E2 Summary

E2 - Enterprise Management
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CIMA E2
Enterprise Management
Tuition Notes
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Contents
Contents
Contents ........................................................................................ 3
LEARNING OUTCOMES GRID ..................................................... 5
Paper Information .......................................................................... 8
How to Pass .................................................................................. 9
The Verb Hierarchy...................................................................... 10
Strategic Management & Assessing the Competitive Environment. (A)12
A2 (c) Explain the relationship between different levels of strategy. 12
A2 (b) Compare and Contrast Approaches to Strategy Formulation 15
A1 (a) Discuss the nature of competitive environments ............ 15
A1 (b) Distinguish between different types of competitive
environments ............................................................................ 15
A2(b) Compare and contrast approaches to strategy formulation39
A2(a) discuss concepts in established and emergent thinking in
strategic management .............................................................. 55
C1 (b) demonstrate the importance of organisational culture .... 88
C2 (g) Analyse issues of business ethics and corporate governance
............................................................................................... 113
Management of Relationships (C)................................................ 66
C2 (a) Analyse the relationship between managers and their
subordinates, including legal aspects affecting work and employment
............................................................................................... 104
C1 (a) discuss the concepts of power, bureaucracy, authority,
responsibility, leadership and delegation .................................. 66
C2 (b) Discuss the roles of negotiation and communication in the
management process, both within an organisation and with external
bodies ....................................................................................... 82
C2 (d) Identify tools for managing and controlling individuals, teams
and networks, and for managing group conflict......................... 97
C1 (c) identify the nature and causes of conflict ....................... 97
C1 (d) discuss alternative approaches to the management of conflict
................................................................................................. 97
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C2 (e) Compare and contrast ways to deal effectively with discipline

problems................................................................................. 106
C2 (f) Explain the process and importance of mentoring junior
colleagues ................................................................................ 87
C2 (c) discuss the effectiveness of relationships between the finance
function and other parts of the organisation and with external
stakeholders ........................................................................... 111
Project Management (B) ............................................................ 116
B1 (a) Identify a project, a programme and their attributes ..... 116
B1 (d) Identify the characteristics of each phase in the project process
............................................................................................... 117
B1 (b) Apply suitable structures and frameworks to projects to identify
common project management issues ..................................... 119
B2 (a) Produce a strategy for a project ................................... 128
B1 (g) Identify structural and leadership issues that will be faced in
managing a project team ........................................................ 119
B2 (c) Explain the roles of key players in a project organisation124
B2 (b) Recommend strategies for the management of stakeholder
perceptions and expectations ................................................. 126
B1 (c) Construct an outline of the process of project management
............................................................................................... 127
B1 (f) Produce a basic project plan, incorporating strategies for
dealing with this uncertainty, in the context of a simple project128
B1 (e) Apply tools and techniques that would need to be applied in the
project process, including the evaluation of proposals ............ 138
B1 (h) Compare and contrast project control systems ............ 147
B1 (i) discuss the value of a post-completion audit ................. 149
B1 (j) Apply a process of continuous improvement to projects151
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LEARNING OUTCOMES GRID

A Strategic Management and Assessing the Competitive
Environment 30%
Lead Component
1. Discuss different (a) discuss the nature of competitive

competitive environments;
environments
and key external (b) distinguish between different types of
characteristics of competitive environments.
these
environments
2. Discuss (a) discuss concepts in established and

developments in emergent thinking in strategic
strategic management;
management
(b) compare and contrast approaches to
strategy formulation;
(c) explain the relationship between different

levels of strategy in organisations.
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B Project Management 40%

Lead Component
1. discuss tools and (a) identify a project, a programme and their

techniques of attributes;
product (b) apply suitable structures and frameworks
management to projects to identify common project
management issues;
(c) construct an outline of the process of
project management;
(d) identify the characteristics of each phase in
the project process;
(e) apply key tools and techniques, including
the evaluation of proposals;
(f) produce a basic project plan incorporating
strategies for dealing with uncertainty, in
the context of a simple project;
(g) identify structural and leadership issues
that will be faced in managing a project
team
(h) compare and contrast project control
systems;
(i) discuss the value of post-completion audit;
(j) apply a process of continuous
improvements to projects.
2. evaluate the (a) produce a strategy for a project;

relationship of (b) recommend strategies for the management
the project of stakeholder perceptions and
manager to the expectations;
external (c) explain the roles of key players in a project
environment organisation
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C Management of Relationships 30%

Lead Component
1. discuss (a) discuss the concepts of power,

concepts bureaucracy, authority, responsibility,
associated with leadership and delegation;
the effective (b) demonstrate the importance of
operation of an organisational culture;
organisation (c) identify the nature and causes of conflict;
(d) discuss alternative approaches to the
management of conflict.
2. Discuss the (a) Analyse the relationship between

activities managers and their subordinates,
associated with including legal aspects affecting work and
managing people employment;
and their (b) Discuss the roles of negotiation and
associated communication in the management
techniques process, both within an organisation and
external bodies;
(c) Discuss the effectiveness of relationships
between the finance function and other
parts of the organisation and external
stakeholders;
(d) Identify tools for managing and controlling
individuals, teams and networks, and for
managing group conflict;
(e) Compare and contrast ways to deal
effectively with discipline problems;
(f) Explain the process and importance of
mentoring junior colleagues;
(g) Analyse issues of business ethics and
corporate governance.
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Paper Information
THE EXAM
Syllabus topics and weightings
A. Strategic Management & Assessing the Competitive Environment

30%
B. Project Management 40%
C. Management of Relationships 30%
Format of the Paper
Section A 50 Marks
Five compulsory questions, each worth 10 marks. Short scenarios may

be given, to which some or all questions relate
Section B 50 Marks
One or two compulsory questions. Short scenarios may be given, to

which questions relate.
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How to Pass
Have sound theoretical knowledge

(Attend Tuition Classes)
Practice application skills
(Question Practice)
Be prepared!
(Attend Revision & QBR)
Read the question requirements
Add value to the scenario material
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The Verb Hierarchy
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Overview of Paper
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Strategic Management & Assessing the

Competitive Environment. (A)
A2 (c) Explain the relationship between different levels of

strategy.
The concept of strategy

A strategy is something that an organisation implements to
take it from where it is now to where it wants to be at some
point in the future.
A course of action, including the specification of resources,
to achieve a specific objective.
Characteristics of strategic planning

Strategic planning is characterised by the following factors:
Long-term planning strategic planning looks at the longer-
term strategy of the organisation.
Emphasis on external factors strategic planning requires
the external environment to be taken into account when
formulating strategies.
Resource analysis strategic planning involves analysing an
organisations resources to determine resource
requirements.
Objectives strategic planning requires the establishment of
organisation objectives which are achievable given the
external factors and realistic given the internal resource
availability.
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Levels of strategy
There are basically three levels of strategy: corporate strategy,
business strategy and functional level strategies:
Corporate strategy
Overall purpose and scope
Decisions on acquisitions, mergers and sell offs
Decisions to enter new markets
Embracing new technologies
Development of corporate policies (i.e. policy on corporate
social responsibility)
The extent to which the SBUs are free to make strategic
decision (centralised or decentralised approach)
Business strategy set within the broad framework of the

corporate strategy
How the SBU approaches a particular market
Winning customers and beating rivals competitive strategy
can be formulated depending on the degree of autonomy
allowed
Marketing issues (segmentation & marketing mix)
Functional level strategies

Dealt with at the departmental level within the SBU such as
marketing, finance and production.
These strategies are to ensure that there is a balanced
portfolio of resources for business and corporate strategy
implementation.
Without the appropriate resource, product and/or business
unit strategies could not be successfully undertaken.
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Corporate
Strategy -
Head Office
Business
SBU SBU SBU SBU
Strategy
Functional
Strategy
Financial
Operations
Human
Resources
Question
V plc operates in the leisure and entertainment industry. It has a range of
different ventures worldwide including fitness centres. Casinos, cinemas
and sports bars, each of which operates as a separate business
Required
Distinguish between the different levels at which strategy should exist in V
plc.
(10 Marks)
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A2 (b) Compare and Contrast Approaches to Strategy

Formulation
A1 (a) Discuss the nature of competitive environments
A1 (b) Distinguish between different types of competitive

environments
The strategy formulation process

According to Johnson and Scholes, there are three stages in the
process of strategy formulation: strategic analysis, strategic choice
and strategic implementation.
Strategic analysis requires the analysis of the internal and

external environments. A corporate appraisal (or SWOT analysis)
is undertaken to ascertain the internal strengths and weaknesses
and the external opportunities and threats.
Strategic evaluation & choice requires management to identify

strategies to take advantage of strengths and opportunities and
strategies to minimise weaknesses and threats.
Strategic implementation (Review & Control) requires

organisational change, which will need to be managed.
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Strategic Analysis and Competitive Analysis
The strategy of an organisation must allow it to achieve a

good fit with its environment and internal resources.
The information from the external environment helps to
analyse potential opportunities and threats and the
competition it faces.
The information from the internal audit helps to analyse the
organisations strengths and weaknesses.
External/Environmental Analysis
All of the factors outside of management control which can
affect the performance of the business and the success of its
strategies. (There are various levels within the environment)
o Nature of the environment
Degree of turbulence and uncertainty
Organisations need to be flexible (E1)
o Macro-environment
PEST
Create opportunities or threats
o Micro-environment
5 Forces
Competitive pressures
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Environmental uncertainty
Uncertainty is:
The inability to predict the outcome from an activity, due to a

lack of information about the required input/output
relationships, or about the environment within which the
activity takes place.
Uncertainty can also be defined as the difficulty in making
reliable assumptions about the future
Causes of Environmental Uncertainty
Complexity the increasing number of variables that impact

upon the firm (and how difficult they are to understand)(the
use of the rational planning model to generate a single
scenario strategic plan ignores this scenario planning
would allow if a what if approach)
Interaction of the variable the idea of complex adaptive

systems (carrying out the strategic planning process annually
means that any changes in the business environment during
the year cannot be incorporated into the strategic plan
planning should be carried out on a continuous basis)
Dynamism the rate of change in the variable that impact

upon the firm. Our assumptions are soon out of date. This
has occurred because of, amongst other things, shortening
product life cycles and swifter communications (the diffusion
of knowledge)
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Impact of uncertainty
Reduces planning horizon
Encourages emergent strategies
Increases information needs and perceived information

needs
Can lead to conservative strategies
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PEST/PESTEL framework
(Key drivers of change)
Political/legal influences
Economic factors and influences
Social values and demographic factors
Technological change and factors
Again, if you are asked to apply the PEST model to an

organisation, simply look for the things that might affect the
organisation and put each of them under the most appropriate
heading with an explanation as to why you feel each activity is an
opportunity or a threat. (i.e. what impact do they have on the
organisation)
PEST(LE) Analysis
Benefits
Identify and capitalise on opportunities
Obtain objective qualitative information giving a deeper
understanding of its markets
More sensitive to changing needs of customer
Improve the quality of strategy formulation and reduce risk
Education and awareness of the industry which should
reduce surprises
Political Analysis
Stability of political system
Availability of tax incentives
Government intervention in the market
etc
Economic Analysis
Interest rates
Exchange rate
Inflation rate
Fund movement control
etc
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Social Analysis
Gender
Age of population
Birth growth rate
Changing tastes and fashions
etc
Technology Analysis
R&D national expenditure
Types of technology available
Usage of technology
etc
Legal Analysis
Intellectual property legislation
Minimum wage regulation
Pricing regulation
Competition regulation
etc
Ecological Analysis
Pollution regulation
Environmental protection legislation
etc
Sources of information
industry analysis
regulatory and professional bodies
press
government
suppliers
watchdog groups
trade associations
consultants
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The Competitive environment five forces model
Porter identified five competitive forces that provide a useful

framework for assessing the competitive forces at work in an
industry /market
It can be used to determine whether that industry/market is
an attractive one to enter.
It is the collective strength of these forces that will determine
the profit potential.
Threat of New
Entrants
Bargaining Power Competitive Bargaining

of suppliers Rivalry Power of Buyers
Threat of
Substitutes
Threat of new entrants
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Threat of substitute products or services
Bargaining power of buyers
Bargaining power of suppliers
Rivalry amongst existing firms
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Evaluation of Environmental Models

