ICAB AL Strategic Business Management cheat sheet

PESTLE covers Political, Economic, Social, Technological, Legal and Environmental factors; use it to scan macro-environment forces that affect all industry participants.

Porter's Five Forces: threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, rivalry among existing competitors; high combined force intensity implies lower industry profitability.

A strategic group is a set of firms within an industry following similar competitive strategies on dimensions such as price, quality and geographic scope; mobility barriers restrict movement between groups.

Industry life cycle stages: introduction, growth, maturity, decline; rivalry typically intensifies in maturity as growth slows and capacity overshoots demand.

Porter's diamond explains national competitive advantage through factor conditions, demand conditions, related and supporting industries, and firm strategy, structure and rivalry.

Scenario planning builds several plausible futures rather than one forecast; use it when uncertainty is high but the cost of being wrong is material.

Key success factors are the few competitive capabilities that determine market success in an industry; they must be derived from customer needs and competitive survival conditions.

Stakeholder power/interest grid classifies stakeholders by ability to influence and concern about outcomes; high power and high interest require close management.

Resources are productive assets; competences are activities and processes through which resources are deployed; a threshold capability is the minimum needed to compete, a distinctive capability is one that rivals cannot easily match.

VRIO test: a resource must be Valuable, Rare, Inimitable and supported by Organisation to yield sustained competitive advantage; failing any criterion caps the return.

Core competence criteria (Prahalad and Hamel): provides access to a wide variety of markets, makes a significant contribution to perceived customer benefits, and is difficult for competitors to imitate.

Value chain analysis separates primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) from support activities (firm infrastructure, HR, technology development, procurement).

Benchmarking compares internal processes or performance against best practice; it identifies gaps but does not by itself explain their causes.

The resource-based view holds that sustained advantage comes from resources that are valuable, rare, imperfectly imitable and non-substitutable.

Dynamic capabilities are the firm's capacity to integrate, build and reconfigure internal and external competences to address rapidly changing environments.

A capability gap is the difference between current resources and competences and those required by the chosen strategy; closing it may require organic development, acquisition or alliance.

Ansoff matrix: market penetration (existing products, existing markets), product development (new products, existing markets), market development (existing products, new markets), diversification (new products, new markets).

Porter's generic strategies: cost leadership, differentiation, and focus (cost focus or differentiation focus); being stuck in the middle typically yields below-average returns.

SAF criteria for evaluating strategic options: Suitability (does it address the strategic position?), Acceptability (risk, return, stakeholder reactions), Feasibility (resources and competences).

BCG matrix: stars (high growth, high share), cash cows (low growth, high share), question marks (high growth, low share), dogs (low growth, low share); cash cows fund stars and selected question marks.

Parenting advantage exists when the corporate centre adds more value to its businesses than alternative owners would; fit between parent and business is assessed through critical success factors.

Merger and acquisition motives include synergy, market power, speed to market and diversification; the winner's curse is overpaying when the premium exceeds synergy value.

A joint venture shares ownership and control with a partner; an alliance may be non-equity; both are used to access resources or markets while limiting capital exposure.

Real options reasoning treats staged investment and the option to defer, expand or abandon as valuable under uncertainty; option value rises with volatility and managerial flexibility.

McKinsey 7S framework: Strategy, Structure, Systems, Style, Staff, Skills, Shared values; all seven must be aligned for effective implementation.

Structure follows strategy (Chandler); a change in diversification or geographic scope typically requires a matching structural change.

A functional structure suits single-product or single-market firms; a divisional (M-form) structure suits diversified firms by giving each division profit responsibility.

A matrix structure combines functional and product or project reporting; it improves coordination but creates dual authority and potential conflict.

The balanced scorecard translates strategy into objectives across financial, customer, internal process, and learning and growth perspectives.

Strategy implementation failure commonly stems from poor communication, inadequate resource allocation, misaligned incentives and lack of management commitment.

Kotter's eight-step model for leading change: create urgency, form a powerful coalition, create a vision, communicate it, remove obstacles, create short-term wins, build on gains, anchor changes in culture.

Culture can be a source of competitive advantage when it supports strategy; the cultural web analyses stories, rituals, symbols, power structures, organisational structures and control systems.

Lewin's three-stage model: unfreeze, change (move), refreeze; change fails when the refreezing stage is neglected.

