Lecture Sheet-1

(Session 1 & 2)
E2: Enterprise Management
Scope of session 1 & 2
• Syllabus structure
• Chapter wise syllabus reference
• Text & reference books
• Assessment criteria
• Question pattern
Chapter 1 – Introduction to strategy formulation
▪ Strategy ▪ Rational approach of
▪ Mintzberg 5 Ps of strategy strategy formulation
▪ Strategic management ▪ Mission, vision, goals &
▪ Levels of strategy objectives
▪ Elements of strategy ▪ Critical success factors
▪ Key Performance (CSF)
Indicators (KPI)

Syllabus structure: The syllabus comprises the following main topics with the relative study weightings:

Segment Topic Weight (%)

A Strategic Management & Assessing the 30%
Competitive Environment
B Project Management 40%
C Management of Relationships 30%

Chapter wise syllabus reference:

Chapter Syllabus Structure

Topic
No. (weight)
1 CIMA Verb Hierarchy
2 Introduction to Strategy Formulation
3 Strategic Analysis Strategic Management
& Assessing the
4 Competitive Environments
Competitive
5 Alternative Approaches to Strategy Formulation Environment (30%)
6 Development in Strategic Management
7 Organizational Culture
8 Management & Leadership
Management of
9 Relationships in the Working Environment
Relationships (30%)
10 Management Control
11 Corporate Governance, ethics and social responsibility
12 Principles of Project Management
13 Project Stages – Initiation
14 Project Stages – Planning Project Management
15 Project Stages- Execution, control and completion (40%)
16 Project Management Method
17 People and projects

Text & reference books:

Text book:
1. Paper E2: Enterprise Management (Kaplan Publishing)
Reference books:
1. Strategic Management & Business Policy: Towards Global Sustainability (13th edition, 2012)

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 Lecture Sheet-1
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E2: Enterprise Management
Author: Thomas L. Wheelen & J. David Hunger
2. Strategic Management: Concepts & Cases (13th edition, 2011)
Author: Fred R. David
3. Organizational Behavior (15th edition, 2013)
Author: Stephen P. Robbins & Timothy A. Judge
4. Organizational Behavior: Managing People & Organization (11th edition, 2014)
Author: Ricky W. Griffin & Gregory Moorhead
5. A Guide to the Project Management Body of Knowledge (PMBOK Guide) – Fifth Edition (2013)
Publisher: Project Management Institute
6. Project Management: A Managerial Approach (7th edition, 2009)
Author: Jack R. Meredith & Samuel J. Mantel, Jr
7. Quantitative Analysis for Management (11th edition, 2012)
Author: Barry Render, Ralph M. Stair, Jr. & Michael E. Hanna

Assessment criteria: There will be a written examination paper of three hours. The examination paper will
assess the skills of the examinee in a holistic manner. All the four skills (leadership, business acumen, technical
and people) will be tested. All the questions are required to be attempted. There will be scenario based
questions along with some essay type questions so that the examinee can demonstrate all the skills to the
satisfaction of the markers.
Question pattern:

Recent trends

•This section consists of 1 question and 8 sub-questions.

Part A •You are advised to spend no longer than 36 minutes on this
section.
20 Marks •Section will carry 20 marks and one sub-question will carry
2.5 marks each.

•This section consists of 1 question and 5 sub-questions.

Part B •You are advised to spend no longer than 9 minutes on each
sub-question in this section.
30 Marks •Section will carry 30 marks and one sub-question will carry
6 marks each.

•This section consists of 2 questions.

Part C •You are advised to spend no longer than 45 minutes on each
question in this section.
50 Marks
•Section will carry 25 marks and allocation of marks for each
sub-question is indicated next to the sub-question.

