ACCA SBL NM Rao

SHAKYAMUNI EDUCATIONS PVT LTD
Strategic Business Leader(SBL)

By CA NM Rao
Syllabus
Section Content
Presentation Professional Skills
A Leader ship
B Governance
C Strategy
D Risk
E Technology and Data Analytics
F Organizational control and Audit
G Financial planning and Decision Making
H Innovation, Performance Excellence and Change
Management
SBL Introduction
SBL Introduction
https://www.youtube.com/watch?v=qW8ZPiB4a
uA
SBL Syllabus Mapping with Previous Papers
4 Hours Paper
One Scenario Based Question
80 Marks Technical and 20 Marks
Professionalism
5 Steps for SBL Success
1. Study with an Approved Learning Partner
2. Give yourself a Longer exam preparation
time
3. Demonstrate Professional skills
4. Complete the Ethics and Professional
Module first
5. Timed Question Practice under exam
conditions
Section: Presentation
Professional Skills
Introduction
 The SBL exam is designed as a work-based
simulation that better reflects the work you may
actually carry out in the real world.
 To reflect this, there are now 20 professional marks
incorporated into this paper (rather than the historical

4) and they are specifically included in each task you
will face.
 The number of professional marks available to you,
and the particular professional skills being assessed

will be made clear within the requirements for each
task.
 Professional marks and technical marks are positively
correlated; earning one will help you to earn the

other.
Ethics and Professional skills module
 The ethics and professional skills module can
be completed at any time but must be done
before you can qualify. The ACCA recommend
that this is completed before attempting the
strategic professional exams.
 If you have not already passed this module,
you should do this now.

http://future.accaglobal.com/changes-to-the-
qualification/what-do-the-changes-mean-for-
me/ethics-and-professional-skills-module
Professional skills
The professional skills that will be assessed
within SBL are:
1. Communication
2. Commercial acumen
3. Analysis
4. Scepticism
5. Evaluation
Professional skills
Communication
 Expressing yourself clearly and putting your
argument across using an appropriate style

and tone.
 The ACCA expects you to be able to:
• Inform, persuade and clarify in order to be
able to demonstrate your ability to

communicate effectively.
Professional skills
Commercial acumen
 To demonstrate commercial acumen, your
ideas you put across should makes sense in

the real-life business world; your suggestions
should be sensible for the case study
organisation.
 This will mean that they will be in line with
the objectives and strategy of that company

and reflect the external environment in which
it operates.
Professional skills
Commercial acumen
 You can develop these skills through:
• Reading the business sections of newspapers
• Using your own experiences both at, and
outside of, work (Eg buying a house, car or

mobile phone)
Professional skills
Commercial acumen
 To demonstrate commercial acumen, the
ACCA state you should show

• Awareness of the wider context and relevant
opportunities and threats

• Judgment in ensuring ideas are a financial fit
with the organisation

• Insight that considers commercial
implications of ideas prior to concluding

Professional skills
Analysis
 Given the nature of the SBL, pulling together
information from a variety of sources is a key

part of analysis.
 Financial analysis, such as the calculation of
ratios, will also be important.

 Compiling this analysis and presenting it
constructively to make logical suggestions or

conclusions will demonstrate your abilities in
this area.
Professional skills
Analysis
 To demonstrate analysis, the ACCA state you
should be able to
• Investigate what is happening and why
• Enquire ask appropriate questions
• Consider the value and use of the given
information
Professional skills
Scepticism
 Keeping an open mind and not taking the
information you are presented with at face

value.
 This will include challenging assumptions and
considering what other conclusions might

have been drawn.
Professional skills
Scepticism
 To demonstrate commercial scepticism, the
ACCA state you should

• Probe into the information, and not accept it
at face value
• Question by looking for evidence to back up
the statements
• Challenge conclusions by considering what
alternatives could have been made

Professional skills
Evaluation
 Evaluating means to determine both the
benefits and drawbacks of something and

form a reasoned and balance conclusion.
Professional judgement and ethics are likely
to play a part in this.
Professional skills
Evaluation
 To demonstrate evaluation skills, the ACCA
state you should

• Assess the pros and cons
• Estimate how variables may change if a course
of action is taken
• Appraise the identified pros and cons to
determine a course of action/conclude

Section A-leadership
Chapter 1
Qualities of leadership
Defining Leadership
 Whatis a Leader
-Views +Theories
 Concept of entrepreneurship
-Role it plays in Leadership
Defining Leadership
 Some at work?
 Business context?
 Key Sports person?
 Politician?
Leadership Vs Management
Management and leadership are not the same
thing.
 Management involves getting things done
through other people and is focused on

action. It is about ‘doing things right’.
 Leadership means to create a vision that

people can buy into by inspiring and
motivating people. It is about ‘doing the right
things’
Management:
 Getting things done through other people
 Focused on Action
 Doings things Right
Steps in Management Role

 Setting objectives
 Defining Team roles
 Ensuring resource availability
 Effective actions
 Taking corrective actions
Leadership:
 Focused on Vision
 Doing the right things
 Doing them right
 May not be a good Leader
Defining Leadership
Inspirational Leader
 Important in Challenging times
 Also Known as
• Charismatic leader
• Visionary Leader
• Transformational leader
 Control Mechanism:
Motivation and Support

Defining Leadership
Transactional Leader
 Important in stable times
 Also known as Instrumental leader
 Control mechanism:
• Supervision&structure
• Reward and Punishment
Exam Focus
 Consider style
 Question appropriateness
 Suggestion and Improvement
Setting the Tone
 Strong Leader is a Focal Point
 Ethical responsibility
 Walk the talk
Gary Jukl’s Approaches
1.Trait Approach:
 Good Leader possess certain Characteristics
• Energy
• Intuition
• Intelligence
• Persuasiveness
 Cannot guarantee leadership
 Most of the research inconclusive
 Largely discredited approach
2.Behaviour Approach:
Coping with
• Demand
• Constraints
Appropriateness of reaction
3.Power/influence approach:
How Much power leader using to reach goals ?
How the leader exercising power?
Dictatorial/Autocratic style-Crisis
Consultative approach-Creative solution

