📒

SBL Notes
Strategy and its levels

Organizational structure: Design or chart of organization that defines tasks,

responsibilities, authorities, accountantabilities, communication channels and job
descriptions etc so that we have effective and efficient operations.

Henry Mintzberg - Building Blocks Components of an Organization

Strategic Apex: “C” Positions. Eg: CEO, CFO,

COO etc

Middle line: Communication link between the

strategic apex and operation core. Eg:
Departmental managers

Operating core: Directly engaged with

operations. Eg: Supervisors, labour and
employees etc
Technostructure: Not directly engages with
production by they know the technicalities. Eg:
Engineers and analysts
Support staff: Admin, security and cafeteria staff
etc

Henry Minzberg - Generic Organizational structures:

SBL Notes 1
 Simple structure—this is centralised and often autocratic, with power coming from
the strategic apex. Control is typically exerted by the chief executive or small,
influential executive team. (Few number of employees, owner managed, less rules and
regulations)

Machine bureaucracy—this structure is common in mass-manufacture. It relies

heavily on a strong techno-structure for production, quality and safety training. (Rules
and regulations bounded, everything requires documentation, clear job descriptions and
promotions on basis of seniority)

Professional bureaucracy—is similar to machinery bureaucracy, but bureaucracy is

imposed by external standards (e.g. set by law). The operating core has most influence
on coordination. (Screening/acceptance etc. Eg: law and audit firms)

Divisionalised form—a small central core provides guidelines for business units that
enjoy a high degree of autonomy. The middle line has a strong coordinating influence.
(Autonomy to employees and more decentralized)

Adhocracy—is task-based or project-based and has to respond quickly and flexibly to

changing demands that are driven by the market or innovation. (opposite of
bureaucracy)

Boundaryless Organizations

1. Vertical: Strategic apex is very far from operating core and it is very difficult to
communicate. (Internal boundaries)

2. Horizontal: Between functions, they are not communicating properly. (Internal

boundaries)

3. External: Not communicating with external parties. Eg: Suppliers and customers etc.

4. Hollow structures: Outsource non core activites.

5. Modula structure: Some parts of the product is outsourced.

6. Virtual Organizations: No physical existence but they work like physical organizations.
They are highly dependent on IT.

Outsourcing: Cost effective, flexible and specialization.

SWOT Analysis

System: Different components work together in a formal manner for a shared purpose.
Open System: Influenced by its environmental and also influences its environment.

SBL Notes 2
 Open system influenced by its environment

Is organization an open system? Yes.

SWOT Analysis: Takes into account internal and external perspectives.

Strength: Internal positive factors that are reason for success. Eg: Liquidity, software,
efficiency, experienced staff etc.

Weakness: Internal negative factors that are reason for failure. Eg: Poor financial
management skills, inexperienced staff, inefficiency etc. (Weakness increases the
magnitude of threat)

Opportunities: External favorable factors right now or in the future.

Threats: External unfavorable factors right or in the future. Eg: Adverse laws, tax rates,
intensity of competition etc.

Porter’s 5 Forces
2 types of environments: 1. Micro: Controllable and immediate

2. Macro: Uncontrollable. Eg: Social and political.

The below 5 forces decides the industry’s attractiveness and competitiveness:

1. Bargaining power of customers

2. Bargaining power of suppliers

3. Threat of new entrants

4. Threat of substitutes

5. Industry rivalry

1. Bargaining power of customers: Analyzes customer’s negotiation power. First see

where you stand. (Are you a supplier? Who is the customer?). Analyzed with:

SBL Notes 3
 No. of customers

Size of customer. (Individual? Corporate?)

Knowledge of customer

Technological factor. (Higher technological factor = higher negotiation power)

Options available

Substitute product

Switching cost

2. Bargaining power of suppliers: Analyzes supplier’s negotiation power. Analyzed with:

No. of suppliers

Different products

Cost leader

Switching cost

Options available (How many more these suppliers supply to?)

3. Threat of new entrants: Risk of new competitors entering the market. Analyzed with:

Initial investment cost

Interest rate

Disposal cost

Regulations

Levels at which industry is at present (Boom? inflation? etc)

Time/Trust required.

4. Threat of substitute: Analyzes the possibility of an industry's products becoming

obsolete or less desirable due to alternatives⁠. Analyzed with:

Presence of new products

Price of new products

Level of satisfaction new products provides

Convenience/ easy to use/ easy to buy

Supply chain

Knowledge of customer

SBL Notes 4
 5. Industry rivalry: Level of competition in the industry. Analyzed with:

No. of competitors present

Level of competition

Relationship between competitors

Way of competing. (Aggressive?)

No. of customers

Pestel Model (Macro → No to less control)

Political: What is the system? is it democracy? Monarch? etc. Manifesto, government

collusion etc

Economical: Interest rate, inflation, forex, fiscal/monetary policy, unemployment rates,

demand and supply, current cycle (boom, inflation etc)

Social: Demography is the study of human population and trends. Population, gender
balance, age group, birth rate, death rate, culture, religion, taste, values, greed,
education, awareness etc

Technological: Infrastructure, e-commerce, e-marketing, virtual organizational structure

etcencstomers. ction process and green cu laws, produon busienss, greenen
environtment

Ecological: Influence of green environment on business, green laws, products,

processes, green customers etc

Legal: Government policies, laws, regulations, acts, ordinance etc

→ Why government policies?: - Employees protection

- Environmental issues
- Customer protection
- Stakeholder management

Porter Diamond Model

Explains why a certain part of the world/industry has advantage over the others.

Factors:

1. Favorable factors: Presence of factors at that particular country/nation which are

favorable or which supports that particular industry. Two types of favorable factos:

Basic: Time zone, nature, weather, population etc

Advanced: Polished by humans/manmade. Eg: Infrastructure

SBL Notes 5
 2. Related and supporting industries: Eg: If tourism, we need good airlines, good hotels
and food etc to support the tourism industry.

3. Demand in homeland: Support from locals helps the industry grow.

4. Firm’s strategy, structure and rivalry: Type of ownership, norms of competition,

second buyers, investors perspective etc.

Porter’s Value Chain

All those benefits derived by customers that makes them pay is the value. The higher the
value in product or services, the higher the shareholder wealth will increase.
Questions to ask:
→ Who is our customer?
→ What value are we providing?
→ What value does one competitor provide?

→ How can we add more value?

Porter’s value chain analysis: Activities/Process=Value

Value chain activities:

1. Primary value chain activities: Ultimately responsible for creating value in the
product.

2. Secondary value chain activities: Supporting activities that support primary value
chain activates.

Eg: Primary: Inbound logistics, operations, outbound logistics, marketing, sales,

aftersales service etc
Secondary: IT, infrastructure, finance, HR, admin, procurement etc
The above examples varies from industry to industry

Value network/system: Value chains of different entities connected to ultimately give extra
value to the customer.

Strategic Capabilities
Strategic capabilities are the combo of resource and competencies.

→ Internal analysis: Resources (tangible and intangible) + Competitiveness (adequate and

suitable)

SBL Notes 6
 Resources:

1. Threshold resource: Any basic resource which is required to stay in the business for
survivial (easy to copy)

2. Unique resource: Gives competitive edge. Eg: Brand name, rights, HR, license etc

Competencies:

1. Threshold: Required to stay in the business for survival (easy to copy)

2. Core: Gives competitive edge (Utilize resource smartly)

→ Threshold: easy to copy, no competitive edge

→ Unique/core/strategic: Hard to copy, difficult to obtain, value creation, critical success
factor.

Critical success factor (CSF): Factors in which you must outperform competitors.
Measured using KPIs.

Eg: Airlines:

Safety No. of accidents

Comfort Customer complaints

Service Sales, customer retention etc

Timelines Late or delayed flights

Performance Analysis

Benchmarking: Setting an ideal standard and then comparing your performance with that
unit/score. It assists in the below that show areas that need improvement.

Strategic analysis

Strategic choices

Strategic implementation

Types of benchmarking:

1. Internal benchmarking: Setting a standard within the organization and then

comparing. Eg: Division, stores, departments etc

2. Competitive benchmarking: Comparing your performance with competitor using

information available in the market. Eg: Financial statements, products, reverse
engineering, customer feedback etc.

SBL Notes 7
 3. Customer benchmarking: Evaluating and comparing an organization's customer-
related metrics and practices. Eg: KYC, customer appraisal etc

4. Operational benchmarking: Comparing own organization operations with another

organization’s operations in a separate industry. Eg: Textile delivery with Fedex, UPS,
DHL etc

5. Generic benchmarking: If you are doing an activity that is new and no benchmark
exists, compare with a similar activity.

Performance analysis:

1. Financial: Based on financial numbers. Eg: Ratio analysis, SWOT, porter 5 forces etc

2. Non financial: Based on critical success factors and KPIs.

3. Multivariable: Mix of above. Balance score card and Malcom Baldrige model is used.

→ Balance score card: The performance is analyzed through all these below 4 perspectives:

Financial perspective: GP, ROE, efficiency ratios etc

Customer perspective: Customer retention rate, customer complaints etc

Innovation perspective: New products, services, earnings etc

Internal business process: How efficient we are in our processes, value creation in
processes, competitive edge, labor turnover etc

→ Malcom Baldrige Model: 7 perspectives which are a combo of financial and non
financial:

Leadership: Corporate governance, vision, leadership practices etc

Strategy: Suitable, feasible, acceptable, clear objective, can be implemented practicably

Customer: Customer satisfaction, loyalty, complaints etc

Workforce: Labour turnover rate, fresh blood etc

Operations: Processes, SOPs, smart, regular appraisal etc

Results: Financial and non financial output of all of the above.

Measurement analysis and knowledge management: How the data is

developed/collected, analysis of data, controls (do we have internal audit function?) etc

Strategic Choices

Strategic choices are available options where organization is right now and wants to be in the
future.