Kotter's eight steps provide a sequenced change process starting with urgency and ending with anchoring new approaches in culture.

The change kaleidoscope (Balogun and Hope Hailey) analyses context through time, scope, preservation, diversity, capability, capacity, readiness and power.

Incremental change adjusts existing routines; transformational change alters the organisation's core assumptions and often its structure and business model.

Organisational design choices include span of control, centralisation versus decentralisation, formalisation, and the balance between specialisation and integration.

Mechanistic structures (high formalisation, centralised) suit stable environments; organic structures (low formalisation, decentralised) suit dynamic environments.

Resistance to change can be cognitive (lack of information), political (loss of power) or cultural (conflicting values); each requires a different response.

Business process reengineering seeks radical redesign of end-to-end processes for dramatic gains in cost, quality, speed and service; it differs from continuous improvement, which seeks incremental gains.

Agency theory addresses conflicts between principals (shareholders) and agents (managers); governance mechanisms include board oversight, incentives and disclosure.

Stewardship theory assumes managers are motivated to act in the owners' interests; it supports empowering rather than monitoring management.

The OECD Principles of Corporate Governance cover shareholder rights, equitable treatment, role of stakeholders, disclosure and transparency, and board responsibilities.

Board committees typically include audit, remuneration and nomination; the audit committee oversees financial reporting and external audit independence.

Stakeholder theory holds that firms should account for all affected parties, not only shareholders; primary stakeholders are essential to the firm's survival.

Mendelow's power/interest matrix classifies stakeholders into minimal effort, keep informed, keep satisfied and key players.

Utilitarian ethics judges actions by consequences; deontological ethics judges by duties and rules; virtue ethics focuses on the character of the decision-maker.

A conflict of interest arises when a personal interest could improperly influence professional judgement; disclosure and recusal are standard controls.

COSO ERM components: governance and culture, strategy and objective-setting, performance, review and revision, and information, communication and reporting.

COSO internal control framework: control environment, risk assessment, control activities, information and communication, and monitoring activities.

Risk appetite is the amount and type of risk an organisation is willing to accept; risk tolerance is the acceptable variation around that appetite.

Risk responses: avoid, reduce (mitigate), transfer (share) and accept; residual risk is the risk remaining after controls.

The risk heat map plots likelihood against impact to prioritise risks for treatment.

Segregation of duties prevents one person from controlling all stages of a transaction; it is a key preventive control.

The three lines model: management owns risk, a risk and compliance function monitors, and internal audit provides independent assurance.

Business continuity management prepares for disruptive events through business impact analysis, recovery time objectives and tested continuity plans.

The balanced scorecard links objectives across financial, customer, internal process, and learning and growth perspectives with cause-and-effect relationships.

A key performance indicator (KPI) must be specific, measurable, achievable, relevant and time-bound; a key result indicator summarises outcome, while a performance indicator informs progress.

Return on capital employed = operating profit / capital employed; it measures the return generated on long-term funds.

Economic value added = net operating profit after tax − (invested capital × weighted average cost of capital); positive EVA indicates value creation.

The DuPont decomposition: return on equity = net profit margin × asset turnover × financial leverage.

The performance prism considers stakeholder satisfaction, strategies, processes, capabilities and stakeholder contribution, broadening measurement beyond the balanced scorecard.

Management information must be accurate, timely, relevant and cost-effective; information overload reduces decision quality.

Benchmarking and variance analysis compare actual performance with standards or peers to identify corrective action.

A business model describes how an organisation creates, delivers and captures value; the Business Model Canvas covers customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure.

Disruptive innovation (Christensen) initially serves overlooked segments with lower-cost or simpler offerings, then moves upmarket and displaces incumbents.

Sustaining innovation improves existing products for existing customers; it rarely displaces market leaders.

Digital transformation changes business processes, culture and customer experience through digital technology; it is broader than digitisation, which converts information to digital form.

The innovation funnel represents the process from idea generation through screening, development and commercialisation; the number of ideas narrows at each stage.

Open innovation draws on external as well as internal ideas and paths to market; it contrasts with closed, internally focused R&D.

Platform business models create value by facilitating interactions between two or more participant groups and benefit from network effects.

The technology acceptance model holds that perceived usefulness and perceived ease of use drive adoption of new technology.