4.Situational/Contingency Approach:
 What is required of leader

(Skill+characteristic+Behaviour) is depending
on situation
5.Integrative Approach:
Combination of 2 or more of the previous

approaches
Exam Focus
 Consider alternative perspectives
 Analyse current leadership style
 Assess appropriateness
Defining Leadership
Johnson Leadership Strategic Management
 Set Direction
 Create Vision
 Effective communication
 Ensure Motivation
 Align objectives
 Ensure resource availability
Defining Leadership
Johnson Leadership Middle Management
 Make vision a reality
 Make sense of strategy
 Lead local teams
 Help achieve goals
Entrepreneurship
Individual Point of View
 Using resources
 Spot-Opportunities-Exploit
 Identify-Need-Meet
Intrapreneurship
In Large organization Intrapreneurship
• Autonomy
• Flexibility
• Toleration
• Rewarding risk
• Innovation
 Over freedom
create friction
Create disagreements
Create conflicts
Summary
 What is Leadership
 Views+Theories
 Examination perspective
Chapter 2
Leadership&Organisational culture
Culture
 The way we do things around here
 Reflects the way it feels to work some where
• Values
• Principles
 Considered a Management control-
• Ensure people are motivated
• Must reflect organisational goals
Culture&Strategy
Conservative culture
Safe strategy
Shunning innovation
Risk-taking culture
A ‘go getting’ strategy
Committing funds to untested ideas
Factors influencing culture
 Country
• Accepting ambiguity in process
• Culture of overseas parent
 Country
• Founding Members
• History of the Organisation
• Current Leaders
• Organisational structure
Managing culture
Aspects of Organisational life that
contribute culture
Paradigm
 Out look
 Assumptions
 Beliefs
 Priorities
Cultural web
Routines&rituals
 Flexible timings
 Celebrations
 Official gatherings
 Formal recruitment
 Example-In Army=Early rising to do exercise
Cultural web
Control Systems
 Rewarding process
 Symbols
 Example
 Manager high specification laptop
 Mobile phone
 Office Cabin

Cultural web
Stories&myths
 Rewarding founding members
 Demonstrate principles
 Example-Armed forces talk bravery
 Organisational structure
 Divisions
 Functions

Cultural web
Power structures
 Organisational hierarchies
 Talent&expertise

Change Management
Significant change in direction or culture.
5 styles of change management(Balogun &
Hope Hailey)
Education & communication

 Explaining why change needed
 No surprise atmosphere

Styles of Change Management
Collaboration & Participation
 Workers involved in creating solution
 Increases worker ownership
 Intervention
 Use a change Agent
 Change agent could be brought in from
outside the company

Styles of Change Management
Direction
 Management dictates new strategy
 Used if harsh&extreme change is imposed
 May breed resentment
 Coercion
 Forcing change through threats
 Not a recommended approach

Summary
 Culture is central to performance
 Leadership has a key role in shaping culture
 Cultural web helps in management of culture
5 styles of change Management
(Balogun&Hope Hailey)

Chapter 3
Professionalism, Ethical codes &
Public Interest
Contents
 What are ethics?
 How to assess ethically challenging
situations?
 ACCA’s Code of ethics
 Reasons for ethical conflicts
 How to resolve ethical conflicts
 Reducing fraud,bribery&corruption

Ethics
 Morals of right & wrong
 Application of ethical principles in challenging
situations
 Apply a structured approach
 Refer to an appropriate frame work

Ethics- Appropriate frame work
Tucker’s 5 Question approach-Not Every Question
relevant
1.Is it profitable?
2.Is it Legal?
3.Is it fair for all involved?
4.Is it right?
5.Is it sustainable or environmentally sound?

Question 1-Is it profitable?
will it further the organisational objectives?
Question 2-Is it Legal?

Illegal actions should not be considered
Question 3-Is it fair to all involved?

How decision effects stakeholders
Question 4-Is it fair right?
Is the course of action good?
Example: stealing Rs Million from 3 families

Stealing Rs 1 Million from each
Equitable-Yes
Fair-Yes
Right-No
Question 5-Is it sustainable?

Does the action compromise future?
Exam focus:
Analyse ethically challenging situations
Should we open a factory?
 Low labour cost
 Labour Laws
Ethical Frame work
Rule Based
 Tries to list out all possible situations
 Dictate a course of action
 Clear where situation exactly matches
 Can’t encapsulate every situation
 Encourage ‘work around the rules’

Ethical Frame work
Principles Based
 More common
 Explain general concepts
 Applied in any circumstance
 Vague in many aspects
 Offer flexibility
Organization’s Ethical Frame work
 Explains organisational principles/values
 Guide decision makers
 Enforced by rewarding system

ACCA’s Ethical Code
Profession
₋ Expertise
₋ Standard behaviour
 Examination process
 Entry requirements
 Disciplinary process
 Monitoring process
Work in Organization
Abide by higher standards at all time
 ACCA is a Member of IFAC(International
federation of accountancy committee)
 Code of IFAC adopted
 Principles based approach
 P-Professional competence & due care
 I-Integrity
 P-Professional behaviour
 C-Confidentiality
 O-Objectivity
P-Professional competence & due care
 Diligent in execution of duties
 Up to date on technical & professional
standards
 Application of technical & professional
standards
I-Integrity
 Honest & straight forward
 Clear in choice of words
 Not misleading
P-Professional behaviour
 Don’t bring disrepute to the profession
 Courteous attitude
 Present profession in a good light
C-Confidentiality
 Not disclosing information to unauthorised
sources
 Disclose if legal obligation
 Disclose if in public interest
O-Objectivity
 Without bias
 Straight application of rules
 No undue external influences

Exam focus
Threats
A-Advocacy
S-Self review
I-Intimidation
F-Familiarity
S-Self-interest
ACCA’s Ethical Code-Threats
A-Advocacy : Taking client’s position such that
objectivity is impaired
Example:
Promoting client about to float on stock
exchange
Safeguards:
Appropriate internal barriers to communication
Refusing to engage in activity that makes you an
advocate of your client
Self review :Reviewing your own work
Example:
Previously worked in finance, then moved to
internal audit reviewing financial system
Safeguards:
Declining to review own work

