESS 7 x Introduction Organisational structures C O O O O O Covered in Text chapter 8 Dec 2013 June 2013 Dec 2012 June Dec June Dec June Dec 2012 2011 2011 2010 2010 2009 C Managing strategic change June Dec June 2009 2008 2008 Dec 2007 Pilot Paper O O O O O O C O BUSINESS... Sections A, B and C of your syllabus is the seventh edition of Exploring Corporate Strategy by Johnson, Scholes and Whittington We shall make frequent reference to this book using the abbreviation JS&W 3 Study guide Intellectual level A1 The need for, and purpose of, strategic and business analysis (a) Recognise the fundamental nature and vocabulary of strategy and strategic decisions 2 (b) Discuss how ... Question Bank Found at the back of the Study Text with more comprehensive chapter questions Cross referenced for easy navigation Studying P3 Much of the P3 exam is concerned with business strategy... practice answer bank have been prepared by BPP Learning Media Ltd, unless otherwise stated BPP Learning Media Ltd BPP House, Aldine Place London W12 8AA www .bpp. com/learningmedia Printed in the United... published by BPP Learning Media Ltd, are printed on paper obtained from traceable sustainable sources © BPP Learning Media Ltd 2014 ii Contents Page Introduction Helping you to pass Studying P3 The