SBL Notes 8
 → Competitive strategies:
> Porter’s generic competitive strategy: Describes how a company can achieve
competitive advantage with the below factors:

1. Cost leadership: You offer the least selling price which cannot be offered by your
competitor. Eg: Smart processes, efficient, input-economy, economies of scale, price
conscious people.

2. Differentiation strategy: Unique product that cannot be offered by competitor. Eg:

Feature/product/service/quality/brand etc. A premium price is charged, works where
people are quality/brand conscious and they value innovation/status.

3. Focus strategy: Focus by entering in a small (niche) segment and targeting a very
specific customer to give yourself a competitive edge. 2 types:

Cost focus: requires basic product (just a price conscious customer). eg: budget
airline/hotel

Focus differentiation: Targeting very status conscious people. Eg: Charter planes for rice
customers.

> Strategic clock by Bowman: Strategic marketing tool that visualizes competitive
positioning based on a company's price and perceived value.

1. Low Price & Low Value Added

Very low cost, minimal product differentiation.

Customers perceive little value.

Strategy depends on volume sales to sustain business.

2. Low Price

Offers acceptable (but not high) value at a low price.

Relies on cost leadership, scale, efficiency.

Profit margins per unit are low, but total profits come from high volumes.

SBL Notes 9
 3. Hybrid (Moderate Price / Moderate Differentiation)

Combines moderate price with some differentiation.

Offers relatively more value than pure low‐price, without premium pricing.

Attracts customers who seek “value for money.”

4. Differentiation

High perceived value, often by unique features, brand, quality.

Customers are willing to pay a premium.

Strong branding, innovation, and quality underpin this approach.

5. Focused Differentiation

Ultra premium, niche market targeting.

Very high prices, but justified by exceptional value and prestige. E.g. luxury brands.

6. Risky High Margins

High price is charged, but without corresponding increase in perceived value.

Seems unjustified to customers, so it’s risky.

May work short‑term during supply imbalances or weak competition.

7. Monopoly Pricing

One dominant player with little competition, so price can be set freely.

Customer alternatives are few.

Regulated markets or monopolistic conditions often needed.

8. Loss of Market Share

Price is high relative to perceived value; customers see poor value.

Over time, this position loses customers and market share.

Seen as a failing or unsustainable position.

> Lock in strategy: What organization does first and switching cost is high, giving
competitive edge. Eg: Iphone > iTunes, Gillete > heads.

> Growth Option: Ansoff growth matrix: Organization grows in terms of product and
market.

Product: Entering new product or service

Market: Entering a new area. Eg: Opening a shop in new market/new segment in current
shop.

SBL Notes 10
 The Ansoff Growth Matrix is a strategic planning tool that helps businesses identify and
evaluate growth opportunities by considering new and existing products in new and existing
markets. It highlights four key strategies, each with a different level of risk.

The matrix is a 2x2 grid that maps product options (existing vs. new) against market options (existing vs.
new)

1. Market Penetration (Existing Products, Existing Markets)

This is the least risky growth strategy, focusing on increasing market share within the
company's current market using its existing products.

Tactics:

Lower prices to attract new customers.

Intensify marketing and promotion efforts.

Increase distribution and sales force activities.

Acquire competitors in the same market.

Example: Coca-Cola launching targeted advertising campaigns and promotions to

increase sales of its existing soda products.

2. Product Development (New Products, Existing Markets)

Tactics:

This strategy involves introducing new or modified products into the company's existing
markets. It is a moderately risky strategy that relies on strong brand loyalty and deep
customer understanding.

Invest in research and development (R&D) to create new products.

Add new features or variations to existing products.

Create new product versions to appeal to the same customer base.

Example: Apple releasing a new version of the iPhone with upgraded features to its
current customer base.

SBL Notes 11
 3. Market Development (Existing Products, New Markets)

This strategy involves selling existing products to new customer segments or new
geographic markets. It carries a moderate level of risk because the company has less
familiarity with the new market.

Tactics:

Expand into new geographical regions, either domestically or internationally.

Enter new market segments or target different demographics.

Use new sales channels, such as moving from brick-and-mortar stores to e-

commerce.

Example: Starbucks expanding its established coffee shop chain into new countries
with emerging coffee cultures.

4. Diversification (New Products, New Markets)

This is the riskiest growth strategy, involving the development of new products for new
markets that the company has no prior experience in. The high risk is offset by the potential
for high rewards.

Types:

Related Diversification: Expanding into a new product or market that has some
strategic fit with the existing business, such as similar technology or customers.

Unrelated Diversification: Moving into a completely different industry with no

obvious link to the current business.

Example: A technology company like Google, which started as a search engine,

expanding into unrelated industries like autonomous vehicles and smart devices.

> Integration:

Horizontal Integration: This involves acquiring or merging with companies at the

same level in your industry—essentially your competitors or similar businesses. The
goal is to increase market share, reduce competition, and achieve economies of scale.⁠⁠

Examples:

Amazon acquiring Whole Foods (both are retailers, operating at the same level in
the supply chain)⁠⁠

Facebook acquiring Instagram (both social media platforms)

Disney acquiring 21st Century Fox (both entertainment companies)

Vertical Integration: This involves acquiring companies either upstream (suppliers) or

downstream (distributors) in your supply chain. The goal is to gain more control over
production, reduce costs, and improve efficiency.⁠⁠

SBL Notes 12
 Examples:

A tire shop owner becoming a supplier to other tire shops (moving up the supply
chain)⁠⁠

Tesla manufacturing its own batteries instead of buying from suppliers (backward
integration)

Evaluating Strategy & Shareholders

3 areas when evaluating strategy: Suitability, Feasibility and Acceptability (SFA):

Suitability: Does it suit the brand image? history? culture? what is the mission statement
and is the strategy suitable with it? Does the strategy align with other objectives? Does
it clash with other strategies? mission? vision? direction? etc

Feasibility: Talks about resources. Does the strategy work with our resources? Do we
have HR? IT? information systems? land? capital? financial liquidity? gearing? etc

Acceptability: Whether it is acceptable by our stakeholders? Is it digestible to our

customers, suppliers, government, shareholder and labor union? etc

Stakeholders: Interest holders (bidirectionality). Eg: employees, customers, marine life etc.

Depends on the activity and size of the organization

Their interest is important and often alot of conflicts occur here. Management’s job is to
reconcile these interests.

Who is the most powerful stakeholder? There is a contingency approach → It depends

upon time and situation.

Stakeholders are adversly hit by organization’s policies and strategy. Here they have
choices/options:

Exit: leave the organization. Eg: sell shares, resign

Loyalty: Stay with the same organization as there is no other option

Voice: powerful stakeholders that revert the decision in their favor.

Identifying stakeholders: Identify and evaluate the importance of stakeholders and allocate
time and resources accordingly. One model that can be used to perform this is Mendelow's
Power-Interest Matrix.

SBL Notes 13
 By plotting stakeholders on the matrix, organizations can develop targeted communication and management
strategies

A. Low power, low interest: Minimal Effort

Description: This group has little power or interest in the project and requires the
least amount of management.

Engagement Strategy: Monitor them with minimal effort and provide broad
communications only when necessary. Ensure they don't move into a more
influential quadrant without your knowledge.

Examples: The general public, minor suppliers, or peripheral partners

B. Low power, high interest: Keep Informed

Description: These stakeholders are very interested in the project but have limited
ability to influence decisions. They can still be valuable supporters or can raise
objections if neglected.

Engagement Strategy: Keep these stakeholders informed with regular updates and
seek their input to ensure their continued support. Their feedback can also highlight
potential issues.

Examples: Project team members, employees, and community groups.

C. High power, low interest: Keep Satisfied

Description: These stakeholders have a lot of power but are not highly involved in
the day-to-day details. They could be influential if they become dissatisfied.

Engagement Strategy: Provide enough information to keep them satisfied and

prevent any negative interference, but do not overwhelm them with excessive detail.

Examples: Government regulatory bodies, large shareholders, or senior

management from other departments.

D. High power, high interest: Key Players (Manage Closely)

SBL Notes 14
 Description: These are the most influential stakeholders with the greatest interest in
the project. Their decisions can have a significant impact.

Engagement Strategy: Actively involve and consult these stakeholders on key

decisions. Their input is crucial for the project's success.

Examples: Senior management, major investors, project sponsors, or key clients.

Classification of stakeholders:

Internal: Within the organization. Eg: Employees, managers, directors etc

Connected: Outside the organization but with more interaction. Eg: Suppliers,
customers etc

External: Outside the organization but with less interaction. Eg: Government, marine
life etc

Primary: Very important, if they leave, the organization will not survive (going concern
status is affected)

Secondary: less important not affecting the going concern status much.

Organic And Inorganic Growth

2 types of growth: organic and inorganic.

Organic: Organization grows using its own resources/profits/funds.

Benefits:

Control/decision making is with the organization

Cultural compatibility

Although slow, due to limited funds, we decide our own pace

Disadvantages:

Might not be able to obtain a competitive advantage

Inorganic: Organization grows utilizing others. Eg: mergers, acquisitions, ventures etc

Benefits:

Can quickly grab opportunities. Eg: Mergers, ventures etc

Disadvantages:

Not slow paced

Involvement of others in strategic decision making

Cultural incompatibility

SBL Notes 15
 → Strategic options:

Acquisition: Holding company takes control of acquisition target.

Merger: Two companies become one entity, almost the same size.

Benefits:

Increased profitability/knowledge of financial and non financial matters

Downsizing/delayering of branches etc

Synergy is increased

Disadvantages

Cultural incompatibility

Conflicts in decision making

Resistance to change by shareholders, employees, suppliers etc

Collaboration: One of the ways to obtain/gain competitive advantage/edge. It is an

agreement between 2 parties like:

Competitors

Companies in different sectors

Suppliers etc

Strategic alliance: When 2 organizations persue a common strategy ontain a

competitive advantage and they share their resources for this purpose. Eg: Airlines

Joint ventures: 2 Organizations come together for a particular project and create “c”
where both A and B has joint control. (Same benefits and disadvantages as mergers and
acquisitions)

Franchising: Agreement between franchiser (brand owner) and franchisee (brings

resources). Successful where the branch is strong, we pay royalties o sales an dis on
exclusive franchise. Eg: McDonald’s restaurants.