Intimidation: Client/employer threats
Example:
Threatened with sack from employer if request
not complied
Safeguards:
Whistle-blowing process

Familiarity: Close personal relationship
Example:
Auditor’s spouse is the finance director
Safeguards:
You should not be involved in such audit

Self interest: Personal interest/advantage
Example:
Auditor is a major shareholder in a supplier to
the business
Safeguards:
 Threat disclosed
 Threat disposed off(selling shares)
 Remove yourself from such assignment
Suggesting way is Display Judgement & commercial

acumen
Public Interest
 Collective well-being of community of people
& institutions
 Part of professional behaviour
 Disclose actions(Breaching confidentiality)
 Seek Legal advise before Breach

Fraud
 Deliberate & dishonest action to create
advantage for perpetrator
 Conditions for fraud
 Opportunity-weak controls
 Pressure-Financial pressure
 Rationalisation-Justification
Examples of Fraud
 Inflating expenses claim
 Manipulating financial statement
 Ghost employees
 Impersonating some one else

Preventing Fraud
 Opportunity-strong control environment
 Pressure-Ensure people are well paid
 Rationalisation-Perform background checks

Fraudsters Dismissed
 Reputation of Firm
 High threshold of proof
Organizational policy should state intended

consequences
Bribery&Corruption
Bribery
Offering/accepting inducements to obtain
inappropriate influence
 Underdetermines confidence in business
 Damage reputation
 Might be a standard practice
 Not acceptable
 2 wrongs don’t make a right
Corruption
 Being dishonest
 Abusing power
Combating Bribery & Corruption
Culture & Environment
 Right people
 Right attitude
 Careful recruitment
 Training
 Reinforcing explicit code
 Staff well treated / adequately paid
Procedures
 Control reviews
 Robust reporting
 Whistle blowing procedure
Summary
 Role of culture in organizational goals
 Fraud
 Bribery & corruption
 Importance of Leadership
Section B-Governance
Chapter 1
Agency
Agency
 An agent is a party that acts of behalf of a
principal.
 In Family owned Business shareholders and
Directors same
 In Large business Like Public Limited
Companies the shareholders (the principals)

appoint directors (the agents) to work on their
behalf(In this case Agency Problem will arise)
Agency Problem
 The agency problem involves ensuring that
agents are acting in the best interests of the
principals, rather than in their own best
interests.
 It arises as a result of two main factors:
1. Self-interest – the agenda and objectives of

the directors are unlikely to perfectly align
with those of the owners.
2. Information asymmetry – the directors know
more about the company than the owners
Managing Agency Problem
There are two key approaches:
1. Governance – appointing non-executive
directors to monitor the activities of the
executive directors
2. Remuneration – this needs to be carefully
considered to ensure the directors (agents)
are working in the best interests of the
shareholders (agents)

Difficulties with Remuneration
 Remunerating directors to ensure they work in the
best interests of shareholders is difficult in
practice. Consider these examples:
 Bonus Based on Profits– this can create short-
termism as directors prioritise short-term profits
at the expense of everything else. E.g. they may
save money to boost short term profits
 Reduce training
 Reduce research
 Cut corners
 Not replacing staff
 It destroy value in Long term
Difficulties with Remuneration
 Linking bonuses to share price – may encourage
risk taking as directors will achieve huge bonuses
if the risk pays off but will not lose anything if it
does not.
 Principal:
 Specific risk in a Company
 Diversifying investments
 Agent:
 Diversifying operations
 Branching Out..
 No need for shareholders to diversify
investments
 Expertise available?
Solution for Agency Problem
 Governance
 Discussed ahead
 Appointing Non Executive directors
 Remuneration
 Linking remuneration with goals
 Careful considerations needed
 Difficult process
 Offering share options-This can encourage
excessive risk and High loss=share options
worthless
Other Solution for Agency Problem
 External Audits
 Clear& Transparent reporting-E.g Companies
act
 Regular Meetings-E.g AGM
 All above will reduce agency Problem

Reduce Agency Problem
 Agency Problem can reduce
 Governance structures
 Remuneration packages
 Agency Problem can not be eliminated

Exam Focus
 Notice Agency Problem
 Analyse Agency Problem
 Suggest reasonable solutions

Summary
 Separation of ownership & control
 Agency Problem
 Goal congruence
 Remuneration packages
 Corporate governance
Chapter 2
Stakeholder Analysis &
Organisational Social Responsibility
Contents
 Nature of Stake holders
 Mendelow’s stakeholder map
 What is corporate social responsibilities(CSR)
 CSR & Share holders wealth

Stakeholders
 Any group affected by or have interest in an
organisation
 Active:
 Proactively seek to be involved
 E.g Managers
 Direct Claim-Communicate directly with organisation
 Passive
 Affected by Business but can’t/won’t affect
organisation
 E.g Local community
 Indirect Claim-Can’t communicate directly with
organisation
Stakeholders
 Any group affected by or have interest in an
organisation
 Active:
 Proactively seek to be involved
 E.g Managers
 Direct Claim-Communicate directly with organisation
 Passive
 Affected by Business but can’t/won’t affect
organisation
 E.g Local community
 Indirect Claim-Can’t communicate directly with
organisation
Manage Stakeholders
 Johnson & Scholes ICE-Identify who are your
stakeholders are
 Internal
 They make organisation work & are inside
 E.g Employees & Managers
 Connected
 They are outside but have a direct relation with
organisation
 E.g suppliers & customers
 External
 Both feet outside organisation but still have
‘claim’
 E.g local community & competitors
Mendelow’s Stakeholder Mapping Matrix
 Mendelow’s matrix is used to determine strategies for
managing stakeholders by plotting their relative power
and interest in the organisation.
 Power: ability to influence decisions made by the

organisation
 Interest: degree to which they are affected by the

actions of the organisation

 Key players: These stakeholders are interested in the
organisation and have the power to affect it. They will
need to be considered in any decision.
 Keep satisfied: These stakeholders have a lot of power,
however they are unlikely to exert this power as they have
little interest in the organisation. They will need to be
satisfied because if they are not their interest levels may
rise and they may decide to exert that power.
 Keep informed: These stakeholders have a lot of interest
in a decision, or a particular decision that it is making,
but do not have the power to do anything about it. They
must be kept informed. These stakeholders can increase
their power by lobbying those that do have power (e.g.
trade unions or governments) if they are insufficiently
informed and reassured.
 Minimal effort: these stakeholders have little power
or interest and as such will need only monitoring in
case either of these factors should be raised at any
time.
 Problems with Mendelow’s matrix

