University of Limpopo
School of Accountancy
Department of Financial Management
POSTGRADUATE DIPLOMA IN ACCOUNTANCY
(CTA)
APPLIED MANAGEMENT ACCOUNTING AND FINANCE
(CCAC180)
Module 1
Business Strategy
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INTRODUCTION
Chartered Accountants are no longer confined to the traditional role of financial stewards; they
are now recognized as integral contributors to strategic business management. As aspirants
embark on their journey to become chartered accountants, it becomes imperative for you to
cultivate a profound understanding of business strategy. This knowledge is instrumental in
navigating the complexities of modern business dynamics and fostering long-term value creation
for stakeholders.
In the context of the PGDA curriculum, the emphasis on business strategy underscores its
critical importance in shaping the professional acumen of chartered accountants. Throughout the
PGDA year, candidates delve into the intricacies of strategic frameworks, honing their ability to
analyze, formulate, and implement strategies that align financial decisions with overarching
business objectives.
A mastery of business strategy equips chartered accountants with the capability to offer strategic
financial counsel, guide investment decisions, and evaluate the financial ramifications of
strategic initiatives. This multifaceted skill set ensures that they not only maintain financial
integrity but also actively contribute to the strategic direction and sustainable growth of the
organizations they serve.
ASSUMED PRIOR LEARNING
Students enrolling in the Applied Management Accounting and Finance program are presumed
to have acquired foundational knowledge of business strategy in their undergraduate studies.
Consequently, the Certificate of Theory in Accounting (CTA) year will serve as an opportunity to
deepen and refine this understanding. The curriculum aims to augment their proficiency in
applying diverse business strategy concepts to real-life scenarios, ensuring that students can
effectively translate theoretical knowledge into practical, strategic decision-making within the
realms of management accounting and finance.
EXAMINATION PERSPECTIVE
From an examination standpoint, Business Strategy holds considerable significance. Over the
past 6 years, SAICA has consistently included this crucial topic in the Initial Test of Competence
(ITC) examinations. With the introduction of the CA2025 Competency Framework, the
significance of Business Strategy has further heightened.
As a result, it is highly probable that you will encounter comprehensive examination coverage on
Business Strategy both throughout your Certificate of Theory in Accounting (CTA) year and in
the SAICA ITC Examinations. Consequently, it is highly likely that you will encounter extensive
examination coverage on Business Strategy both during your Certificate of Theory in Accounting
(CTA) year and in the SAICA ITC Examinations.
SAICA COMPETENCY FRAMEWORK
Annexure A below, details the syllabus requirements, as well as the competencies that need to
be developed by the prospective chartered accountants prior to entering the chartered
accountancy profession. Furthermore, the said annexure details the proficiency levels and
knowledge levels of various aspects of strategy.
EXTRACT OF COMPETENCIES:
Summarised SAICA Knowledge Reference Levels
Level 1 (Basic): Basic Knowledge and Understanding of the core aspects excluding complex
calculations and scenarios.
Level 2 (Intermediate): Detailed Knowledge and Understanding of the central ideas and
issues including simple calculations and scenarios.
Level 3 (Advanced): Thorough Knowledge and Understanding including complexities and
unusual aspects including complex calculations and scenarios
A2.1 Strategy development process
Level
Learning Outcomes
2 • Following a multi-capital management approach,
analyse and align the overall purpose of an
organisation (to provide sustainable value to the
organisation and its stakeholders) with its context,
vision, mission, values, and mandates
• Facilitate and advise on the strategy development
process of the organization
• Review key stakeholder roles and responsibilities
in the organisation’s business plan and the
execution of its business strategy
• Review the organisation’s strategic direction and
highlight areas of potential value and risk
Minimum content
• Definition of purpose, objectives and strategies
• Application of appropriate analysis tools for considering
the internal and external environment.
• Application of integrated thinking in strategy formulation.
• Contrasting competitive strategy models.
• Identifying and recognising key stakeholders of an entity,
and their interests and influence.
