Summary
Summary CIMA E3 Notes
- Course
- Institution
- Everything you need to pass E3. - Detailed 35 pages of notes, complete with diagrams, graphs and formulae - My score: 89%
[Show more]
1 review
By: keaganhiggins • 5 months ago
Very useful and helpful. Would recommend the notes. For someone that has worked in finance for several years, I did not need to read the text books on offer - I need a high level summary like these. I have used these summaries for E3, P3, and F3.
Seller
Follow
jackg
Reviews received
Content preview
Chartered Institute of Management Accountants Strategic Level E3E3 Strategic Management
Structure
A.The strategy process (15%)
1. The strategy process
2. Generating strategic options: Mission, vision, values and stakeholders
3. The role of governance and ethics in the strategy process
B.Analysing the organisational ecosystem (20%)
4. The organisational ecosystem: External environmental analysis
5. Strategic networks and platforms
6. Resources and value creation within the organisational ecosystem
C.Generating strategic options (15%)
7. Framework for generating strategic options
D.Making strategic choices (15%)
8. Strategic options and choice
E.Strategic control (20%)
9. Developing strategic performance management systems
10.Understanding the impact and context of change
11.Change management: the role of the leader in managing change
F. Digital strategy (15%)
12.Digital strategy: digital technologies
13.Digital strategy: governance and elements of digital strategies
Jack Gould 1 of 35
,Chartered Institute of Management Accountants Strategic Level E3
E3A1: The strategy process
• Business ecosystem: network of organisations involved in delivery of a product via competition
or cooperation; all components impact each other to create a constant evolving relationship in
which organisations must be flexible and adapt to survive
• Helps businesses to navigate rapidly changing business environment driven by technological
advances and globalisation
• Strategy: course of action, including specification of resources required, to achieve a specific aim;
the direction and scope of an organisation over the long term (Johnson, Scholes & Whittington)
• Involves setting future plans of the organisation and requires a detailed understanding of:
• Resources: ie cash, • Ecosystem: ie markets, politics, the • Stakeholders:
assets, employees economy, competitors, customers expectations
• Strategic business unit (SBU): department within an organisation for which there is an
external market for products distinct from other units
Advantages of formal, long-term planning Disadvantages of formal, long-term planning
Short-term pressures: difficult to motivate managers to achieve long-term
Forces managers to look ahead to the long-term strategies when short-term problems can consume daily work
Improved control and goal congruence: as mission and Contradictory needs of stakeholders: thus difficult to create overall mission
objectives are communicated to management and corporate objectives
Helpful for less skilled/experienced managers Management distrust: towards management accounting techniques
Identifies key risks: create contingency plans Accurate forecasting: difficult over the long-term
Bounded rationality: long-term strategy is often based on incomplete
Ensures no strategic drift analysis due to time and knowledge constraints; thus key issues are missed
Encourages creativity Rigidity: managers often follow plans at all costs; stifling initiative
Easier for the business to raise finance Expensive and time-consuming
LEVELS OF STRATEGY: all levels are linked; corporate strategy will only succeed if supported by
the day-to-day activities of functional strategy
A.Corporate (strategic) level: which markets should the organisation operate in
• Acquisitions and disposals
• Entering new or leaving existing industries
B.Business (management) level: how should the organisation successfully compete within each
market to achieve competitive advantage; how should each strategic business unit (SBU) behave
• Achieve advantage over customers
• Meet the needs of key customers
• Avoid competitive disadvantage
C.Functional (operational) level: practical, day-to-day operational strategies of the organisation;
• Human resources (HR) strategy
• Marketing strategy
• Information systems (IS) and technology (IT) strategy
TYPES OF STRATEGY: spectrum of four models an organisation can use to develop a strategy
Formal planning approaches suit firms: Informal planning approaches suit firms:
• In stable industries where there is time to • In dynamic industries where there is little time to
undertake strategic analysis undertake strategic analysis
• With inexperienced managers, as formal • With experienced managers able to quickly
planning provides a series of guidelines and identify and react to environmental changes
ensures they are familiar with the organisation • Do not need to raise significant finance
Rational model (Johnson, Scholes & Whittington) (most formal): logical, time-consuming, step-by-
step approach; following a series of defined stages to create a strategy
• Strategic analysis: analyse existing circumstances; internal, external, stakeholder, gap analysis
1. Mission & objectives: decide what the organisation needs to accomplish
2. Position & appraisal: detailed analysis to understand operations and external environment
• Strategic choice: generate, identify and select appropriate strategies
3. Strategic options: suggest strategic options that help achieve overall mission
4. Evaluation & choice: pick the strategic option
• Strategic implementation: undertake and implement the chosen strategies