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E2: Enterprise Management

Previous
trends

Year 2018 2017 2016

Part\Month June December June December June

2 questions 2 questions 2 questions 2 questions 2 questions

A
20 marks 30 marks 30 marks 30 marks 30 marks
2 questions 2 questions 2 questions 2 questions 2 questions
B
45 marks 35 marks 30 marks 40 marks 40 marks
2 questions 2 questions 2 questions 2 questions 2 questions
C
35 marks 35 marks 40 marks 30 marks 30 marks

Chapter 1: Introduction to Strategy formulation

Chapter overview

Strategy: It’s a course of action and long-term direction that determines the scope of organization’s activities to
achieve competitive advantage and objectives by using internal resources effectively, meeting challenges from
external environment and delivering value to the people who depend on the firm.
➢ Course of action, including specification of resources required, to achieve a specific objective.
(CIMA: Management Accounting: Official Terminology, 2005 edition p. 54.)
➢ Strategy determines the direction and scope of an organization over the long term, and it should
determine how resources should be configured to meet the needs of markets and stakeholders.
(Gerry Johnson and Kevan Scholes, authors of Exploring Corporate Strategy)

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Mintzberg 5 Ps of Strategy:
Henry Mintzberg suggests various definitions of strategy covering the five Ps.
Plan: The plan by which the organization hopes
to achieve its aims. It’s a direction, a guide, or
course of action into the future.

• Ploy: A specific tactic to outwit a

competitor. It can be seen as a maneuver in a
competitive business game. For example-
o Dropping prices to deter
competitors.
o Filing for patents.
o Threatening legal action.
o Investing in areas of excellence,
for example, customer support.
• Pattern: Consistent behavior over time,
giving the impression of a logically thought out
strategy. It highlights that strategy isn’t an event. It is a constant series of decisions and actions moving
the organization towards its aims.
• Position: The position of each product in the marketplace relative to competitors. For example-
o Being the cheapest.
o Having the most features.
o Servicing a particular customer niche.
o Having world-beating customer service.
• Perspective: The organization’s culture and personality. It’s way of getting things done. One of
Apple’s values is “think different”. Its culture and personality are all about making the best products in
the marketplace and doing it in an innovative way.

Strategic management:
➢ Concerned with the decision organizations make
about their future direction and the development and Competitiveness is the ability to provide
implementation of strategies which will enhance products and services as or more effectively
and efficiently than the relevant
competitiveness of organizations. (CIMA)
competitors.
➢ Art and science of formulating, implementing, and evaluating cross-functional decisions that enable
an organization to achieve its objectives. (Fred R. David & Forest R. David)
➢ Focuses on integrating management, marketing, finance & accounting, production & operations,
research & development (R&D), and information systems to achieve organizational success.

Levels of strategy
Strategy can be formulated at three
levels, namely, the corporate level,
the business level, and the
functional level. At the corporate
level, strategy is formulated for an
organization as a whole. Corporate
strategy deals with decisions related
to various business areas in which
the firm operates and competes. At
the business unit level, strategy is
formulated to convert the corporate
vision into reality. At the

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functional level, strategy is formulated to realize the business unit level goals and objectives using the strengths
and capabilities of your organization.
Comparative Analysis of Levels of Strategy
Level Definition Example/considerations

Corporate ➢ concerned with determining the ✓ decisions on acquisitions, mergers and sell-
Strategy overall purpose and scope of the offs or closure of business units;
(Complex & organization ✓ decisions to enter new markets or embrace
non-routine) ➢ what type of business or businesses new technologies
should the organosilicon be in.
Business ➢ concerned with how an operating ✓ marketing issues such as product
Strategy or strategic business unit development, pricing, promotion and
approaches a particular market. distribution
(competitive
➢ Responsible for winning customers ✓ how should it segment the market – should it
strategy
& beating rivals in particular specialize in particular profitable segments.
formulated)
market

Functional ➢ concerned with long-term ✓ Long-term management policies to ensure

Strategies management policies of business that the functional area plays its part in
functions e.g. sales, production, helping the SBU achieve the goals of its
purchasing, human resource and corporate strategy.
finance.