A2.2 External and internal influences on the organisation’s strategy
Level
Learning Outcomes
Minimum content
• The drivers of change in the business ecosystem.
2 a) Assess the contextual influencers on an
organisation’s external and internal environment • External and internal influences on an entity’s strategy
o Macro opportunities and threats (economic, political,
(also taking into account, economic, industry,
regulatory / legal, technological and competitive
competition, market, social, natural, technology
environment)
and political spheres) by using relevant strategic
o
Internal strengths and weaknesses (structures,
analysis tools, frameworks and models
relationships, resources, systems and processes)
b) Review the impact of organisational internal factors o Natural environment and sustainability
(e.g., tone of the leadership, human resources
o Corporate culture
policies, personnel selection and development,
o Human resource management
remuneration strategies, management/trade union o Industrial relations
o Remuneration strategies
relationships) on the organisation’s strategy
c) Review the impact of events and activities related o Motivational aspects
o Goal congruence and alignment
to the organisation’s context while creating their
o Code of conduct and ethical codes
business strategy
A2.2 External and internal influences on the organisation’s strategy
Level
Learning Outcomes
Minimum content
d) Identify and evaluate significant opportunities and o The role of technology and the digital environment,
transformation, and ecosystems.
risks associated with the entity’s external and
internal environments
A2.3 Implementing strategy
Level
Learning Outcomes
Minimum content
• Context relevant strategy models
3 a) Review context relevant models to appraise the
organisation’s capabilities to achieve the business • SWOT analysis
• PESTLE analysis
strategy and purpose
• Porters five forces
b) Identify and evaluate significant business risks,
strengths, weaknesses, opportunities and threats • Use of the balanced scorecard in managing different
aspects of the business, putting effective drivers in place.
associated with the organisation’s external and
• Value chain analysis
internal environments
• Four corner’s analysis
2 c) Prepare a strategic response to the organisation’s • Risk management models, critical success factors and
competitive environment by applying strategic
key performance indicators.
analysis tools to identified external and internal
factors
d) Assess the risk tolerance of the entity’s
stakeholders’ and its balance with opportunity
e) Identify priorities and actions either to mitigate
critical risks or capitalise on opportunities
f) Formulate insights into the impact of future
opportunities and risks
A3
ALIGNING THE BUSINESS MODEL WITH THE BUSINESS STRATEGY
This competency area refers to how an organisation’s strategy is embedded in a plan aimed at successful
operation and includes the building blocks of the business model, disruptive business models, the change
management process and building relations and growth strategies.
A3.1 Building blocks of the business model
Level
Learning Outcomes
2
a) Assess the business model of the organisation in
terms of its key building blocks
b) Consider and apply different perspectives to
evaluate the organisation’s business model (e.g.,
risk, innovation, investment, etc.)
c) Assess the organisation’s business model as a
vehicle for the implementation of its business
strategy
d) Assess the organisation’s business model as a
vehicle for long-term value creation for
stakeholders
Minimum content
• Key building blocks of the business model of the entity
which may include:
o Customer segments
o Value propositions
o Channels (communication, distribution and sales)
o Customer relationships
o Revenue streams
o Key resources
✓ Physical
✓ Intellectual
✓ Human
✓ Financial
✓ Digital
o Key activities
o Key partnerships
o Cost structure
• Assesses corporate culture
• Utilises analytical tools for assessing feasibility of
strategies formulated
A3.2 Disruptive business models
Level
Learning Outcomes
2
a) Assess the effectiveness or threat of disruptive
business models
b) Assess the organisational pursuit of, and
responses to disruptive business models
A3.4 Building relations and growth strategies
Level
Learning Outcomes
2
a) Evaluate different growth strategies (e.g.,
organic, mergers and acquisitions, joint ventures,
strategic alliances, divestment decisions) which
the organisation could implement, taking
cognisance of its overall objectives and the
creation of value
b) Analyse stakeholder profiles to identify potential
strategic alliances and partnerships
c) Evaluate stakeholder potential to achieve and
improve joint efficiencies.