Licensing: A right over my own products and can be shared with multiple licensors.
Mostly done because of limited resources. Eg: books publishers, payment of royalties
etc

Portfolio Analysis

How can a parent company add value to SBUs? By providing a better analysis, adding
financial value, international skills etc through either of roles.

What is the role of the parent company?

SBL Notes 16
 Holding company/portfolio manager role: An important role where like an analyst,
knows when to acquire or dispose of a subsidiary. Creates financial value.

Synergy manager role: Where parent company is creating synergy between

subsidiaries. Eg: Marketing, transportation synergy etc.

Parental developer: Parent company supports SBUs directly.

All SBUs are not the same therefore we need portfolio analysis.

Boston Consulting Group (BCG) Matrix

Strategic tool used to analyze a company's products or business units based on their market
growth rate and relative market share.

→ Industry growth: What is the rate of growth of the industry in which our SBU is
operating? (Not in our control)

→ Market share: How much is our SBU’s market share in the total sales in market/industry?
(In our control)

Helps companies decide on resource allocation, investment, and divestment strategies.

Quadrant Market Share Market Growth Description Strategy

⭐ Stars High High - Leaders in Invest and build.

growing markets
- Require heavy
investment to
sustain growth
- Can become self
funded
- Customer
expectation is
high
- Enjoying
economies of
scale
- Supports other

SBL Notes 17
 Quadrant Market Share Market Growth Description Strategy
products in the
whole group

- Well-established
- Generate strong
cash flows with
low investment
needs
- No new
competitors,
Harvest –
🐄 Cash Cows High Low
existing
competitors
maintain and
extract profits.
leaving
- Enjoys
economies of
scale
- Liquid funds are
good and supports
overall group

- Uncertain future
- Need high
investment to
grow, or risk

❓ Question failure
- Sometimes sold
Invest or divest
Marks (Problem Low High depending on
by co. as buyers
Children) potential.
are present
- Needs a detailed
strategy on how to
increase market
share

- Weak in low-
growth markets
- Often
unprofitable
- If any seller
present then

🐶 Dogs Low Low

dispose of it
- Sometimes
Divest or
reposition.
present because of
the positive
contribution as it
gives some profit
or complete a
product range

Ashbridge Parenting Model

SBL Notes 18
 Helps organizations decide which business units in a diversified portfolio the corporate
parent can add the most value to — and how?.

It’s particularly relevant to diversified (multi-business) organizations and helps assess

whether the corporate center (the "parent") is a good “owner” of each business unit (the
“child”). In diversified companies, the corporate parent is the central HQ or group-level
management that oversees individual business units. This model looks at how well the
parent adds value — or potentially destroys value — in managing these units. This maps
maps the business units along two dimensions:

Dimension Meaning

Parenting Opportunity Can the parent add value? (High or low)

How well does the business unit match the parent’s skills, culture, and
Parenting Fit
resources? (Good or poor fit)

From this, the model produces 5 categories of business units:

Category Meaning

✅ Heartland High opportunity + good fit → Parent adds value. Keep and grow.

⚠️ Edge of Some value added, but with risk. May need to adapt.
Heartland

❌ Ballast Good fit but little value added → Stable but not growing. Don’t invest much.

🚨 Alien Poor fit and no opportunity → Consider divesting.

Territory

🧨 Value Trap High opportunity, but poor fit → Looks attractive, but risky. Parent may destroy
value due to poor understanding.

Foreign subsidies

→ Location: Sometimes kept because of location/geographical position.

→ Funds: Low capital/funding cost

→ Why companies go international?

Economies of scale

Porter diamond model → you want to enjoy the favorable factors of the market. Eg: tax
rates, infrastructure etc

Risk management

Become more competitive/gain competitive advantage

Manage currency risk

Multinational company (MNCs): Gives product according to the tastes of the market. Eg:
Hindistan shampoo has a different formula due to difference in hair texture

Global: Makes a standard product sold all over the world. Eg: Apple.

SBL Notes 19
 Some companies try to create a balance between multinational companies and global. Eg:
Taste, expiry date, law requirements etc

Cultural issues in international growth

Ethnocentric orientation: Home oriented, adapts home country culture and managers
are from home country.

Polycentric orientation: Host oriented, adapts that country’s culture and managers are
locals.

Geocentric orientation: World oriented, tastes are similar so differences can be

reconciled and managers are hired on the basis of skills/merit.

Process Change, Reengineering and Harmon’s Matrix

→ Process is related to value creation therefore giving a competitive edge

→ Processes should be simple

! In case study: Check for gaps, disconnects, additions, duplications, overlaps etc

Process change: Automate simple processes/new processes

Redesign: Still in the existing process and making a change

Reengineer: Outside the process, making a change. Eg: transformational change, huge
benefits

→ What is the relationship between process and strategy implementation?

Common goal is not to compromise on quality

Harmon’s process strategy matrix

Helps organizations evaluate and prioritize business processes based on:

1. Strategic importance - the most important process for our organization

2. Process complexity - how complex or dynamic the process is

The goal is to decide which processes to focus on — and how to manage them — based on
their complexity and importance.

Strategic
Quadrant Process Type Complexity Strategy
Importance

🔹 Support Low Low Often simple

Standardize or
outsource

🔸 Factory High Low Routine, Focus on

structured efficiency, cost

SBL Notes 20
 Strategic
Quadrant Process Type Complexity Strategy
Importance
control

🔺 Improvement Low High

Complex or
variable
Consider redesign
or simplification

⭐ Strategic High High

Critical and
complex
Invest, innovate,
align with strategy

Project Management
→ Characteristics of a project: One off, unique, resources allocated, start and desired end,
project manager responsibility

Project sponsor: The real owner of the project, provides resources. Eg: Government,
BoDs etc

Project customer: Beneficiaries of the project - users. Eg: Any department, consumers
etc

Project managers: Ultimately responsible throughout the project. Eg: How to use and
control the resources, meeting deadlines etc

Project risk factors Project success factors

- No clear objective
- Clear objective
- Insufficient resources
- Sufficient funds
- No authority
- Authority
- Uncompetitive team and project manager
- Competitive team and project manager
- Improper documentation
- Proper documentation
- No project plan
- Project plan
- Incoordination
- Coordination
- Environmental factor

Documentation
→ Business case: You see the needs for this project, existing analysis (PESTEL etc), cost
benefit analysis, environmental analysis, commercial viability of the project, IRR, NPV etc

→ Project initiation document (PID): Broad, overall strategy. Eg: Cost, time, personnel
etc

→ Project plan (PP): More detailed than the strategy (PID). Eg: Cost breakup, time
breakup, duties of the team etc (needed for control purpose)

Change Management

→ Triggers of change: PESTEL

→ When talking about size, scope and extent of change: Incremental (small changes) and
transformational (big changes)

SBL Notes 21
 → When talking about speed of change: Evolution (slow and gradual change) and revolution
(quick change)

→ Approaches to change:

Coersive: Change by force/pressure. (Crisis situation, high resistance, maybe wrong

decision is made, time saving, quick response)

Adaptive: Inviting people to participate in decision making. (Low resistance, effective

decisions, time consuming)

Change agent: An outsider independent party hired to announce, implement, introduce etc
the change as because of the culture, employees will not accept or allow change.

Systematic approach to change:

Need of change: identify the need

Brainstorming: compe up with options

Decision making+analysis+consequences: from brainstormed ideas

Set the timetable

Before implementation, introduce/communicate the change to relevant stakeholders

Implement the change

Feedback/monitor/control the change

Reactions of stakeholders/employees to change

Acceptance: when they feel the change is in their favor

Indifferent: too early to talk/no affect on them

Resistance: > Passive: Cannot directly resist

> Active: Direct, open resistance

Dealing with resistance

Negotiate, motivate, communicate the apeal, rewards, adopt democratic/participative

leadership, allow them to participate, training and development, give time to adopt.

Factors which influence the success of change

Time: The faster the change, the higher the resistance when it is introduced.

Style/manner: leadership style affects the success.

SBL Notes 22
 Scope: How big the change is. Break it into small pieces.

People: How trained and aware they are.

Culture: Type of culture at the organization. (Machine, bureaucracy etc)

Changing the behavior by Kurt Lewin

Freeze: Meltdown existing practices (most difficult phase)

Move: Introduce the change

Refreeze: New behavior to implement amount all using positive and negative
motivation

Explanation and application

💡 Overview:
Kurt Lewin’s model explains how to manage change by focusing on behavioral
change. It is especially useful in understanding how individuals and organizations
adapt to new systems, strategies, or cultures.

🔁 3-Stage Model of Change:

1. Unfreeze
Objective: Prepare the organization and individuals for change.

Key Actions:

Create awareness of the need for change (e.g., through communication, data).

Challenge existing beliefs, values, and behaviors.

Deal with resistance to change.

Application: Leadership must communicate urgency and create psychological

readiness.

2. Change (Transition)
Objective: Move from the old state to the new one.

Key Actions:

Implement the planned changes (new policies, systems, structure, behavior).

Provide support (training, coaching).

Encourage involvement and engagement.

Application: Leaders must act as role models and support staff during transition.

3. Refreeze

SBL Notes 23
 Objective: Stabilize the change and make it permanent.

Key Actions:

Embed new behaviors into organizational culture.

Reinforce change through performance management and reward systems.

Monitor and adjust where necessary.

Application: Long-term commitment to sustain change; align structures and incentives.

📚 Key Features & Relevance to SBL:

Element Explanation

Lewin focused on breaking and forming behavior patterns within

Behavioral Focus
individuals.

Force Field Analysis Analyze driving and restraining forces affecting change.

