ICAG L3 Strategic Case Study cheat sheet

PESTLE covers Political, Economic, Social, Technological, Legal and Environmental factors; use it to surface macro drivers, then test each for likelihood and impact on the case organisation.

Porter's Five Forces: threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, competitive rivalry; a force is strong only if it measurably depresses industry margins.

Porter's Diamond (national advantage) rests on factor conditions, demand conditions, related and supporting industries, and firm strategy/structure/rivalry; government and chance are external modifiers.

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

SWOT is only analytic when each strength or weakness is evidenced and each opportunity or threat is external and dated; pair items into SO, ST, WO and WT options before concluding.

Product life cycle stages are introduction, growth, maturity and decline; cash flow is negative in introduction, peaks in growth and turns positive-to-neutral in maturity.

Ansoff matrix: market penetration (existing product, existing market), product development, market development, diversification (related or conglomerate); risk rises along that sequence.

Scenario analysis defines two to four plausible, internally consistent futures with triggers and signposts; it is not forecasting and should not be probability-weighted unless evidence supports it.

Stakeholder mapping uses power against interest: high power/high interest = manage closely; high power/low interest = keep satisfied; low power/high interest = keep informed; low/low = monitor.

Generic strategies (Porter): cost leadership, differentiation and focus; being stuck in the middle implies no defensible advantage and typically below-average returns.

SAF criteria for evaluating strategic options: Suitability (addresses the strategic position), Acceptability (returns, risk, stakeholder reactions) and Feasibility (resources, competences, capability).

Bowman's strategy clock: price-based (low price/low value), hybrid, differentiation, focused differentiation, and failure positions (higher price with lower perceived value).

Core competence tests (Prahalad and Hamel): it must provide access to markets, contribute to perceived customer value, and be hard for competitors to imitate.

Mendelow's matrix links stakeholder power and interest to a response strategy; implementation plans must name owners, milestones, resources and control points.

Balanced scorecard perspectives: financial, customer, internal business process, and learning and growth; each objective needs a measure, target and initiative.

Culture change levers include leadership modelling, reward and appraisal systems, communication, training and structural redesign; changing structure alone rarely shifts behaviour.

Growth routes: organic build, merger or acquisition, joint venture, strategic alliance and franchising; acquisition risk concentrates in overpayment, integration and culture clash.

Kotter's eight steps run from urgency and coalition through vision, communication, short-term wins, consolidation to anchoring change in culture.

Financial ratio families: profitability (ROCE, gross and net margin), liquidity (current, quick), gearing (debt/equity, interest cover), efficiency (asset turnover, inventory days, receivable days) and investor ratios (EPS, P/E, dividend cover).

ROCE = operating profit / (total assets less current liabilities); it can be decomposed into operating margin multiplied by asset turnover (DuPont).

The risk management cycle: identify, assess (likelihood x impact), treat (avoid, reduce, transfer, accept), monitor and report; residual risk is what remains after controls.

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

UK Corporate Governance Code principles: board leadership and company purpose, division of responsibilities, composition/succession/nomination, audit/risk/internal control, and remuneration.

Independence tests for non-executive directors include prior employment, material business relationships, family ties, tenure beyond nine years and cross-directorships.

Agency problem arises where ownership is separated from control; mitigants include equity incentives, independent boards, transparent reporting and active institutional investors.

Key performance indicators pass the SMART test and should be linked to strategy; avoid measures that reward volume while ignoring quality or risk.

Segmental and divisional performance needs divisional profit measures (contribution, controllable profit, ROI, RI); RI = divisional profit less (capital employed x imputed interest rate).

NPV discounts incremental after-tax cash flows at the weighted average cost of capital; accept if NPV is positive; it is the primary appraisal method because it measures value added.

WACC = (E/V x Ke) + (D/V x Kd x (1 - t)), where V = E + D and t is the corporate tax rate; use market values where available.

CAPM: Ke = Rf + beta x (Rm - Rf); the equity risk premium is the market return less the risk-free rate.

