BA-01-CIA-REVIEW-BUSINESS-ACUMEN-2.pdf

AUD1207 – CIA INTEGRATED REVIEW COURSES 1ST SEMESTER SY 2024-2025 BUSINESS ACUMEN STRATEGIC MANAGEMENT  MONDAY MOTIVATION "Things work out best for those who make the best of how things work out." - John Wooden CIA EXAMINATION SYLLABUS CIA EXAMINATION SY...

AUD1207 – CIA INTEGRATED REVIEW COURSES 1ST SEMESTER SY 2024-2025 BUSINESS ACUMEN STRATEGIC MANAGEMENT  MONDAY MOTIVATION "Things work out best for those who make the best of how things work out." - John Wooden CIA EXAMINATION SYLLABUS CIA EXAMINATION SYLLABUS CIA EXAMINATION SYLLABUS CIA EXAMINATION SYLLABUS SCHEDULE  CONTENT ▪Business Acumen Defined ▪Strategic Planning BUSINESS ACUMEN  BUSINESS ACUMEN Business Acumen means possessing the knowledge, abilities and skills (KASs) to succeed in the business field. The goal of the IIA for CIAs in Business Acumen consists of: ▪ Obtain deep understanding in company’s visions and missions ▪ Develop business strategies and goals ▪ Understanding inner workings of core business functions ▪ Applying IT and general technology ▪ Solving business problems and aid in making business decisions  STRATEGIES Strategies show a big picture of the company and explains on how senior management works on developing and executing strategies.  MISSION AND VISION Mission reflects management’s values and beliefs. Vision is a statement that explains what a company wants to become and what is hopes to achieve. MISSION AND VISION MISSION AND VISION MISSION AND VISION  GOAL Goals are developed from vision and mission. A goal is a statement of general, broad, long-term target, aim and intent. It is a desired future state that the organization aims to reach.  GOAL Goals are developed from vision and mission. A goal is a statement of general, broad, long-term target, aim and intent. It is a desired future state that the organization aims to reach.  TACTICAL GOAL Tactical Goals include both specific, broad, medium term measurable results in terms of clear outcomes expected of individual decisions, departments and business units that support strategic goals. EXAMPLES: 1. To add 1,000 branches across the Philippines 2. To be included in the Top 1,000 Corporations in the Philippines  OPERATIONAL GOAL Operational Goals include very specific, very detailed (narrow) and low-level measurable results of individual work groups. Operational Goals are usually SHORT-TERM in nature and are revised periodically EXAMPLES: 1. To be able to generate 15% additional sales 2. To be able to reduce employee turnover by 50%  PLAN Plans are blueprints specifying the resources, schedules and actions needed to achieve goals. Plans are turned into actions and then turned to results.  ACTION Actions are systematic and structured steps, tasks or activities required to achieve the defined plans. Actions will produce results that management is expecting. STRATEGIC PLANNING  PORTER’S FIVE FORCES MODEL Michael Porter's five-force strategic analysis model, introduced in a 1979 article published in the Harvard Business Review, remains a fundamental tool for strategic analysts plotting the competitive landscape of an industry. The model guides businesses in determining the intensity of competition and potential profitability within their market, helping them better understand where power lies in their sector. PORTER’S FIVE FORCES MODEL  PORTER’S FIVE FORCES MODEL 1. COMPETITIVE RIVALRY Several factors contribute to the intensity of competitive rivalry in an industry: ▪ The number of competitors ▪ Industry Growth ▪ Similarities in what’s offered ▪ Exit barriers ▪ Fixed costs  PORTER’S FIVE FORCES MODEL 2. THREAT OF NEW ENTRANTS Here are factors in measuring how much new entrants threaten an industry: ▪ Economies of scale ▪ Product differentiation ▪ Capital requirements ▪ Access to distribution channels ▪ Regulations  PORTER’S FIVE FORCES MODEL 3. BARGAINING POWER OF SUPPLIERS When the power of suppliers in an industry is high, this raises costs or otherwise limits the resources a firm needs. Here are some factors used to measure the supplier power of an industry: ▪ The number of suppliers ▪ Uniqueness ▪ Industry importance  PORTER’S FIVE FORCES MODEL 4. BARGAINING POWER OF CUSTOMERS When customers have more strength, they can exert pressure on businesses to provide better products or services at lower prices. This force intensifies under certain conditions: ▪ The