The adaptability of strategic models

http://www.accaglobal.com/en/student/acca-qual-student-journey/qual-resource/accaqualification/p3/technical-articles/adaptability-strategic.html by Malcolm Eva 10 May 00! "he #tudy $uide for %aper %3& 'usiness (nalysis& features a number of models to aid )nformation #ystem *)#+ strategy planning. "hese models can be used to assist in identifying and assessing strategic opportunities& or diagnosing and appraising the current strategic situation. #ome of these models are ,nown by acronyms& such as the %-#" or #./" chec,lists. #ome are represented as matrices& such as the 'oston Matri0. /thers are diagrammatic& such as %orter1s 2-forces or the 3alue 4hain. (t %aper %3& you should be both familiar with the models in their traditional form& and be able to apply them to different scenarios. (lthough the te0tboo,s describe what could be called the 1classical1 application of models& the 5alue of the models often lies in their fle0ibility. "o illustrate this& two well,nown models are discussed in this article - %-#" and 3alue 4hain - showing how they can be used to reflect different situations.

PEST
%-#" *%olitical& -conomic& #ociological& "echnological+& also ,nown as #6-%" *including 6egal+ and %-#"6- *including 6egal and -n5ironmental+& represents the factors in the wider en5ironment to which an organisation needs to react. "he %olitical& -conomic& #ociological& and "echnological elements are usually applied at a macro-le5el& to the world at large. "hey can& howe5er& be scaled down to show internal& organisational influences on a gi5en target department. "able 1& at the end of this article& illustrates the macro and micro-le5els of %-#"& with e0amples at an organisational and departmental le5el& indicating the factors that an analyst may want to e0amine. %-#" is not only rele5ant to en5ironment analyses - it can also be used to help assess the feasibility of a proposal for business change. "hus a business analyst& when considering a solution in a department or di5ision of a company& might perform a %-#" analysis. "he analyst would e0amine the organisational strategy& board ma,e-up& and organisational structure for political influences. -conomic factors would include the budget allocation& cross-charging policies& and accounting models. #ociological factors might be the pre5ailing organisational culture& or the li,elihood of a change in wor, practice or redundancies. "echnological considerations would co5er the capability of the current infrastructure to handle the new system& and the compatibility of different components of the system. (s can be seen& used in this way& the %-#" model draws more on the internal& departmental le5el e0perience. 'y focusing on internal factors& the analysis allows us to see whether or not the proposed solution will be compatible with the company1s present position and e0pectations. "he model itself has not been changed by using it in this way& but it has demonstrated fle0ibility in its application.

The adaptability of strategic models

The value chain
(nother model that can be used to illustrate fle0ibility in application is %orter1s 3alue 4hain. Most te0tboo,s describe the 3alue 4hain in terms of the handling of physical resources. )n itself& the 3alue 4hain is a model which helps us brea, down the business cycle into strategic acti5ities that add 5alue to a product or ser5ice. "hrough this analysis& the company can identify where costs are too high& or are reasonable& and also understand where and how differentiation from competitors can be achie5ed. )n the conte0t of managing business information& the company can also decide where information systems can help reduce costs and deli5er competiti5e ad5antage. (s mentioned abo5e& in most te0tboo,s the 3alue 4hain refers mainly to the handling of physical goods& often in a manufacturing or retail conte0t. )n -0ample 1& only the primary acti5ities are considered& as 1bac,room1 support *or secondary+ acti5ities are similar& regardless of the type of organisation. -0ample 1 - 7andling physical goods )nbound logistics may be met by automated warehouse procedures for manufacturing& or by a dedicated transport fleet for shipping stoc, into branch stores. /perations would be controlled by a manufacturing system& such as a production scheduling system& or by a stac,ing and selling process in a retail business /utward logistics could be handled by a deli5ery fleet& a transport scheduling system or a collection point. See Figure 1: The value chain (M E Porter (19 !"

