Cima E1 2012 Notes

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Notes
CIMA Paper E1
Enterprise Operations
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ExPress Notes
CIMA E1 Enterprise Operations
Contents
About ExPress Notes
1. 2. 3. 4. 5. 6. The Global Business Environment
3
7 11 15
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Internal & External Governance and Regulation Information Systems Operations Management Marketing 21 27 33 Human Capital
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2011 The ExP Group. Individuals may reproduce this material if it is for their own private study use only. Reproduction by any means for any other purpose is prohibited. These course materials are for educational purposes only and so are necessarily simplified and summarised. Always obtain expert advice on any specific issue. Refer to our full terms and conditions of use. No liability for damage arising from use of these notes will be accepted by the ExP Group.
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START About ExPress Notes

First, we would like to draw your attention to the terms and conditions of usage. Its a condition of printing these notes that you agree to the terms and conditions of usage. These are available to view at www.theexpgroup.com. Essentially, we want to help people get through their exams. If you are a student for the CIMA exams and you are using these notes for yourself only, you will have no problems complying with our fair use policy. You will however need to get our written permission in advance if you want to use these notes as part of a training programme that you are delivering. WARNING! These notes are not designed to cover everything in the syllabus! They are designed to help you assimilate and understand the most important areas for the exam as quickly as possible. If you study from these notes only, you will not have covered everything that is in the CIMA syllabus and study guide for this paper. Components of an effective study system On ExP classroom courses, we provide people with the following learning materials: The ExPress notes for that paper The ExP recommended course notes / essential text or the ExPedite classroom course notes where we have published our own course notes for that paper The ExP recommended exam kit for that paper. In addition, we will recommend a study text / complete text from one of the CIMA official publishers, but we do not necessarily give this as part of a classroom course, as we think that it can sometimes slow people down and reduce the time that they are able to spend practising past questions.
We are very pleased that you have downloaded a copy of our ExPress notes for this paper. We expect that you are keen to get on with the job in hand, so we will keep the introduction brief.
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ExPress Notes
How to get the most from these ExPress notes

Your stage in study for each paper These ExPress notes ExP recommended course notes, or ExPedite notes Dont use yet ExP recommended exam kit Dont use yet CIMA online past exams Prior to study, e.g. deciding which optional papers to take Skim through the ExPress notes to get a feel for whats in the syllabus, the size of the paper and how much it appeals to you. Work through each chapter of the ExPress notes in detail before you then work through your course notes. Dont try to feel that you have to understand everything just get an idea for what you are about to study. Dont make any annotations on the ExPress notes at this stage. Have a quick look at the two most recent real CIMA exam papers to get a feel for examiners style. Dont use at this stage. At the start of the learning phase Work through in detail. Review each chapter after class at least once. Make sure that you understand each area reasonably well, but also make sure that you can recall key definitions, concepts, approaches to exam questions, mnemonics, etc. Nobody passes an exam by what they have studied we pass exams by being efficient in being able to prove what we know. In other words, you need to have effectively input the knowledge and be effective in the output of what you know. Exam practice is key to this. Try to do at least one past exam question on the learning phase for each major chapter.
For people on a classroom course, this is how we recommend that you use the suite of learning materials that we provide. This depends where you are in terms of your exam preparation for each paper.
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ExPress Notes
Your stage in study for each paper Practice phase
These ExPress notes
ExP recommended course notes, or ExPedite notes Avoid reading through your notes again. Try to focus on doing past exam questions first and then go back to your course notes/ ExPress notes if theres something in an answer that you dont understand.
ExP recommended exam kit This is your most important tool at this stage. You should aim to have worked through and understood at least two or three questions on each major area of the syllabus. You pass real exams by passing mock exams. Dont be tempted to fall into passive revision at this stage (e.g. reading notes or listening to CDs). Passive revision tends to be a waste of time. Dont touch it!
CIMA online past exams

