Chartered Institute of Management Accountants (CIMA) Strategic Level: Management Accounting (E3, F3, P3) Syllabus

Strategic Level: Management Accounting (E3, F3, P3) syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Strategic Level: Management Accounting (E3, F3, P3) in Chartered Institute of Management Accountants (CIMA), not a summary of it.

1. 1

   E3 — Strategic Management

   5 topics

   • Strategic management process
     • Rational vs emergent strategy
     • Mission, vision, objectives and stakeholders
   • Environmental and competitive analysis
     • PESTEL, scenario planning and forecasting
     • Porter's Five Forces and the value chain
     • SWOT and resource-based view
   • Strategic options and choice
     • Ansoff matrix and Porter's generic strategies
     • Methods of growth: organic, M&A, strategic alliances
     • Suitability, acceptability and feasibility (SAF)
   • Strategy implementation and change
     • Change management models (Lewin, Kotter)
     • Organisational structure and culture
   • Digital strategy
     • Digital ecosystems and disruptive technologies
     • IT/IS strategy alignment and data strategy
2. 2

   F3 — Financial Strategy

   4 topics

   • Financial policy decisions
     • Financial objectives and stakeholder reconciliation
     • Dividend policy and distribution decisions
   • Sources of finance and capital structure
     • Cost of equity (CAPM) and WACC
     • Optimal capital structure and gearing
     • Lease vs buy and financing decisions
   • Business valuation
     • Asset-based, earnings-based and DCF valuation
     • Valuing equity, debt and intangibles
     • Efficient market hypothesis
   • Mergers, acquisitions and reorganisations
     • Acquisition rationale and consideration types
     • Demergers, MBOs and exit strategies
3. 3

   P3 — Risk Management

   4 topics

   • Enterprise risk management
     • Risk identification, assessment and the risk register
     • Risk appetite, mapping and TARA responses
   • Internal control and corporate governance
     • Control frameworks (COSO) and internal audit
     • UK Corporate Governance Code principles
   • Managing financial risk
     • Currency risk hedging: forwards, futures, options, swaps
     • Interest rate risk management
   • Risks in IT and cyber security
     • Information systems risks and controls
     • Cyber threats and business continuity

Strategic Level: Management Accounting (E3, F3, P3) flashcards for Chartered Institute of Management Accountants (CIMA)

19 of 51 cards from the Strategic Level: Management Accounting (E3, F3, P3) deck — real questions with worked answers.

1. In the rational/strategic management process, what are the three core stages of the model?

   1) Strategic analysis (understanding the environment, resources and stakeholders), 2) Strategic choice (generating, evaluating and selecting options), and 3) Strategic implementation (putting the chosen strategy into action through structure, systems and change management).

2. What is the difference between deliberate (rational/planned) and emergent strategy?

   A deliberate strategy is intended and realised through a formal, top-down planning process. An emergent strategy develops over time from patterns of decisions and responses to a changing environment, without a fully pre-formulated plan (Mintzberg).

3. What does each letter of a PESTEL analysis stand for?

   Political, Economic, Social, Technological, Environmental (ecological), and Legal factors of the macro-environment.

4. List the five forces in Porter's Five Forces model of industry competition.

   1) Threat of new entrants, 2) Bargaining power of suppliers, 3) Bargaining power of buyers, 4) Threat of substitute products/services, and 5) Competitive rivalry among existing firms.

5. What are Porter's three generic competitive strategies?

   Cost leadership (lowest cost in the industry), Differentiation (unique product/service valued by customers), and Focus (cost focus or differentiation focus aimed at a narrow market segment).

6. In a SWOT analysis, which factors are internal and which are external?

   Strengths and Weaknesses are internal to the organisation; Opportunities and Threats are external (arising from the environment).

7. What are the four perspectives of the Balanced Scorecard (Kaplan and Norton)?

   Financial, Customer, Internal business process, and Learning and growth (innovation) perspectives.

8. What four elements make up the value chain's primary activities in Porter's model?

   Inbound logistics, Operations, Outbound logistics, Marketing and sales, and Service. (Supported by the four support activities: firm infrastructure, HR management, technology development, and procurement.)

9. What does the BCG matrix classify products into, using which two axes?

   It plots market share (high/low) against market growth rate (high/low), giving four categories: Stars, Cash cows, Question marks (problem children), and Dogs.

10. In the Ansoff matrix, what are the four growth strategies?

    Market penetration (existing products/existing markets), Market development (existing products/new markets), Product development (new products/existing markets), and Diversification (new products/new markets).

11. What three tests does Johnson, Scholes and Whittington use to evaluate strategic options (the SAF framework)?

    Suitability (does it address the strategic position/fit the environment?), Acceptability (return, risk and stakeholder reaction?), and Feasibility (do we have the resources and capabilities?).

12. What is the difference between organic growth, acquisition, and a strategic alliance as expansion methods?

    Organic (internal) growth builds capacity from within; Acquisition buys an existing business for fast access to markets/resources; a Strategic alliance/joint venture shares risk and resources via cooperation without full ownership.

13. What are Lewin's three stages of planned organisational change?

    Unfreeze (create the motivation to change and dismantle the status quo), Change/Move (implement the new behaviours and processes), and Refreeze (embed and stabilise the new state as the norm).

14. In Lewin's force field analysis, how is change achieved?

    Change occurs by increasing the driving forces favouring change and/or reducing the restraining forces resisting it, so the driving forces outweigh the restraining forces and the equilibrium shifts.

15. What are the components of the McKinsey 7S framework?

    Strategy, Structure, Systems (the 'hard' Ss) and Shared values, Skills, Style, Staff (the 'soft' Ss). All seven must be aligned for effective implementation.

16. What are the four main types of digital business model or technology associated with digital strategy that CIMA highlights?

    CIMA highlights technologies such as Cloud computing, Big data analytics, the Internet of Things (IoT), Artificial intelligence/automation, Blockchain, and Mobile/social platforms, used to create new value propositions and disrupt industries.

17. What is meant by 'digital disruption'?

    Digital disruption is the change that occurs when new digital technologies and business models affect the value proposition of existing goods/services, displacing established firms and reshaping markets (e.g., streaming replacing physical media).

18. What is the formula for the cost of equity using the dividend growth (Gordon) model?

    $$K_e = \frac{D_0(1+g)}{P_0} + g$$ where $D_0$ is the current dividend, $g$ is the constant growth rate, and $P_0$ is the current ex-dividend share price.

19. State the Capital Asset Pricing Model (CAPM) formula for the cost of equity.

    $$K_e = R_f + \beta\,(R_m - R_f)$$ where $R_f$ is the risk-free rate, $\beta$ is the equity beta, and $(R_m - R_f)$ is the equity market risk premium.

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