Benefits Limitations
Consider a wide range They can distort reality
of potential impacts (the real business world
does not fall into neat
segments)
They allow for division They present the
of work environment as external
(the boundary between
internal and external is
blurred)
They provide a common Networks and
language interdependencies are
overlooked
They provide an insight They overload
into key strategic issues management
(should only a small
number of factors be
monitored?)
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Question
T is the CEO of S Company, a manufacturer of hair and body care
products. Over the years the company has been market leader in
its field. It has achieved this through being at the forefront of
product innovation. S Company has invested heavily in research
and development, which has enabled it to be the first in the market
to introduce new variants of the product range. However, this has
meant that the cost of operations has spiralled, leading to an
increase in the price of the companys products.
Up until last year, the company has been very successful in
increasing its market share. However, the most recent
performance indicators show that sales are down. It would seem
that supermarket own brand products are stealing market share
and T is worried about the future ability of the company to meet its
objectives for continual growth. T has decided to undertake a
strategic review, the first stage of which will involve conducting an
appraisal of its external environment.
Required
Explain what would be involved in undertaking an appraisal of S
Companys external environment, and how the information could
be used to help T in his review.
(10 Marks)
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Competitor Analysis
The systematic review of all available information (marketing,
promotion, financial, etc.) on the activities of competitors in order to
gain a competitive advantage
The Purpose of competitor analysis is:
o To help understand our competitive

advantage/disadvantage relative to competition
o To forecast competitors future strategies and how to

counteract them
o To give an informed basis for the construction of the firms

strategies, to gain or sustain competitive advantage
o To assist with the forecasting of the returns on strategic

investments when deciding between alternative options
o To forecast competitors likely reactions to the firms

strategic decisions
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Levels of Competitors
Brand
Industry
Form
Generic
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The following process can be used for gathering competitive

intelligence:
Identify competitors current strategy
Identify competitors objectives
Identify competitors assumptions about the industry/market
Identify competitors resources and capabilities
Information that should be gathered:
o Products and services

o Marketing
o Human resources
o Operations
o Management profiles
o Socio-political information
o Technology
o Organisational structure
o Competitive intelligence capacity
o Strategy
o Customer value analysis
o Financial information and Cost structures
Sources of data
From partnership
Physical analysis of competitors products
Banks and financial markets
Ex-employees of competitors
Generalisation from own cost base
Industrial experts and consultants
Physical observations of their operations
Published financial statements
Competitor press releases
Trade and financial media coverage
Inspection of wage rates in job adverts
Availability of the market segments they serve
The work methods they employ
Competitor threat
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We can link this back to Five Forces Analysis and the extent
to which competitors are a threat depends upon:
Number of rivals and the extent of differentiation in the

market a market for commodity products is always more
fiercely competitive
Entry and mobility barriers
Cost structure anything that makes it harder to make a
profit will make it more fiercely competitive
Degree of vertical integration vertical integration gives
power but removes flexibility
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Strategies that can be used against competitors and potential

new entrants
Attack competition
Market segmentation
Occupy new territory
Block first mover advantage
Rewrite the rules of the game
Technical innovation
Higher levels of service
Co-operation
Competitor Accounting
Evaluation of barriers to entry

Estimate the present value of the costs that an entrant will
incur to overcome barriers
Compare with present value of returns
Estimate competitors costs
Regarding competitor analysis
you should make sure that you are able to discuss the role of
competitor analysis do not forget that it is strongly linked to
Five Forces Analysis.
in scenario questions, you should be looking for clues to the

industry structure and, therefore, the nature of the
competition that a firm in likely to experience in that industry.
you should also be able to describe a process for gathering

competitive intelligence, including the sources you would use
tailored to the scenario of the question
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National Competitive Advantage
Porters Diamond
This model can be used to answer questions such as:
1. Where should an organisation locate to gain a competitive

advantage?
2. Why certain organisations are successful international firms
and how they sustain superior performance?
3. Where should an organisation locate part of its operations
(e.g. production) to take advantage of what a country offers?
4. What are the implications for competitive strategy (home and
overseas)?
Firm strategy,
structure and rivalry
Factor conditions Demand conditions
Related and
supporting industries
The four elements on the diamond that need to be analysed

are;
1 Demand conditions
o The demand conditions in the home market are important
because:
If the demand in terms of volume is substantial, it
enables the firm to obtain the economies of scale
and experience effects it will need to compete
internationally.
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The experience the firm gets from supplying

domestic consumers will give it an information
advantage in international markets, provided that:
(i) its customers are critical and demanding

enough to force the firm to produce at world-
class levels of quality in its chosen products
and
(ii) its customers encourage the firm to develop

new and sophisticated products.
2 Related and supporting industries

o The internationally competitive firm must have enjoyed the
support of world-class producers of components and
related products. Moreover, success in a related industry
may be due to expertise accumulated elsewhere.
3 Factor conditions
These are the basic factor of production referred to in
economic theory. Factors may be of two sorts:
(i) Basic factors such as raw materials, semi-
skilled or unskilled labour and initial capital
availability. These are largely natural and not
created as a matter of policy or strategy.
(ii) Advanced factors such as infrastructure,

training and skill, R & D experience, etc. are a
matter of strategy.
4 Firm structure, strategy and rivalry

Intense rivalry can lead to emergence of firms with strong
competitive characteristics.
Search for competitive advantage within a nation uses
competitive skills, which promote domination in worldwide
markets.
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The model also includes Government and Chance Events.
1. The role of government - subsidies, encouraging enterprise,

infrastructure building, legislation and education all impact on
firms.
2. The role of chance events can change the other elements

on the diamond such as war, terrorism and national
discoveries.
Gaining a national advantage
Successful firms from a particular country tend to have

linkages between the four factors, a phenomenon that Porter
calls clustering.
Clustering may take place in two ways:
1 Common geographical location (eg Silicon Valley, City
of London)
2 Expertise in key industry (eg Sweden in timber, wood
pulp, wood-handling machinery).
Clustering allows for the development of competitive
advantage for the following reasons:
(i) transfer of expertise, eg through staff movement and
contracts
(ii) concentration of advanced factors (eg

telecommunications, training, workforce)
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Sources of Information for Environmental Analysis.
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Internal Analysis
Appraising internal resources and capabilities

Identification of those things the organisation is good at in
comparison to the competition
Position Audit Value Chain
Value Chain
Possibly one the most powerful techniques for analysing the

strengths and weaknesses of an organisation and its
component functions.
The model looks at the functions within the organisation to
determine where value is added, either by cost leadership or
differentiation the only two routes to competitive advantage
(according to Porter).
According to Porter there are five primary activities and four

support activities.
The primary activities:
1 Inbound logistics of raw materials and input components eg.

storage, inventory control, materials handling etc.
2 Operations that transform inputs into products eg.

manufacturing, packaging and assembly etc.
3 Outbound logistics of the finished goods eg. transport and
distribution etc.
4 Marketing and sales, eg sales administration receiving

orders etc.
5 Customer service, which includes after sales activities,

installation, repairs and customer training etc.
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The support activities:
1 Procurement how the resources are purchased for the

organisation.
2 Technology development how systems and technology

assist the firm.
3 Human resource management how people are organised

and managed within the organisation.
4 Firm infrastructure how the firm is organised, eg

centralised, decentralised, product based etc.
Linkages among primary and support activities need to be

examined in order to identify areas of competitive strengths and
any possible synergies from the sharing of value chain activities.
Firm infrastructure
M
Technology development
A
Human resource management R
G
IN
Procurement
Inbound Operations Outbound Marketing Service

logistics logistics and sales
IN
G
R
A
M
Suppliers Firms Channels Customers

value chain value chain value chain value chain
Competitors
value chain
The value added by the entire system is the difference between

the revenue received by the last time buyer and the costs
generated in the system. This is shared between the firms at the
various stages of the value system.
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The SWOT analysis - Corporate appraisal
SWOT
A critical assessment of the strengths and weaknesses,
opportunities and threats (SWOT analysis) in relation to the
internal and environmental factors affecting and entity, in order to
establish its condition prior to the preparation of the long term plan
SWOT forces management to focus on the big issues.
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The Use of Stakeholder Mapping
Stakeholder analysis
Stakeholders are those individuals or groups who have an interest
in, can be affected by or can affect the outcome of the strategy.
Stakeholders exert powerful influences on a business and

management must balance the returns to various stakeholder
groups
Internal stakeholders employees and management
Connected stakeholders shareholders, customers and
suppliers
External stakeholders governments, community, local
pressure groups
The Mendelow Matrix assessing power and

interest of stakeholders
A useful checklist for the management of stakeholders is as
follows:
Identify the key stakeholders
Determine vested interests
Identify the specific stake
Evaluate stakeholder influence status, claim on resources,
formal representation in decision making process
Modify project strategy
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Interest High
Low
Keep Informed - Education

Minimal Effort - Direction
& Communication
Mendelow's
power-interest
Power matrix
Keep Satisfied -
Key Players - Participation
Intervention
High
Resolving Competing Objectives (Cyert & March)

Satisfying
Sequential attention
Side payments
Exercise of power
Handling Conflict (Thomas)

Avoidance avoid, suppress, ignore. This is not
recommended as it does not resolve the conflict which may
break out again when the parties meet in the future
Accommodation one party putting the others interest first.
Compromise each party gives something up if both parties
see this as losing something it may not be ideal
Competition parties seek to maximise their own interests
and goals, it creates winners and losers and can prove
damaging to the organisation
Collaboration differences are confronted and jointly
resolved so that a win: win outcome is achieved
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A2(b) Compare and contrast approaches to strategy

formulation
A2(a) Discuss concepts in established and emergent thinking
in strategic management
The strategy formulation process

According to Johnson and Scholes, there are three stages in the
process of strategy formulation: strategic analysis, strategic choice
and strategic implementation.
Strategic analysis requires the analysis of the internal and

external environments. A corporate appraisal (or SWOT analysis)
is undertaken to ascertain the internal strengths and weaknesses
and the external opportunities and threats.
Strategic evaluation & choice requires management to identify

strategies to take advantage of strengths and opportunities and
strategies to minimise weaknesses and threats.
Strategic implementation (Review & Control) requires

organisational change, which will need to be managed.
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Rational Strategy Process
Position Audit Review &