IRR is the discount rate giving zero NPV; it can mislead with non-conventional cash flows or mutually exclusive projects, so use NPV or modified IRR for ranking.

Free cash flow to the firm = operating profit after tax + depreciation - capital expenditure - increase in working capital; enterprise value equals the present value of these flows.

Valuation methods: discounted cash flow, dividend valuation (P0 = D1/(Ke - g)), P/E multiples, net asset value and replacement cost; triangulate and explain the range.

Gearing measures: debt/equity (book or market) and interest cover = operating profit / interest; high gearing raises financial risk and the cost of equity.

Dividend policy theories: residual theory (pay only after funding positive-NPV projects), Modigliani-Miller irrelevance (frictionless world), and signalling and clientele effects.

Modified duration approximates bond price sensitivity: percentage price change is roughly -duration x change in yield; longer duration means greater interest rate risk.

Ethical frameworks: deontological (duty and rules), teleological or consequentialist (outcomes), and virtue ethics (character); identify which the case stakeholders are applying.

Ethical threats under the ACCA/IESBA code: self-interest, self-review, advocacy, familiarity and intimidation; apply safeguards such as disclosure, rotation or independent review.

The five fundamental principles are integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.

Professional scepticism means questioning evidence and assumptions, especially management forecasts, related-party transactions and one-off adjustments.

Written reports should follow a structure: purpose and scope, assumptions, analysis, conclusions, recommendations with risks, and appendices for workings.

When advising a board, quantify the impact, state the sensitivity of key assumptions, and give a clear recommendation rather than a list of options.

Conflict of interest requires disclosure and, where material, withdrawal; confidentiality obligations survive the end of the engagement.

Communication should be tailored to the audience: the board needs summary and decision focus; operational managers need detail and action points.

Recommendations should be prioritised by impact and feasibility, with named owners, timing and success measures.

Case technique: read the requirement first, identify the verb (evaluate, advise, assess), and allocate time in proportion to marks.

Diagnose before recommending: link environmental analysis to internal capability, then to option generation, appraisal, choice and implementation.

Quantify where numbers are given: compute the financial impact of each option and state the assumptions behind the calculation.

Every recommendation should carry an implementation plan and a risk assessment, since marks are awarded for both.

Integrate topics across the syllabus: a financing decision affects gearing, WACC, covenant headroom and stakeholder reactions.

Use a clear structure with headings, short paragraphs and bullet points; state conclusions up front and support them with evidence from the case.

Address ethical and stakeholder dimensions explicitly; ignoring them loses marks even where the financial analysis is sound.

Sustainability reporting frameworks include ISSB IFRS S1 and S2, GRI and the TCFD recommendations; disclosures cover governance, strategy, risk management and metrics.

ESG factors affect cost of capital through investor preferences and risk premia; poor ESG performance can raise the cost of debt and equity.

Digital transformation changes the value chain: automation, data analytics and AI can reduce cost but require investment and change management.

Circular economy models shift from take-make-dispose to reuse, repair and recycle, altering cost structures and supplier relationships.

Geopolitical risk (trade barriers, sanctions, supply chain concentration) should be tested in scenario analysis.

Regulatory change such as carbon pricing, minimum wage rises or data protection rules can materially shift the cost base and competitive position.

Reputation risk is hard to quantify but can destroy value quickly; monitor through stakeholder feedback, media and complaint data.

Strategic control compares actual performance with plan at milestones; it is distinct from operational control, which monitors day-to-day activity.

Variance analysis decomposes differences into price/rate and volume/efficiency components; investigate only material variances.

The balanced scorecard links measures to strategy and prevents short-termism by including leading indicators.

Benchmarking compares performance against internal, competitive, functional or generic benchmarks.

Transfer pricing between divisions should use market price, cost-plus or negotiated price; it affects divisional profit and motivation.

Divisional ROI can encourage under-investment because managers reject projects below current divisional ROI even when above WACC.

Rolling forecasts and beyond-budgeting approaches reduce the rigidity of annual budgets in volatile environments.