 Does not show how conflict can be resolved
 Levels of power and interest can change over time
 There is a range between ‘high’ and ‘low’ which is
not really covered by the model
 Stakeholder management is an art, not a science

Corporate Social Responsibility(CSR)
Carroll’s model
Descrptive Model
 1st Economic responsibilities-creation of wealth
 2nd Legal responsibilities-Abide law
 3rd Ethical responsibilities-Fair dealing
 4th Philanthropic responsibilities-support good

cause
 CSR relates to the impact that an organisation
has on society as a whole and how it manages
that impact.
 Organisations may have a narrow or broad CSR
stance (Johnson et al)

 Narrowest: Focus is on short-term profitability;
unlikely to support charity which it would view

as an expense
 Narrow: Focus is on profitability over the longer
term; charity viewed as an investment so would

only be supported if profits would rise as a
result
 Broad: Focuses on other stakeholders, not just
shareholders, others would be considered due
to moral obligations not simply because profit
would increase as a result
 Broadest: Large, influential organisations that
consider that they have a moral responsibility

to enter discussions internationally and take an
active role in responsibly shaping society and
the world in which they operate.
 Grey, Owen and Adams also describe a
spectrum of CSR stances which organisations
take:
 Pristine capitalist: Business exists only for
shareholders, money would not be spent on

anything that does not direct increase the
wealth of shareholders and to do so would be
considered to be theft
 Expedients: Might support CSR only if
shareholder wealth would increase as a result

 Proponents of the social contract: Beyond
acting within the law, if customers do not
approve of their actions the social contract will
have been breached and revenue will fall.
Recognises that actions need to be seen to be
moral as well as legal.
 Social ecologists: Businesses have a moral
obligation to consider their social and

environmental impact
 Socialists:Business decisions should be made
to serve all (not the shareholders)
 Radical feminists: Promote traditional feminine
values, e.g. compassion, cooperation and

understanding
 Deep ecologists: Man has no right to exist or
consume resources than any other animal or

plant
Exam Focus
 Identify CSR Approach
 Discuss appropriateness
 Consider other views
 Make recommendations
Governance-Scope & Approaches
Corporate Governance(CG)
 System by which organizations are directed &
controlled
 Workers ultimately working for the

shareholders
 Detailed internal controls

 Bigger picture-Board structure-Covered in later
topics
Corporate Governance(CG)-Approaches
Rules-Based
 Enshrined in Law
 List Down requirements
 Must be complied with
 Try to cover all eventualities
 E.g Sarbanes Oxley Act 2002(SOX)

Principles-Based
 Explain general concepts
 Flexible
 ‘Listing’ requirement
 ‘Comply or explain’
 E.g UK Code on Corporate Governance

Rules-Based-Advantages
 Legal backing
 Reduce cost of capital
 Reduce ambiguity
 Increase standardization
Rules-Based-Disadvantages
 No flexibility
 ‘Work around the rules’
 Discourage business activity
 Not every thing can be covered by rules
 Increase compliance cost

Principles-Based-Advantages
 Increase flexibility
 Judge by people directly affected
 Easier to apply
 Reduce compliance cost
 Emphasizes ‘sprit’ of sound Governance

Principles-Based-Disadvantages
 Generate inconsistencies
 Reduce confidence
Exam Focus
 Consider approach
 Analyze situation
 Advise
UK Code on Corporate Goverance
 Principal based approach is UK Code
 We will cover detailed in later

Sarbanes Oxley Act 2002(SOX)
 Rules-based approach
 Establishes public oversight board(PCAOB-
Public Company Accounting Oversight Board)

 External auditors can not carry out Non Audit
services
 Audit committee is independent & at least 1
Member has financial experience

 Annual reports detail internal control reports
 External auditors review internal controls
 CEO&CFO certify financial statements
personally
 Detailed control procedures tested regularly
International Bodies
 Describe their own versions of best practice
 Voluntary codes
 Organization
for Economic co-operation &
Development(OECD)
 International
Corporate Governance
Network(ICGN)
Organization for Economic Co-operation &
Development(OECD)
 Deals mainly with governance issues
 Areas Covered:
 Rights of shareholders
 Equitable treatment of shareholders
 Role of stakeholders
 Disclosure & transparency
 Responsibilities of board
International Corporate Governance
Network(ICGN)
 Aimed to enhance the OECD Guidance
 Focus on:
 Managing relationships with all stakeholders
 Participation required to create shareholders
wealth
 Fairly broad view of corporate governance
Outsider Model
 Corporate governance frameworks
 Address agency problem
 Owner are outside the Business
 Relationship is little remote

Insider Model
 Owners are not so remote

 Owners usually managers as well
 Small number of large shareholders
 More active role in Questioning management
 Separation between ownership & control not
so pronounced
 Need for corporate Governance is not
eliminated
 Treat all shareholders equally
 Rights of minority shareholders-Area of
concern
Role of institutional shareholders
 Active role
 Keen Interest
 Need for rigorous Corporate Governance
procedures reduced
 Investors-Invest funds-Pension funds-
Investments in Companies
 Investors rights should be taken care by
Pension fund holders

Stewardship Code
 Financialintermediaries explain how

stewardship responsibilities are discharged
 Compelled to look out for their investments
 Attending & voting at AGM +intervening when
issues
 Applied on a ‘comply or explain’ basis
 Strongly encouraged for their intermediaries
Exam focus
 Consider impact of ‘insider’ investors
 Make recommendations
 Insider Vs Outsider ownership structure

Summary
 Approaches to Corporate Governance
 Advantages & disadvantages of each approach
 Different regimes
 Outsider & insider models