Minimum content
• Utilising new technologies to reformulate value
propositions
• Unlearning and relearning business models
• Reflective models to drive re-development
• Monitoring the transient nature of digital value
• Timing of disruptive models
• Building an ecosystem
Minimum content
• Acquisitions, takeovers, restructurings
• Issues that can arise from a change in control
• Due diligence, risks
• Corporate culture
• Stakeholder theory
PRESCRIBED READING
1.
2.
3.
4.
Exploring Strategy 12th edition – Richard Whittington
Introduction to Strategy (Chapters 1 to 5 & 9) – refer to Learner Guide for details about this book;
Correia et. al. Financial Management 8th Edition, Chapter 21.
Slides, and additional notes handed out in class.
OVERVIEW
INTRODUCTION
Enterprise strategy is essential for an organisation's long-term success in the challenging and competitive
business environment of today. According to Potter (1996) entities should aim to design and execute a
unique strategy which it should preserve over the long term. This will enable them to outperform
competitors and gain a sustainable competitive advantage. With the sustainable competitive advantage,
the organisation will be able to attract significant number of customers who will keep on choosing the
products and services of the entity over those offered by competitors. This enduring demand for the
goods and services of the organisation will make the organisation to earn above average profits over a
long period of time. But how is a unique enterprise strategy developed and who are the key players in
this strategy formulation process?
DEVELOPING ENTERPRISE STRATEGY
When developing a unique enterprise strategy, managers of all types of organisations must answer three
important questions. These questions are; "where are we now?", "where do we want to go?", and "how
do we get there?" (Gamble et al, 2019). By answering these questions in detail, an organisation can
come up with a successful unique strategy that is in line with its specific circumstances.
Where are we now?
The foundation of the strategy formulation process lies on the answer to the question “where are we
now?” (Gamble et al, 2019). When answering this question, an organisation must look at both the internal
and external environment. The internal environment of the organisation is analysed by gaining a deeper
understanding of the organisation’s competitive resources and capabilities, organisation culture,
competitiveness of costs and prices of goods and services and the organisation’s competitive strength in
comparison to its competitors (Gamble et al, 2019).
The external environment is analysed by investigating the industry in which the company operates in and
macro-economic conditions of the economy. A model such as porter’s five forces can be used to analyse
the industry competitiveness by assessing the bargaining power of suppliers and customers, the threat of
new entrants, the threat of substitute products, and the rivalry among the different players in the industry
(Porter, 2008). The PESTELE analysis can be used to analyse the macro-economic conditions of the
economy in which the company operates in by looking at political, economic, social, technological,
environmental, and legal factors. A SWOT analysis is also another good model that can be used to gain
a holistic understanding of both the internal and external environment by looking at the organization's
strengths, weaknesses, opportunities, and threats (Whittington et al, 2019).
Where do we want to go
After answering the question “where are we now?” the next question that must be answered is "where do
we want to go?". When answering this question, top management develop a strategic vision for the
organisation. The strategic vision must outline the long term direction, future products, services,
customers, markets and technology of the organisation. Additionally, top management should craft the
mission statement. The mission statement must convey the organization's purpose and core values. The
vision and mission statement must be communicated with all the stakeholders.
The strategic vision and mission statement and both long term and they must be reduced to short term
goals. This is done by developing the objectives for the organisation. According to (Ogbeiwi, 2017), the
objectives should be specific, measurable, achievable, relevant, and time-bound (SMART). It is important
for an organisation not to only consider financial objectives but to also include non-financial objectives.
Key performance indicators (KPIs) must then be set to ensure that the entity stays on track towards in
achieving its objectives. A popular model used to craft strategic objectives and KPIs is the Balanced
Scorecard (Kaplan, 2009). It enables a balanced view of the organisation objectives and include both
financial and non-financial objectives by looking at financial, customer, internal process, and learning and
growth perspectives.
How do we get there
After an entity has understood its current circumstances and where it would want to be in the future, they
must now answer the question how do we get there. This will link the current circumstances of the
organisation with where they would want to be in the future. How management answer this question
defines an organisation’s business strategy. When answering this question, management must clearly
articulate how they intend to compete in a competitive environment, manage the different areas of the
organisation and come up with new capabilities and gathering resources to improve the organisations
long term success.
