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Questions and answers

We hold events twice a year which give you the opportunity to ask an experienced tutor a question.

You can use our 'ask a tutor' events to put a syllabus topic that you are having problems with to our tutors. All you need to do is log into your My CIMA account during the advertised days and submit your question using our online form. We'll get a response to you by email as soon as possible.

Details and dates of our next event will be published here and in Velocity, our student e-magazine.
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Below are some questions and answers relating to paper P6 Management Accounting Business Strategy from past events.

 

Question

Can you clarify a Balance Scorecard as tool for measuring perfomance and achieving control as well?

Answer

The balanced scorecard perspectives become organisational objectives. Performance is then measured against achievement of these. This is control which essentially means management activity to establish the extent to which objectives are being achieved. The balanced scorecard just sets out non financial as well as financial objectives.

 

Question

Could you please explain how Porter's diamond theory is applied as I keep getting confused with it?

Answer

Porter’s diamond model relates to why certain countries have a National Competitive Advantage in particular industries. To succeed in opening an overseas branch an organisation would need to compare the availability of factors that may have contributed to their home-based success.

The diamond model sets these out as:

Demand conditions

Strong home-based demand brings with it experience in supplying a healthy and growing market with the additional benefit of economies of scale.

Factor conditions

These are such as the availability of skilled labour and knowledge workers, resource capital, transport infrastructure and economic conditions.

Firm strategy structure and rivalry

How effectively the strategy matches the prevailing environmental conditions and the extent of competition which forces firms to be lean, fit and innovative.

Related and supporting industries

The availability of firms and working partners locally can facilitate an exchange of information and ideas leading to innovation in products and services.

Question

 Is it important to be able to distinguish between BPR & PI and RI and EVA and what is the difference between them?

Answer

You should be able to distinguish between BPR and Pi, a later development on BPR.

BPR can be thought of as automating processes to remove non value adding aspects, whilst PI focuses on the very justification for the existence of the process itself and is thus a more radical approach.

RI is a version of ROI which uses a notional interest charge for the capital employed. EVA is a development on RI which uses adjusted profit figures and adjusted capital employed figures, for instance including debt as part of total capital employed. Financial strategy deals more in depth with this technique.

Question

Performance Measures: 6 Dimensional Model. Can you provide me with examples for each of the measures in Fitzgerald's dimensional model?

Answer

Here are some suggestions:

• Competitiveness -

Unit cost per unit of output against competitors – for example, litre of fizzy drink

• Financial

Any standard financial ratio – for example, unit sale per unit of asset employed

• Quality of service

Response time to customer order – for example, lead time from customer order of specified car to order fulfilment

• Flexibility

Time taken to switch production from one range of current product to alternative range of current product

• Resource utilisation

Amount of resource(s) consumed per unit of output eg total hours worked across whole organisation to produce one unit of output

• Innovation

Number of products from initial idea – through development that actually reach the market

Question

Why is the exit route for venture capitalist regarded as important? isnt it worth for them to stay with a growing business?

Answer

Venture capitalists – like other investors – will have specific objectives in terms of the returns they require and will monitor closely the extent to which these objectives are being achieved. Any indicators that their investments are not going to plan will sound alarm bells and accordingly pre-determined exit strategies will be implemented to limit the extent of their exposure to loss.

Question

Is there any relationship between data warehousing and data mining and strategic aspects of marketing?

Answer

Data mining is a technique used on data warehouses to identify hidden trends and patterns in the data which might not otherwise be recognised. It is a useful strategic marketing tool as it can identify certain categories or classifications of customers of which the organisation may have been formerly unaware. This could lead to more targeted marketing approaches to these specific groups.

Question

Could you tell me what relationship marketing is? Is this a relationship between brands? Or a relationship within a company regarding the brand?

Answer

Relationship marketing involves building long term relationships with customers, sometimes expanded to embrace other groups of stakeholders also. It involves adopting a view of the longer term based not on a single transaction or contact but an ongoing series of exchanges that eventually lead to supplier customer relationships based on loyalty and trust.  It is important for managers as their decision making will be greatly influenced given their short term versus long term goals in terns of the extent to which they may wish to build lasting relationships with these different groups.

Branding influences customer relationships because one of the key advantages of a strong brand is the repeat purchase factor. Customers who develop a strong brand loyalty are viewed as having a long term relationship with that brand and product.

Question

Most of the times I have problem in applying or using practical examples in answering exam questions. How to go about this?

Answer

In general, application can embrace the particular skills of Analysis, Evaluation, Recommendation and Explanation [of how, why, when & who NOT just what].   The scenario in Business Strategy forms a specific context within which questions should be answered and ‘applied’ to the organisation in the scenario. One method which may be useful to you is to make a point and then write down at the end of the sentence the word because. This will prompt you to think about how the point you have just made relates specifically to the situation and or organisation in the scenario.   Beware of using just random examples of theoretical principles unless the question specifically states “using [whoever’s] model or theory”  

Question

What are the elements of national competitive advantages, reasons for having an overseas branch, and how does Porter's diamond model fit it?

Answer

Porter’s diamond model relates to why certain countries have a National Competitive Advantage in particular industries. To succeed in opening an overseas branch an organisation would need to compare the availability of factors that may have contributed to their home based success.

The diamond model sets these out as –

1. Demand conditions

Strong home based demand brings with it experience in supplying a healthy and growing market with the additional benefit of economies of scale.

2. Factor conditions

These are such as the availability of skilled labour and knowledge workers, resource capital, transport infrastructure and economic conditions.

3. Firm strategy structure and rivalry

How effectively the strategy matches the prevailing environmental conditions and the extent of competition which forces firms to be lean, fit & innovative

4. Related and supporting industries

The availability of firms and working partners locally can facilitate an exchange of information and ideas leading to innovation in products and services.

 

Question

I've sat the Business Strategy paper several times and believe my failure is due to the quality of my answers to the numerical questions in section A. Other than practice, how can I prepare for these questions?          

Answer

My suspicion is that your approach, not your technical skill, may be at fault in the numerical section.

Most of these questions require analysis and evaluation. Therefore there is not always one right answer. Many students embark upon a fruitless search for the perfect numerical answer when in fact there may not be one. The skill being tested is evaluation and analysis - how do you see the situation as presented in the scenario and what do you make of the numbers presented.

Could I suggest that you consider leaving the numerical section until the very last - it is an excellent thief of precious time!

Question

Will the same level of answer structure and depth be required for the new paper P6 as the old paper 12 - is there any difference between the scope of the question?

Answer

The style of P6 will be very much along the lines of the old paper 12 - it will be testing your application skills, the ability to use theoretical concepts to solve real world business problems. Therefore the scope of questions will be similar to those set historically. Professional level papers will always expect students to provide an in depth analysis, appraisal and evaluation of the business situation presented.

Please note that the responses given are the tutors' own. They are not definitive nor do they necessarily reflect the views of CIMA.