Reporting to stakeholders
Traditional financial reports
 Narrow focus
 Only as financial results
 Backward working
Traditional financial reports
 Narrow focus
 Only as financial results and Business

activities
 Historic and Backward working

International integrated reporting Council
 Financial reports-Explain link between

strategy and deployment of resources
 Create value-In short, medium and long term


Integrated Reporting(IR)
 Adaption-voluntary
 Popularity-Increasing
 Information-useful for decision makers

IR Vs Financial reporting
Elements of IR
 Six Capitals
 Guiding Principles
 Content Elements

Integrated Reporting(IR)
 Adaption-voluntary
 Popularity-Increasing-New standards
 Information-useful for decision makers

Six Capitals
Resources combined to create value

 Financial capital-Money
 Manufactured-Factories and Equipments
 Human capital-Skills, experience and
motivation of work force

 Intellectual capital-Intangible assets like
Patents, Brand Value

 Social capital-Relationship with stakeholders
 Nature capital-Access to natural resources to
get Raw materials etc..

Guiding Principles
 Strategic focus and future orientation

 Connectivity of information
 Stakeholders relationships
 Materiality
 Conciseness
 Reliability and completeness
 Consistency and comparability
Content Elements
 Organizational overview and external

environment
 Governance
 Explanation of Business Model
 Risks and opportunities
 Strategy and resource allocation
 Performance
 Outlook
 Basis of preparation and presentation
 General reporting guidance
Content Elements
 Organizational overview and external

environment
 Governance
 Explanation of Business Model
 Risks and opportunities
 Strategy and resource allocation
 Performance
 Outlook
 Basis of preparation and presentation
 General reporting guidance
Adaption of Integrated Reporting
 Increase confidence among stakeholders
 Benefits usually outweigh costs-In Exam you

need to check benefits in relation to costs
while giving suggestion
Sustainability Reporting
 May be included in IR
 Not compromising future by current actions
 Triple Bottom Line (People, Planet and Profit)
 Economic, Social and Environmental

performance
 Voluntary adoption
 Codes enhance organization reputation

Social and Environmental Reporting
 Eco-Management and Audit Scheme(EU

Commission)
 Expressed commitments to comply
 Continuous improvement
 EMS(Environmental Management System) to

control and measure impact
 Audit at least every 3 years
 Audited statement with detailed disclosure

International Organization for Standardization(ISO)
 Similar to EMAS
 Public declaration of compliance
 Detailed internal audit to support
 No External verification
 Independent verification possible

Exam Focus
 Support case for introducing EMAS or ISO

14001
 Accreditation costs
 Benefits
 Better communication
 Reduced cost and Risk
 Winning More Business
Summary
 Voluntary frameworks to enhance reporting

Quality
 Adopting schemes can add value
 Value enhanced by independent

disclosures
The Board of Directors
Introduction
 Previous video-General corporate

governance frame work
 This video-Board of directors

The Board
 Act on behalf of shareholders

 Considered as shareholders insiders
 Fiduciary duty to act in best interest of
shareholders
 Some argue the duty extends to other
stakeholders
 This section based on UK Model
 Other Models very similar
Main Duties
 Monitoring and controlling
 Overseeing strategy
 Providing Leadership-Set the tone

organization culture
 Ensuring Risk is Managed
 Raising company profile

Functioning as a Team
Responsibility of the chair of the Board

 Number of directors
 Promote from within or Bring in from out side
 Diversity(gender/race/back ground
 Ensure knowledge & skill is present
 Ensure sufficient time & information available

Functioning as a Team
Responsibility of the chair of the Board

 Induction
 Training
 Continuing professional development
 Regular appraisals
Operation as a whole
Seek external and independent advise

Makeup of the Board
 If the Chair and CEO Separate

 Chair runs the Board
 Chief Executive officer(CEO)

 Responsible for operations
 If the Chair and CEO same person

 Chair cannot be critical of operations
 Too Much ‘unfettered power’
 Too Much responsibility
Unitary Board Structure
Finance Director
 Head of finance
 Executive/operational role
 Reporting to CEO
 Know the details of operations
 If Board Member
 Non Executive role
 Reporting to chair
 Reduce independence
Non-Executive Directors (NEDs)
 Don’t have any operational role

 No conflict of interest
 More independence
 Independence of NEDs
 No close personal relation
 No other business dealings
Non-Executive Directors (NEDs)
 Don’t have any operational role

 No conflict of interest
 More independence
 No close personal relation
 No other business dealings
Role of (NEDs)
 Contribute to strategy
 Scrutinize the executives
 Assist in ensuring risk is managed
 Ensuring right people are the executives

Role of (NEDs)
 Contribute to strategy
 Scrutinize the executives
 Assist in ensuring risk is managed
 Ensuring right people are the executives

Exam focus
 Balance of Executives and NEDs
 Recommended changes to board composition

Board Subcommittees
 Audit committee
 Nominations Committee
 Remuneration Committee
Audit committee
3 Members (2 in small companies)
 All members should be NEDs
1 Member should have financial experience

Role of Audit Committees
 Review financial statements-Report back to

Board
 Clearance point for internal audit-Enhance
independence and Power
 Clearance point for External audit-Enhance

independence and Power
 Risk Management-Ensuring adequate risk

management process
Nominations Committee
 Manage appointments
 Consider- Size+skills+diversity
 Succession planning
 Annual reappointments
Nominations committee-Nature of work

 Recruitment policies-Interview+assessment
 Recruitment process-put forward
recommendations
Remuneration Committee
 Deciding executive pay
 Principles adopted for setting remuneration

packages
 Pay and remunerations package reviews

Remuneration Committee
Deciding remuneration packages
 Decent but not excessive
 Market rate + skills & experience
 Appropriate bonuses
 Aligning interests (Goal congruence)

Unitary Board Vs Two-Tier Board
 Unitary Board-Only One Board exists
 Two-Tier Board
 Supervisory Board-NEDs
 Management Board-Executives
Unitary Board Vs Two-Tier Board
Unitary Board
 Quicker decisions
 Less cost
 Better decisions
Two-Tier Board
 Complete segregation
 Check each other
 More time
Exam focus
 Impact of different Board structures
 Different approaches to governance
 Comment on Pros&cons of Board structure

