Idea Transcript
Examiner’s analysis interview: P3 – Business Analysis
Interviewer:
Hello. Welcome to the examiner’s interview for Business Analysis. The examiner has provided the answers and his words are spoken by an actor.
I understand that we will begin by outlining the structure of the presentation.
Examiner:
Yes. In the introduction, I would like to briefly look at each area of the Study Guide and comment on candidate performance in this area since the examination was first sat in December 2007. A reflection really, on the last five years of the examination.
There is a relatively small addition to the syllabus which I would like to highlight.
I want to then review performance in the last four sittings. I do not want to repeat the examiner’s reports, but I do want to highlight good and bad performance.
Interviewer: So you are going to start by looking at each area of the Study Guide?
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Examiner:
Yes, here is a model of the syllabus.
Strategic position: Candidates have regularly displayed competence in the main models of this syllabus area; such as PESTEL, Porter’s five forces, SWOT, cultural web etc. The main concern has been about application to the scenario. Too many answers have focused on explaining the models. Candidates also need to recognise that questions may not be evenly balanced. For example; not all elements of a PESTEL analysis may be described in a scenario.
Strategic choices: Candidates appear to be familiar with corporate strategy portfolio models, although some are reluctant to fully exploit the supporting data provided. Alternative methods of achieving competitive advantages and of direction and method seem well known, but again application to the scenario is weaker. For example; candidates are able to identify the theoretical dimensions of the Ansoff model, but not to apply them to a scenario.
Strategic action: Candidates appear to be familiar with the main models that drive this section; the Balogun and Hope Hailey contextual features model and Mintzberg’s organisational configurations. Again application to scenario is the main weakness.
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Business process change: Harmon’s process-strategy matrix has become the staple part of many questions and answers. It is an area where candidates’ application to the scenario has been quite good. Questions which ask candidates to identify problems in a process and to suggest solutions are less popular, and are certainly quite demanding within a time-constrained examination. Most candidates appear to understand the advantages (and disadvantages) of a software package solution and are comfortable with describing a generic process for selecting such a solution.
Information technology: In many respects this is a badly named section. IT-enabled business change might be a better title. Generally, candidates seem very comfortable with this area, particularly the supply chain and emarketing. Customer relationship management seems less well understood.
Project management: This seems to be a main area of weakness. Even relatively simple concepts (such as a project initiation document) seem to cause difficulties. I am genuinely surprised by this as we are surrounded by projects (some succeeding, some failing, some based on optimistic estimation, some very controversial). This area has been strengthened since the last review and I urge learning providers to ensure that project management and its related topics (benefits management, risk management) are well taught. 3
Financial accounting: Candidates are now much better at showing their competence in this area than they were five years ago. Financial data is now used accurately and appropriately.
Management accounting: Significant management accounting has been introduced relatively recently into the syllabus. At present, performance is quite poor. However, this could have been said of financial accounting five years ago. Hopefully the syllabus ‘silo effect’ will break down and we will see better performance in this area.
People: This is a well-established part of the syllabus that is relatively well answered, particularly by candidates with good F1 knowledge.
Interviewer:
Is there anything new in the Study Guide?
Examiner:
Well, I just want to be sure that everyone has recognised this Study Guide addition.
Evaluate the role and limitations of cost accounting in strategy development and implementation, specifically relating to:
Direct and indirect costs in multi-product contexts
Overhead apportionment in full costing 4
Activity based costing in planning and control
This is at the intellectual level of Atrill and McLaney – Accounting and Finance – chapter eight (full costing) and ensures that P3 includes an approach to costing that considers all costs, not just the variable ones. Again, it is the principles and implications that should be understood, not the detailed arithmetic of (for example), recharging overheads.
Interviewer:
How well have candidates performed in recent examinations?
Examiner:
Let’s begin by looking at June 2011.
1a: This was a question based around a niche car maker called EcoCar, asking candidates to analyse the external macro-environment and marketplace (industry) environment of the company. This was relatively well answered, although many answers strayed into internal strengths and weaknesses and invented external aspects which were not in the scenario. In some instances this question was over-answered, leading to poor time management overall in the examination.
1b: This question concerned outsourcing manufacturing, both from a financial and a non-financial perspective. Context was critical here; too many general answers included aspects which were irrelevant to the scenario and there was little use of quantitative data provided. 5
1c: This question focused on three areas of weakness in the company; budgeting, human resource management and risk. Only risk was answered relatively well.
2a: The scenario for this question provided a poorly executed cost-benefit analysis which candidates were asked to critique. The question was relatively unpopular and poorly answered. Too many candidates actually agreed with the incorrect conclusions and statements of the main protagonist, Barry Blunt! Remember that scenario characters are not always correct or virtuous.