Internal Analysis Control
Corporate Strategy
Mission & Appraisal Strategic Option Strategy
Evaluation &
Objectives Generation Implementation
(SWOT) Choice
Environmental Analysis
External Analysis
Competitor Analysis
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This approach generally involves a deliberate step by step

approach.
The company will start with the existing strategy of the
organisation
The current strategy is then evaluated using information from
the internal and external environment
The information from the external environment helps to
analyse potential opportunities and threats
The information from the internal audit helps to analyse the
organisations strengths and weaknesses.
Strategic alternatives are evaluated to determine which
strategy will best position the organisations strengths
while minimising threats and weaknesses.
The organisation can then determine if the organisation
should continue with its existing strategy or formulate a new
strategy in order to compete more effectively.
Then a plan is prepared to assist in the implementation of the
chosen strategy and then evaluating performance to
determine whether or not goals have been achieved.
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Mission
A mission is an open-ended statement of the firms purposes and
strategies.
A statement of the purpose of the business
A statement of its products and markets
A statement of its competitive strategy or positioning
A statement of its principles, ways of doing business and
social responsibilities.
A definition of the industry the organization competes in
S
C
O
P
E
Organisational goals and objectives

General statement of aim or purpose may be qualitative in
nature
A goal is a target such as we want to increase our market
share.
An objective is a quantification of a goal.
Organisational objectives when set by managers should be

S
M
A
R
T
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The goal structure is the hierarchy of objectives in the

organisation.
Mission Statement is translated into
Strategic
Tactical
Opertaional
Individual
Objectives perform five functions
1. Planning
2. Responsibility
3. Integration
4. Motivation
5. Evaluation
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Approaches to formulating business strategy

Typical features of the process
~ A designated team for strategy development
~ Formal collection of information for strategy purposes
~ Collective decision making by the senior management team
~ A process of communicating and implementing the strategy
~ Regular review and control of the strategy
Benefits Drawbacks
Avoids short term Can be too infrequent to
behavior by considering allow the business to be
the nature of the dynamic. If the business
environment. Anticipating environment changes
competitor actions is unexpectedly then the
about being proactive in companys performance
planning in order to keep may deteriorate further.
ahead. A formal approach does
Goal congruence not encourage the
providing direction for the development of more
different areas of the radical and innovative
business. Targets set at strategies and often
different levels with enable results in the loss of
the strategy to be entrepreneurial spirit since
implemented and it encourages rewards to
reviewed. be given to managers who
If the company has a clear carry out their part of the
idea of where it is going strategy sticking to the
then the stakeholders conventional way of doing
perceptions of the business.
business should be Does not encourage
improved. Investors may contributions from staff
be more confident of who are lower down the
higher returns which could hierarchy. Yet it is often
lead to a higher share these staff who are most
price. in touch with the customer
and can see the impact of
competitor activity.
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It assumes that the

strategist can make
reliable business
assumptions about the
future and particularly
about the opportunities
and threats that face the
company.
Too expensive &
complicated for small
businesses
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Strategy and Small Business
Business goal aligned with

owner manager
Limited number of options
Limited resources
Expensive and time consuming
Could get in the way of creativity

& innovation
- 46 -
_____________________________________________________________________
Alternatives to the rational approach to Strategy

There is a need to question some of the assumptions of the
rational approach
People not organizations have objectives peoples beliefs
are partially irrational therefore any strategy based on them
would not be completely rational
Senior management should not be the only people involved
in setting the strategy
The process is not a simple step-by step process
Actual strategies often need to be adapted
Strategies are often adaptive the organization adapts to the
circumstances around it
- 47 -
_____________________________________________________________________
Emergent strategies
Strategy is best constructed as an emergent process. In a rapidly
changing and dynamic environment Mintzberg contends that
formal planning is inadequate and rather, it is better that the
organization retains flexibility and be ready to adapt strategy as its
competitive environment changes.
Mintzberg suggested that few strategies are consciously planned

but are the results of patterns of behaviour and emerge through
the ways in which people do things.
The totality of an organisations strategies can be seen as a
combination of planned and emergent strategies.
Planned Deliberate Realised

or Strategies Strategies
Intended Unrealised
Strategy Strategies
Emergent
Strategies
- 48 -
_____________________________________________________________________
Evaluation of approaches to strategy

A rational approach is usually used as the basic framework
(evolutionary)
Strategies can be influenced by irrational factors (adaptive,
systems)
Most real world strategies are balanced between the two
(incremental taking small steps and testing strategies as
they go)
- 49 -
_____________________________________________________________________
Resource Based versus Positioning Views on

strategy formulation:
Positioning view competitive advantage stems from the firms

position in relation to its competitors, customers or stakeholders. It
is sometimes called an outside-in view because it is concerned
with adapting the organisation to fit its environment.
Positioning based view strategy should start with the setting of a

mission and strategic objectives. These should be expressed in
terms of the customers the firm seeks to serve and the needs it
seeks to satisfy, ie what market it is in. Assessing resources and
competencies should be undertaken in terms of how they affect the
ability of the business to serve this market and to identify where
improvements in these will be needed. It places the customer and
market at the centre of strategy
Resource based view the principle of the resource based view is

that management should identify which of the activities carried out
by the firm are not easily copied or improved on by competitors.
Management should make these activities the core competencies
of the business and then develop products and services based
upon them.
This is an inside-out view of strategy because the firm must go in

search of environments that enable it to harness its internal
competencies.
Modern strategy formulation is tending towards the resource based

view for the following reasons:
Strategic management should focus on developing core

competencies. The sensible path open to management is to
develop key competitive strengths that will sustain the business in
the uncertain times ahead. Therefore identify the competencies
first and develop objectives aimed at exploiting and maintaining
them.
- 50 -
_____________________________________________________________________
It will avoid the firm losing sight of what it is good at. Some early
objectives-led views insisted that missions be formulated in terms
of the needs that the firm satisfied. Consequently railways found
themselves in the transportation business which led to
unsuccessful diversification into road services where the firms
could not compete. Attention to core competencies means firms
will stick to the knitting.
Underlying Principles of the Resource Based Approach

Sustainable competitive advantage depends on the
organisations possession of unique resources or distinctive
capabilities that cannot be easily replicated by its competitors
Resources include all assets, capabilities, organisational
processes, information and knowledge controlled by a firm
that enable it to create and pursue effective strategies
Writers views on the resource based approach

Barney
o Valuable
o Rare
o Difficult to imitate
o No freely available substitutes
Kay
o Competitive architecture
o Reputation
o Innovation
o Ownership of strategic assets
- 51 -
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Critical Success Factors
The identification of critical success factors is a key part of the

strategy development process since they will help to determine the
resources and competences needed to achieve competitive
advantage. They are important in establishing where a business
must excel to outperform thecompetition and as such CSFs are
crucial elements of the firms business strategy.
Customers will value product/service features to a greater or lesser

extent and so it will be critical to the development of a business
idea to understand which features are of particular importance.
CSFs relate to those product or service features that are
particularly valued by a group of customers, and can be used to
distinguish between the offerings of potential providers.
In summary, CSFs are those factors where performance

requirements will be fundamental to the competitive success and
identifying the skills processes and technologies that support them.
Core competences are closely related to CSFs since they are the
distinctive group of skills and technologies that enable an
organisation to provide a particular set of benefits to customers. In
other words, the things that the business must do well and be
difficult for competitors to imitate in order to deliver on the critical
success factors that will give it competitive advantage.
The things the company has to do well in order to outperform the

competition (usually customer focused)
1. Identify the CSFs
2. Identify the underpinning competences
3. Identify performance measures
4. Ensure advantages are sustainable
5. Monitor competitors
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Question
The PAX company is a successful supermarket chain. It has a
strong reputation for innovation with its successful launch of
internet shopping and clothes ranges. PAX Companys ability to
provide value for money through the efficient use of operations, its
use of the latest technology and its strong customer focus has
enabled it to gain the largest share of the market in Country S.
Following detailed analysis, the senior management of PAX

Company has concluded that the market in Country S has reached
saturation point and that the only opportunity for significant growth
is to develop activities in new markets abroad.
Acting partly on the advice of the central governments Overseas

Advisory Board, and using its own research team, PAXs Board
has made the strategic decision to enter into a new market in
Country Y. The location selected for the first supermarket is in the
suburbs of a growing city where groceries, clothing and the other
non-food products that PAX intends to supply are currently
provided by a large number of small shops.
This is a major new project for the PAX Company, and as such
requires strong project management skills. D has been appointed
as project manager and is already facing significant challenges in
terms of the reactions to the project from different stakeholders.
The land on which the supermarket will be built has been

purchased and following a series of negotiations with state and
local government officials, planning permission has been granted.
However, there have been strong protests from a number of
groups including the Citys Civic Society, local residents and
shopkeepers who are located near to the proposed development.
The Civic Society is concerned about the detrimental impact on the

local environment. Residents are concerned about the potential
increase in traffic and the danger it poses to the children at the
local school. The shopkeepers are fearful about the impact of the
new supermarket on their future business prospects.
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_____________________________________________________________________
The media including television, radio and newspaper have

publicised the fears of the local residents and shopkeepers and
these two groups, together with the Citys Civic Society have
formed a coalition to attempt to prevent the development.
Required
(a) Explain how the project team should manage the different
stakeholders who threaten the future of PAX Companys
project to open a supermarket in Country Y. (13 Marks)
(b) Discuss the Resource Based approach to strategic

management, making reference to the resources and
competences that appear to give PAX Company
competitive advantage.
(12 Marks)
(Total for Question 25 Marks)
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______________________________________________________ _______________
A2(a) discuss concepts in established and emergent thinking

in strategic management
Changes in the business environment have occurred due to

the following:
Saturated home markets

Trade barriers coming down
Improved communications technology
Access to cheaper resources
Increasing competition
Fast changing
In todays business environment organisations need to be flexible

so that they can be more responsive to change.
The Flexible Firm
Structure
Handy The Shamrock Organisation
CORE
PERIPHERAL
OUTSOURCING
- 55 -
_____________________________________________________________________
Employment
Functional
Numerical Temporal
Financial
- 56 -
_____________________________________________________________________
Complex organisational forms
Remember, an organisations strategy should focus management

on being both efficient and effective. Efficiency (doing things right)
and effectiveness (doing the right things) must be pursued
simultaneously in todays competitive environment.
This drive has widened some organisational structures to include

external groupings such as franchised firms, resellers who are
allowed to sell other products, joint ventures, partnerships and
alliances. In this way it is possible to have a market penetration at
lowest cost and internally reduce overheads by outsourcing
activities considered non-core into the market.
Network Organisations
Network organisations rely on relationships with other

organisations in order to carry out their work. Eg Amazon, UK
hospitals, Airlines
Network organisations can choose to buy in a range of value-

creating activities:
Contract staffing
Use of specific capital assets
Outsourcing elements of production or service provision
Reliance on outside organisations for referral of business
- 57 -
_____________________________________________________________________
Transaction cost theory
Purpose of transaction cost analysis