Summary
 Board of Directors
 Tactful recommendations
Public Sector Governance
Private Sector Vs Public Sector
Factor Private Sector Public Sector

Agency relationship Principals>shareholders Principals>Taxpayers
Ownership Shareholders Governments

Objectives Profit motive Value for Money(3Es)-
Economy,Effectiveness,
Efficiency
Finance For future returns To meet Public Policy
objectives
Lower scrutiny Higher scrutiny
Good Performance>More Poor
funds performance>More
funds
Public Sector Organization-Size
 Sub National-Local Government
 National-National Health service in UK
 Supranational-European Union or United

Nations
Similar Corporate Principles
 Objectivity, Independence and no operational

roles for NEDs
 State-Owner-State will dictate the structure
 Reporting to oversight board
 Subject to External audit or political scrutiny

Exam Focus
 Corporate Governance of Public sector
 Consider Best Practices in private sector
 Adapt to particular situation
 Control structure and stakeholder objectives
 Consider impact on Best practice approach

Summary
 Similar governance principles
 Difference in ownership and objectives
 Ultimate influence on best structure

Section C-Strategy
Chapter 1
The Internal Resources,
Capabilities and Competencies of
an Organization
Strategy
 Long Term Plan
 Overall Direction
 Obtaining & deploying resources
 Big Picture
 Forward Looking
Levels of Strategy
 Inthe context of a large for-profit

organisation with several business units, we
can identify three levels of strategy:
 Corporate:It is concerned with what business
and markets the organisation operates in, the

products and services it provides and how it
achieves competitive advantage.
 Business strategy: It is concerned with how
each how each strategic business unit (SBU)

achieves its mission and within its business
area.
Levels of Strategy
Operational strategy: It is concerned with how

different business functions support business
strategy and corporate strategy.
 Strategies and each of the three levels must
be consistent. For example, if corporate

strategy aims to establish the organisation as
an upmarket retail chain, business strategy
and operational strategy must support this
aim, for example by ensuring ongoing
investment in premises and in staff training
Mission
 Johnson, Scholes and Whittington refer to an

organisation's mission as 'the most
generalised type of objective’ and an
expression of the organisation’s reason for
existing.
 The mission statement outlines the vision of
what the organisation wishes to become and

what it wishes to achieve.
Mission Statement
What to achieve
 Purpose-Why the Organization exists & for

whom?
 Strategy-How it intends to achieve its
purpose?
 Policies-What we expect of our stakeholders?
 Values-What are the priorities?
Mission statement is Guiding Light and often

vague
Mission Statement
 Mission statement shape the Vision. Vision

convert in to clear objectives
 Specific
 Measurable
 Achievable
 Results Oriented
 Time Bound
 Clearly decide whether achieved or not
The Johnson,Scholes and Whittington three Stage Model
 Strategic position (‘where we are’):

 Internal environment
 External environment
 Strategic direction (‘where we want to be’)
 Strategic Choice-Generate ideas
 Put our strategy into action (‘how we get
there’)
 Obtaining resources
 Project Management
 Change Management
The Johnson,Scholes and Whittington three Stage Model
 Johnson, Scholes and Whittington point out

that a successful organisation ‘will have found
a way of operating such that environmental
forces, organisational resources and
competences, and stakeholder expectations
mutually reinforce one another’.
Strategy and Change Management
 Emergent strategies
 Building New ideas as they emerge
 Crafting out irrelevant parts
 Logically incremental-Little change to what
was done before

 Freewheeling opportunism
 Not planning much at all
 Keeps business agile & responsive
Summary
 What is a strategy
 Strategy formulation
Exam focus
 Evaluate an organisation’s mission and

objectives and the ‘fit’ with the organisation’s
competencies and resources.
 Identify inconsistencies in strategies and the
actions of the CEO or senior managers. For

example, imposing budgetary cuts that
prevent strategic objectives being achieved.
 Identify an unrealistic, inflexible long-term
strategy that has failed to adapt to

environmental change and suggest a more
flexible approach.
Section C-Strategy
Chapter 2
The Internal Resources,
Capabilities and Competencies of
an Organization
Competitive Advantage
 Ability to outperform competition in Long

term
 Resources-Things we have
 Competencies-Things we do
Competitive Advantage-Example
Restaurant:
Threshold Competencies and resources

 Kitchen
 Sitting area
 Service staff
 Ingredients
 Chef
 Cook and serving food
 Unique resource-Celebrity chef
 Core competencies
 Good with buying ingredients
 Better food taste

Core Competencies and unique resource criteria

as per Johnson scholes
 Valuable
 Rare
 Inimitable
 Supported by Organization
Michel Porter Competitive Advantage
Low cost producers

-Similar product at low cost
Differentiated Producers
-Better product
Peter sense-The fifth Discipline
Competitors learn Quickly

-Temporary advantage
Learn faster than competitors

-Sustainable advantage
Knowledge Management
-Vital
Peter senge-The fifth Discipline
Types of Knowledge
Explicit knowledge
-Cable of being written down
Tacit knowledge
-innate skill or ability
-Difficult to communicate
Peter sense-The fifth Discipline
Knowledge Management-Process of capturing,
Explicit knowledge
-Cable of being written down
Tacit knowledge
-Innate skill or ability
-Difficult to communicate
Knowledge Management
-Process of capturing
-Process of growing
-Process of Exploiting knowledge

Explicit Knowledge Management
 Record and share

 Central data base
 Incredibly difficult in Practice
 How to go and look for?
 Directing relevant information
 Be Better than competition
Tacit Knowledge Management
 Even More problematic

 Self process
 Difficult to pass
 Examples
 Job rotation
 Empower work force
 Staff suggestions schemes
 Reflect on Experience
SWOT Analasis
 Internal Environment
 External environment
SWOT Analasis
Internal Strengths Weakness
External Opportunities Threats

Summary
 Competitive advantage
 Sustainable competitive advantage
 SWOT Analysis
Section C-Strategy
Chapter 2
Environmental Issues
Macro Environmental
 PESTEL Analysis
 Porter’s Diamond
 Strategic Drift
 Scenario Planning
Johnson Environmental Analysis
 Organization
 Markets and Competitors
 Industry or sector
 Macro Environment
We are discussing about Industry or sector and