According to (Gamble et al, 2019), when choosing on how to compete, entities choose one of the generic
competitive strategies; low cost provider, differentiation, focused and hybrid strategies. When an entity
chooses the low-cost provider strategy, it will focus on achieving cost leadership in the industry by
delivering products or services at a lower price than its rivals while maintaining acceptable quality levels.
This can be achieved through economies of scale, efficient operations, and effective supply chain
management. On the other hand, a differentiation strategy places importance on creating a unique and
distinctive offerings that stand out in the market. This can be done by offering products with superior
quality, focusing on innovation, improving customer experience, or providing additional features and
benefits that competitors do not offer. An organisation will also have to choose of whether to apply the
differentiation strategy or the low cost provider strategy to the broad market or to a targeted market. A
hybrid strategy also known as the best cost provider stakes out a middle ground between pursuing a low
cost strategy and differentiation strategy.
Over and above determining how they will competitive, management must also determine how they will
manage other functional areas of the organisation. These areas includes financing, marketing, human
resources, operations and technology. All these areas plays are important in achieving the overall
success of the business. As such strategies must be developed to align them with the strategic vision.
Strategies in the marketing area include activities such as identifying target markets for goods and
services, internationalisation, developing marketing campaigns and implementing customer relationship
management initiatives. Strategy in the operations functional area covers aspects such as enhancing
production processes, quality control, and managing the supply chain activities. Financial strategies might
involve finding sources of finance, managing cash flow, and improving financial performance through cost
containment. Human resources strategies may involve training and development programs, creating a
positive work culture, and implementing competitive salaries and benefits packages for the organisation.
Since we are currently in the digital era, technological strategies are also important and management
must spend some time crafting it. This can include areas such like digital transformation in the
organisation, data analytics, automation and cybersecurity. Managers must also have a strategy for
developing new capabilities and assembling important resources for the organisation. This may be done
through mergers and acquisitions, developing and implementing new technologies, research and
development, strategic alliances, and investing in talent and skills development.
Answering the question on “where do we want to go?” also includes more functional areas over and
above the ones discussed above. An entity can make use of a model such as the business model canvas
in setting up a strategy for the different processes in an organisation (Osterwalder & Pigneur, 2010).
There is no single activity, process, department or functional area that should be left to chance. All the
strategies developed must be suitable, acceptable and feasible. The strategy will be suitable if it is in line
with the answers to the question “where are we now?” and where the organisation wants to go. It will be
acceptable if it considers the expectations and preferences of all the different stakeholders. It will be
feasible if it can be successfully implemented in practice (Whittington et al, 2019).
Sustainability
Sustainability is a comprehensive concept that revolves around meeting present needs without
compromising the ability of future generations to meet their own needs. This holistic approach
encompasses environmental, social, and economic dimensions, guided by principles of responsible
resource management, social equity, and economic viability. In the business context, sustainability
involves assessing the long-term impact of operations on the environment and society while ensuring
economic profitability. The integration of sustainability into corporate strategy involves pursuing a
balanced approach that considers ecological, economic, and social aspects. No longer optional,
sustainability has become fundamental in strategic decisions. Businesses now strive to align with
sustainability principles, minimizing environmental footprints, and addressing social implications while
maintaining economic viability.
Companies with strong sustainability practices are more likely to attract investors and secure favorable
financing terms. Sustainability initiatives, such as reducing carbon emissions or improving resource
efficiency, position businesses for green financing options. Given the contemporary importance of
sustainability, showcasing a commitment to sustainable practices is crucial for maintaining or accessing
financing. In investment decisions, companies have the choice between negative and positive
approaches. The negative approach involves avoiding activities or organizations that negatively impact
sustainability. Conversely, the positive approach allows for investment in initiatives that positively
contribute to sustainability, such as impact investing or Environmental, Social, and Governance (ESG)
integration. Engaging with influential stakeholders, including pension funds, becomes essential for
shaping decision-making.