To identify the most economically viable solution
Identification of unique competences
To support organisational restructuring
Information technology has helped companies to lower
transaction costs making it worthwhile to contract with
external suppliers.
Transaction Costs are concerned with the costs of control

specifically related to the delivery of a product or provision of a
service
Transaction Cost = Unit Cost + Cost of Control
. Williamson suggests two methods of controlling resources and

deciding how to manage transaction costs
to buy in (market solutions) and which

to own and operate directly (hierarchy solutions)
Transaction cost theory states that companies exist because they

can conduct transactions internally more cheaply than they can
with external companies.
- 58 -
_____________________________________________________________________
When the organisation relies on outside suppliers for an input or

service (market solution) in addition to the price for the bought-in
service it will incur the following transaction costs:
negotiation and drafting of the contract
Monitoring the suppliers compliance
Penalty payments if the contract needs to change
Pursuing legal actions for redress due to non performance

These costs arise because both the firm and the supplier wish to
be protected and use the contract to define the risks that each are
taking on.
Bounded rationality neither party can completely anticipate

the future
Opportunistic behaviour- each party seeks to pursue their

own economic self interest.
Managers will often suggest an internal solution in order to

make their lifes easier in terms of control and certainty, and
it increases their empire.
Consideration of the decision (in-house or external)
If these transaction costs become too high the

organisation may reduce its costs by taking the supply in-
house (hierarchy solution).
Another and the most important reason for bringing the

transaction in-house is due to asset specificity.
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_____________________________________________________________________
Asset specificity cost of an external solution is low when

specificity of the assets are low i.e. the assets required to
fulfil the contract are readily transferable to other
transactions.
Asset specificity can force the buyer into long term contracts
with the sole supplier, or encourage an in-house supply as
the high asset specificity may result in no suppliers coming
forward on the market
o Site
o Physical
o Human
The asset specific concept of Williamson suggests that

corporations reduce transactions costs by vertically
integrating which creates a more complex internal
environment. (a company ends up operating in more
than one market with more than one product)
To-day this concept is challenged and organisations will

consider the external market place
Due to realisation that internal costs can be
undervalued
Due to the fact that technology lowers the cost of
searching & maintaining the supplier relationship
The conclusion that should be drawn is that the decision

should be based on the most economically viable solution for
the company (i.e. the shareholders).
- 60 -
_____________________________________________________________________
A Wider Stakeholder /Ecological perspective
Shareholder Perspective (Friedman) the primary purpose of an

organisation is to make as much money as it can, maximising
wealth for its owners and that it is the role of the state to regulate
organisational activities from a social perspective.
Stakeholder Perspective accepts that organisations should have

a duty towards the wider community and society.
Social responsibility can be defined as accepting responsibilities

over and above legal responsibilities. Issues commonly associated
with social responsibility include:
- 61 -
_____________________________________________________________________
How does social responsibility conflict with benefiting

shareholders?
Extra cost involved in implementing socially

responsible strategies
o Cost of treating emissions and waste
Reduced revenues
o Refusing to do business in certain countries
Management time should be about running the
business
Funds that may otherwise have been paid out in
dividends are instead being used to make charitable
donations
Can social responsibility improve shareholders returns?

Any strategy that conflicts with the needs and values of
society is unlikely to survive in the long term
o Negative publicity McDonalds received
Reducing waste and pollution and saving energy and
recycling resources may lead to lower overheads, which
in turn can help to improve profits.
Could attract socially conscious consumers
Increase corporate image and have a positive effect on
share price
- 62 -
_____________________________________________________________________
Ecological Perspective
Closely aligned with social responsibility

Concerned with relationship of the organisation & its natural
environment
Companys need to monitor their impact on the environment
Areas that might be considered will include

Carbon emissions
Energy reduction
Treatment of waste
Compliance with environmental legislation
Continuous improvement
Triple bottom line accounting (financial/social/environmental)
- 63 -
_____________________________________________________________________
Ethics is the code of moral principles and values that govern

behaviours with respect to what is right or wrong.
good ethics is good business this imposes on the business the

duties of being a good corporate citizen
The importance of ethics

Ethical issues are important for a number of reasons:
Some organisations have incomes larger than those of many

nation states. How these companies use their wealth has
numerous implications for the well-being of the countries in
which they operate.
Typically, senior managers in big firms occupy positions where
they can hurt or promote the interests of large numbers of
employees, and might take decisions affecting entire
communities.
Consumers increasingly judge the worth of a company in terms
of how it deals with ethical and environmental problems.
Certain business practices are considered unethical throughout the

world. Examples are:
The dumping of products, ie selling them at less than cost price

in order to drive competing firms out of business;
Covert involvement in the political affairs of a country;
Knowingly breaking the law on consumer protection, health

and safety of employees, equal opportunities, pollution of the
physical environment, etc.
- 64 -
_____________________________________________________________________
Professional ethics are principles that guide the decisions and

behaviours of managers with regard to whether they are right or
wrong in a moral sense.
CIMAs ethical guidelines: remember COPPI
Confidentiality
Objectivity
Professional competence and due care
Professional behaviour
Integrity
Encouraging ethical behaviour

Codes of practice
A code of practice is a document published by a government
agency, professional body, trade association or other relevant
authority outlining model procedures for good practice in a
particular field. Some large organisations issue their own in-house
codes of practice on particular matters.
Codes give examples of excellent and bad behaviour, and

recommendations regarding how things should be done.
Government codes of practice (eg those issued by the Equal
Opportunities Commission) are not legally binding, but will be
looked at by the courts when adjudicating cases.
Role of the professional bodies/organisations in

regulating members behavior
o Education and communication
o Training
o Punishment
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_____________________________________________________________________
Management of Relationships (C)
C1 (a) discuss the concepts of power, bureaucracy, authority,

responsibility, leadership and delegation
Power is the possession of a controlling influence.

Power is the ability to exert influence. To have power is to be able
to change the behaviour or attitudes of other individuals.
The sources of power

Power does not simply derive from an individuals level in the
organisational hierarchy. John French and Bertram Raven have
identified five sources or bases of power. Each may occur at all
levels.
Reward power is based on one person having the ability to reward

another person for carrying out orders or meeting other
requirements.
Coercive power, based on one persons ability to punish another
for not meeting requirements, is the negative side of reward
power.
Legitimate power exists when a subordinate acknowledges that a
manager has a right or is lawfully entitled to exert influence
within certain bounds.
Expert power is based on the perception or belief that a person
has some relevant expertise or special knowledge that
others do not.
Referent power, which may be held by a person or a group, is
based on one persons desire to identify with or imitate
another. For example, popular, conscientious managers will
have referent power if subordinates are motivated to emulate
their work habits.
- 66 -
_____________________________________________________________________
Bureaucracy is based on authority derived from the law

and written rules. Weber suggests eight characteristics
Specialisation
Hierarchy
Rules and regulations
Impersonality
Appointed officials
Career officials
Fulltime officials
Public/private division
- 67 -
_____________________________________________________________________
Authority is the right to do or act (to take actions and

make decisions)
Weber defined three bases for authority
Charismatic derived from the personality of the leader
Traditional derived from custom and practice
Rational-legal
- 68 -
_____________________________________________________________________
Responsibility involves obligation (accountability).

Responsibility cannot be delegated, the buck should stop with the
responsible manager.
Delegation is the process whereby a manger or

supervisor transfers part of his or her authority to a
subordinate.
Delegation is an important aspect of organisation and effective

management. Without delegation, formal organisations could not
exist. If there were no delegation the chief executive would be
responsible for everything and would be the only person with the
authority to do anything. Consequently nothing much would ever
get done. Because management is the act of getting things done
(accomplishing objectives) through the work of other people, to put
it simply, it is obvious that management could not succeed without
delegation.
Reasons for Delegation
Effective time management routine task are reduced so
that time can be spent on strategic decisions
Effective stress management staff have physical and
mental limitations this reduces personal job overload
Speeds up decision making and implementation
(decentralisation allows managers to react quicker to local
changes)
Assists with progression succession planning and career
development
Increases the job satisfaction of employee - increase
motivation (unless delegation only of mundane tasks without
satisfaction to the subordinate)
Effective deployment of resources employee has the
expertise
- 69 -
_____________________________________________________________________
Process of Delegation (TARA)

Targets / Standards
Set the targets/performance levels required (individual
chosen should be capable of reaching the standards)
Set the levels of authority
Set the level of resources to be made available in order to
complete the task (ensure these are made available)
Actual Performance
Ensure that there is a mechanism for measuring actual
performance this should be achievable if SMART
objectives were set
Regular Review
Maintain frequent contact to review progress made, give
constructive feedback and be available for help and
advice if requested
Action (appropriate)
Frequent review allows action to be taken if the task is not
being completed as required (accountability remains with
the superior it is important to keep the task on track)
Why is there a reluctance to delegate?

Lack of confidence in the abilities of subordinates
Fear of releasing so many duties that the manager
eventually becomes redundant
Organisational culture may not encourage delegation
(delegation is seen as avoiding ones own duties)
Desire of managers to keep control
Manager not trained in delegation
Seen as ineffective time management (quicker to
complete the job yourself than spend the time explaining it
to someone else)
Ineffective stress management the manager should not
delegate so much as to overload a subordinate totally.
- 70 -
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Question
G, the senior partner of L, a medium sized accounting firm, has
worked for L for over twenty years and has a sound knowledge
and understanding of the different activities of the firms business.
over the years G has become known for his fairness in how he
manages staff. he is also well liked and respected for his
enthusiastic approach. He always has time to encourage and
mentor younger members of staff.
The firm has recently invested in new technology which will

improve the effectiveness of its office systems, but will mean that
the roles and responsibilities of the support staff will change. G
has taken on the difficult role of leading the project to introduce the
technology and new working practices. He knows that the project
will be meet with some resistance from some members of staff and
he will need to draw on various sources of power to ensure the
changes are successfully implemented.
Required
Describe the different sources of power that G has and which will
help him in introducing the changes (10 Marks)
- 71 -
_____________________________________________________________________
Management Leadership
Classical Direction
o Scientific (Taylor) Vision
o Functions (Fayol) Influencing others
o Bureaucracy Achieving goals
Human Relations Foresight
o Mayo empowerment
o Herzberg
Systems
o Trist & Bamforth
Contingency
o No one best
approach
- 72 -
_____________________________________________________________________
Leadership getting people to do things willingly

Leadership involves possessing vision, and the ability to
communicate that vision.
Can leaders be trained or is someone born a leader?
Robert Blake and Jane Mouton

Blake and Mouton argued that managerial competence can be
taught and learned. Their managerial grid provides a framework for
understanding and applying effective management.
High country club team

9 management management
CONCERN
FOR Middle-of-the-
PEOPLE road management
impoverished authority-compliance
1 management management
Low
Low 1 9 high
CONCERN FOR PRODUCTION
- 73 -
_____________________________________________________________________
John Adair
Effective leadership requires a bringing together of task, team and
individual needs.
Concern for task
Concern for team Concern for individuals
McGregor (assumed knowledge from P4)

Theory X
Theory Y
Kurt Lewin
Democratic
Laissez-Faire
Authoritarian
- 74 -
_____________________________________________________________________
Likert identified four basic leadership styles