(lthough %orter defined the 3alue 4hain as pertaining to both products and ser5ices& most te0tboo,s simply describe the physical aspects& as reflected in the descriptions abo5e. "he terms 1)nbound logistics1 and 1/utbound logistics1 gi5e emphasis to the idea of physical mo5ement. #er5ices& howe5er& are less tangible& so we need to e0amine whether the 3alue 4hain model can still be applied. #er5ice sectors include financial ser5ices& tra5el and tourism& mar,eting& and ad5ertising. (t the outset& we need to be comfortable with what the model portrays. "he core acti5ities can be seen as a simple process model& as shown in 8igure : #imple process model.

(ny ser5ice must ha5e identifiable inputs and outputs. )nbound and outbound logistics refer to the input and output to and from the process part of the system. /ur other primary acti5ities of mar,eting& sales and ser5ice also feed into the process& but not in the same manner& hence their separate bo0es on the process model. 4onsidered in this way& we can reconsider our 5iew of the 3alue 4hain as only appraising the cost of handling physical goods. #o what can we see from this 5iew9 7ere1s an e0ample of a training company

The adaptability of strategic models

that specialises in pro5iding online learning rather than traditional classroom instruction. "he source for this is a study underta,en by .oudstra and %owell in 1:;:. <ather than tal, in terms of logistics& we need to consider what represents the inputs to& and outputs from& the process. /ne way to approach this is to list some of what we *ie the business+ consider to be the core acti5ities& and see how they map onto the process model. "ypical core acti5ities underta,en by an online learning pro5ider will include: mar,et research into learning needs curriculum planning course de5elopment preparing written and multimedia teaching materials de5eloping a learning technology strategy e0ercise preparation course promotion see,ing affiliation with a funding or accreditation body deciding pre-requisites for modules student registration assessment mar,ing distributing materials scheduling tutorial/guidance sessions pro5iding telephone support for students ensuring students ha5e access to learning materials feeding results bac, to students. 8igure 3 suggests how these may populate the 3alue 4hain. (lthough the term 1logistics1 is there& thin, more in terms of what is input to& and output from& the process. Figure #: $alue chain

/nce the acti5ities ha5e been identified and the model populated& the business can analyse the costs of each element& as in the traditional model. "his e0ample shows how a company selling a largely intangible ser5ice still has to control its 5alue chain in order to manipulate its costs to ma0imum effect. )n the current economy& where ser5ice

The adaptability of strategic models

industries generate as much money as manufacturing& it is important to be able to recognise the primary acti5ities in these sectors& and how they can be appraised. %orter1s Model is fle0ible enough to accommodate all types of ser5ices& as long as the analysis is not 1fro=en1 by the rigid terms used in the original model.

%onclusion
"he 5arious models cited in the %aper %3 #tudy $uide are described in their original form and conte0t. 7owe5er& the e5ol5ing business en5ironment and the range of business strategies currently used means that these models should be used with thought and fle0ibility. "heir use is intended as an aid to thought& not a substitute.

Further reading
%orter& M& 4ompetiti5e ad5antage: 4reating and sustaining superior performance& %ub 8ree %ress& 1:;2 .oudstra& ( and %owell& <& 3alue 4hain analysis: ( framewor, for management of distance education& "he (merican >ournal of ?istance -ducation& 3*3+& !- 1 Malcolm Eva is a former assessor for Paper #&'

Table 1: Macro and micro(levels of PEST

Political )rganisational level $o5ernment policies& possible changes of go5ernment& international law& industry regulation. *epartmental level 4ompany policies& organisational strategy& change of 4-/ or 'oard members& organisational structure and lines of control& management style.

Economic
)rganisational level $eneral state of economy/stoc, mar,et& le5el of e0change rates& interest rates& share prices& le5el of disposable income in the mar,etplace& 5olatility of mar,etplace. *epartmental level 'udget allocations& cross-charging policies& stage of the financial year.

The adaptability of strategic models

Sociological
)rganisational level 8ashions& trends& social priorities& demographics. *epartmental level /rganisational culture& wor, practices& e0pected wor,ing hours& fle0ibility of wor, time& le5el of autonomy among staff.

Technological
)rganisational level @ew technologies& whether information or production& such as wireless& broadband& portable. *epartmental level "echnology owned and used in-house& organisational infrastructure& whether )" is de5eloped in-house or outsourced& a5ailability of standard pac,ages to suit the department1s tas,s.