Sustainability and climate-related risks must be integral to the risk management process. These risks
extend beyond environmental concerns, impacting reputation and brand. Strategies for mitigating and
adapting to these risks are crucial for ensuring operational continuity and resilience. In reporting and
monitoring, sustainability/ESG-related metrics must be included in performance management measures.
Commitment to sustainability should be transparently reflected in performance indicators. Compliance
with sustainability reporting frameworks, such as the Global Reporting Initiative (GRI) Standards,
Integrated Reporting (<IR>), and climate-related disclosures (IFRS S1 and IFRS S2), is essential.
External validation through assurance of sustainability/ESG reporting enhances transparency and
credibility.
Key metrics reported on the concept of sustainability.
In corporate reporting, companies often highlight key sustainability metrics that reflect their commitment
to environmental responsibility. Four critical concepts frequently featured in these reports are electricity
consumption, water consumption, carbon emissions, and waste management. Implementing strategic
initiatives in these areas not only aligns with global sustainability goals but also demonstrates a
company's commitment to minimizing its environmental impact. Here, we delve into specific strategies
that businesses can adopt to address these key sustainability metrics.
Electricity Consumption:
a. Energy Efficiency Measures: Implement energy-efficient technologies, such as LED lighting, smart
sensors, and energy-efficient appliances, to reduce overall electricity consumption.
b. Renewable Energy Sources: Invest in renewable energy sources like solar panels or wind turbines to
generate clean energy, offsetting traditional electricity consumption.
c. Demand Response Programs: Participate in demand response programs to adjust electricity usage
during peak hours, promoting efficient energy use.
Water Consumption:
a. Water-Efficient Technologies: Integrate water-efficient technologies, such as low-flow fixtures and
efficient irrigation systems, to reduce overall water usage.
b. Water Recycling and Reuse: Implement water recycling systems to reuse treated water for non-potable
purposes, minimizing reliance on fresh water sources.
c. Water Conservation Programs: Develop and promote water conservation programs within the
organization to raise awareness and encourage responsible water usage.
Carbon Emissions:
a. Transition to Clean Energy: Shift towards clean energy sources and reduce dependence on fossil fuels
to lower carbon emissions associated with electricity consumption.
b. Carbon Offsetting: Invest in carbon offset projects, such as reforestation or renewable energy
initiatives, to counterbalance unavoidable carbon emissions.
c. Sustainable Transportation: Promote sustainable commuting options, such as telecommuting or
electric vehicles, to reduce the carbon footprint of employee transportation.
Waste Management:
a. Waste Reduction Policies: Implement policies that encourage waste reduction, reuse, and recycling
within the organization.
b. Circular Economy Practices: Adopt a circular economy approach by designing products for durability,
repairability, and recycling, reducing the overall waste generated.
c. Waste-to-Energy Programs: Explore waste-to-energy technologies to convert certain types of waste
into energy, contributing to both waste management and energy efficiency.
Strategy evaluation
One of the most common challenges students face in strategic management is evaluating decisions
made by organizational management. To provide a comprehensive analysis, a well-structured framework
is essential. One effective framework for evaluating strategic decisions is the Suitability, Acceptability,
and Feasibility (SAF) model. This model enables a thorough assessment of the strategic decision from
multiple perspectives, ensuring a holistic understanding of its impact and potential outcomes.
Suitability:
In the first phase of the SAF model, students evaluate the suitability of the strategic decision. This
involves assessing whether the decision aligns with the overall strategic goals and objectives of the
organization. Students should analyze if the decision is coherent with the internal and external
environment, considering factors such as market conditions, competitive landscape, and organizational
capabilities. Examining the suitability aspect also involves scrutinizing the strategic options considered
and understanding if the chosen decision is the most appropriate given the context. Questions to
consider include: Does the decision capitalize on organizational strengths? Does it address identified
weaknesses? Is it aligned with the organization's long-term vision and mission?