Role of Leadership Leaders must guide, support, and reinforce behavioral change.

Managing Resistance Early stakeholder engagement is crucial.

📌 Exam Tip:
Use Lewin’s model when answering case study questions on:

Implementing a new strategy or system.

Managing cultural or behavioral change.

Leading transformation in business models or digital innovation.

Force field analysis

Driving force: Push/motivates towards the change

Restraining force: Barrier towards change

Management needs to consider cost benefit analysis for both

McKinsey 7S Framework

Helps analyze how well-aligned an organization is to achieve its strategic goals. It identifies
seven interdependent factors that must be aligned for effective performance, change, or
transformation. The 7 interconnected factors are:

Hard Elements (Easier to define and change)

1. Strategy

The plan to achieve competitive advantage.

Must align with internal capabilities and external environment.

SBL Notes 24
 2. Structure

How the organization is organized (hierarchy, departments, teams).

Affects communication and decision-making.

3. Systems

Day-to-day procedures and processes (IT systems, HR processes, performance

management).

Enable operations and strategy execution.

Soft Elements (More difficult to define and change, but equally important)

1. Shared Values

Core values, culture, and corporate identity.

The foundation of the model – influences all other elements.

2. Style

Leadership style and organizational culture.

Impacts how strategies are implemented and how people behave.

3. Staff

Workforce capabilities, demographics, motivation, and development.

Includes recruitment, training, and retention.

4. Skills

The actual competencies and capabilities of employees and the organization.

Must be aligned with strategic needs.

Insights and exam application

🧠 Key Insights:
Concept Explanation

Holistic
All 7 elements must work in harmony – changing one affects the others.
approach

Change Useful tool to identify areas of misalignment when undergoing

management transformation.

Strategic
Crucial for implementing new strategies successfully.
alignment

📘 ACCA SBL Application:

Use the McKinsey 7S Model when analyzing:

Organizational readiness for change.

Strategic misalignment and performance issues.

SBL Notes 25
 Integration during mergers or acquisitions.

Leadership, culture, and capability alignment

In a case study, if a company is struggling to implement a strategy, use the 7S model to

identify misalignments between hard and soft elements.

What makes change successful

1. Culture

Refers to the shared values, beliefs, and behaviors in the organization.

A culture that is open to innovation and continuous improvement makes change

easier.

Resistance to change is often cultural — leadership must work to shift mindsets.

2. Structure

The organizational setup (e.g. hierarchy, teams, reporting lines).

Change is more effective when the structure supports faster decision-making,

accountability, and cross-functional collaboration.

Example: A rigid, hierarchical structure can slow down digital transformation.

3. Leadership

Strong, committed leadership is essential to set direction, communicate vision, and

manage resistance.

Leaders must model the behavior they expect from others.

Key role in building trust and engagement during change.

4. People

Refers to the skills, mindset, and engagement of employees.

Success depends on having the right people in the right roles, with clear roles and
responsibilities.

Training, support, and involvement help people adapt and stay motivated.

5. Systems

The technological and operational systems that run the business (e.g. IT, finance,
HR systems).

Must be aligned to support new processes or strategies.

Poor or outdated systems can become a barrier to change.

6. Processes

These are the formal and informal workflows that guide how work is done.

SBL Notes 26
 Streamlined, flexible processes help organizations adapt faster.

Change often fails when new strategies are introduced without updating old
processes.

POPIT Model

Used to analyze the impact of change on different areas of a business. It helps ensure a
holistic approach to change by identifying all the elements that need to be considered for
successful implementation. POPIT stands for:

Processes

Organization

People

IT (Information Technology)

1. Processes

Focuses on how the business operates — the activities, workflows, and procedures.

Change must ensure processes are:

Efficient and effective

Aligned with new strategy

Consistently applied

Example: Automating manual tasks, redefining approval workflows.

2. Organization

Refers to the structure, roles, responsibilities, and governance.

Key questions:

Are roles and reporting lines clear?

Does the structure support collaboration and decision-making?

Example: Flattening the hierarchy to support agile (flexible and responsive) working.

3. People

Looks at the employees, their skills, engagement, and behavior.

Change success depends on:

Staff buy-in and participation

Training and development

Managing resistance and motivation

Example: Upskilling teams for a digital transformation.

SBL Notes 27
 4. Information Technology (IT)

Focuses on the systems and digital tools that support operations.

Ensures IT is:

Capable of enabling the change

Reliable, secure, and fit-for-purpose

Example: Implementing new CRM or ERP systems.

Risk Management

Risk: A condition in which exists quantifiable dispersion in the possible outcome of an

activity.

Hazard: Impact when risk materializes

Types of risk

Fundamental risk: Affects society at large and not in control of anyone. Eg: Pollution,
global warming etc

Particular risk: Affects an individual and it is in their control. Eg: Smoking

Speculative risk: Outcome of risk can be either positive or negative. Eg: Shares,
starting a business, forex etc

Pure risk: End of risk is always negative. Eg: Accident, fires etc. (easier to avoid)

Impact of risk at stakeholders

Liquidity risk: Employees immediately affect (salaries, bonuses), supplier payments

shareholders (dividends), bankers (interest) etc

Going concern risk: Employees job security, shareholders investment etc

Profitability risk: Profit based salaries affected, bad interest cover ratios, EPS etc

…. and many more risks affecting stakeholders!

Risk appetite

The ability/attitude of the firm as to how much risk they can or are willing to take. 2 types of
people:

Risk averse: avoids risks

Risk seekers: Wants more risks

SBL Notes 28
 Factors that influence the risk apatite of an organization

Personality: Personality of the person in position (bringing up matters alot)

Shareholders demands: What is the rate of return required?

Stakeholders pressure+environmental demands: Competition pressure

Culture: Mentality of the people/market (aggressive etc)

Detailed summary

1. Leadership Personality & Attitude

The personal traits, beliefs, and confidence levels of those in leadership positions
(e.g. CEO, board) have a major impact.

Some leaders are risk-seeking, seeing bold moves as opportunities.

Others are risk-averse, preferring caution and control.

Key Point: Leadership sets the tone for organizational risk tolerance.

Example: A visionary founder may push for aggressive expansion into new markets,
increasing risk appetite.

2. Shareholder Expectations

Shareholders often demand specific returns on their investment (e.g. dividends,

share price growth).

If shareholders expect high returns, the company may need to take higher risks to
meet those expectations.

Short-term profit pressures can lead to more risk-taking.

In contrast, long-term investors may support more conservative growth strategies.

Example: Venture capitalists backing a startup may expect fast scaling, encouraging
risk-taking.

3. Stakeholder & Environmental Pressures

Includes pressure from customers, regulators, employees, suppliers, and

competitors.

Competitive industries often push companies to take calculated risks to stay

ahead.

Regulatory environments may reduce risk appetite due to high compliance costs
or penalties.

Social and environmental expectations (e.g. ESG concerns) may push

organizations to avoid reputational risks.

SBL Notes 29
 Example: A financial firm under heavy regulation may become more risk-averse,
even if competitors are innovating aggressively.

4. Organizational Culture

Culture shapes how people perceive and respond to risk across the business.

An entrepreneurial or aggressive culture encourages innovation and higher risk.

A compliance-driven or conservative culture prefers predictability and lower

risk.

Culture also influences how risks are discussed, reported, and managed.

Example: A startup in fintech may tolerate trial-and-error, while a hospital prioritizes

stability and safety.

5. Market and Industry Norms

Risk appetite is also influenced by what’s considered "normal" in that sector.

Some industries are inherently riskier (e.g. tech, oil & gas), while others are more
stable (e.g. utilities, healthcare).

Firms may mirror competitors’ behavior to stay competitive.

Example: A tech firm may invest heavily in R&D and innovation with uncertain
payoffs — this is expected in that market.

6. Financial Strength

The financial health of an organization impacts its capacity to take risk.

Strong cash reserves or stable cash flow support higher risk tolerance.

Financially constrained firms must be more cautious.

Example: A company with high debt levels may have low risk appetite due to
repayment obligations.

7. Past Experience with Risk

Organizations learn from past successes or failures.

A previous failed project or scandal may lead to more cautious risk behavior.

Alternatively, repeated success in risky ventures may increase confidence and

tolerance for future risk.

Example: A company burned by a failed international expansion may avoid similar

ventures for a while.

Risk assessment framework

SBL Notes 30
 → Risk identification: You cannot manage a risk unless you are aware of it.

→ How to identify: Event identification: political, government, interests up or down, tarrifs

etc

→ Once risk is identified: Assess/evaluate

Probability Impact matrix

2 dimensions: Probability (chances) and impact (consequences). Plotting is done to give a

response to the risk according to its probability/impact.

Probability Impact Examples TARA Strategy

High Low Switching customers in retail Reduce

High High Loss of key staff Avoid

Minor supplier switching, minor wage

Low Low Accept
earners leaving

Low High Going concern, terrorism Transfer

TARA Framework

Transfer: Insuring the risk. Eg: transferring risk to another

organization

Accept: Do cost benefit analysis and accept the risks that benefit

Reduce: Minimize risk through internal controls

Avoid: Risk is eliminated as we do not want to take that risk. (In

exam: Risk can be managed but not eliminated)

→ Risk quantification: Calculating the risk: NPV, IRR, sensitivity analysis etc and then

→ Risk consolidation: All the risk at individual level are looked at from overall group level

→ Risk review/feedback/monitoring: Risk is volatile so constant monitoring is requried to

know if particular strategy is relevant and resources are not being wasted

! ALARP Principle: As low as reasonably practical/possible

→ Residual risk: After applying all strategies, whatever risk is left, it is our accepted risk.

→ Drop/Stop and go error: Grabbing or letting go of opportunities at wrong time. Eg:

Selling shares thinking their value will go down but it goes up instead.

→ Risk perception: Depends on availability of information.

Objectivity: Absolute risk perception. Eg: Earthquake affected houses

Subjectivity: Other risks related to perception. Eg: Mental health of earthquake

affected people.