Read through the technical articles written by the examiner. Read through the two most recent examiners reports in detail. Read through some other older ones. Try to see if there are any recurring criticism he/ she makes. You must avoid these! Do a final review of the two most recent examiners reports for the paper you will be taking tomorrow.
Work through the ExPress notes again, this time annotating to explain bits that you think are easy and be brave enough to cross out the bits that you are confident youll remember without reviewing them.
Download the two most recent real exam questions and answers.
The night before the real exam
Read through the ExPress notes in full. Highlight the bits that you think are important but you think you are most likely to forget.
Unless there are specific bits that you feel you must revise, avoid looking at your course notes. Give up on any areas that you still dont understand. Its too late now. Avoid looking at them in detail, especially if the notes are very big. It will scare you.
At the door of the exam room before you go in.
Read quickly through the full set of ExPress notes, focusing on areas youve highlighted, key workings, approaches to exam questions, etc.
Leave at home.
Leave at home.
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ExPress Notes
Our ExPress notes fit into our portfolio of materials as follows:

Provide a base understanding of the most important areas of the syllabus only. Provide a comprehensive coverage of the syllabus and accompany our face to face professional exam courses Provide detailed coverage of particular technical areas and are used on our Professional Development and Executive Programmes. To maximise your chances of success in the exam we recommend you visit www.theexpgroup.com where you will be able to access additional free resources to help you in your studies.
Notes
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START About The ExP Group

Born with a desire to be the leading supplier of business training services, the ExP Group delivers courses through either one of its permanent centres or onsite at a variety of locations around the world. Our clients range from multinational household corporate names, through local companies to individuals furthering themselves through studying for one of the various professional exams or professional development courses. As well as courses for CIMA and other professional qualifications, our portfolio of expertise covers all areas of financial training ranging from introductory financial awareness courses for non financial staff to high level corporate finance and banking courses for senior executives. Our expert team has worked with many different audiences around the world ranging from graduate recruits through to senior board level positions. Full details about us can be found at www.theexpgroup.com and for any specific enquiries please contact us at info@theexpgroup.com.
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ExPress Notes
Chapter 1
The Global Business Environment

START The Big Picture
Globalisation is the situation where local markets are increasingly dominated by global markets.
KEY KNOWLEDGE PESTEL (or PEST or SLEPT) Analysis

Global business is impacted by PESTEL analysis. An analysis of the external macro environment. The organisation is unlikely to be able to influence these factors but it should have an awareness of the issues. Political - global, national and local changes and trends. Taxation policies. Relationships between certain countries. Economic - global, regional and local issues. Exchange rates. Link to topical issues such as global recession, current interest rates for funding. Social - changes in behavior and expectations in society. Demographics, lifestyle.
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Technological - changes including hardware, software, e-issues, materials and services. Global communications. Environmental what are the environmental considerations such as recycling, pollution, attitude of the media, customers, etc.
SAMPLE PAGES Free full set from KEY KNOWLEDGE www.facebook.com/theexpgroup Hofstede: international perspectives on culture
Legal - changes and predicted changes to regional (e.g. EU) and national legislation. Regulatory bodies. Changes to employment law. Hofstede looked at international perspectives on culture. He identified five characteristics:
1. Power distance
do cultures accept inferior positions? do people work individually or together via collectivism? how different is the focus on gender roles? do cultures try to reduce uncertainty? what is the attitude to change over time?
2. Individualism
3. Masculinity 4. Uncertainty
5. Long term orientation
Emerging market multinationals.
Previously, many companies located manufacturing facilities in developing countries. Over recent years this has changed with more service business elements being located within developing countries. There has also been an emergence of multinational companies originating from these so called developing countries. For example, the Indian company Tata is now the owner of the UK car manufacturer LandRover.
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ExPress Notes
KEY KNOWLEDGE The BRIC Countries

The BRIC (Brazil, Russia, India and China) countries are the worlds largest emerging economies. The large population of these countries together with their economic potential has resulted in it being predicted that they could be the four most dominant economies by 2050. Liberalisation and economic nationalism. Over recent years there has been a trend of trade liberalization in certain parts of the world. For example, the enlargement of the European Union has resulted in it easier to trade between the 27 EU countries.
KEY KNOWLEDGE Outsourcing and offshoring

Outsourcing is where work which was previously done in-house is contracted out to specialist external providers. Advantages include: Cost savings Access to expertise Flexibility (i.e. easier to switch the offshoring on or off rather than recruiting or laying off staff)
Disadvantages include: Risk with confidentiality Loss of in-house expertise Potential loss of competitive advantage if other companies can outsource to the same entity
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ExPress Notes
KEY KNOWLEDGE Major Economic Systems
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There are 3 main types of economic systems:
government & partly by the free market