(Tannenbaum & Schmidt)
Exploitative Benevolent Consultative Participative

Authoritative Authoritative (Joins/
(Tells) (Sells) (Consults) Abdicates)
Decisions Increasing trust in subordinates Complete trust
Imposed ability and discussion
Motivated by Motivated by
threats More participative motivational rewards
style goals agreed
Centralised High degree of

decision making delegation
Increasing delegation
Rare supervisor/ Frequent
subordinate communication
communication
Increasing communication
Superior and Superior and
subordinate act subordinates
as individuals act as a team
Increasing teamwork
- 75 -
_____________________________________________________________________
Leadership style will depend on

Task
o Simple/complex
o Structured/unstructured
o Significance
o Innovation required
Individual
o Motivation
Theory X and Y
Maslows hierarchy of needs
Herzberg
o Maturity (Hersey & Blanchard)
Willingness
Ability
Knowledge of task have they carried out the
task before?
Leader/subordinate relationship (Fiedler)

o Militant low relationship
o Co-operative high relationship
Leader position/power high/low (Fiedler)
Group needs/organisational needs
Types of groups
A group is defined as two or more people who interact with and
influence each other toward a common purpose.
Formal groups
Formal groups are created deliberately by managers and charged
with carrying out specific tasks to help the organisation achieve its
goals.
The most common type of formal group in organisations is the
command group, which includes a manager and his subordinates.
Permanent formal groups include command groups and
permanent committees. Temporary formal groups include task
forces and project groups that are created to deal with a particular
problem and are disbanded once the problem is solved.
- 76 -
_____________________________________________________________________
Informal groups
Informal groups emerge whenever people come together and
interact regularly. Members of informal groups tend to subordinate
some of their individual needs to those of the group as a whole. In
return, the group supports and protects them.
Informal groups may further the interests of the organisation
Saturday morning football games, for example, may strengthen the
players ties to the organisation. They may also oppose
organisational objectives, such as high performance standards,
when these are considered harmful to the group.
Tuckman on groups
Tuckman suggested that groups go through four stages of

development. It is only when these stages have been successfully
completed that the group can concentrate on the attainment of its
purpose.
Forming (ie getting to know each other) This is the initial period
when the individual members of the project team come
together, finding out about each others attitudes, abilities
and characters. The initial objectives and parameters of the
team work are established which, in this case, will be
determined by the project scope. It is at this stage that
individuals will work out initial roles. Relationships,
acceptable behaviours and codes of conduct.
Storming (initial conflict as individuals compete for leadership

positions and to influence the direction taken by the group).
This stage can be characterized as a period of
disagreements, arguments and high emotion. As members
of the team begin to work together and get to know each
other, so they present their different views on the best way of
achieving the project objectives and different approaches to
working on the project.
- 77 -
_____________________________________________________________________
Norming (the establishment of shared values) It is important that

conflicts at the storming stage are resolved. It is important
that team members reach agreement over any issues
through negotiation, compromise and finding areas of
commonality. Team cohesion develops during this stage
and norms of what is acceptable behavior, which in turn will
govern individual members behavior whilst on the project,
are established. This stage is important in agreeing
procedures and standards of performance.
Performing (where the group utilises its strengths to perform

desired activities). When the group has successfully
progressed through the three earlier stages it will have
created cohesiveness to operate effectively as a team while
working on the project. At this stage the team will finally be
able to concentrate on the achievement of project objectives
and it will be at its most efficient because all energies are
focused on the project task, rather than conflicts within the
group.
There is a further stage, adjourning, which will happen when the

project comes to an end, and project team members return
to their normal duties. This is something referred to as
mourning, when the project team disbands.
- 78 -
_____________________________________________________________________
Belbin on groups
Many groups find difficulty in moving beyond the second and third
stages. Team-building exercises, to encourage group cohesion,
are an attempt to solve such problems.
Research has shown that individual contributions to groups differ,

and that in some cases they are effective whilst in others they are
not. Belbin has argued that each individual has a preferred team
role and a secondary role which he adopts if unable to occupy his
preferred role. These roles are:
Chairman (setting the agenda),

Shaper (defining the task),
Plant (generating ideas),
Monitor/Evaluator (evaluating ideas),
Company Worker (organising the group),
Resource Investigator (seeking out resources),
Team Worker (maintaining group cohesion),
Finisher (ensuring deadlines are kept),
Expert (technical person).
On the basis of research of this type managers have attempted to

influence group performance by selecting appropriate team
members.
Whilst team working is generally thought to be a useful approach

to achieving organisational goals, it can have negative effects.
The most damaging of these is groupthink, where pressures
towards group conformity stifle creativity.
- 79 -
_____________________________________________________________________
Group norms and conformity

Over time, group members form expectations about how they and
the other members of the group will behave. They exert pressure
on one another to ensure that these expectations are met. The
anticipation of rejection or acceptance by the group is usually
enough to ensure that members conform to their groups
expectations in advance.
When an individual does not conform to group norms, the other

members of the group will initially try to persuade the deviant to
conform. They will try to reason with him or make pointed jokes at
his expense. If this approach fails, they are likely to increase the
pressure. If the norm being violated is considered important, they
will use criticism, sarcasm, ridicule and finally ostracism total
rejection of the individual through the silent treatment.
Group cohesiveness
The cohesiveness, of a group is an important indicator of how
much influence the group has over its individual members. The
more cohesive the group is, the more strongly members feel about
belonging to it, the greater its influence. If the members of a group
feel strongly attached to it, they are not likely to violate its norms.
Cohesiveness and performance

Studies have found that the output of members of cohesive groups
tends to be more uniform than that of members of less cohesive
groups. These findings are important for managers because
cohesive groups commonly set their own production standards.
Groups that are hostile to management may restrict their output to
levels well below management standards. This sort of restriction
often occurs among factory work groups paid by piece rates
because they may believe that if they reach or surpass
management standards, management will establish higher
standards or lower rates.
- 80 -
_____________________________________________________________________
Project objectives need to be clear and accepted by

members of the team
Objectives need to be reinforced throughout the project,
using team briefings
Team building exercise are helpful when there is a diversity
of views and attitudes.
Individual members need to participate, divergent views
need to be encouraged, the emphasis being on a carefully
considered decision making process. (the opposite would be
the concept of groupthink when members agree with a
decision which they know is wrong or where the group fail to
examine all of the options available or the Abilene
paradox when no-one wants to disturb the consensus.)
The group need to consider the implications of any decision
and assess the acceptability of any associated risk. (Risky
shift phenomenon is where groups are prepared to take
riskier decisions than would be taken by any one individual
member of the group).
Making formal groups effective

Because formal groups are vital to successful organisations,
managers must learn to use them effectively.
Several formal procedures are useful in helping groups operate

effectively:
The group goals should be clearly defined, preferably in writing.

This will focus the groups activities and reduce discussion of
what the group is supposed to do.
The groups authority should be specified. Can the group
merely investigate, advise and recommend, or is it authorised to
implement decisions?
The optimum size of the group should be determined. With
fewer than five members, the advantages of group work may be
diminished. Potential resources increase as group size
increases.
- 81 -
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C2 (b) Discuss the roles of negotiation and communication in

the management process, both within an organisation and
with external bodies
Negotiation
Preparation
Opening both sides present their position
Bargaining persuade the other side that your case is strong
Closing reach agreement (win: win)
Negotiation involves argument and persuasion in order to

strengthen ones own case by undermining the opposition.
It occurs when there is no established set of rules for

resolving the conflict and parties are committed to search for
an agreement rather than fighting openly.
Negotiation is often necessary within organisations to resolve

conflicts of interest between two or more parties which have
arisen because the parties have different objectives.
It has, overtime, become a useful and civilised way of

settling disputes. In earlier times industrial disputes often
resulted in industrial sabotage by workers and sometimes
physical violence between workers and their employers.
It is likely that conflicts will arise as a result of the

restructuring proposals which will involve the need for the
relocation of staff and possible redundancies.
These conflicts may be resolved through negotiation

between management and the unions who are representing
employees.
The process of negotiation between employers and trade

unions is often referred to as collective bargaining and
involves at least two parties with a defined interest.
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Without any negotiation the result could be that the union

calls for industrial or strike action which could have a
detrimental impact on the companys future survival.
Approaches to the negotiation process can be through

focussing initially on each sides primaryobjectives, rather
than becoming distracted by minor negotiating points at an
early stage.
It is necessary to maintain some flexibility within the

negotiation process and for both parties to be prepared to
settle for what is fair.
It is important to listen to what the other side wants and to

make an effort to compromise so that both sides can attain
their goals.
However, this is often where negotiation can fail because of

the tensions between the different objectives that can never
coincide.
This could occur since the unions main objective will be to

keep jobs, whilst the organisation may see no alternative to
job cuts if it is to survive in the long term.
It is likely that in the first stages of negotiation that the union

will reject the proposals as unacceptable and will prepare its
negotiation strategy. While the union will not want to agree to
job losses it might recognise that they are inevitable and
concentrate instead on persuading management to provide
generous severance pay above the legal minimum.
The ideal will be to achieve a win-win outcome where both

sides achieve enough of their objectives to be satisfied with
the end result, trading-off wins and losses so that each side
get something in return for everything it concedes on. Win-
lose or lose-lose outcomes are in no ones best long term
interest.
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It is suggested that effective negotiation between should go

through the following four stages:
Preparation which involves both parties gathering information and

insight to the problems in order to understand the constraints
acting on the negotiating parties. Who is involved in the
negotiation, what the concerns of each party are and what the goal
of the negotiation is will need to be determined. Another key
feature at this stage is to determine the time for negotiation.
The opening phase of negotiation involves both sides presenting

their starting positions to one another. It is at this stage that the
greatest opportunity is present to influence the other side.
The bargaining phase is where both parties will aim to narrow the
gap between the two initial positions to persuade the other party
that its case is so strong that the other must accept less than it had
planned.
The closing phase of negotiation represents the opportunity to

capitalise on the work that has been done at the earlier phases. It
is at this stage that agreement is reached. The outcomes from the
agreement should be publicised and implemented.
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Communication
Meetings should always be seen to benefit those who attend
but often people leave meetings feeling frustrated at the time
spent without any useful outcomes.
o Purpose clear objectives
o Who needs to attend
o When and where
o Agenda & Papers allowing for a focus for discussion
and preparation time
o Effective Chairperson - Facilitate discussion silent
attendees, dominating characters. Should impose
order on the meeting and manage conflict should it
arise. Summarise points, note actions that need to be
taken and by whom.
o Publish minutes - timely
Telephone conversations
Videoconferencing
Written communication memos & e-mails
The Role of Team Members in Meetings

Facilitator set the agenda, make sure the objectives of the
meeting are being met
Chair ensure agenda is being followed, all members
participate equally
Secretary/Administrator takes minutes and distributes them
(timely
Protagonists positive supporters
Antagonists disagreement and a negative attitude to team
members
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Problems with meetings