There is a clear hierarchy in levels of strategy, with corporate level strategy at the top, business level strategy
being derived from the corporate level, and the functional level strategy being formulated out of the business
level strategy. Business strategy should be formulated within the broad framework of the overall objectives laid
down by the corporate center to ensure that each SBU plays its part.
Elements of Strategy:
There are three main elements of strategy; Financial, Competitive and Investment & Resource.

Elements Definition Example

Financial ➢ Concerned with the organization’s ✓ Obtaining funds at the optimum

relationship with the providers of capital cost
➢ Financial strategy taking place at the ✓ Delivering adequate return to
corporate level the shareholders

Competitive ➢ Concerned with how and where the ✓ How to attract customers
organization should compete ✓ Which markets to enter and
➢ Competitive stagey taking place at the exit
business level ✓ Which products to market
✓ How to outperform rivals

Investment & ➢ Concerned with how management uses the ✓ Expenditure on brand support
resource finance it has available & advertising
➢ Investment and resource strategy taking ✓ R & D expenditure on new
place at the functional area. techniques & products
✓ Capital expenditure

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Rational Approach to Strategy Formulation
The rational strategic planning process model is based on rational behavior, whereby planners, management and
organizations are expected to behave logically. The rational model is also referred to as the traditional, formal
or top-down approach. It can be described as a series of logical steps which involve:
i. Determine the mission of the organization
ii. Set corporate objectives
iii. Carry out corporate appraisal – involving analysis of internal and external environments (SWOT
Analysis)
iv. Identifying and evaluating
strategic options – select
strategies to achieve
competitive advantage by
exploiting strengths and
opportunities or minimizing
threats and weaknesses
(Action to findings achieved
through SWOT Analysis)
v. Evaluate each option in detail
for its fit with the mission and
circumstances of the business
and choose the most
appropriate option
vi. Implementing the chosen strategy
vii. Review and control – reviewing the performance of the organization to determine whether goals have
been achieved. This is a continuous process and involves taking correcting action if changes occur
internally or externally
Mission, vision, goals and objectives
Values
Important and lasting beliefs or ideals shared by the members of a culture about what is good or bad and
desirable or undesirable. Values have major influence on a person's behavior and attitude and serve as broad
guidelines in all situations. Some common business values are fairness, innovation and community
involvement.

Vision
A vision statement looks
forward and creates a
mental image of the ideal
state that the organization
wishes to achieve. It
describes how future will
look if the organization
achieves its mission. It
should answer the basic
question, “What do we
want to become?”.
Mission
A mission statement is a
concise explanation of the
organization's reason for

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existence. It describes the organization's purpose and its overall intention. The mission statement supports the
vision and serves to communicate purpose and direction to employees, customers, vendors and other
stakeholders. It addresses three main questions:
• Why do we exist?
• What are we providing?
• For whom do we exist?

Some examples of vision and mission statement of local and international companies:
Company Vision Mission
Brac A world free from all forms of Our mission is to empower people and
exploitation and discrimination where communities in situations of poverty,
everyone has the opportunity to realize illiteracy, disease and social injustice. Our
their potential. interventions aim to achieve large scale,
positive changes through economic and
social programs that enable men and
women to realize their potential.
British Broadcasting To be the most creative organization in To enrich peoples’ lives with programs and
Corporation (BBC) the world services that inform, educate and entertain
Unilever To make sustainable living To add vitality to life. We meet every day
commonplace. We believe this is the needs for nutrition, hygiene and personal
best long-term way for our business to care with brands that help people feel
grow. good, look good and get more out of life
Google To provide access to the world’s To organize the world’s information and
information in one click. make it universally accessible and useful.