number of buyers ▪ Purchase size ▪ Price sensitivity ▪ Informed buyers  PORTER’S FIVE FORCES MODEL 5. THREAT OF SUBSTITUTES When customers can find substitutes for a sector's services, that's a major threat to the companies in that industry. Here are some ways that this threat can be magnified: ▪ Relative price performance ▪ Customer willingness to go elsewhere ▪ The sense that products are similar ▪ Availability of close substitutes MICHAEL PORTER’S GENERIC STRATEGIES  MICHAEL PORTER’S GENERIC STRATEGIES A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average. The fundamental basis of above average profitability in the long run is sustainable competitive advantage.  MICHAEL PORTER’S GENERIC STRATEGIES 1. Cost Leadership In cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry average.  MICHAEL PORTER’S GENERIC STRATEGIES 2. Differentiation In a differentiation strategy a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many buyers in an industry perceive as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.  MICHAEL PORTER’S GENERIC STRATEGIES 3. Focus The generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.  MICHAEL PORTER’S GENERIC STRATEGIES The focus strategy has two variants. (a) In cost focus a firm seeks a cost advantage in its target segment, while in (b) differentiation focus a firm seeks differentiation in its target segment. Both variants of the focus strategy rest on differences between a focuser's target segment and other segments in the industry. The target segments must either have buyers with unusual needs or else the production and delivery system that best serves the target segment must differ from that of other industry segments. Cost focus exploits differences in cost behavior in some segments, while differentiation focus exploits the special needs of buyers in certain segments. VALUE CHAIN  VALUE CHAIN A value chain is a series of consecutive steps that go into the creation of a finished product, from its initial design to its arrival at a customer’s door. The chain identifies each step in the process at which value is added, including the sourcing, manufacturing, and marketing stages of its production. A company conducts a value chain analysis by evaluating the detailed procedures involved in each step of its business. The purpose of a value chain analysis is to increase production efficiency so that a company can deliver maximum value for the least possible cost.  COMPONENTS OF VALUE CHAIN Primary Activities Primary activities consist of five components, all essential for adding value and creating competitive advantage: 1. Inbound logistics include functions like receiving, warehousing, and managing inventory. 2. Operations include procedures for converting raw materials into a finished product. 3. Outbound logistics include activities to distribute a final product to a consumer. 4. Marketing and sales include strategies to enhance visibility and target appropriate customers—such as advertising, promotion, and pricing. 5. Service includes programs to maintain products and enhance the consumer experience—like customer service, maintenance, repair, refund, and exchange.  COMPONENTS OF VALUE CHAIN Support Activities The role of support activities is to help make the primary activities more efficient. When you increase the efficiency of any of the four support activities, it benefits at least one of the five primary activities. These support activities are generally denoted as overhead costs on a company’s income statement: 1. Procurement concerns how a company obtains raw materials. 2. Technological development is used at a firm’s research and development (R&D) stage— like designing and developing manufacturing techniques and automating processes. 3. Human resources (HR) management involves hiring and retaining employees who will fulfill the firm’s business strategy and help design, market, and sell the product. 4. Infrastructure includes company systems and the composition of its management team— such as planning, accounting, finance, and quality control. BOSTON CONSULTING GROUP (BCG) GROWTH SHARE MATRIX  BOSTON CONSULTING GROUP (BCG) GROWTH SHARE MATRIX The Boston Consulting Group (BCG) growth share matrix is a planning tool that uses graphical representations of a company’s products and services to help the company decide what it should keep, invest more money in, or sell. The company’s offerings are plotted in a four-square matrix. The y axis represents the rate of market growth, and the x axis represents market share. The BCG growth share matrix was introduced by the Boston Consulting Group in 1970.  