Poor preparation
o Agenda/papers
o Inappropriate chair
Lack of enthusiasm/interest
o Right people
o Take a break
Too much talk, not structured
Cannot reach agreement
Hostility between attendees
Action points from previous meeting not carried out
Minutes too long/ too brief, not sent out on time
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C2 (f) Explain the process and importance of mentoring junior

colleagues
A mentor is a guide, counselor, tutor or trainer. In modern business
a mentor tends to be a senior colleague who acts as a guide and
advisor on any aspect of a junior colleagues development. It is
normal for the mentor to be from the same function (eg finance)
but unusual for the mentor to be a direct or indirect line manager to
the subordinate.
The purpose of mentoring is to put an additional form of control

into the organisation. Mentoring works alongside more formal
control mechanisms, such as appraisal, and is intended to
provide the employee with a forum to discuss development
issues that is relaxed and supportive.
Mentors often discuss issues such as training, choice of
qualification and career goals.
encourage & assist identify strengths and weaknesses
provide honest, supportive feedback & guidance
help build network of contacts and exposure in the
organization
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C1 (b) demonstrate the importance of organisational culture
Organisational Culture - the way we do things around here

(Handy)
Culture can influence the behaviour and actions of employees

which can be a powerful force on how well the organisation
performs.
An organisations culture is the underlying set of key values,

beliefs, understandings, and norms shared by employees.
The organizational iceberg
Some aspects of the

organisations culture will be
visible
(goals, technology, structure)
Some aspects of the

organisations culture will be
hidden.
(attitudes, communication
patterns, personality conflict)
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______________________________________________________ _______________
McKinsey
Hard (above the surface)

Strategy
Systems
Structure
Soft (below the surface)
Skills
Style
Staff
Shared values
EDGAR SCHEIN THREE LEVELS OF CULTURE
Artefacts
Expoused values
Basic underlying assumptions
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Cultural Web (CORPSS)
Stories
Symbols
The Power
Control Cultural Structures
Systems Web
Organisational Routines
Structures & Rituals
- 90 -
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Handy/Harrison identified four types of culture.
Power culture based on a few powerful

individuals, motivate by fear, make little use of rules
Role culture impersonal, rely on rules and

procedure, bureaucratic and standardised decision making,
Task culture teamwork, flexibility and

commitment to the achievement of objectives, no formal
hierarchy of authority,
People (support) culture two types:

constellation of stars, based on individual expertise, eg
colleges; and for the benefit of members, based on friendship,
belonging and consensus, eg social clubs.
- 91 -
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Deal and Kennedy
Deal and Kennedy suggested a typology which categorized

cultural types by two variables risk taking and feedback of
results.
Tough-guy macho high risk, quick feedback

Work-hard, play-hard few risks taken
Bet your company high risk but slow feedback
Process no feedback, bureaucratic
Deal and Kennedy suggested that companies with very strong

cultures.perform well when the environment around them
changes. Referring to strong as the degree to which members
subscribe to the norms and values taken up by management.
Changing the culture of an organisation

To alter an existing culture the following steps may be required:
Injection of new staff into the organisation

Introduction of incentive schemes to encourage the acceptance
of new approaches and working methods
Emphatic managerial endorsement of new ideas, plus an
increase in the flow of information between management and
workers
Deliberate promotion of individuals who possess flexible and
appropriate cultural attitudes.
William Ouchi
Theory A American approach
Theory J Japanese approach
Theory Z How American Business can meet the Japanese
challenge.
- 92 -
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Tom J Peters and Robert H Waterman

Peters and Waterman challenged the usefulness of
traditional line and staff organisation systems and attacked
western industry for its lack of concern for customer care.
Their work began with a study in the early 1980s of 43 US
organisations that the authors considered excellent, in an
attempt to discover the root causes of their success.
The eight key characteristics of excellent organisations are as
follows:
Bias for action

Close to the customer
Autonomy and entrepreneurship
Productivity through people
Hands on value driven
Stick to the knitting
Simple form, lean staff
Simultaneous loose-tight properties
Thriving on chaos
Peters developed his own work in a book entitled Thriving on
Chaos in which he made the following points:
Changes in market demand and production methods are today
so frequent that it is no longer possible to predict the future
environments in which an organisation will operate. Thus,
flexibility and total acceptance of the need for change are
required.
Firms must continuously monitor consumer attitudes and
respond immediately to alterations in consumer demand.
A businesss primary concern should be the improvement of
quality and service to customers.
Managers must be encouraged to innovate and to assume risk.
Organisation structures should be basic and simple with a
minimum of bureaucratic control.
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Improving Effectiveness
Balance autonomy with control
New venturing
o Empowerment
o Innovation (Kanter)
A
N
I
T
A
Organisational learning and knowledge management
- 94 -
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National Cultures
Hofstede suggests that the national culture of different countries
can be classified according to five dimensions of culture
1. Power Distance
a. High Power Distance means people accept inequality in
power
b. Low Power Distance means people expect equality in
power
High PD
Managers make autocratic decisions
Structures tend to be tall
Status differences between managers and subordinates
2. Uncertainty Avoidance
a. High Uncertainty Avoidance means people are
uncomfortable with uncertainty and ambiguity
b. Low Uncertainty Avoidance means people have high
tolerance for the unstructured and unpredictable
High UA
Formalised organisational structures
Depend heavily on rules and regulations
Do not like anything that deviates from accepted norms
3. Individualism and Collectivism

a. Individualism individuals are expected to take care of
themselves
b. Collectivism individuals look after one another and
organisations protect their members interests
Individualism emphasise
Self reliance
Autonomy
Individual achievement not the achievement of the group
or community
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4. Masculinity / Femininity
a. Masculine value achievement, heroism, assertiveness
and material success important
b. Feminine value relationships, caring for the weak and
quality of life.
Masculinity places importance on

Earnings
Advancement
Challenge
5. Time Orientation
Short-term orientation rapid feedback from decisions
quick solutions quick profit
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C2 (d) Identify tools for managing and controlling individuals,

teams and networks, and for managing group conflict
C1 (c) identify the nature and causes of conflict
C1 (d) discuss alternative approaches to the management of

conflict
Internal Control Systems
Internal control systems exist to enhance the achievement of

organisational objectives. It has been defined by the Auditing
Practices Committee as the whole system of controls, financial
and otherwise, established by the management in order to carry on
the business of the enterprise in an orderly and efficient manner,
ensure adherence to management policies, safeguard the assets
and secure as far as possible the completeness and accuracy of
the records. The individual components of the control system are
known as controls or internal controls.
Some of the controls, such as those over contracts and dismissal,

may be formal (or legal) in nature, whereas others may be informal
(or managerial).
Levels of Control
There are three levels of management decision making and,

therefore, three levels of control.
Strategic control operates at board level and largely consists of

setting the control environment. It will include:
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Tactical control operates at middle management level and largely

consists of setting the controls to implement the decisions and
policies of the board. It will include:
Performance appraisals
Question
Explain what needs to be considered in the design and
implementation of an effective staff performance appraisal
system
(10 Marks)
- 98 -
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Health & Safety
Question
You have been asked to deliver a seminar on the importance of
health and safety at work. Explain the key areas that
should be covered in the seminar.
(10 Marks)
- 99 -
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Operational control operates at the lower levels of the

organisation and largely consists of setting controls for structured
and repetitive tasks using preset rules. It will include:
Control Reports
A basic requirement is reports that clearly identify areas of good

and bad performance so that appropriate action can be taken.
Control reports should show the following features:
They should contain measurements which are accurate, valid

and reliable. Permit a direct and easy comparison between
planned and actual performance with each function.
They should analyse trends, for example, comparing one
periods performance with that of the previous period or of the
same period the previous year.
They should be given to the person who is responsible for the
activity concerned within the function.
They should arrive in time to allow the necessary action to be
taken.
They should provide succinct explanations of any deviations
from plan.
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Conflict
Horizontal at the same level
Vertical at different levels, manger: subordinate
Causes
Competition for scarce resources
o Availability of staff, equipment priorities need to be
established
o External environment demands for lower prices,
better quality, improved services, causing greater
conflict internally
Competition for power and influence

o Where employees are competing for one position
o Where power is exercised over individuals and there is
no formal authority
o Size as companies increase in size divisionalisation
occurs and individual SBUs think of themselves as
separate divisions, power and differences between
them
Differences in goals, values, expectations

o Conflicting objectives should not be set
o Individuals may have different beliefs, values open
communication about differences is required, trying to
see everyones point of view
o Reward for achieving individual goals should be
based on overall company goals not departmental goal
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Handling Conflict (Thomas)

Avoidance avoid, suppress, ignore. This is not
recommended as it does not resolve the conflict which may
break out again when the parties meet in the future
Accommodation one party putting the others interest first.
Compromise each party gives something up if both parties
see this as losing something it may not be ideal
Competition parties seek to maximise their own interests
and goals, it creates winners and losers and can prove
damaging to the organisation
Collaboration differences are confronted and jointly
resolved so that a win: win outcome is achieved
Handling Conflict with Different Goals

Bargaining - negotiation
Satisfying satisfying performance across several criteria,
for several goals simultaneously
Sequential attention - stakeholder are kept happy by taking
turns to get their objectives realised, when a crisis a goal will
be given attention until the crisis has been resolved
Priority setting top management define a preference
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A useful framework for classifying different ways of handling

conflict has been developed based on 2 conflict management
dimensions. These consist of (i) the degree of assertiveness in
pursuit of ones interests and (ii) the level of cooperation in
attempting to satisfy others interests. The strength of each of
these in a particular situation produce the 5 conflict handling
strategies below:
ASSERTIVE
COMPETING COLLABORATING
COMPROMISING
AVOIDING ACCOMODATING
COOPERATIVE
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C2 (a) Analyse the relationship between managers and their

subordinates, including legal aspects affecting work and
employment
Industrial relations and conflict
Vertical conflict has been discussed in the previous learning

outcome the most common form is between managers and
subordinates.
This conflict is often more visible when workers join a union

and this provides their mechanism for resolving the conflict.
Negotiation is about looking for a win-win attitude to benefit

both company and employees
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Company approaches
Union-avoidance strategies
Individualistic approaches
Collective bargaining
Partnership agreements
Gain sharing
Labour-management teams
Employment security
- 105 -
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C2 (e) Compare and contrast ways to deal effectively with

discipline problems
Typical disciplinary problems are as follows:
Excessive lateness in arriving at work, which delays any tasks

done on a team basis or in the provision of a service for a
customer
Failure to wear correct clothing, for reasons of hygiene with
potential damage to output
Poor work performance, due to lack of care with shoddy work or
a large number of rejects
Involvement with competition or undertaking private work to the
detriment of the employer
Personal abuse of alcohol or drugs, which adversely affect
performance at work
In addition to the use of motivators to control discipline (see earlier
notes) a model disciplinary procedure should aim to correct
unsatisfactory behaviour, rather than to punish it.
It should specify as fully as possible what constitutes misconduct

and what constitutes gross misconduct. It should then state the
penalty for each of these categories.
In cases of proven gross misconduct, this is most likely to be

immediate (or summary) dismissal, or suspension, followed
by dismissal.
In cases of less serious misconduct, the most likely consequence
is that a formal warning will be given.
For repeated acts of misconduct, it is likely that the employee
concerned will be dismissed.
So far as appeals are concerned, a model procedure should aim to
ensure that these are dealt with quickly, so that the employee
involved can be informed of the final decision without undue delay.
- 106 -
_____________________________________________________________________
ACAS Code of Practice