2b: This question asked candidates to discuss the principles, benefits and problems of introducing a matrix management structure at the company. Again this was poorly answered, with candidates being unfamiliar with matrix management; knowledge first introduced in F1.
3a: This question described a process for handling questions in a certification programme. Candidates were asked to re-design the process. Too many candidates described general re-design possibilities and principles, completely unrelated to the scenario.
3b: This part of the question asked candidates to explain the advantages of fulfilling users’ requirements with a software package solution. This was 6
relatively well answered, but candidates often produced weak or nonexistent answers to the second part of the question, the requirement to discuss the implications of this approach to process re-design.
4a: This question asked candidates to evaluate the principles of ‘4I’s to a car retailer. Again, context is important. One of the ‘I’s (the independence of location) was not particularly relevant in the context of the scenario. However, candidates tried to justify that it was.
4b: This question concerned principles of e-procurement and was well answered, although many candidates did not consider the procurement of the cars themselves, focusing more on stationery and office consumables.
Interviewer:
Thank you, that’s very useful, what about December 2011?
Examiner:
Let’s look at it again question by question.
1a: This question asked candidates to analyse the strategic position of an organisation (GET – a rail service provider) from both an internal and external perspective. This was well answered, although often overanswered, leading to time management problems later in the paper.
1b: This question asked candidates to write a report evaluating the company’s proposed strategy. Few candidates tied their answer to the 7
strategic position, so did not notice that certain strengths were irrelevant to the proposed strategy.
1c: This question asked candidates to explain and discuss the concepts of CSFs and KPIs in the context of the scenario. Many candidates were unfamiliar with this area or did not relate their answer to the rail industry.
2a: This question concerned the culture of a company and I want to look at this in some depth later in the presentation. Lack of context in the answers was the main problem.
2b: This part of the question required the application of the Harmon process-strategy matrix to three high-level processes. Application was generally good, although over-elaborate at times causing time problems.
3a: This question asked candidates to distinguish between three different types of reviews. Many were able to do this very well and so they scored well on this question.
3b: Candidates were asked to evaluate problems and lessons learnt from two reviews described in the scenario. The answers tended to describe what went wrong, rather than evaluate its effect and lessons learnt.
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4a: The question asked candidates to identify and discuss factors that need to be taken into consideration when pricing an e-learning product. The pricing process was very poorly described. Most answers were too theoretical and made no reference at all to the scenario and the product that had to be priced.
4b: Statistical data to support the pricing decision was provided and candidates were asked to evaluate the potential use of such data. However, very few candidates used the data provided in any constructive way and as a result few candidates achieved a pass mark on this question.
Interviewer:
Thank you, now moving to June 2012.
Examiner:
Yes, let’s have a look at this in depth.
1a: The scenario concerned a producer of shoes and boots, Hammond Shoes. The first part of the question asked candidates to evaluate the financial position of this company. The financial analysis of published data was relatively good. Appropriate ratios were calculated and interpreted.
However, the appraisal of a proposed $37m investment in production facilities was relatively poor. Many candidates failed to use probabilities to calculate expected values. There were many attempts to use the 9
feasibility, acceptability, suitability approach, but this was not really appropriate to this question, particularly with its focus on financial analysis.
1b: This question asked candidates to suggest strategic options for the company based on a SWOT analysis. Many candidates did identify appropriate frameworks (Ansoff, TOWS etc.) but failed to apply them to the scenario. However, a significant number of questions also used inappropriate frameworks (PESTEL, Five forces) which had already been developed to form the SWOT. This seemed to suggest that some candidates did not really understand the strategic planning process.
1c: The final part of Question 1 asked candidates to advise on the importance of mission, values and objectives. Despite a relevant Student Accountant article, this was not done particularly well. Too many answers again failed to apply theory to the case study scenario.
2a: This question asked candidates to evaluate a decision made by the CEO of a company. There was a major misunderstanding with this question which I have documented in the examiner’s report and I would ask you to read this report. As marked, performance was average, although answers duplicated much of the second part of the question. However, candidates are reminded to read the whole question before launching into answers. 10
2b: This was a relatively straightforward question on software package procurement, evaluation and implementation. However, many answers strayed well outside the scope of the procurement process.
3a: This question concerned the use of a formal ‘terms of reference’ in project initiation. I will look at this question in more detail later in this presentation. It was a good example of candidates producing theoretical answers that did not really answer the question.
3b: This question asked candidates to formally categorise and evaluate benefits defined in the business case. Candidates seemed to be unfamiliar with this area of benefits management.
4a: The final question on the value chain did, as one marker commented, ‘save many candidates’. In general, answers were appropriate to the scenario and very well presented.
4b: This second part of the question, on how technology could be used in the upstream and downstream supply chain, was also well answered.