Roles of Mission statements

Mission statements help at four places in the rational model of strategy:
1. Mission and objectives: The mission sets the long-term framework and route for the business. It is the
job of the strategy to progress the firm towards this mission over the coming few years covered by the
strategy.
2. Corporate Appraisal: Assessing the firm’s opportunities, threats, strengths and weakness (SWOT)
must be related to its ability to compete within chosen business domain. Factors are relevant only when
they affect its ability to follow its mission.
3. Strategic evaluation: When deciding between alternative strategic options, management can use the
mission as a touchstone or benchmark against which to judge their suitability. The crucial question will
be, “Does the strategy help us along the road to being the kind of business we want to be?”
4. Review and Control: The key targets of the division and functions should be related to the mission,
otherwise the mission will not be accomplished.
Benefits of having a clear mission/vision
The importance (benefits) of vision and mission
statements to effective strategic management is well Purposes of mission statements according to Hooley et
documented in the literature, although research results al.
are mixed. Rarick and Vitton found that firms with a ✓ To provide a basis for consistent planning
formalized mission statement have twice the average decisions
return on shareholders’ equity than those firms without ✓ To assist in translating purposes & direction into
a formalized mission statement have; Bart and Baetz objectives suitable for assessment and control
found a positive relationship between mission ✓ To provide a consistent purpose between different
statements and organizational performance; interest groups connected to the organizations
BusinessWeek reports that firms using mission ✓ To establish organizational goals and ethics
statements have a 30 percent higher return on certain ✓ To improve understanding and support from key
financial measures than those without such statements; groups outside the organization

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however, some studies have found that having a mission statement does not directly contribute positively to
financial performance.

King and Cleland recommend that organizations carefully develop a written mission statement in order to reap
the following benefits:
1. To ensure unanimity of purpose within the organization
2. To provide a basis, or standard, for allocating organizational resources
3. To establish a general tone or organizational climate
4. To serve as a focal point for individuals to identify with the organization’s purpose
and direction, and to deter those who cannot from participating further in the organization’s activities
5. To facilitate the translation of objectives into a work structure involving the assignment of tasks to
responsible elements within the organization
6. To specify organizational purposes and then to translate these purposes into objectives in such a way
that cost, time, and performance parameters can be assessed and controlled.

Contents of a mission statement

Fred R. David and Forest R. David provide a useful list of what areas should be included in a mission
statement:
1) Customers- A statement making reference to who are the firm’s customers.
2) Products or services- A description of what are the firm’s major products or services.
3) Markets- Geographically, where does the firm compete?
4) Technology- Is the firm technologically current?
5) Concern for survival, growth, and profitability - Is the firm committed to growth and financial
soundness? It focuses on the broad economic objectives of the firm.
6) Philosophy - A statement of what are the basic beliefs, values, aspirations, and ethical priorities of the
firm.
7) Self-concept - A statement of what is the firm’s distinctive competence or major competitive
advantage.
8) Concern for public image - A statement of how much the firm responsive to social, community, and
environmental concerns?
9) Concern for employees–Are employees a valuable asset of the firm? It’s a statement of the firm’s
attitude to its employees.

The lifespan of a mission

There are no set rules on how long a mission statement will be appropriate for an organisation. It should be
reviewed periodically to ensure it still reflects the organisation’s environment.
If the market or key stakeholders have changed since the mission statement was written, then it may no longer
be appropriate.
A change in the mission statement may result in new performance measures being established to monitor the
achievement (or otherwise) of the new mission.

Goals
A goal is a general statement of what you want to achieve. More specifically, a goal is a milestone(s) in the
process of implementing a strategy. Henry Minzberg defines goals as the intention behind an organization’s
decisions or actions. Examples of business goals are:
• Increase profit margin
• Increase efficiency
• Capture a bigger market share
• Provide better customer service
• Improve employee training
• Reduce carbon emissions

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Objectives
An objective turns a goal’s general statement of what is to be accomplished into a specific, quantifiable, time-
sensitive statement of what is going to be achieved and when it will be achieved. Examples of business
objectives are:
• Earn at least a 20 percent after-tax rate of return on our investment during the next fiscal year
• Increase market share by 10 percent over the next three years.
• Lower operating costs by 15 percent over the next two years through improvement in the efficiency of
the manufacturing process.
• Reduce the call-back time of customer inquiries and questions to no more than four hours.