Macro Environmnet
Importance of Environment
 Continuous interaction with Environment-

Resources utilization and allocation
 Static Environment-Incremental planning
 Reality-Dynamic Environment
 Same action unlikely to get same results
 Using same approach-Strategic Drift
 Example Kodak,Nokia and My Space
Tools for Environmental Analysis
PESTEL Analysis:
P-Political
E-Economic
S-Social
T-Technological
E-Environmental
Legal
PESTEL Environmental Analysis
Political:
Change in Policy
Reduced Bureaucracy
Helpful construction industry
Economic:
Boom-High interest rate, Inflation and low
unemployment
Boom-Increased interest-High input cost-High
Demand
Social:
 Tastes, Fashion and Demographic
 Single occupancy trend
 High Demand for Housing Industry
Technological:
 Impact on Production technology
 Defines Products,Working Methods and
relation ships
Environmental:
 Duty to Manage Environmental impact
 Environmental legislation
Legal:
 General and Specific
 Constraints on Operations
 Helps to identify environmental factors
 No need to worrying about classification
 Identify key Factors
 Relate back to organization

Specific Countries-Advantage for Specific Industries
 Germany-Car industry
 French-Wine Industry
 California-Hitech Industry
Porter’s Demand-French Wine Industry
 Firm strategy,structure and Rivalry

-Many wine Producers
 Demand conditions
-Strong Local Demand

 Related and supporting Industries
-Supporting specialists
 Factor conditions
-Climate, soil Viticulture, roads and internet

Imperfections
 Limited focus on international trade

 Exporting wine from France may be
unsuccessful
 No need for perfection
Scenario planning
 Plan ahead for plausible future

 Originally used in military
Scenario planning Process:

 Identify scope of scenario-Ex time,Product
market
 Predict Variables
 Build scenario
 Eliminate impossible combinations-Full
employment in zero inflation

 Fleshout scenarios
Scenario planning
Not exact science

Keep thinking about change
Stay proactive
Exam focus
 Individual Business Perspective

 Evaluate competitive position
 Positive factors
-Supporting conditions and industry related

positive things
 Challenges-Intense local competition
Summary
 Importance of environmental changes in plans

 PESTEL,Porter’s Demand and Scenario
planning
 Apply Models to provide suggestions
Section C-Strategy
Chapter 3
Competitive forces
The competitive Environment
 The competitive environment comprises the

elements of the environment most directly
linked to how a business competes and
functions.
 Put simply, the more sellers of a similar
product or service the more competitive the

business environment. For example, in a large
city a restaurant is likely to face a very
competitive environment with many
restaurants for potential customers to choose
from.
The competitive Environment
 Two of Michael Porter’s models which focus

on the level of competition in an industry and
an organisation’s ability to compete are the
Five Forces model and the Value Chain.
 As with the models we considered when
covering the organisation’s general

environment, think of the models simply as
frameworks to help ensure key issues are
considered .
Market Segmentation:
 Market segmentation involves identifying

customer groups based on characteristics or
variables, for example:
 Demographic variables, such as age, gender,
sexual orientation, income, occupation,
education, socio-economic status, religion,
nationality, race and others.
 Psychographic variables, such as personality,
values and attitudes.
Market Segmentation:
 Geographic variables, such as a country,

region or city.
 Behavioural variables, such as benefit sought
(quality, value, convenience), brand loyalty
and product end use
The Marketing Mix:
 An appropriate marketing mix is required for

each market segment that will be targeted. The
traditional marketing mix contains the four Ps
 Price-Whether relatively high or relatively low, the
price should be perceived as offering value for
money – even if the value comes from the
exceptional quality and premium branding.
 Product-By ‘product’, we mean what the
organisation offers to the market to satisfy
customer wants or needs. The product may be a
service. The term product also includes
surrounding elements such as after sales service.
The Marketing Mix:
 Place refers to sales and distribution channels.

For example, most motor vehicle manufacturers
make their new products available through an
approved dealer network. Many organisations
follow a multi-channel approach including their
own website, retail stores and third-party sellers
such as Amazon.
 Promotion activities aim to raise awareness and
encourage action, for example advertising,
discount coupons and special offers.
The Marketing Mix:
 Beyond the four Ps, three additional elements

of the marketing mix may be added to create
the seven Ps model. The additional Ps are
most applicable to service delivery.
 People - staff and others involves in providing
the service to satisfy customer needs.
 Processes - the systems through which the
service is delivered.
 Physical evidence – a physical representation
of a service, for example an insurance
certificate.
Five Forces Model:
 Porter’s five forces model identifies five

external competitive threats
 The threat from new entrants. A profitable
industry that lacks barriers to entry will attract
new entrants, raising the level of competition.
 The bargaining power of customers (buyers). If
customers have a large number of potential
suppliers to choose from, they are likely to be
able to negotiate price reductions.
 The bargaining power of suppliers. If there are
only a few viable suppliers, these suppliers are in
a strong bargaining position and may increase
their prices.
Five Forces Model:
 The threat from substitute products. If similar are

able to be used as substitute, then the price of
the substitute will affect the price able to be
charged for the product or service. An often
quoted example is butter and margarine.
 The extent of competitive rivalry. Relevant factors
here include the number of competitors, the rate
of growth of the industry and industry exit costs.
Porter’s Value Chain:
 Identify strengths & weaknesses
 Internal Analysis
 Comparison with competition

 Example-One cheap plastic ball pen cost Rs

20/- and adding profit Rs10/-
 Why not Make your self?
 Material
 Equipment
 Know-how
 Time
 Convenience
 The reason for paying extra Rs 10/- is for
value addition
 Porter’s value chain groups the activities that

organisations carry out into primary activities and
support activities
 Primary activities are identified as: inbound logistics,
operations, outbound logistics, marketing and sales,

and after sales service.
 Support activities are identified as: procurement,
human resource management, technology

development and the firm’s infrastructure.
 All activities have costs. To be profitable, the business
must organise and carry out their activities in such a

way that value is added. Adding value enables a price
to be charged that exceeds costs, generating
sufficient revenue to exceed costs and earn pro
 When using the model, for each activity the

key question is: How can more value be
added? This usually requires either reducing
costs or increasing quality.
 The value chains of different organisations
involved in producing and delivering a product

or service to an end customer many be joined
together to create a value network or supply
chain network. Inventory can be minimised
and customer service improved if all parties in
the supply chain are closely synchronised and
have the ability to react quickly
Porter’s Value Chain-Criticism
 Itcan be applicable to Manufacturing Business