Interviewer:
And finally, the paper that candidates have just taken – December 2012.
Examiner:
Let’s also have a look at this in depth. 11
1a: The mandatory Section A scenario question concerned a portfolio of businesses owned by the EA group. The first part of the question asked candidates to analyse this portfolio. Most candidates used an appropriate model (the Boston Box was the favourite) and some very good answers were produced.
1b: In the second part of the question, four contextual factors were provided – time, scope, capability and readiness for change, and candidates were asked to discuss these within the context of strategic change at one of the companies – Steeltown Information Technology. Most candidates produced poor answers, showing unfamiliarity with the factors (taken from the Balogun and Hope Hailey model) and they also failed to apply them successfully to the scenario.
1c: The final part of Question 1 looked at benchmarking. Most candidates were relatively comfortable with this, although very few outstanding answers were produced. However, there was also a significant number of candidates who did not answer this question at all.
2a: The first part of Question 2 looked at three aspects of strategic position – expectations of stakeholders, the external environment and internal capabilities. Candidates over-complicated their answers to this question by applying models which were only partially relevant such as 12
the power/interest grid (which is more about management than expectation and perspective) SWOT and PESTEL. The problems with the organisation’s website were often discussed at length under the T of PESTEL, even though the website is an internal facet (indeed, an internal weakness). Consequently, many answers scored very poor marks.
2b: In contrast, candidates answered the second part of the question, on enhancing the website to address the issues highlighted in the scenario, relatively well. Although many had to re-iterate points that they had already made in the answer to the first part of the question.
3a: The third question looked at franchising (which was relatively well answered).
3b: Strategic alliances (average answers were produced) and
3c: Internal sources of finance. This final topic, which had not been examined before, was poorly answered. Too many candidates suggested general strategies (reduce trade receivables), sources of external finance (share issue) or tried to turn the question into one about the advantages and disadvantages of organic growth.
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4a: The first part of the final question asked candidates to develop and explain a decision tree. This was either answered well or poorly, depending upon the candidate’s mastery of the technique.
4b: The second part of the question asked what other factors should be considered in software selection. This was answered fairly poorly. Too many candidates saw this as a question about decision trees, rather than one about software selection factors.
4c: Finally, the third part of the question looked at risk in two facets of the scenario. This was averagely answered. Again, too many candidates provided general answers about what to do about a risk (transfer it, avoid it, accept it), rather than applying these ideas to the actual scenario.
Interviewer:
Do you have concerns about how candidates are tackling questions?
Examiner:
Yes, I do.
Here is a project management question from the June 2012 examination.
Analyse how a formal ‘terms of reference’ (project initiation document) would have helped address problems encountered in the project to construct the community centre and lead to improved project management in future projects. 14
Notice that the question is about addressing problems encountered in the construction project and also about improving the management of future projects, either from the context of the council or the construction company.
Many typical answers were like this one. Some good points made, but very general – not addressing the question.
The project initiation document, also known as the project charter or terms of reference, is a very important document in a project. It should be produced at the start, or near the start of a project. It will be used to communicate to stakeholders the reason why the project has been commissioned, who the project manager is and who will be working on the project.
The project initiation document will also state the budget of the project and the delivery date. These are very important pieces of information and they must be known for the community centre in Tillo. A cost-benefit analysis must also be produced to assess the feasibility of the project. Actually cost and time constraints are known; they are not one of the problems encountered in the scenario.
The project initiation document will also include the following information: 15
Objectives: as I have said before, all stakeholders need to know why the project is taking place. How will it contribute to the public of Tillo?
Scope: what is being produced, in this case the construction of a new community centre in Tillo.
Risks: what the risks are in undertaking the Tillo community centre project. Risks may be accepted, avoided, transferred or, if none of these is feasible, a mitigation action will be suggested for what to do if the risk occurs. For example; disabled people will not be able to use the new centre. R can also stand for resources; who will be project manager and sponsor? The change of sponsor at Tillo also caused problems.
The project initiation document must be signed off by all concerned before starting the project.
Again, very general, not addressing the question and the references to Tillo remain vague and unconvincing.
Interviewer:
Do you have a suggested alternative approach?
Examiner:
Yes, here is my suggestion. Start, by identifying what problems can be found in the scenario. So, here we start with the scenario – not theory. 16
Firstly, the project did not adhere to restrictions concerning the use of subcontract labour or timber from sustainable forests. These should have been written into the constraints of the project. This is a standard part of a project initiation document (PID). Lessons learnt; in future all constraints of the public/private investment initiative should be explicitly defined in the PID.
Secondly, there was an issue about the quality of the paintwork. The required quality should have again been defined in the PID, perhaps under the section concerning the deliverables. What quality finish is expected? Lessons learnt: make sure that the quality of deliverables is well defined in the PID.