Be in writing
Specify to whom they apply
Provide for matters to be dealt with quickly
Indicate the disciplinary actions which may be taken
Provide for individuals to be informed of the complaints
against them and be given the opportunity to reply
Give individuals the opportunity to be accompanied by a
trade union representative or a fellow employee
Ensure the disciplinary action is not taken until the case has
been fully investigated
Progressive Steps in the Disciplinary Process
Informal Talk
Oral Writing
Written or official warning
Layoffs or suspension
Demotion or transfer
- 107 -
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Disciplinary Interview
Preparation Stage
Gather the facts (do the homework on the case)
Understand the company procedures (as above)
Give notice of the interview and the complaint
Make sure the right to be accompanied is also explained
During the interview

Explain clearly the reason for the company taking action
Company expectations need to be made clear (future
behaviour)
Explain the penalties
Record the interview (needs to be kept on file)
Appeals procedures should be explained
Post Interview
Follow up on whether company expectations have been met
Take any further action required
Grievance Procedures
Who can pursue a grievance

Understand the rights of employees for each type of
grievance
Set a procedure for pursuing a grievance
o Discuss the grievance with staff/union representative
o If case exits take it to higher authority and inform
personnel
o Allow for representation
o State time limits for initiating procedure
- 108 -
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Tribunal Applications
If an employee is unhappy with the outcome of the grievance
procedure they may want to an independent body like an industrial
tribunal. Typical disputes that would be taken to the tribunal
include;
1. Unfair dismissal
Dismissal
Under UK law dismissal is described as termination of employment
with or without notice by the employer. Dismissal without notice is
usually wrongful dismissal and in breach of the contract of
employment, it may or may not also be unfair dismissal.
The following five reasons are capable of providing fair grounds for
dismissal:
The employees lack of capability

The employees misconduct
Redundancy of the employee
Inability to pursue duties without breaking the law
Some other substantial reason
Redundancy
A dismissal on the grounds of redundancy may be justified on any
of the following grounds:
Cessation of business
Cessation of business in the place where the employee was
employed
Cessation of the type of work for which he or she was
employed
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2. Achieving fairness and commitment in the workplace
Arbitration
- 110 -
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Conciliation
C2 (c) discuss the effectiveness of relationships between the

finance function and other parts of the organisation and with
external stakeholders
Gaining competitive advantage from the finance function
- 111 -
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efficient service
value for money
effective contribution to the strategic decision making
process
Outsourcing?
Shared Services?
Business Partner?
The Finance Function and External Stakeholders
- 112 -
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C2 (g) Analyse issues of business ethics and corporate

governance
Business Ethics
- 113 -
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The standards of conduct that an organisation sets itself in

its dealings with different stakeholders both within the
organisation and outside with its environment.
The company should develop a code of conduct that sets the
norms of behaviour by which people will abide.
How do we choose the right behaviour
The purpose of corporate governance is to control the

board of a listed company to ensure that they act in the best
interests of that company.
- 114 -
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Corporate governance is the system by which

companies are directed and controlled.
Combined Code (UK)

The combined code comprises principles of good governance and
a code of best practice which sets out code provisions for each of
these principles. These broad areas are listed below:
Directors.
Directors remuneration
Accountability and audit
- 115 -
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Relations with shareholders
Benefits of corporate governance

Reduces risk
Stimulates performance
Improves access to capital markets
Enhances the marketability of goods and services
Improves leadership
Demonstrates transparency and social accountability
Project Management (B)
B1 (a) Identify a project, a programme and their attributes
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A unique undertaking to achieve a specific objective

that requires resources and activities.
Characteristics of a project
Projects have:
Stakeholders
Uniqueness
Objectives
Resources
Schedules
Quality
Uncertainty
Finiteness
Change
B1 (d) Identify the characteristics of each phase in the project

process
The project lifecycle
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Large scale projects usually follow separate phases, which occur

in sequence. The four phases are:
Identify a need
Develop a proposed solution
Perform the project
Terminate the project
For smaller projects and those whose requirements are uncertain

the life cycle may be repeated several times before a solution is
agreed. For example, ideas may be combined with customer input
into a prototype. This prototype can be implemented in a trial
operational environment, revised and the cycle repeated until
agreement is reached. This is known as the iterative approach.
- 118 -
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B1 (b) Apply suitable structures and frameworks to projects to

identify common project management issues
B1 (g) Identify structural and leadership issues that will be

faced in managing a project team
General Project Structure
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Whichever life cycle is used, a project may adopt a particular

method or approach to identify all of the tasks that will need to be
completed in order to achieve the project objectives.
Why some projects fail

Time/resource estimates unrealistic
Objectives not clearly defined or measurable
Project manager poor communication skills
Objectives changed during project
Project manager poor leadership skills
Senior management not showing strong support
Stakeholders not taking ownership of the project
Role and responsibilities of the project team not defined
Resources not identified/made available at the start
Project team did not work as a team
Structural Issues a structure is required in order to understand

the roles, responsibilities, tasks required in order to complete the
project.
A matrix structure is often used to complete projects, teams of

people working together in order to complete the task in hand.
Role/Responsibilities
Successful delivery of project objectives (strategic

management0
Selection and development of the project team (relationship
management)
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Organisation, planning, monitor & control
The Skills of the project manager
The project manager needs a set of skills that will encourage and
lead the project team to succeed and to create customer
confidence in the project team.
Not preparing the projects financial plan could cause
disastrous losses.
There are many frameworks: 4, 5, 7 or 9?
The 4 D model
~ Discover
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~ Dream
~ Design
~ Deliver
The 5 project management process areas
~ Initiate
~ Plan
~ Execute
~ Control
~ Close
The 7 S model
~ Systems
~ Structure
~ Style
~ Strategy
~ Staff
~ Skills
~ Shared values
The 9 project management knowledge areas
~ Integration management
- 122 -
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~ Scope management
~ Time management
~ Cost management
~ Quality management
~ Resource management
~ Communications management
~ Risk management
~ Procurement management
- 123 -
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B2 (c) Explain the roles of key players in a project

organisation
Project sponsor
Project brief, Project owner Project

allocation of proposals,
funds, terms schedules
of reference and status
reports
Project customer
Project manager
Project team
You should make sure you are aware of the needs of each
stakeholder in respect of a project, and the conflicts between those
needs.
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Project Sponsor Makes Yes/No Decision, provides resources
Project Owner the person for whom the project is being carried
out, they are interested in the end result being achieved and their
needs being met
Project Manager responsible for the successful delivery of

project objectives
Project Team will be given individual responsibility for parts of

the project
Project Customers/Users will use the final output
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B2 (b) Recommend strategies for the management of

stakeholder perceptions and expectations
Once the project manager has established the key stakeholder
groups, a list can be drawn up which identifies each stakeholders
goals, past behaviour towards projects, what can be expected of
their future behaviour and how they may react to future changes.
You may choose to use Mendelows matrix, this will allow the
project manager to assess the risks associated with the various
stakeholder groups, and indicate where attention needs to be
focused. (see Strategic Management)
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B1 (c) Construct an outline of the process of project

management
The project management process can be represented by a 5 stage

process covering the project lifecycle.
Initiate
Plan
Execute
Control
Completion
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B1 (f) Produce a basic project plan, incorporating strategies

for dealing with this uncertainty, in the context of a simple
project
B2 (a) Produce a strategy for a project
A strategy is something that an organisation

implements to take it from where it is now to where it wants to be
at some point in the future. A course of action, including the
specification of resources, to achieve a specific objective.
Projects should fit in with the strategies of the organisation. a

project may be the means by which an objective is achieved.
A feasibility study will establish whether a project can achieve its

objective in a cost effective manner.
Setting Project Objectives

Once a need or objective is identified a project becomes the
strategy to achieve that objective. It is likely that an organisation
will have a number of strategic options so the next stage is to
examine their feasibility. Sometimes the potential project manager
is involved in the feasibility study stage, but not always.
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The Feasibility Study

The purpose of project feasibility is to establish if the proposed
project can achieve its objective in a cost effective manner.
Technical feasibility
o Is the technology available or is sufficient innovation
needed?
o Is the technology tried and tested
o Performance standards can the required
performance be achieved from the available
technology, is the expertise to make use of it readily
available
Social feasibility
o Can the required performance be achieved from the
people available
o Company Image
Ecological feasibility
o Health & safety requirements
o Environmental concerns
o Planning permissions
Financial feasibility (cost:benefit)

o Capital acquisition of assets plus any other costs of
installation and maintenance
o Revenue any other project costs other than
acquisition of assets
o Finance funds required to deliver the project and cost
of funding
o Tangible and Intangible
o Financial Evaluation NPV etc.
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Business
o Does the project fit with the business goals of the
company.
Time
o Key milestones key events
o Duration of each
o Dependencies and parallel activities
o Minimum completion time
Quality
o Conformance Measures
o Zero defects
o Satisfy a need
Risk Assessment/Risk Management
Risk Assessment
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Risk Management
Risk Treatment (also called risk response)

Avoidance Action is taken to exit the
activities giving rise to risk.
Changing or abandoning goals

or objectives specifically
associated with the risk in
question, or choosing alternative
approaches or processes that
remove the risk.
Reduction Action is taken to mitigate
(reduce) the risk likelihood or
impact.
This is often through internal

controls.
Sharing Action is taken to transfer a
portion of the risk (insurance,
outsourcing, hedging)
Acceptance No action is taken to affect the

likelihood or impact
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SWOT Analysis
SWOT is an analytical tool that can be used in 2 ways:
Applied to a whole company, it can be used to identify
strategies needed by the business based on its current
position
Applied to a specific project, it can be used to check the
feasibility of a project
SWOT stands for strengths, weaknesses, opportunities and

threats.
Strengths
Weaknesses
Opportunities
Threats
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Uncertainty
We cannot reduce the possibility of uncertain events occurring by
putting in place management controls, instead we must use
contingency planning to construct a series of action plans to be
implemented if it does occur.
The purpose of contingency planning is to speed up the planning

process if the uncertain event occurs. The contingency plan may
never be used but if we wait for the uncertain event before doing
any planning, the project may be delayed further.
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Project Planning
The scope of a project is the extent of work needed to produce the

projects deliverables. It is generally expressed as a list of tasks
taken from the work breakdown structure.
The benefits of using a WBS are numerous and include the
following:
Summarising all the activities comprising the project, including

support and other tasks . A WBS enables the project manager to
think of the totality of all the activities comprising the project.
Displaying the interrelationships of the various jobs (work

packages) to each other and to the total project, provides a picture
of how the various activities are related to each other. Unless the
specialist activities are co-ordinated with each other the outcome
of the whole project would be jeopardised.
Establishing the authority and responsibility for each part of the

project
This would involve establishing who was responsible for each
activity and how has the authority to make decisions.
Estimating project cost

The breaking down of the overall project into activities or work
packages makes it easier to estimate the cost of each activity and
also the overall cost of the project. For example, in obtaining cost
estimates from specialists the WBS enables the project manager
to build up a more detailed picture of the overall cost and also a
picture of where the major costs of the project will fall.
Performing risk analysis

The use of the WBS can also help identify which part, or which
activities in the project carry the highest risks.
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Scheduling jobs (work packages)