The vast majority of economies are a form of a mixed economy.
be utilised
A transition economy is one which is moving from a planned economy to a free market economy.
KEY KNOWLEDGE National Account Balances

Balance of payments record transactions between residents of a particular country and overseas residents. A balance of payment deficit is where there is a net outflow of funds from the country. A balance of payment surplus is where a nation has more funds from trade and investments coming in than it pays out to other countries.
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ExPress Notes
Chapter 2
Internal & External Governance and Regulation
KEY KNOWLEDGE Stakeholder mapping

Stakeholders are individuals, groups or organisations that can impact or be impacted by, an organisation. Stakeholders can be classified into: Internal - e.g. employees and management Connected (sources of finance) e.g. shareholders and banks External e.g. general public and government Mendelows Matrix allocates stakeholders into quadrants according to their level of power and how likely they are to exercise that power (i.e. their interest).
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ExPress Notes
Low Low
Stakeholder Interest Minimum effort Keep informed
High
SAMPLE PAGES Free full set from KEY KNOWLEDGE www.facebook.com/theexpgroup Corporate Governance
Stakeholder Power Keep satisfied Key players High The separation of ownership and control arises when shareholders who own a company appoint directors to control it.
Shareholders
Appoint Own
Directors
Control
Company
Smaller companies may have the same persons as a shareholder and director. Larger companies will almost certainly have separate shareholders and possibly thousands of shareholders. Corporate governance refers to how a company is governed. i.e. the processes by which a company is controlled and directed. Areas of importance within corporate governance include:
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ExPress Notes
Non Executive Directors (NED) directors who are not involved in the day to day activities but who primarily attend board meetings. Remuneration Committee established to avoid directors setting their own remuneration levels. Audit Committee acts as an interface between the board of directors and the external auditors.

Public Oversight this gives the public an insight into the company (e.g. via public open days). In the US, the SarbanesOxley Act of 2002 (named after sponsors US Senator Paul Sarbanes and US Representative Michael Oxley and commonly called SOX), sets standards expected from all US public company boards, management and public accounting firms. The Act was enacted in response to a number of major accounting scandals including Enron and Worldcom. SOX is only applicable for US companies and for subsidiaries of US based companies.
KEY KNOWLEDGE Social responsibility in business

Corporate Social Responsibility (CSR) refers to the organisations duty to look after all of its stakeholders as opposed to just the shareholders. Traditionally, CSR was often seen as a burden on a company but now it is often seen as a source of opportunity (e.g. improvement in a companys reputation). CSR often involves a Stakeholder Needs Analysis whereby organisations identify their key stakeholders and what their needs are.
Business-government relations in developed and developing economies. In developed countries there is likely to be a higher level of government lobbying present that that which is found in developing countries. Government lobbying is where
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ExPress Notes
representatives from individual businesses or business associations meet with the government to discuss or promote certain ideas. Regulation in the national and international context and its impact on the firm.
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One particular area is that of the regulation of the level of competition in the market. For example, in the UK the government is keen to encourage competition. Competition is seen to be positive in that it encourages innovation and helps keep prices low.
There are a number of areas of regulation present within the business environment. For example, company legislation.
Country & Political Risk
Country risk
The risk of operating in a particular country. e.g. economic, cultural and political risk.
Political risk
A component of country risk and includes political stability and political corruption.
Country risk is the risk arising from operating or investing in a particular country, with risks relating to matters such as political interference, political stability, the social and economic infrastructure, the culture of the country and its attitude to foreign business. Country risk is a much more general term than political risk and relates to all of the risks of operating or investing in a particular country.
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ExPress Notes
Chapter 3
Information Systems
KEY KNOWLEDGE Information Systems
Raw data is just a collection of data such as figures. It needs to be processed by way of an information system to provide suitable management information. Information systems can range from a relatively simple Excel spreadsheet through to a sophisticated purpose built database.
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ExPress Notes
Good information is ACCURATE using the following pneumonic: Accurate Complete Cost-beneficial Understandable Relevant Adaptable Timely Easy to use
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There are both internal users (e.g. management) and external users (e.g. shareholders or banks) of information.
Porters 5 Forces
Information Systems can be used by an organisation to improve its performance and market position. Using Porters 5 Forces model as an illustration: This model examines the role of 5 forces close to an organisation that impact on its ability to make a profit and hence how attractive a particular market or industry is. There are 5 forces as follows:
Entrants
Suppliers
Competition
Customers
Substitute
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ExPress Notes
1. Threat of substitute products If there are similar products, a customer will be more likely to switch rather than stay with a product when there are price rises (elastic demand). An advanced IS infrastructure could help an organisation identify new innovative substitute products.