SBL Notes 31
 → Sources of information for risk management: Managed better if good information is
available. Sources are either:

Internal: Employees, line managers, directors, exceptional reporting channels etc

External: Stakeholders, news, gazets etc

Tools: Scenario building, decision tree, sensitivity analysis etc

Then we create contingency plan for different situations and scenarios

Generic and specific

Generic:

These are broad, general risks that apply to most or all organizations, regardless of
their industry or size.

Often linked to fundamental business operations and the external environment.

Must be considered in any risk management framework or strategic planning

process.

Examples:

Going concern risk – The risk the business can’t continue to operate

Bad debts – Customers failing to pay

Cybersecurity threats

Compliance with laws and regulations

Inflation or interest rate changes

Economic downturns

Specific Risks (Also called Industry-Specific or Operational Risks)

These are risks that are unique to a particular industry, sector, or type of operation.

Often tied to technical, regulatory, or environmental aspects of that industry.

Usually require specialist knowledge or custom controls to manage effectively.

Examples:

Oil & Gas Industry: Environmental hazards, oil price volatility, drilling
accidents

Banking: Credit risk, liquidity risk, regulatory capital requirements

Airlines: Fuel cost fluctuation, safety incidents, air traffic disruptions

Related risks

SBL Notes 32
 Positive correlated: Increase/decrease in one risk increases/decreases the other risk

Negative correlated: Increase/decrease in one risk decreases/increases the other risk

Maintaining risk register

A formal document that includes:

What are the risks organization faces at strategic, tactical and operational level

Risk probability

Consequences (how material is this risk)

What steps can be taken to minimize this risk

Who is responsible for this risk

Strategic and operational risk (related to macro factors)

Strategic: Present in board’s decisions which affects the overall profitability and going
concern

Operational: Present in the day to day activities of the business. Eg: Health and safety,
systems production etc

Responsibilities of risk management

Everyone is responsible but the scope is different. Ultimate responsibility is of board of

directors. Their scope is:

Policy making

Risk management strategy

Budgeting

Control reporting

If board of directors lack time or competence, then a risk management committee is

established. It functions on behalf of the board. Non mandatory to establish. Executive
directors are preferred for this committee. If these executives do not work in good faith then
non executive directors should be appointed (specialized).

After board of directors and risk management committee, CEO is responsible. CEO
implements policies throughout the organization, develops culture and control environment
and is involved in investment decision making as well.

Then risk management groups consisting of senior managers.

Departmental managers, like finance director is responsible for finance function. Each
department is responsible for its own function.

SBL Notes 33
 Supervisors responsible for being a bridge between managerial and non managerial staff.
Eg: Are our employees actuallty implementing policies? like using safety equipment etc.

Internal auditor has to ensure if the organization is not exposed to any big risks.

Sometimes external auditors, as they prepare a management report, list control weaknesses,
its implication and recommendations.

Sometimes risk specialists are hired for unfamiliar risks. Eg: Hedging.

Risk manager is hired and given funds to allocate capital for risk management.

Deals with other risk management firms. Eg: Insurance

Must be competent

Good leadership quality

Good communication skills and persuasive skills

Steps for risk audit

A risk audit is a structured review process to identify, evaluate, and improve how risks are
being managed in an organization.

1. Risk Identification – "What are the risks?"

The first step is to create awareness of all possible risks facing the organization.

This includes identifying:

Internal risks (e.g. fraud, IT failure, operational errors)

External risks (e.g. regulation, market changes, cyberattacks)

Techniques may include:

Brainstorming with managers

Reviewing risk registers

Interviews, workshops, surveys

Using models like PESTEL or SWOT

🔎 Goal: Build a comprehensive list of potential risks across the business.

2. Risk Assessment – "How serious are they?"

Each identified risk is evaluated in terms of:

Probability (likelihood) – How likely is it to occur?

Impact (severity) – What are the consequences if it does?

Materiality – How significant is the risk to business performance, reputation, or

continuity?

This is often visualized using a Probability-Impact Matrix.

SBL Notes 34
 Consider whether the risk is:

Strategic

Operational

Compliance-related

Financial

🔎 Goal: Prioritize risks so attention is focused on the most critical ones.

3. Review of Controls – "How well are we managing the risks?"

Assess the effectiveness of existing controls and mitigation measures.

Evaluate:

Whether controls are in place

How well they are working

Gaps in risk management strategy

Alignment with the TARA model (Transfer, Avoid, Reduce, Accept)

Also assess:

Risk ownership – Are responsibilities clearly assigned?

Monitoring systems – Are there regular checks or early warning systems?

🔎 Goal: Identify whether current risk controls are adequate, or need strengthening.
4. Reporting and Recommendations – "What needs to be done next?"

Document findings in a clear, structured risk audit report.

The report is shared with senior management, the audit committee, or the board.

Include:

Summary of key risks

Current controls and their effectiveness

Gaps and weaknesses

Recommendations for improvement

Clear accountability (who should take action)

🔎 Goal: Enable informed decision-making and strategic improvement in risk

management.

Embedded risk/risk embeddedness

Embedded risk means that risk management should be part of everyday activities in an
organization, not just something handled by a separate team. It should be built into systems,

SBL Notes 35
 processes, culture, and even informal areas — not just in formal things like budgets or
policies. Everyone, no matter their role, should be aware of risks and take responsibility for
helping to manage them. When risk awareness is part of the culture, the business is better
prepared to deal with problems.
→ How to do risk embedding

Finance allocation for risk management (risk management budget)

Training and development

Website/walls should include words about risk management

Appraisal containing risk management points as well

Part of salary/bonus based on risk management

Implementation by seniors

Marketing - 7Ps and 6Is

Marketing: A management process where organization identify/anticipate customer needs.

Research: Planned investigation to obtain information about the customer.

Primary: You ask what you want to ask from your target audience. Direct info

Secondary: Information is already obtained but now you are using it. Second hand
information, not purely for us

3 Types of businesses

1. Product-Oriented Business - “We make it, you’ll want it.”

A product-oriented business focuses on what it can produce, not necessarily what the market
wants. These businesses believe that if they create a great product, customers will naturally
come. They often invest heavily in innovation, design, and quality without first asking what
the customer is asking for. Eg: Apple — they often release products based on their vision
and innovation, not direct customer demand.

2. Market-Oriented Business - “Tell us what you want, we’ll make it.”

A market-oriented business is customer-focused. It starts by researching what the customer

wants, and then builds products or services to meet those needs. This type of business is
driven by market trends, customer feedback, and demand. Eg: A fashion brand that
constantly changes its designs based on customer preferences or seasonal trends.

Sales-Oriented Business (also called Brand-Oriented) - “We’ll convince you to want

it.”

A sales-oriented business focuses on persuading customers to buy through marketing,

branding, and promotion — rather than focusing solely on the product or the customer's

SBL Notes 36
 needs. It’s about pushing the product, using sales techniques to create demand. Eg: A
company that uses celebrity endorsements, heavy advertising, or discounts to convince
people to buy — even if the product isn’t solving a clear customer problem.

7Ps of Marketing of traditional and digital marketing

Used to design and evaluate a company's marketing strategy. It expands the traditional 4Ps
(Product, Price, Place, Promotion) by adding three more that are especially important in
services and customer experience.

1. Product: What the business offers to satisfy customer needs (goods or services).
Includes quality, features, design, and branding.

2. Price: How much the customer pays. This can influence perception, demand, and
profitability. Includes discounts, pricing strategy, and payment terms.

3. Place: Where and how the product is delivered to the customer. Includes distribution
channels (retail, online, direct).

4. Promotion: How the business communicates with customers to raise awareness and
persuade them. Includes advertising, PR, social media, and sales promotions.

5. People: Everyone involved in delivering the product/service. Staff, customer service,

and interactions shape customer experience.

6. Process: The steps involved in delivering the product or service. Smooth, efficient
processes increase customer satisfaction. Eg: Online classes, amazon, uber etc

7. Physical Evidence and environment: Tangible elements that support the service or
brand image (e.g. packaging, premises 9coffee aroma in a donut or coffee shop, website
design, receipts, branding).

6Is of Digital marketing

The 6Is help explain how digital marketing is different from traditional marketing. They
show how technology changes the way businesses engage with customers.

1. Interactivity: Digital platforms allow two-way communication between business and

customer. Unlike traditional marketing, customers can respond instantly (e.g. comments,
likes, messages).

2. Intelligence: Digital tools allow businesses to collect detailed customer data, helping
them understand preferences, behaviour, and trends. Eg: Curated ads, trade in products
etc

3. Individualisation: Digital marketing can be highly personalised (e.g. targeted ads,

personalised emails), increasing engagement and effectiveness.

4. Integration: Digital channels can be integrated with other marketing efforts (e.g.
combining email, social media, website campaigns) for consistent messaging.

SBL Notes 37
 5. Industry Restructuring: Technology disrupts traditional business models. For
example, retailers can sell directly to consumers online, bypassing intermediaries.

6. Independence of Location: Businesses and customers are no longer limited by physical

location. Products and services can be offered and accessed globally, 24/7.

Corporate social responsibility (CSR) and Sustainability

CSR is not a legal contract, but organization pays back the society. It is the social/moral
contract between the society and the organization. Moral obligation of organization towards
the society is there to present itself as a good corporate citizen and to make this world a
better place.

Why CSR has become part of the strategy? How does it give a competitive edge?

Public awareness is high.

Ability to attract good stakeholders/green/socially responsible customers.

Budget should be set aside for CSR.

Areas of CSR
Education, housing, training and development, recreation facility, lowering poverty, shelter,
food and much more.

Limitations/criticism of CSR

Managers are agents of shareholders. They are responsible for shareholders only.

Once organization pays tax, now it is governments liability to take care of the people.

Accountability of managers are reduced.

Profitability is affected/disturbed.

Strategic CSR
Investing in activities with an objective where you want something back in the future. Eg:
Pharma opening a medical school to later employ those students.