Acceptability:
The second phase of the SAF model focuses on the acceptability of the strategic decision. Here,
students assess the acceptability of the decision from the perspectives of key stakeholders, including
shareholders, employees, customers, and the broader community. They evaluate the social, ethical, and
cultural implications of the decision. Additionally, students consider the financial implications, assessing if
the decision is economically viable and aligns with the risk tolerance of stakeholders. Acceptability also
involves examining the political and legal aspects, ensuring that the decision complies with regulations
and is likely to gain approval and support from relevant stakeholders. Questions to address include: Is
the decision ethically sound? Will it be accepted by employees and the broader community? Does it align
with shareholder expectations and financial constraints?
Feasibility:
The final phase of the SAF model is feasibility, where students assess the practicality of implementing the
strategic decision. This involves analyzing the resources, capabilities, and competencies required to
execute the decision successfully. Students consider the financial feasibility, evaluating if the
organization has the necessary funding or can secure it. They also assess operational feasibility, looking
at whether the organization has the capabilities and systems to implement the decision effectively.
Technical feasibility is examined to determine if the necessary technology and infrastructure are in place.
Feasibility analysis also involves evaluating the potential risks and challenges associated with
implementing the decision. Key questions include: Does the organization have the financial resources to
implement the decision? Are the necessary skills and technology available? What are the potential
obstacles, and how can they be mitigated?
MODELS TO ASSESS STRATEGIC FOCUS
Tools
SWOT
ANALYSIS
CAPABILITY
ANLYSIS
(USING
RESOURCE
CAPITALS)
PORTERS FIVE
FORCES
STAKEHOLDER
MAPPING AND
ANALYSIS
PORTERS
COMPETITIVE
STRATEGIES
BUSINESS
MODEL
CANVAS
McKINSEY GEC
MODEL
Use Stage
Use
Strategic
Planning:
Environmental
Analysis
To determine the internal influences (Strength and
Weaknesses) and external influences (Opportunities and
Threats) on strategy in order to mitigate (SW) and leverage
(OT) for the benefit of an organisation.
Strategic
Planning:
Environmental
Analysis
Internal Analysis of the tangible, intangible and human
resources of the business and how effectively they have been
used. Key Strengths and Weaknesses are identifies in order to
Mitigate Weaknesses and Leverage Strengths.
Strategic
Planning:
Environmental
Analysis
Strategic
Planning:
Environmental
Analysis
Strategic
Planning:
Strategic
Choice
Strategic
Planning:
Environmental
Analysis &
Strategic
Choice
Strategic
Planning:
Environmental
Analysis &
Strategic
Choice
Industry Analysis to determine the level of competitiveness of
the industry and factors that contribute to industry profitability.
The model considers the extent of competition, threat of
substitute, barriers to entry into industry as well as the
bargaining powers of the sellers and the buyers that contribute
to the toughness of competition and its effect on firm
profitability and sustainability.
Analysis tools to identify a business’ stakeholders, to
determine their needs, interests and influences/powers to
promote or prevent the businesses strategic plans and
projects. The model helps a business determine the strategy
to consult and communicate with the stakeholder.
Generic business level strategies that can be applied by a
business. These include cost leadership, differentiation and
diversification strategies for both narrow and wide-range
customer bases.
The models used to determine, evaluating or documenting
existing business models and developing or designing a new
business model. It enables you to describe, design, challenge,
invent and pivot your business model (Osterwalder & Pigneur,
2009)
The model is used to perform business portfolio analysis on
the strategic business units (a unit that formulates its own
business level strategy) of a business. It is used to determine
the level of investment per business unit, develop strategies
for adding new products and businesses to the portfolio and to
decide which businesses or products should no longer be
retained (McKinsey, n.d.).
Tools
PRODUCTMARKET
MATRIX
Use Stage
Strategic
Planning:
Environmental
Analysis &
Strategic
Choice
Use
Also called the Ansoff Matrix: the model is useful in business
units strategic processes to determine business growth
opportunities. It can be used to determine strategies to be
adopted for business units/product portfolios (Ansoff, n.d.).