5. Implementation: of the chosen strategy
6. Review & control: review strategy implementation against initial mission and objectives
Jack Gould 2 of 35
,Chartered Institute of Management Accountants Strategic Level E3
Advantages of rational model Disadvantages of rational model
Increased management control over organisational activities Difficulties in accurate forecasting
Requires the organisation to complete external market analysis Bounded rationality
Expensive and time-consuming
Emergent approach (Mintzberg) (somewhat formal): argues the rational model, while useful, is
too slow in a changing environment and must be adjusted for unexpected events
• Emergent strategy is evolving, continuous, incremental, and likely to be more short term
• The timing, order and distinctions between analysis, choice and implementation become blurred
Logical incrementalism (Lindblom) (somewhat informal): argues that formal planning is a waste
of management time and the organisation should instead adopt small-scale extensions of
successful past strategies rather than radical change
Advantages of incrementalism vs rational model Disadvantages of incrementalism vs rational model
Possible strategic drift: as there is no overall long-term plan
More acceptable to stakeholders as consultation, compromise
and accommodation are built into the process Organisation may fail to implement major changes if needed
Less of a cultural shift for the organisation rather than Unlikely to be suitable for new organisations as they have no past
implementing major operational shifts strategies on which to base future policy
Freewheeling opportunism (most informal): avoid formal planning as it is too constraining and
long, especially in dynamic industries; instead take advantage of opportunities as they arise. Risks:
• Failure to identify risks: firm is not being forced to look ahead thus will not have contingency plans
• Strategic drift: firm does not have overall plan thus will be difficult to compete long term
• Raising finance: difficult to convince investors without future plans
• Management skill: requires managers skilled at reacting to a changing environment
PERSPECTIVES TO STRATEGIC PLANNING
• Traditional approach: emphasis on formulating plans to achieve the objectives of stakeholders;
• However objectives are often set in isolation from market considerations, thus are unrealistic; but especially useful for NFPs
• Positioning (market-led) approach: markets/competitor actions determine objectives/strategy;
• However predicting the future in volatile markets is problematic
• Resource-based (competence-led) approach: emphasis on core competences of the firm;
• However these should ideally also be difficult for competitors to emulate
ROLE OF THE STRATEGIC MANAGEMENT ACCOUNTANT: emphasis on providing information
which relates to external factors, as well as non-financial and internally generated information, ie:
• Competitor analysis • Corporate decisions: enter/leave markets, whether to
• Customer profitability analysis launch new products
• Product decisions: pricing, portfolio • Investment decisions: strategic information for acquisitions,
analysis, brand value analysis disposals, mergers, strategic management systems (SMAs)
Strategic management accounting Traditional management accounting
External focus: provide information to aid key strategic decisions, requiring
Internal focus: on internal company issue
a strong external (and internal) focus in order to understand the market
Forward-looking: analysing strategies the business will employ in future Backwards-looking: measurement of historic performance
Value of strategic management information/benefits of strategic management accountant:
• More effective strategic planning • Greater control over business performance
• Higher quality information to aid decisions • Increased awareness of the business environment
NOT-FOR-PROFIT ORGANISATIONS (NFP): rather than seeking to make a profit, NFPs seek to
satisfy the particular needs of the members of society they have been set up to benefit
• NFP objectives: more complex and conflicting; difficult to set due to range of stakeholders
• NFP strategic planning: further complexities/problems
• Likely to have multiple objectives: hard to prioritise
• Difficult to measure objectives: usually non-financial
• May be a more equal influence/balance of power between stakeholders
• Recipients of the service are not necessarily those paying for it
Value for money (VFM) / 3Es concept: developed as useful means of assessing NFP performance
1. Economy (input measure): 2. Efficiency (links inputs to 3. Effectiveness (output measure):
measures the relationship outputs): measures whether measures to what extent the
between money spent and the maximum output is being outputs generated achieve
inputs achieved with resources used organisational objectives
Jack Gould 3 of 35
, Chartered Institute of Management Accountants Strategic Level E3
E3A2: Generating strategic options: mission, vision, values and
stakeholders
MISSION: fundamental objective of an entity expressed in general terms; basic purpose of the entity
• Strategy: should be designed to support the accomplishment of the entity’s mission
MISSION STATEMENT: important to internally and externally communicate mission; published
statement outlining the entity’s fundamental objective and summarising the reasoning/values that
underpin its operations; characterised by addressing these fundamental questions (Drucker):
• What is our business? • What is valued by the customer? • What will our business be? • What should our business be?