Footprints

Impacts of organization’s activites/products/processes/services. 2 types that can either be

negative or positive:

1. Social: Impact on society. Eg: Child labour

SBL Notes 38
 2. Environmental: Impact on plants/green natural environmental. Eg: CO2 emission

Sustainability or sustainable development

Satisfying current needs efficiently, recycling and finding its alternative without
compromising on future needs. Eg: Tesla is an alternative of mechanical cars.

→ Weak: 20-30 years vision. Eg: Artificial rain

→ Strong: Centuries. Eg: Natural resources maintained for future generations

Who is responsible for sustainability?

Ideally, everyone is responsible but if the material impact is considered, then giant
corporates and countries are responsible.

At what cost?
Sacrificing one/burdening one to serve another. Eg: No gas to industrials in winter, gas goes
to normal people

Reporting

Either company can adopt it’s own way of reporting or triple bottom line or Global reporting
initiative (GRI):

Triple Bottom Line – The 3Ps

1. Planet (Environmental Performance)

How the company affects the natural environment

Includes things like: pollution, carbon emissions, resource usage, waste

management, energy efficiency

2. People (Social Performance)

How the company treats employees, communities, and society

Includes: fair labor practices, diversity, community support, health and safety,
human rights

3. Profit (Economic/Financial Performance)

The financial results of the company

Includes: revenue, profit, shareholder returns, economic value created

✅ A responsible company doesn't just aim to make profit — it tries to do so in a way

that protects the environment and benefits society.
Example: Triple Bottom Line Report – EcoTech Ltd

SBL Notes 39
 TBL Area Example Metrics What It Shows

- 20% reduction in carbon

🌍 Planet emissions this year - 60% of

energy used from renewable
Shows how EcoTech is reducing
its environmental footprint and
(Environmental)
sources - Waste recycling rate supporting sustainability
increased to 75%

- 95% employee satisfaction rate -

Shows commitment to employee
👥 People (Social) Community investment: $250,000
in local education - Achieved
well-being, community support,
and social responsibility
gender pay gap target of <5%

Shows the company remains

- Revenue growth of 12% - Net
💰 Profit (Economic) profit: $8.5 million - Shareholder
financially strong while being
socially and environmentally
return: 6% dividend paid
responsible

Global Reporting Initiative (GRI)

The GRI is a global framework for standardised sustainability reporting. It helps

companies report their environmental, social, and economic impacts in a consistent,
comparable way.

While a company can create its own reporting style, using GRI or TBL provides
more transparency, accountability, and credibility to stakeholders (e.g. investors,
regulators, customers).

Full cost accounting (FCA)

Cost of product, externality, clean up (eg: affect on marine life), provision, other intangible
cost and co2 emissions etc. The organization will know exact cost and will know what to
reduce and corporate image enhances.

Balanced Scorecard (BSC)

Performance management framework that helps organizations translate strategy into action
by setting goals, targets, and KPIs across four key perspectives. Unlike traditional
performance measurement (which focuses only on financial results), the BSC includes non-
financial areas that drive long-term success. The 4 Perspectives of the Balanced Scorecard
are:

1. Financial Perspective

Focus: Profitability, growth, shareholder value

Common goals: Increase revenue, reduce costs, improve return on investment

Example KPIs: Net profit margin, revenue growth and return on capital employed
(ROCE)

2. Customer Perspective

SBL Notes 40
 Focus: Customer satisfaction and retention

Goal: Understand and meet customer needs better than competitors

Example KPIs: Customer satisfaction score, customer retention rate and net
promoter score (NPS)

3. Internal (Operational) Perspective

Focus: Efficiency and effectiveness of internal processes

Goal: Optimize resource utilization and process quality

Example KPIs: Cycle time, productivity levels and error or defect rates

4. Innovation & Learning (Growth) Perspective

Focus: Future improvement, learning, and adaptability

Goal: Support innovation, staff development, and readiness for change

Example KPIs: Number of new products launched, employee training hours and
staff turnover rate

→ Set goals and targets for each perspective. Eg: Under Innovation – "Improve employee
skills through 20 hours of training per staff member per year"
→ Define KPIs to measure progress. These indicators act as an appraisal tool to evaluate
performance in each area

→ Review regularly to check alignment with strategy and make improvements

Perspective Focus Area

📌 Exam application:
Example KPIs

Net income, Recommend performance evaluation

Financial Profitability, ROI
ROCE frameworks
Satisfaction, NPS, retention Propose a more balanced approach to
Customer
loyalty rate
management appraisal
Defect rate, cycle
Internal Process efficiency How strategy can be measured and
time
aligned across departments
Learning, future New products,
Innovation
growth Example: “The company could adopt a BS
training hours
to evaluate not only financial results but
also customer satisfaction, internal
efficiency, and innovation capability —
ensuring a more holistic view of
performance.”

Ethics

SBL Notes 41
 Moral principles which guide your behaviour, whatever comes after fulfilling the minimum
legal obligation.

1. Personal ethics: This refers to an individual's own moral beliefs, values, and principles
that guide their behaviour in everyday life. influence how a person behaves both inside
and outside of the workplace — for example, being honest, respectful, or fair even when
no one is watching. They are shaped by factors such as:

Upbringing

Religion or culture

Life experiences

Personal sense of right and wrong

2. Professional Ethics: These are the standards and principles set by a profession that its
members must follow. Professional ethics ensure trust, accountability, and high
standards in how members of a profession behave. In the case of accountants, this
includes the ACCA Code of Ethics and Conduct, which is based on five fundamental
principles:

Integrity

Objectivity

Professional competence and due care

Confidentiality

Professional behavior

3. Organizational Code of Conduct: This is a formal document created by an

organization that outlines the expected ethical behaviour of employees and
management. It includes rules, policies, and behavioural expectations aligned with the
company’s values and legal obligations. It serves as a guide to help employees make
decisions and act in ways that protect the company’s reputation and integrity. The code
usually covers:

Anti-bribery and corruption

Confidentiality

Equal treatment

Whistleblowing

Compliance with laws and company policies

Types of Ethical Approaches/Approaches to Ethical Standards

1. Rule-Based Ethics (Also called: Compliance-based or Deontological approach)

Focuses on following specific rules, laws, or codes of conduct.

SBL Notes 42
 Actions are judged as right or wrong based on adherence to rules, not the outcome.
Eg: A company following exact procedures laid out in a regulatory manual.

2. Principle-Based Ethics (Also called: Values-based or Integrity-based)

Relies on individual or organizational values and ethical principles (e.g. honesty,

fairness, integrity).

Encourages personal judgment and accountability. Eg: A manager choosing not to

exploit a legal loophole.

3. Hybrid Approach

Combines rules and principles.

Recognizes that while rules are essential, personal judgment and values are also
necessary, especially in complex or grey areas. Eg: ACCA’s Code of Ethics and
Conduct uses both rules (e.g. confidentiality) and fundamental principles (e.g.
integrity, objectivity).

Code of conduct

Formal statement set by senior management/board of directors.

Regulates employee behavior.

Explains expectations of organization.

Manage stakeholders relationships.

Minimize compliance risk.

Contents of typical code of conduct include names of stakeholders and how we deal
with them:

Employees

Customers

Suppliers

Regulators

Competitors

Society

Shareholders etc

Problems with code of conduct:

Resources/expertise for writing it

If organization has different branches in different countries, then it will vary

Subjective. Eg: Cannot drink with customers in some countries

SBL Notes 43
 Interpretation issues

Sometimes not impersonal (depends on who you are and your position/power in the
company)

Mirror test
When you want to see whether your decision is ethical or unethical, ask the following
questions:

1. Is it legal? Yes? No?

2. From stakeholders perspective - what do people think about it? Fair? right? wrong?
(Subjective)

3. Even if it is legal, what about ethics?

Ethical problems faced by managers

Bribery: Amount when you try to convert illegal work to legal work.

Grease money: Work that you want it to be done is legal but will take time so you
accelerate the process.

Extortion money: When someone is forced to pay under threat or pressure, usually
by someone in a position of power.

Gifts: Giving or receiving gifts in a business context can be sensitive and culturally
variable. A gift could be:

A genuine gesture of goodwill

A disguised bribe or influence attempt

A culturally expected practice (e.g. hospitality)

→ Safeguards:

Hire poeple from good background

Strong controls, where there are high chances of above

Training and development

Set examples by strict disciplinary/zero tolerance policy

Keep people highly motivated

Protection to whistleblower etc

Johnson, Scholes & Whittington (JSW) 4 ethical stances

SBL Notes 44
 Refers to the four approaches an organisation can take when responding to ethical issues —
particularly regarding social responsibility and stakeholder expectations. This model
explores how much responsibility a business takes towards wider society, based on whose
interests it prioritizes — shareholders or broader stakeholders.

1. Shareholder’s Short-Term Interest - "Our goal is to maximise immediate shareholder

value."

The business prioritises short-term profits and dividends.

Ethics or social responsibility are considered only if they affect short-term financial
performance.

Minimal interest in broader stakeholder concerns.

🧠 Example: Cutting employee benefits or outsourcing to reduce costs, even if it

damages staff morale or community welfare.

2. Shareholder’s Long-Term Interest -"We care about ethics if it protects long-term

value for shareholders."

Focus is still on shareholders, but with a long-term view.

Ethical practices are supported if they reduce future risk, build reputation, or ensure
sustainability.

Social and environmental concerns are addressed only if they align with long-term
business goals.

🧠 Example: Investing in renewable energy to protect the brand and avoid future
regulatory fines.

3. Stakeholder Interest - "We aim to balance the needs of all stakeholders."

Ethical stance is based on fairness and responsibility to all affected parties — not
just shareholders.

May involve sacrificing some profit to do the right thing for employees, customers,
or the environment.

Values corporate citizenship and social justice.

🧠 Example: Paying suppliers fairly, supporting local communities, and ensuring

employee well-being, even if profits are slightly lower.