BOSTON CONSULTING GROUP (BCG) GROWTH SHARE MATRIX Dogs (or Pets) A company is considered a dog and should be sold, liquidated, or repositioned if its product has a low market share and is at a low growth rate. Dogs are found in the lower right quadrant of the grid. Dogs don’t generate much cash for the company because they have a low market share and little to no growth. They can turn out to be cash traps, tying up company funds for long periods, so they’re prime candidates for divestiture.  BOSTON CONSULTING GROUP (BCG) GROWTH SHARE MATRIX Cash Cows Products that are in low-growth areas but for which the company has a relatively large market share are considered cash cows. The company should milk the cash cow for as long as it can. Cash cows are seen in the lower left quadrant. They’re typically leading products in mature markets. These products often generate returns that are higher than the market’s growth rate. They sustain themselves from a cash flow perspective. These products should be taken advantage of for as long as possible. The value of cash cows can be easily calculated because their cash flow patterns are highly predictable. Low-growth, high-share cash cows should be milked for cash to reinvest in high-growth, high-share stars with high future potential.  BOSTON CONSULTING GROUP (BCG) GROWTH SHARE MATRIX Stars Products that are in high-growth markets and that make up a sizable portion of that market are considered stars and should be invested in. Stars appear in the upper left quadrant. Stars generate high income but also consume large amounts of company cash. A star eventually becomes a cash cow when the market’s overall growth rate declines if it can remain a market leader.  BOSTON CONSULTING GROUP (BCG) GROWTH SHARE MATRIX Question Marks Questionable opportunities are those in high growth rate markets but in which the company doesn’t maintain a large market share. Question marks or problem children appear in the upper right portion of the grid. Question marks typically grow fast but consume large amounts of company resources. Products in this quadrant should be analyzed frequently and closely to see if they’re worth maintaining.  CONTINUOUS IMPROVEMENT CONTINUOUS IMPROVEMENT is the constant effort to eliminate waste, reduce response time, simplify the design of both products and processes, improve quality and enhance customer service. Continuous improvement can be done in two ways: A. Kaizen B. Business Process Reengineering  CONTINUOUS IMPROVEMENT 1) KAIZEN is the Japanese term for “Continuous Improvement” Kaizen is the gradual process of reducing costs during the = manufacturing phase of an existing product through small and continual improvements rather than through radical “big-time” changes.  CONTINUOUS IMPROVEMENT 2) BUSINESS PROCESS REENGINEERING (BPR) involves redesigning business process to reduce costs and eliminate inefficiencies and opportunities for errors. Common features of BPR include: ✓ Radical, quick, significant and drastic approach to improvement ✓ Business process is diagrammed in details, analyzed and completely redesigned ✓ Simplification of business process ✓ Elimination of non-value-added activities.  BENCHMARKING BENCHMARKING is the process of getting the “best practices” in the industry and applying such best practices to day-to-day business operations. This involves the three steps: 1) Identifying critical success factors 2) Studying the best practices of other firms based on identified success factors 3) Implementing needed improvements to match or beat the performance of other firms.  JUST-IN-TIME (JIT) SYSTEM JUST-IN-TIME (JIT) is a “demand-pull” system where inventories are purchased/produced only as needed for production/sale, reduced to the minimum level and, in some cases, reduced to zero (i.e., elimination of non- value-added costs). JIT can be classified into two categories: ✓ JIT Purchasing - raw materials are received just in time for production; goods for sale are received just in time for delivery or sale. ✓ JIT Manufacturing – manufactured materials are completed just in time for production; products are completed just in time for delivery. JUST-IN-TIME (JIT) SYSTEM END