Institute of Chartered Accountants in England and Wales (ICAEW) ACA Professional Level: Business Strategy, Finance and Management Syllabus

Professional Level: Business Strategy, Finance and Management syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Professional Level: Business Strategy, Finance and Management in Institute of Chartered Accountants in England and Wales (ICAEW) ACA, not a summary of it.

1. 1

   Strategic Analysis

   3 topics

   • Analysing the external environment
     • PESTEL and scenario analysis
     • Porter's five forces and industry life cycle
   • Analysing internal resources and capabilities
     • Value chain and core competences
     • SWOT and resource audit
   • Stakeholders, governance and ethics in strategy
2. 2

   Strategic Choice and Implementation

   3 topics

   • Competitive and corporate-level strategy
     • Cost leadership, differentiation and focus
     • Ansoff's directions of growth
   • Methods of strategic development
     • Organic growth, acquisitions and alliances
     • Evaluating strategic options
   • Implementation, change management and performance measurement
     • The balanced scorecard
     • Managing strategic change
3. 3

   Corporate Finance and Investment Decisions

   4 topics

   • Investment appraisal and capital budgeting
     • NPV with tax, inflation and working capital
     • Capital rationing and risk in appraisal
   • Cost of capital and capital structure
     • Cost of equity, debt and WACC
     • Gearing and the impact on value
   • Business valuations
     • Asset, earnings and cash flow based methods
     • Valuing shares and intangible value
   • Financing decisions and dividend policy
4. 4

   Managing Financial Risk

   4 topics

   • Identifying and assessing financial risk
   • Foreign currency risk management
     • Forward contracts and money market hedges
     • Currency futures and options
   • Interest rate risk management
   • Treasury management and the role of derivatives

Professional Level: Business Strategy, Finance and Management flashcards for Institute of Chartered Accountants in England and Wales (ICAEW) ACA

21 of 58 cards from the Professional Level: Business Strategy, Finance and Management deck — real questions with worked answers.

1. In external environment analysis, what does PESTEL stand for?

   The six categories of macro-environmental factors: Political, Economic, Social, Technological, Environmental (ecological) and Legal.

2. What are the five forces in Porter's Five Forces model used to analyse industry attractiveness?

   (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.

3. What is a 'strategic group' in industry analysis?

   A set of firms within an industry that follow similar strategies along key dimensions (e.g. price, product range, geographic scope), and therefore compete more directly with each other than with other groups.

4. In analysing internal resources, what conditions must a resource meet under the VRIO framework to give sustained competitive advantage?

   It must be Valuable, Rare, costly to Imitate, and the firm must be Organised to exploit it (V-R-I-O). Resources meeting all four can be a source of sustained competitive advantage.

5. Distinguish between a firm's resources and its competences (capabilities).

   Resources are the assets a firm owns or has access to (tangible and intangible inputs). Competences/capabilities are the ways the firm deploys and coordinates those resources to perform activities effectively. Core competences are those that are difficult to imitate and underpin competitive advantage.

6. What are the primary activities in Porter's value chain?

   Inbound logistics, Operations, Outbound logistics, Marketing and sales, and Service.

7. What are the four support activities in Porter's value chain?

   Firm infrastructure, Human resource management, Technology development, and Procurement.

8. Define a stakeholder and name the two dimensions used in Mendelow's matrix to map stakeholders.

   A stakeholder is any individual or group that can affect, or is affected by, the organisation's objectives. Mendelow's matrix maps stakeholders by their Power and their level of Interest, giving four groups: Minimal effort (low/low), Keep informed (low power/high interest), Keep satisfied (high power/low interest), and Key players (high/high).

9. What is the agency problem in corporate governance?

   The conflict of interest arising when agents (directors/managers) run a business on behalf of principals (shareholders) but may pursue their own interests rather than maximising shareholder wealth. It creates agency costs, mitigated by monitoring, incentives and governance mechanisms.

10. In the UK Corporate Governance Code, what is the recommended split of board roles between Chair and CEO?

    The roles of Chair and Chief Executive should be separate (not held by one person), to ensure a division of responsibilities between running the board and running the company, providing a balance of power.

11. Name two influential ethical frameworks contrasted in strategic decision-making.

    Deontology (duty/rule-based ethics — actions are right or wrong in themselves) versus Teleology/Consequentialism (e.g. utilitarianism — actions judged by their outcomes, seeking the greatest good for the greatest number).

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

    Cost leadership, Differentiation, and Focus (which can be cost focus or differentiation focus, targeting a narrow market segment).

13. What does Porter mean by being 'stuck in the middle'?

    A firm that fails to commit clearly to either cost leadership or differentiation ends up with no competitive advantage and typically earns below-average returns.

14. In Ansoff's 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 — the riskiest).

15. Distinguish related (concentric) diversification from unrelated (conglomerate) diversification.

    Related diversification moves into business areas linked to existing operations (sharing technology, markets or value-chain activities), offering synergy. Unrelated/conglomerate diversification enters businesses with no obvious link, primarily for risk spreading or financial reasons.

16. What are the three principal methods (routes) of strategic development?

    Organic (internal) development, Mergers and acquisitions, and Strategic alliances/joint ventures.

17. State two key advantages and two key drawbacks of growth by acquisition versus organic growth.

    Advantages: speed of entry/growth and immediate access to resources, market share or capabilities. Drawbacks: high cost (acquisition premium) and integration risk/culture clash, often leading to value destruction.

18. In the BCG growth-share matrix, name the four quadrants and the underlying axes.

    Axes are market growth rate (vertical) and relative market share (horizontal). Quadrants: Stars (high growth/high share), Cash cows (low growth/high share), Question marks/problem children (high growth/low share), and Dogs (low growth/low share).

19. What three components make up McKinsey's 7S framework, grouped as 'hard' and 'soft' elements?

    Hard elements: Strategy, Structure, Systems. Soft elements: Shared values (centre), Skills, Staff, Style. Used to assess organisational alignment during change/implementation.

20. What are the three stages of Lewin's model of change management?

    Unfreeze (create readiness for change and break down the status quo), Change/Move (implement the new ways of working), and Refreeze (embed and stabilise the new behaviours).

21. What four perspectives make up Kaplan and Norton's Balanced Scorecard?

    Financial, Customer, Internal business process, and Learning and growth (innovation) perspectives — linking performance measures to strategy beyond purely financial measures.

See more Professional Level: Business Strategy, Finance and Management flashcards →

Planning Professional Level: Business Strategy, Finance and Management for Institute of Chartered Accountants in England and Wales (ICAEW) ACA

Professional Level: Business Strategy, Finance and Management (Institute of Chartered Accountants in England and Wales (ICAEW) ACA) FAQ