4. Shaper of Society - "We actively lead and influence ethical standards in society."

The most proactive and responsible stance.

The business seeks to drive change, set new norms, and take moral leadership.

It sees its role as creating social good, not just managing impact.

🧠 Example: A company campaigns for stricter environmental laws or offering school

fee for employee’s children.

SBL Notes 45
 Ethical Stance Primary Focus Ethical Responsibility Level

Shareholder’s Short-Term Interest Immediate profit Low

Shareholder’s Long-Term Interest Sustainable value creation Medium

Stakeholder Interest Fairness to all stakeholders High

Shaper of Society Leading societal change Very High

Corporate Governance

Corporate governance: System/mechanism by which companies are directed, administered,

monitored and controlled. It is a set of relationship between companies, directors,
shareholders and other stakeholders. shareholder are also responsible. Eg: Going through
financial statements prepared by directors. The purpose/importance of corporate governance
is as follows:

Long life to organizations and sustainability

Important for economy

Comfort factor to shareholders

Smart utilization of resources

Contents and underlying concept of corporate governance

1. Risk management: How well the risk is managed. Internal control system is very
important.

2. Fairness: Equitable treatment among shareholders and stakeholders. Eg: Mandelow’s

theory.

3. Independence: Neutral/impartial people are required. Eg: NEDs.

4. Accountability: Accountable to all stakeholders.

5. Transparency: Giving voluntarily disclosures besides legal disclosures.

6. Integrity/honesty: Background matters. Subjective quality.

7. Training and development: Professional judgement and competent people. There should
be a successor plan.

8. Innovation: Skilled people will bring innovation to products, services and processes.

9. Professional skepticism: Questioning mind.

Principal based vs rule based corporate governance - Corporate governance is a

principle based approach!

SBL Notes 46
 Aspect Principle-Based Approach Rule-Based Approach

Based on broad ethical principles and Based on detailed, specific rules and
Definition
professional judgment laws

"Spirit of the law" – Encourages "Letter of the law" – Focuses on

Focus
doing what is right strict compliance

High – Allows adaptation to different Low – Same rules apply regardless of

Flexibility
contexts and companies context

Judgment Requires professional and ethical Less room for judgment – just follow
Required judgment the rules

Ethical culture, accountability, and

Encourages Legal compliance and ticking boxes
integrity

Lower – Intent matters more than Higher – Companies may exploit

Risk of Loopholes
form technical gaps in the rules

UK Corporate Governance Code

Example Code US Sarbanes-Oxley Act (SOX)
(“comply or explain”)

- Clear guidelines
- Encourages ethical behavior - Easy to enforce
Pros - Adaptable - Reduces ambiguity
- Focuses on values - No discrimination between big and
small firms

- Open to interpretation - Can lead to box-ticking

- May lack enforcement - Discourages ethical thinking
Cons
- Guidelines creators are necessarily - Leaves no room for explanation
experts - High cost and high resources used

Agency: Relationship when principal appoints an agent, delegates him authority and allows
him to do contracts on his behalf. Interests of both might not align leading to agency
problems.

Stewardship: A relationship where a steward (manager) is entrusted with assets or

responsibilities and is expected to manage them responsibly for the benefit of the owner.
Interests align here.

Conflict of interest: Agent has to be transparent and report any conflict of interest that
arises.

Agency cost: Cost borne by principal to monitor the agent. Eg: Controls, audit etc.

Alignment of interest: Aligning the interest of agent and principal through profit related
pay, performance related pay and share option schemes to employees.

⭐ Listed companies
Public Ownership: Shares are owned by many public investors through stock
exchanges.

SBL Notes 47
 Complex Agency Relationship: Because ownership is spread out among many
shareholders, and management runs the company, the link between owners (principals)
and managers (agents) becomes complicated. This often leads to the agency problem —
managers might not always act in shareholders’ best interests.

Performance Indicators: To monitor how well the company is doing, investors and
regulators look at key financial metrics such as ROCE, EPS and financial statements
etc.

Limited Liability: Shareholders’ financial risk is limited to the amount they invested;
they are not personally liable for company debts beyond that. Limited liability makes
shareholders less personally exposed to risk, which can reduce their motivation to
monitor managers closely — increasing the agency problem in listed companies.

Private companies

Performance Indicators: Like listed companies, they use financial statements, EPS,
and other metrics to evaluate success — but often with less pressure from public
markets.

Agency Relationship is Different: In many private companies, shareholders and

managers are often the same people (e.g., family businesses or owner-managed firms).
This reduces the agency problem, since there's less separation between ownership and
control.

Board and Ownership Structure: Boards may be less formal, smaller, and more
closely connected to ownership. Fewer external directors, sometimes none.

Unlimited Liability (for some private firms): In sole proprietorships or partnerships,

owners may have unlimited liability — meaning they are personally responsible for
business debts. This increases their motivation to manage the business carefully,
reducing the need to monitor agents.

Non profit organizations

Donor Members Elect Agents: Non-profits are often governed by a board of trustees
or directors, elected by donors, members, or stakeholders to manage funds and
operations.

Policy Manuals & Governance: Non-profits rely on policy documents and governance
frameworks (e.g., mission statements, ethical codes) to guide decisions — because
profit isn’t the goal.

Performance Indicators: Since profits are not the focus, performance is measured by:

Effectiveness – Are they meeting their goals?

Efficiency – Are resources being used wisely?

SBL Notes 48
 No Ownership: Non-profits have no shareholders. All income is reinvested into the
mission, not distributed as profit.

⭐ Value for money - 3Es

1. Economy: Obtaining resources at least consideration/good value for money without
compromising quality. (Input)

2. Efficiency: Utilization of obtained resources smartly. (Output)

3. Effectiveness: Impact and achieving ultimate objectives.

→ Challenges: - Hard to impossible to achieve 3Es

- Profit and non profit performance indicators are different

- Short termism (too much on short-term results, like cutting costs or

hitting quick targets harm long-term effectiveness, like investing in
staff or quality systems)

Things to consider for good corporate governance

Law and Regulations

Governance must comply with local laws, company law, listing rules, and
regulations Eg: Companies Act, stock exchange requirements).

These provide the minimum standards every company must follow.

Best Practices

Look at corporate governance codes like the UK Corporate Governance Code.

These include guidelines for board structure, independence, transparency, and

accountability — even if they’re not legally binding, they are often expected.

Financial Resources

Good governance systems cost time and money (e.g. for independent directors,
internal audit, reporting).

A company must assess if it has the budget to implement strong governance

measures.

Time and Capacity

Effective governance also depends on having enough time and effort from the board
and executives to do it properly.

It’s not just about rules — it needs commitment.

Current Board Composition

SBL Notes 49
 Who is already on the board? Are there enough independent and qualified
members?

Governance must reflect the skills, experience, and balance of the current board.

Industry Practices

What is common or expected in the company’s industry?

Governance may need to match sector-specific risks or norms (e.g. in banking,

stricter rules apply).

Stakeholder Demands

Different stakeholders (investors, regulators, customers) may expect different levels

of transparency or ethical behaviour.

Governance must address their expectations and concerns.

Business Segments and Structure

Large or diversified companies need more complex governance systems to manage

risk, ensure accountability, and coordinate across units.

Small businesses may need a simpler structure.

Exam application:

Transition from country A to B

You meet a regulator/mayor/law making body directly or indirectly

Bribery/familiarity brought in

Transition to underdeveloped country creating opportunity to exploit

Big Data

Most valuable asset for organization is information. Big data is a data that is so huge, fast,
and varied that traditional methods can’t handle it — you need special tools and systems to
process it. Characteristics of big data are the below 3Vs:

1. Volume: Amount of data collected

2. Velocity: Quick response to data/speed of data/real time data

3. Variety: Data is structured and unstructured at the same time.

Structured: Data in rows and columns (like databases)

Unstructured: Social media posts, videos, emails, sensor data, etc

Use of big data strategically

SBL Notes 50
 New markets

New products

New segments

Branding/segment

Investment decisions/portfolio

Targeted marketing/marketing medium

Collaboration

Disruptive industry

Refers to a new business model or innovation that completely changes how an industry
works — either by eliminating an existing industry or creating a brand-new market or
segment.

→ What makes it "disruptive"?

It challenges traditional companies by offering a faster, cheaper, or more convenient

alternative.

Often uses technology or platforms to connect people directly (e.g. peer-to-peer, app-
based models).

It forces existing businesses to adapt or risk becoming irrelevant.

Integrated Reporting

Integrated reporting is a modern approach to corporate reporting that combines financial and
non-financial information into a single, clear, and concise report. It gives a complete picture
of how an organisation creates value over time — not just for shareholders, but for all
stakeholders including employees, customers, communities, and the environment.

Traditional reports tend to focus only on financial performance. Integrated reporting, on the
other hand, also includes environmental, social, governance (ESG), and strategic
information. It shows how various resources — called “capitals” (like financial, human,
intellectual, stakeholder relationships and natural) — are used and impacted by the business.
(In context of environment: PESTEL, MACRO etc)

This approach is important for accountability because it helps investors understand the long-
term sustainability and risks of a business, not just short-term profits. It also holds businesses
accountable to society by showing how they affect the environment, communities, and future
generations. By making this information transparent and connected, integrated reporting
builds trust and supports more responsible, ethical decision-making.

Summary

Combines financial and non-financial information into one clear and concise report.

SBL Notes 51
 Provides a complete picture of how an organisation creates value over time for all
stakeholders:

Shareholders

Employees

Customers

Communities

Environment

Traditional reports focus mainly on financial performance.

Integrated reporting includes:

Environmental, Social, and Governance (ESG) factors

Strategic information

Use and impact of different capitals:

Financial

Human

Intellectual

Stakeholder relationships

Natural (linked to environment, PESTEL, macro factors)

Important for accountability:

Helps investors understand long-term sustainability and risks, beyond short-

term profits.