2. Competitive rivalry The rivalry will depend on the number and strength of competitors, economies of scale and exit barriers. Advanced IT systems for stock control for example can help with reducing cost of manufacture compared to competitors. 3. Threat of new entrants Markets generating high returns will attract new entrants which in turn could reduce industry profits. Barriers to entry such as government licenses (mobile phone operators) are important in reducing the threat of new entrants. 4. Power of customers The stronger the power of the customer the more pressure it can place on the company. Issues to consider include the size of the customer relative to the firms customer base, switching costs and availability of substitute products. An advanced CRM system can help the relationships with customers. 5. Power of suppliers Suppliers of materials and services can exercise power over an organisation. This depends on the level of differentiation of the product, presence of substitute products, etc. Compare the power of Intel supplying computer chips to the computer industry vs. a sugar producer supplying sugar to a soft drinks manufacturer.
KEY KNOWLEDGE Customer Relationship Management Systems (CRM)

An emerging trend in a lot of organisations is the establishment of sophisticated CRM systems. These aim to ensure that the customer relationship is developed and information is shared across the various business functions such as customer service, marketing and product design and innovation.
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ExPress Notes
KEY KNOWLEDGE Virtual Organisations

These organisations utilise relationships with external organisations to undertake work that would previously have been performed in-house. This is more than outsourcing an individual component of the business and in some situations can involve the majority of the business being performed by 3rd party providers outside of the organisation. For example, the key components of product design, product manufacture, product delivery and corporate branding can all be performed by entities that are external to the host organisation.
The growth of the internet and advancement of e-relationships has driven the virtual organisation.
KEY KNOWLEDGE Emerging Trends Social Networking

More and more companies are building and maintaining relationships by way of social media networks such as Facebook, LinkedIn and Twitter. These enable companies to develop relationships with large numbers of people but need a different approach when compared to the more traditional relationship methods. As a result companies should have a defined social networking strategy.
KEY KNOWLEDGE Costs & Benefits of Information Systems

Both costs and benefits of Information Systems can be either tangible (e.g. cost of hardware and software) or intangible (e.g. distraction to the staff during training period). Generally, it can be argues that costs of IS implementation are easier to identify than the benefits.
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SAMPLE PAGES Free full set from www.facebook.

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

START About ExPress Notes

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

How to get the most from these ExPress notes

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

Your stage in study for each paper Practice phase

These ExPress notes

CIMA online past exams

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

The night before the real exam

At the door of the exam room before you go in.

Our ExPress notes fit into our portfolio of materials as follows:

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

START About The ExP Group

The Global Business Environment

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

KEY KNOWLEDGE PESTEL (or PEST or SLEPT) Analysis

KEY KNOWLEDGE The BRIC Countries

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

KEY KNOWLEDGE Outsourcing and offshoring

KEY KNOWLEDGE Major Economic Systems

government & partly by the free market

KEY KNOWLEDGE National Account Balances

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

Internal & External Governance and Regulation

KEY KNOWLEDGE Stakeholder mapping

Stakeholder Interest Minimum effort Keep informed

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

KEY KNOWLEDGE Social responsibility in business

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup KEY KNOWLEDGE

Country & Political Risk

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

KEY KNOWLEDGE Information Systems

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup KEY KNOWLEDGE

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

KEY KNOWLEDGE Customer Relationship Management Systems (CRM)

KEY KNOWLEDGE Virtual Organisations

SAMPLE PAGES Free full set from www.facebook.com/theexpgroup

KEY KNOWLEDGE Emerging Trends Social Networking

KEY KNOWLEDGE Costs & Benefits of Information Systems

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