 In case of service Business
 Tricky to apply
 Inbound logistics
 Ignores relationships with external parties
 Very introspective model
Value Networks
Exam focus
 Think Beyond boundaries
 Benefits of collaboration
 Value Network
 Recommendations and advice

Summary
 Market segmentation
 Michael Porter’s Key Models
 5 Forces
 Value Chain
 Value Networks
Section C-Strategy
Chapter 5
Strategic Choices
Content
 SAF
 Generic competitive strategies
 BCG
 Ansoff
 Lynch
Steps for selection of strategy
 Look at various Models
 Generate list of ideas
 Shortlisting..
 Generate strategy
SAF
 Suitability
 Acceptability
 Feasibility
SAF
 Suitability
 Is it likely to work?
 Is it a strategy to fit?
 Example strategic aim to increase revenue

then ideas of decrease in cost is irrelavent
SAF
 Acceptability-Is it acceptable to all

stakeholders
 Shareholders-Risk Vs Return
 Customers-CSR
 Employees-Motivation
SAF
 Feasibility
 Affordability
 Time
 Skill
 Resources
 Example Detailed appraisal NPV

SAF-3 Screening Questions
3 Screening Questions
 Suitability
 Acceptability
 Feasibility
All are yes then it includes in strategic list

Generic Competitive strategy
 Amount spending Based on
 Satisfaction
 Value
 Value/Rs Spent
 Producers
 Quality-High-Meet Needs-Differentiator
 Cost-Low-Low Price-Cost Leader
 Producer
 Differentiator-Quality High-Low Price-Not
Best
 Cost Leader-Cost High-Low Margin-Not
Cheap
 Apply consistently and Porters describes it as
struck in Middle
Summary
 Generic Strategies
 Mindful Suggestions
 Suitable Generic Approaches

Boston Consulting Group(BCG Matrix)
 Multiple Products
 Health of Portfolio
 Balance of Products
Drawbacks
 Market growth/Market share are binary

numbers
 Bear in mind during interpretation

Question Mark(Problem Child)

 Market share-Low
 Market growth-High
 Do investment
 Negative cash flows
 New/Developing Products
Star Product
 Market share-High
 Market growth-High
 Continue investment
 Cash can be positive or negative

Cash Cows
 Market share-High
 Market growth-Low
 Dominant player
 Cash flow positive
 Repairing rewards
 Not forever
 Invest generated cash to stars & question
marks
Dog Products
 Market share-Low
 Market growth-Low
 Not necessarily bad news
 Profitable products(PEPSI)-Harvest
 Narrowing target-Niche
 Release funds-Disinvest
Criticism
 Definition of Market
 Static Analysis-Does not focus on change
 Market share/Market growth rate narrow

dimensions
Summary
 Not perfect
 A useful tool
 Application more important

Ansoff Matrix
Ansoff Matrix
 Market penetration involves increasing market

share in the organisation’s current market
with the current product range, for example
through improved quality or increased
marketing activity.
 Product development involves introducing new

products into the organisation’s existing
market(s).
Ansoff Matrix
 Under Market development the organisation

attempts to introduce existing products to new
markets.
 Diversification involves the introduction of new
products into new markets. Related diversification

involves a new product and a new market, but
within the broad confines of the existing industry.
Unrelated diversification involves a new product and
a new market and an unrelated industry
 Diversification is the strategy that carries most risk,
as it involves both new products and new markets.

As always though, risk is related to reward. To
achieve higher rewards may require bigger risks to
be taken.
Ansoff Matrix
 Broadness thought process
 Not restricted to current product range
 What to do Next
 Not restricted to current Markets

Lynch Matrix
Lynch Matrix
Lynch Matrix
 Internal development in the home country is

expansion through organic growth in the home
market.
 Internal development overseas is expansion
through exporting or setting up an overseas

facility.
 External development in the home country
involves a merger or acquisition within the home

market.
 External development overseas involves a merger
or acquisition of an organisation based overseas.

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SHAKYAMUNI EDUCATIONS PVT LTD

Strategic Business Leader(SBL)

incorporated into this paper (rather than the historical

and the particular professional skills being assessed

correlated; earning one will help you to earn the

you should do this now.

argument across using an appropriate style

• Inform, persuade and clarify in order to be

able to demonstrate your ability to

ideas you put across should makes sense in

the objectives and strategy of that company

outside of, work (Eg buying a house, car or

ACCA state you should show

opportunities and threats

with the organisation

implications of ideas prior to concluding

information from a variety of sources is a key

ratios, will also be important.

constructively to make logical suggestions or

information you are presented with at face

considering what other conclusions might

ACCA state you should

alternatives could have been made

benefits and drawbacks of something and

state you should

determine a course of action/conclude

 Key Sports person?

through other people and is focused on

 Leadership means to create a vision that

Steps in Management Role

Motivation and Support

How Much power leader using to reach goals ?

How the leader exercising power?

Consultative approach-Creative solution

 What is required of leader

Combination of 2 or more of the previous

 Consider alternative perspectives

 Analyse current leadership style

Education & communication

outside the company

Question 2-Is it Legal?

Question 3-Is it fair to all involved?

Example: stealing Rs Million from 3 families

Question 5-Is it sustainable?

Analyse ethically challenging situations

Should we open a factory?

 Low labour cost

 Dictate a course of action

 Clear where situation exactly matches

 Can’t encapsulate every situation

 Encourage ‘work around the rules’

 Explain general concepts

 Applied in any circumstance

 Vague in many aspects

 Guide decision makers

 Enforced by rewarding system

Suggesting way is Display Judgement & commercial

 Part of professional behaviour