The WBS will enable the project manager to arrange for work to be
carried out in a sequence that ensures that jobs that must be
completed first are scheduled as a priority.
Providing a basis for controlling the application of resources to the

project
The WBS assists in the overall monitoring and control of the
project because it provides information on all the tasks to be
carried out and the materials needed for each. In its simplest form
it provides a check list of tasks that must be completed in order for
the project to be successful. These can be ticked off as they are
completed. The activities outstanding are more easily identified
and arrangements made for their completion.
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A major responsibility of the project manager is the initial planning

of the project, establishing a baseline plan that provides a clear
definition of how the project scope will be accomplished on time, to
budget and using available resources.
Depending on the size of the project the baseline plan will
comprise some or all of the following separate plans:
Time
Resources
Project Cost
Planning
Quality
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Creating the plan

ESTABLISH PROJECT GOALS
Work Breakdown Structure
o Clear definition of the project scope
Work package
Who define key roles and decision
making responsibilities
What define the exact deliverables to
allow quality to be measured
When estimate timings for each activity
o Estimate resources - need to mange any limited

resource
o Make a cost estimate used to create a budget for the
project and help with cash flow projections
o Carry out risk analysis
IN SIMPLE TERMS THE PLANNING STAGE IS ABOUT

WHAT NEEDS TO BE DONE
WHO NEEDS TO DO IT
HOW LONG WILL IT TAKE
HOW MUCH WILL IT COST
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B1 (e) Apply tools and techniques that would need to be

applied in the project process, including the evaluation of
proposals
By converting complex projects into a graphical picture the project
manager can more easily communicate the project activities to the
project team and the project sponsors.
Gantt Chart
A Gantt Chart is a horizontal bar chart which graphically represents
the schedule of activities or tasks required to complete the project.
A simple look at a Gantt chart should enable its user to determine
which tasks take the longest time to complete, which tasks are
overlapping with each other, etc.
In its simplest form, the Gantt Chart consists of:

A horizontal timescale
A vertical list of tasks
A horizontal line or bar drawn to scale to represent the time
needed to complete the activity.
Days
Time 1 2 3 4 5 6
Activity
A
Planned
A Actual
B Planned
B Actual
C Planned
C Actual
D Planned
D Actual
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A separate task bar may be drawn to represent the proportion of

work actually complete or the task bar may filled with a different
colour. The chart may also incorporate a 'Resources' column,
which is simply an additional column that identifies the people
responsible for each activity. It may also incorporate a 'Budget'
section, which shows a vertical bar chart presenting the target
budget and actual costs incurred in implementing the project.
Gantt charts are used for: 1) planning and scheduling projects; 2)

assessing how long it takes to complete a project and its
component activities; 3) laying out the order in which the activities
or tasks will be carried out; 4) managing inter-dependencies
among the various activities or tasks; 5) managing the resources
(including manpower) needed to complete simultaneous activities;
6) monitoring the progress of each activity; and 7) facilitating
recovery actions to get delayed activities back on track.
Network Analysis
Critical path analysis is a technique that can be used to assist in

the time planning for project management. It will help to identify
the sequential relationship between the various activities that need
to be undertaken in planning the project. In conducting the analysis
the project manager will need to answer the following questions
for each activity:
1. What must be done before this activity can start?

2. What can be done once this activity finishes?
3. What activities can be done at the same time as this activity?
The answers to these questions will help to determine the

dependencies between different activities and will also help the
project manager determine the project duration. It will identify the
activities that are critical, in other words the activities where any
delay will lead to a delay in the project overall and in also whether
the project actually going ahead.
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_____________________________________________________________________
Undertaking the analysis should assist the project manager in

deciding when to start working on the arrangements for the project,
and to identify the start and finish times for each activity. Thiswill
involve calculating the earliest event time (EET) which is the
earliest time at which any subsequent activity can start, and latest
event time (LET) which is the latest time at which all previous
activities must have been completed to prevent the whole project
being delayed.
The main aim of network analysis (critical path analysis) is to

analyse activities that occur in parallel in order to identify start and
finish times for each activity and the project as a whole. Critical
path analysis will identify those activities that are critical (activities
where any delay in the activity will lead to a delay in the overall
project).
1. First draw a dot to dot diagram this can be completed

quickly and allows the student to test the logic of the diagram
before you spend the time drawing the neat version of the
critical path.
2. Each dot becomes a node when you draw the final diagram
Node Identifier
Earliest Event Time

(EET)
Latest Event Time (LET)
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Node Identifier = unique number given to each node

Earliest event time = earliest time the next event can start given
the dependencies given ( it is the largest number when you take a
forward pass through the diagram)
Latest event time = the latest time the activity can be completed
in order to complete the project in the minimum completion time
The arrows represent activities or tasks, and the nodes represent

events. The events are therefore start and finish points for the
activities. Events are labelled with numbers in the nodes and
activities are labelled with letters above the arrow and the duration
of the activity below the arrow.
Dummy activities (shown as broken lines) do not consume any

time they are simply included to maintain project logic.
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Example
Activity Description Dependency Duration
A Dig Trench - 2 days
B Lay Pipework A 3 days
C Lay electrical cabling A 1 day
D Fill in trench B&C 1 day
E Connect cable to C 2 days
equipment
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PERT (Project Evaluation and Review Technique)

Network analysis is often complicated by uncertainty of events so
that a single time given for an event is likely to have a degree of
error. To overcome this uncertainty PERT uses 3 time estimates
for each activity in the network:
An optimistic estimate (o)
A probable estimate (m)
A pessimistic estimate (p)
The expected duration is then calculated as follows:
o + 4m + p
6
Contingency allowance
o + 4m + p
6
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_____________________________________________________________________
Resource Histograms.
- 144 -
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Identify methodologies and systems used by professional project

managers
PM Software
Functions that would commonly be found within a standard project
management software package such as Microsoft Project are:
Budgeting and cost control
Calendars
Graphics
Multiple project handling
Planning
Scheduling
Resource planning
Resource histograms
Reporting
Advantages Drawbacks
Accuracy Emphasis on plan not
Affordability project
Ease of use Still only estimates
Ability to handle It matters which person
complexity performs the task
what if
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_____________________________________________________________________
Question
Explain how the work breakdown structure (WBS) technique and
Gantt charts can assist in the project management process.
(10 Marks)
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B1 (h) Compare and contrast project control systems

In order to effectively monitor and control a project a
continuous flow of information about the progress of work is
required.
Progress reports are needed to understand the current status

of the project in terms of
Time
Cost
Quality
The information in the report will need to enable the project
manager to see whether the project is progressing as
expected towards the final objectives.
Any deviations need to be reported so that corrective action
can be taken on a timely basis.
(TARA)
Control in this context is any mechanism designed to ensure that a

project achieves its objectives. The PRINCE 2 (PRojects IN
Controlled Environments version 2) methodology contains a large
number of control elements to ensure successful delivery of a
project:
delivery of the agreed outcomes
on time
within budget
conforming to the required quality standards
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_____________________________________________________________________
______________________________________________________ _______________
Features of PRINCE 2
business to justify the undertaking of the project

Case
structure
enforces a clear structure of authority and responsibility
products
associated with the management and control of the project
Risk
risk management
Quality
contains several quality controls
Change
risk assessment and risk management regularly
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B1 (i) discuss the value of a post-completion audit

Project Closure
The final stage of the project lifecycle is the closure of the project
once the work is finished. The main purpose is to evaluate the
overall project and learn from the experiences gained. Activities
would include the following:
project
documentation
continuous
Project final payments
improvement
Closure
project
objectives
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Post Completion Review Meetings

Evaluation meetings should be carried out with the project team
members and with the customer. A review meeting with the project
team is an opportunity to discuss the successes and failures of the
project process so that lessons can be learnt for future projects. It
is also an opportunity for the project manager to discuss individual
team member performance. An evaluation from the customer
perspective is important in determining whether the project was
successful in satisfying the customers requirements and again
obtaining feedback to improve future projects.
Project
manager
business Project
case Review team
tools and
techniques
used
- 150 -
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______________________________________________________ _______________
B1 (j) Apply a process of continuous improvement to projects

Many organisations view project management as a strategic
competence from which they can gain competitive advantage,
particularly those based in project based industries such as
construction or consultancy. For these organisations project
management without continuous improvement to the methodology
used means that mistakes and poor practices will be repeated.
Excellence in project management

management requires the development of a
methodology, a culture that believes in that methodology and
continues improvements to that methodology. One such approach
is the Project Management Maturity Model (PMMM). The PMMM
consists of 5 levels and each level represents a different degree of
maturity in project management:
Common
Training and education on project management
Knowledge
Common
Common processes need to be defined
processes
all corporate methodologies should be combined into a singular

singular
methodology
methodology, the centre of which is project management
process improvement is necessary to maintain a competitive

Benchmarking advantage
Continuous
continuous improvement and feedback
Improvement
- 151 -
_____________________________________________________________________
- 152 -

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E2 - Enterprise Management

C2 (e) Compare and contrast ways to deal effectively with discipline

LEARNING OUTCOMES GRID

1. Discuss different (a) discuss the nature of competitive

2. Discuss (a) discuss concepts in established and

(c) explain the relationship between different

B Project Management 40%

1. discuss tools and (a) identify a project, a programme and their

2. evaluate the (a) produce a strategy for a project;

C Management of Relationships 30%

1. discuss (a) discuss the concepts of power,

2. Discuss the (a) Analyse the relationship between

Syllabus topics and weightings

A. Strategic Management & Assessing the Competitive Environment

B. Project Management 40%

C. Management of Relationships 30%

Format of the Paper

Five compulsory questions, each worth 10 marks. Short scenarios may

One or two compulsory questions. Short scenarios may be given, to

Have sound theoretical knowledge

The Verb Hierarchy

Strategic Management & Assessing the

A2 (c) Explain the relationship between different levels of

The concept of strategy

Characteristics of strategic planning

Business strategy set within the broad framework of the

Functional level strategies

A2 (b) Compare and Contrast Approaches to Strategy

A1 (b) Distinguish between different types of competitive

The strategy formulation process

Strategic analysis requires the analysis of the internal and

Strategic evaluation & choice requires management to identify

Strategic implementation (Review & Control) requires

Strategic Analysis and Competitive Analysis

The strategy of an organisation must allow it to achieve a

The inability to predict the outcome from an activity, due to a

Causes of Environmental Uncertainty

Complexity the increasing number of variables that impact

Interaction of the variable the idea of complex adaptive

Dynamism the rate of change in the variable that impact

Reduces planning horizon

Encourages emergent strategies

Increases information needs and perceived information

Can lead to conservative strategies

Economic factors and influences

Social values and demographic factors

Technological change and factors

Again, if you are asked to apply the PEST model to an

The Competitive environment five forces model

Porter identified five competitive forces that provide a useful

Bargaining Power Competitive Bargaining

Threat of new entrants

Threat of substitute products or services

Bargaining power of buyers

Bargaining power of suppliers

Rivalry amongst existing firms

Evaluation of Environmental Models

The systematic review of all available information (marketing,

promotion, financial, etc.) on the activities of competitors in order to

gain a competitive advantage

The Purpose of competitor analysis is:

o To help understand our competitive

o To forecast competitors future strategies and how to

o To give an informed basis for the construction of the firms