Action Plans
Action plans are statements of specific actions or activities that will be used to achieve a goal within the
constraints of the objective.

Goal Objective Action Plan

Increase Profit Reduce operating costs by 10% in 18 Finance department will conduct an in-depth
Margin months analysis of identifying low cost suppliers.
Improve Conduct a training program in the next A special committee will be formed to select and
employee skills 12 months to improve employee skills hire a professional trainer to conduct the training.
Increase Profit Increase sales volume by 20% in 12 Marketing department will create and implement
margin months. a plan to increase sales in regions west and east.
Smart Goals

Critical Success Factors (CSF) & Key Performance Indicators (KPI)

Introduction
Once an organisation has established its objectives, it needs to identify the key factors and processes that will
enable it to achieve those objectives.
Some aspects of performance are 'nice to have' but others are critical to the organisation if it is to succeed.

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Critical success factors (CSFs) are the vital areas ’where things must go right’ for the business in order for
them to achieve their strategic objectives. The achievement of CSFs should allow the organisation to cope better
than rivals with any changes in the competitive environment and to maximise performance.
Just as critical success factors are more important than other aspects of performance, not all performance
indicators are created equal. The performance indicators that measure the most important aspects of
performance are the key performance indicators.
Key performance indicators (KPIs) are the measures which indicate whether or not the CSFs are being
achieved.
Example:
A parcel delivery service, such as DHL, may have an objective to increase revenue by 4% year on year. The
business will establish CSFs and KPIs which are aligned to the achievement of this objective, for example:

CSF
Speedy collection from customers after their
requestfor a parcel to be delivered.
Rapid and reliable delivery.
KPI
Collection from customers within
3 hours of receiving the orders, in any part of the country,
for orders receivedbefore 2.30pm on a working day.
Next day delivery for destinations withinthe UK or delivery
within 2 days for destinations in Europe.

Critical Success Factors (CSF)

The organisation will need to have in place the core competencies that are required to achieve the CSFs, i.e.
something that they are able to do that is difficult for competitors to follow.
There are five prime sources of CSFs:
(1) The structure of the industry — CSFs will be determined by the characteristics of the industry itself,
e.g. in the car industry 'efficient dealer network organisation' will be important where as in the food
processing industry 'new product development' will be important.
(2) Competitive strategy, industry position and geographic location

— Competitive strategies such as differentiation or cost leadership will impact CSFs.

— Industry position, e.g. a small company’s CSFs may be driven by a major competitor's strategy.

— Geographical location will impact factors such as distribution costs and hence CSFs.
(3) Environmental factors — factors such as increasing fuel costs can have an impact on the choice of
CSFs.
(4) Temporary factors — temporary internal factors may drive CSFs, e.g. a supermarket may have been
forced to recall certain products due to contamination fears and may therefore generate a short term CSF
of ensuring that such contamination does not happen again in the future.
(5) Functional managerial position — the function will affect the CSFs, e.g. production managers will be
concerned with product quality and cost control.

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Classifying CSFs

Key Performance Indicators (KPI)

KPIs are essential to the achievement of strategy since:
'what gets measured gets done’
i.e. things that are measured get done more often than things that are notmeasured.
Features of good performance measures

In addition, KPIs should be SMART (specific, measurable, attainable, relevant and time-bound).
Care must be taken when choosing what to measure and report. An unbalanced set of indicators may be valid
for fulfilling the short-term needs of the organisation but will not necessarily result in long-term success.
Developed By
Md. Shahadat Hossen ACMA
Deputy Director & Head of Finance
Dhaka Shishu (Children) Hospital
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