Purposes of mission statements Criticisms of mission statements
Helps develop a desired corporate culture: instils core values and May not represent actual values of the organisation/values
communicates expected behavioural standards to employees that employees feel are important
Assists in strategic planning: ensures strategies are consistent with Often ignored: often regarded as public relations exercise
overall mission and its corporate values; provides basis for control and not used when developing strategies
Often vague: tend to use meaningless terms
Communicate with all stakeholder groups: all key stakeholders know
what to expect from the organisation May quickly be outdated: especially in fast-moving industries
VISION STATEMENTS: ideal future position the entity wishes to reach; the long-term aspirations of
the entity; however shares many of the same drawbacks as missions statements
VALUES: core ethics or principles the entity will abide by; helps drive the behaviour of the business,
and guide actions of management, employees and other stakeholders; purposes:
• Guide staff behaviour: everyone expected to share and exhibit the values
• Demonstrate integrity/accountability to external stakeholders: commitment to behavioural standard
• Competitive advantage: via proven adherence to stated values
• Reduced risk of inappropriate behaviour from staff: particularly if consequences are widely known
• Sets culture of the organisation
OBJECTIVES: specific targets the entity sets itself, translating the mission into a series of mileposts
for the organisation to follow to ensure it stays on course; to be useful, objectives must be SMART:
• Specific: clearly defined and easy to understand
• Measurable: able to accurately measure
• Achievable: pointless to set unachievable targets
• Relevant: appropriate to the mission and stakeholders
• Time-bound: time period for achievement
Short vs long term objectives: if resources are scarce, short/long-term objectives may conflict,
leading to short-termist decision-making at the expense of long-term success; it is thus important to
set short and long-term objectives that do not directly contradict one another
Primary vs secondary objectives
• Primary: major overriding objectives of the entity; relate to the entity and needs of its stakeholders
• Secondary: relates to the various strategies the entity needs to adopt to meet its primary objective
STAKEHOLDERS: group/individual with an interest in the organisation
Identification of stakeholders
• Internal stakeholder: intimately connected to the business; aims likely to have strong influence
• Employees/managers: seek pay, working conditions, job security, status, career development
• Connected stakeholder: invest in or have dealings with the business
• Shareholders: seek dividends, capital growth • Suppliers: seek assured demand, prompt payment
• Customers: seek value-for-money goods/services • Finance providers: seek repayment of finance
• External stakeholder: no direct link to the business but can influence/be influenced by its activity
• Civil society (including pressure groups): various; seek no negative impact as a result of the firm
• Government: seek provision of taxes and jobs, compliance with legislation
• Trade unions: seek member rights, expect to take an active part in decision-making process
• Actors (Braithwaite & Drahos): identify the full range of ‘actors’ who may have an influence on
the way an organisation conducts its business:
• States: France
• Organisations of states: WTO, EU
• Corporations: HSBC
• Organisations formed by firms: Chambers of Commerce
• Civil society:
• Non-Governmental Organisations (NGOs): British Standards Institute
• Mass publics: large audiences of citizens
• Knowledge based communities: CIMA
Jack Gould 4 of 35
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller jackg. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $14.28. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
77254 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now