Holds businesses accountable to society by showing impact on environment,

communities, and future generations.

Increases transparency and trust, supporting more responsible and ethical decision-
making.

Triggers of IR

Backward-looking: Traditional reports only focus on past performance, not future

value creation.

Too complex or long: Annual reports became overloaded with information, making
them hard to understand.

Compliance-driven: Focus was on meeting rules, not communicating useful insight.

Red tape / Red tapism: Excessive formality and bureaucracy reduced clarity and
relevance.

SBL Notes 52
 Only financial focus: Ignored non-financial aspects like sustainability, people, and
environmental impact.

Short-termism: Reporting was often focused on quarterly profits instead of long-term

strategy.

Lack of trust: Stakeholders lost confidence due to poor transparency and corporate
scandals.

IR gives a broad picture about organizations strategy, governance and operational

performance.

IR should highlight

Risks we are facing and backup plan

Standing

Opportunities

Where we want to be

Resources

Benefits Disadvantages

Trust and transparency increases Losing competitive edge

Forward looking information No benchmarks available

Better decision making Not accepted widely

Better allocation of resources Different standards worldwide

Time consuming and costly to

Corporate image improves
prepare

Organizational Culture

Informal groups

Pros Cons

Improve motivation Loss of control by formal management

Lower absence rate May create conflicts or cliques

Lower turnover rate Can lead to accidents (if informal rules ignored)

Fast communication among members Charismatic leader may bypass formal authority

Increased efficiency Informal norms may resist formal rules

Makes change easier (peer support) Potential for misalignment with company goals

Smaller communication channels (faster spread) Risk of rumors or misinformation

SBL Notes 53
 Culture

The way we do things around shared values and beliefs

It is the collective programming of the mind which distinguishes the member from one
category to another

What shapes the organizational culture?

Founder/leader of the organization

History

Leaders/managers

The environment where we operate

Importance of culture

Gives identity

Motivates you

Helps in bringing change

Values can be used as rewards

Dysfunctional aspects of culture

Resistance to introduction of diversity

Suppress innovation and creativity/new practices

Acquisition and mergers - companies cultures might not align and be accepted by
employees

Cultural web

SBL Notes 54
 Rituals and routines are the things that are done on a
regular basis and reflect the underlying beliefs of the
organisation (e.g. long working hours, induction
courses).

Stories that people tell about the organisation reflect

what people in the organisation admire or dislike.
Typically these might relate to a former boss or other
key employee, or to a big event in the life of the
A useful tool for analysing the
culture of an organisation. This organisation. They often reflect a belief in the way
involves examining different things should or should not be done.
aspects of the organisation and
Symbols are objects, events, acts or people that may
considering what these say
about the culture and its convey some meaning above their functional purpose
values. In essence, it is a more (e.g. company cars may symbolise status of managers).
detailed list of factors
The paradigm is the set of assumptions and collective
identified by Schein’s artifacts,
espoused values and basic experience of the organization. It will determine how the
assumptions and values. organization reacts to events, and therefore shape the
strategic decisions. The paradigm is the result of all the
other aspects of the cultural web.

Power structures relates to which person or group of

people hold power. Power means the ability to persuade,
induce or coerce others into doing certain things. Power
may be held closely by senior management or
distributed in a more democratic way.

Organisational structures reflect the power structure.

If the organisation is structured around a traditional
hierarchy, for example, this suggests that power is held
by the people at the top of the hierarchy; more informal,
flatter structures may reflect a more democratic
structure.

Control systems are the formal and informal ways that

staff are monitored, including reward systems and
performance metrics. They reflect what is considered
important to the organisation.

Meme style summary

What It Really
Cultural Web Meme-Style
Means (Exam
Element Meaning
Style)

Rituals & “If we don’t have Daily habits that

Routines 🕺 3 useless meetings show what the

SBL Notes 55
 What It Really
Cultural Web Meme-Style
Means (Exam
Element Meaning
Style)
before lunch, did organisation
we even work?” actually values.

“Legend says the The tales

old boss once employees tell that
Stories 📖 fixed everything reveal what’s
with an Excel admired or
sheet.” disliked.

“Boss gets a
corner office, Physical or social
Symbols 💼 interns get signs of hierarchy
motivational and culture.
mugs.”

The unspoken core

Paradigm 🧩 “We’ve always

done it this way.”
beliefs that guide
decisions and
reactions.

“The one who

Who truly holds
Power Structures controls the Wi-Fi
⚡ password controls
power — not just
on paper.
the world.”

How the org is

“Looks like a built — flat or
Organisational
Structures 🏗️ lasagna: too many
layers.”
hierarchical,
formal or
informal.

The ways
“We track coffee performance is
Control Systems
🧾 breaks, not
innovation.”
monitored and
rewarded —
shows priorities.

Hofstede’s international perspectives

• Power distance
- High power societies accept a hierarchical order where everyone has a place without
further justification.
- Low power strive to equalize power distribution and demand justification for
inequalities.
• Individualism v collectivism
- Individualistic societies place stress on personal achievements.
- In collectivist societies, individuals act predominantly as members of a group or team.
• Uncertainty avoidance
- People in cultures with high uncertainty avoidance tend to be more cautious and proceed

SBL Notes 56
 by careful planning.
- Low uncertainty avoidance cultures feel relatively comfortable making unstructured
situations and dealing with change.
• Long-term orientation v short-term orientation
- Long-term oriented cultures attach importance to the future and place emphasis on
persistence, flexibility and a willingness to change.
- Short-term oriented cultures emphasise tradition and meeting social expectations.
• Masculinity v femininity
- Masculine cultures include competitiveness and assertiveness.
- Feminine cultures place greater emphasis on relationships and consensus.

Ethical Decision Making

Tucker’s 5 questions model is used to assess whether a business decision is ethically sound
and ensure decisions are not based on profit alone but consider legal, ethical, social, and
environmental impacts.

1. Is it profitable?

➤ Will the decision generate financial return for the business?

2. Is it legal?

➤ Does it comply with relevant laws and regulations?

3. Is it fair?

➤ Is it just and equitable to all stakeholders involved?

4. Is it right?

➤ Is it morally acceptable, beyond just being legal?

5. Is it sustainable or environmentally sound?

➤ Does it avoid harming the environment or future generations?

Exam application

Going from one country to another

Delayering

Bribery

Dam/freeway etc

Other Models

Baldridge performance excellence criteria

SBL Notes 57
 Category Explanation Example

The CEO of a company

How leaders set direction,
regularly communicates the
values, and promote
1. Leadership vision and values, and ensures
accountability, ethics, and
ethical conduct is part of
performance.
employee training.

A retail company plans to

How the organisation sets long-
expand into online markets in 3
2. Strategy term goals and allocates
years and invests in an e-
resources to meet them.
commerce platform.

A telecom company uses

How the organisation
surveys and customer feedback
3. Customers understands customer needs and
to improve its service quality
builds strong relationships.
and reduce churn.

A hospital uses real-time

How the organisation collects,
4. Measurement, Analysis, & dashboards to track patient wait
uses, and manages performance
Knowledge Management times and staff performance to
data.
improve service.

A tech company offers regular

How employees are recruited, upskilling, team-building, and
5. Workforce
trained, motivated, and engaged. performance bonuses to keep
employees engaged.

A manufacturing firm
How key work processes are implements lean processes and
6. Operations designed, managed, and quality control systems to
improved for efficiency. reduce waste and improve
productivity.

A logistics company shows

The outcomes achieved across
year-on-year improvement in
all key areas — financial,
7. Results delivery times, customer
customer satisfaction, employee
satisfaction scores, and profit
engagement, operations.
margins.

Hope and Balogun Model

Type Change Style Change Size Explanation Example

Minor Updating a CRM

Participative, adjustments made system with input
Adaptation Small change
incremental gradually, often from the sales
with staff input. team.

Gradual change Slowly shifting

Top-down, led by leadership, from in-store to
Evolution Small change
incremental but not online retail over
transformational. several years.

Reconstruction Top-down, Big/urgent change Fast, major A bank

transformational change imposed restructures

SBL Notes 58
 Type Change Style Change Size Explanation Example
by top departments and
management, lays off staff to
often in response survive a financial
to a crisis. crisis.

Significant change
A company co-
involving input
creates a
and buy-in across
Big and sustainability
Participative, all levels —
Revolution collaborative strategy with
transformational leadership
change employees,
encourages
suppliers, and
involvement and
customers.
ownership.

Key Factors Influencing Strategic Change

Time / Pace / Speed of Change

How quickly does the change need to happen?

Urgent change may require a top-down approach (e.g. crisis), while slower change
allows more consultation and planning.

🧠 Eg: A company facing bankruptcy needs fast restructuring (reconstruction), while

digital transformation can be gradual (evolution).

Scope of Change

Is the change small (e.g. one department) or large-scale (whole organisation)?

Wider scope = more complexity = more planning and communication needed.

🧠 Eg: Updating HR software (small) vs changing the whole business model (large).
Diversity

Refers to the variety of people, cultures, and roles in the organisation.

More diversity can make change harder, but also brings richer input if managed well.

🧠 Eg: A global company needs to consider cultural differences when changing values
or policies.

Readiness for Change

Are employees mentally and emotionally prepared for change?

If not, resistance will be high — more communication and support will be needed.

🧠 Eg: Staff burnout during COVID made them less open to further changes.
Power

Who has the authority or influence to drive or resist change?

Leaders must understand internal politics and influencers (formal and informal).

🧠 Eg: A strong union can block change unless consulted early.

SBL Notes 59
 Capacity

Does the organisation have enough time, people, and resources to implement the
change?

Without capacity, even good change plans can fail.

🧠 Eg: A company launching a new product while cutting staff may struggle to manage
both.

Capability

Does the organisation have the skills and knowledge needed for change?

Training or external help may be needed to fill capability gaps.

🧠 Eg: Moving to AI systems requires staff with digital skills — or hiring consultants.

SBL Notes 60