Thirdly, the local authority staff were not available to discuss disability access. As it happens, no problem emerged, but it could have done and so the local authority should ensure that appropriate resources should be allocated to a project in the future.
Finally, the new project sponsor was negative and unsupportive. Proper succession planning was required so that the sponsor knew what her role was and she should have been familiar with the history of the project. Lessons learnt; people acting as sponsors should know what their role is and should be removed if they do not fill it properly. The sponsor has to 17
be aware that it is not the responsibility of a project manager to deliver the business benefits of the community centre.
Interviewer:
That is really interesting; I see that it is a completely different approach. Do you have another example?
Examiner:
I do.
Here is a question on culture. It is taken from the December 2011 examination.
It asked candidates to analyse the culture of iCompute, and to assess the implications of your analysis for the company’s future performance.
Again, many candidates accurately identified aspects of the cultural web and so gained some credit. However, many answers failed to refer to the context of iCompute or to assess the implications for the company’s future performance. What will be the effect on the company if the culture remains unchanged?
Highlighting issues in the case study environment would have been an effective approach. The scenario is rich in stories and the language of the stories is illuminating.
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For example: Managers describe the end users of customers as incompetent and ‘too lazy to read user guides’. Is it acceptable to describe your customers in this way? What are the likely long-term effects of a culture where managers have this perception of customers? The need to re-focus managers on customers is mentioned in the model answer.
One of the managers states that ‘he is still one of the boys’, a developer praises the ‘good social scene, working long hours we socialise together, often playing computer games well into the early hours of the morning’. Could this be a reason why one third of the staff leave within twelve months, and 50% of female staff leave within that period? What are the implications – the wasted cost of recruitment and training, the health and the productivity of developers? What is the acceptability of a culture which is now out of step with the needs of the company and, perhaps, society as a whole?
Clashes of culture and the implications of a corporate culture which may no longer be aligned with societal expectations are rich areas for examination questions.
Interviewer:
Candidates often ask about how script answers are marked. Can you give us an example?
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Examiner:
Well, I can give you a fragment of an example.
Here is Question 1a from the June 2012 paper. It shows an answer that (like many others) focused on the financial data given in the scenario and ignored the evaluation of the proposed investment of $37.5m to upgrade the production facilities.
The question asked candidates to analyse the financial position of Hammond Shoes and to evaluate the proposed investment of $37.5 million in upgrading its production facilities.
So, now let’s look at an answer.
The candidate begins the answer by tabulating some calculated ROCE figures. Unfortunately they are wrong and no evidence is given of calculation. Therefore, no marks can be given. The supporting text is very weak, presenting the same data again, and making a very general comment. At best, this would be given a generous ½ mark.
The candidate then presents revenue and cost figures. These are taken directly from the scenario. However, percentage decline of revenue and sales (one mark) is correct and so is reference to ethics of the company (one mark) and the problems of quickly reducing labour costs (one mark).
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Finally the candidate provides trade receivables days (given in scenario) and trade payable days; calculated correctly (one mark). Recognition of a 30 day target (½ a mark), good credit control (one mark) and worsening cash flow situation, using creditors as free source of credit (one mark).
Thus this page is worth seven marks and notice where the marks are scored.
Interviewer: And what about the future?
Examiner:
Well, let’s look at the areas of the syllabus.
I have bundled together the three aspects of strategic management here. Questions will continue very much in the same vein. Questions need to be carefully read. Sometimes the requirement might be to develop a SWOT, other times to develop options based on the SWOT. Such questions will not necessarily be found in Section A of the examination. More quantitative questions from this part of the syllabus reflecting insertion of (for example) objective A2e can be expected.
Business process change: This area of the syllabus has not changed since its inception; so questions will be similar in content and format.
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Information technology: This will again continue in much the same vein with potential questions on value chain, CRM, upstream and downstream supply chain, e-marketing etc. Again, the relatively recent insertion of an objective specifically in pricing provides an opportunity for more quantitative assessment.
Project management: This area was significantly extended in the last major revision and this will be reflected in the future. The business case is likely to appear more often, particularly as it gives the opportunity to test investment appraisal. Benefits management is an important contemporary trend and elements of risk management can be expected. Project management is so significant that it may become the basis of a Section A.
Financial analysis: Again, candidates might expect to meet more quantitative data that can be used to support a strategic analysis or develop or critique proposed strategic options. Specific questions may be asked about such areas as decision trees and budgeting.
People: Questions will remain in the same vein. It is this area where brought forward knowledge from F1 can be drawn upon to help answer requirements.
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Overall, questions will not shift significantly. However, there is a gradual evolution towards examinations where the appropriate handling of quantitative data will be assessed and rewarded.
Interviewer: Thanks very much. That has been very useful.
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