YJ T4 Strategic Analysis - CIMA

1 T4 Case study -TOPCIMAS trategic AnalysisYJ Oil and GasNick to Nick Best s T4 Case Study Strategic analysisFor those of you who don t know me, I ve tutored TOPCIMA for BPP, Kaplan, First Intuition and Reed Business School, am the author of the official CIMA T4 learning system, on which I worked together with one of the TOPCIMA examiners, and now work for astranti Financial Training on their TOPCIMA Mock Exams on the latest case, and a range of other TOPCIMA information visit to the caseThe oil and gas industry is the focus for the latest T4 Case Study. It s a tough industry as for many as it is something most people know little about. On the plus side is a well known global industry which should make finding industry examples (necessary for the diversity marks) relatively easy to case company YJ is relatively young Oil and Gas exploration and production company which has had a successful start to its life with 3 successful fields which are now generating strong revenues andprofits.

2 Investors are understandably very happy with the share price having risen from $6 per share at listing 6 years ago to $27 key twist this time around is the new CEO, and he is demanding a development of new fields which will require significant investment, which may be hard to find. He may bring a culture change which could also have wider ramifications for both directors and Analysis the rational modelThis Analysis uses the rational planning model of Strategic Analysis , summarised in the following diagramFUTUREM ission &ObjectivesNOWB usiness StrategyBusiness EnvironmentInternalanalysisS WO TPEST5 ForcesProduct Analysis -Product life cycle-BCG matrixStakeholderMappingGeneric strategiesAnsoff s matrixMethod of growthGovernance& EthicsStrategic Analysis the rational modelThe first stage of Analysis is to ensure we fully understand where the organisation is heading, along with its approach to meeting stakeholder &ObjectivesStakeholderMappingGovernance& EthicsMissionThe mission statement sets the direction and tone of the organisation, and guides Strategic decision making.

3 As is the case with most T4 Case Study exams, we are not given the company s mission it were to have one, we could perhaps conclude that it might focus on: Development of new oil and gas fields Delivering returns for investors Technological development in exploration and drilling Health, Safety and environmental issues/CSR Being well capitalised to facilitate development of new fieldsObjectives and performance measurementThe objectives provide a focused target to move towards to direct planning, motivate staff and enable accurate performance measurementWe are given few specific targets in the case study!This is the first case in many sittings where this is the case. Previous cases have included a 5 year plan!We should probably assume they have forecasts and a clear Strategic plan, but that they are simply not mentioned in the case. If they don t have these that would be a TOPCIMA Courses Detailed video exam guides Full video debrief of the preseen 2 day long live master-classes covering: The exam and marking criteria Prioritisation of Issues Preseen Analysis and discussion Keys to passing the exam Industry example knowledge share 5 full mock exams (7 for May sitting) Marking and personal feedback on 3 mock exams 60 industry examples to use on exam day 3 mini-mock exams Personal feedback on 2 mini-mock exams Detailed course notes Calculations e-book to practise vital calculations Ethics e-book perfect your ethics sections Issues e-book to master issues structure and timings Private forum.

4 Debate the case with others focused tutor support Ongoing e-mail support Progress reviews Keeping you on track for a pass Hi Nick,I passed with 62% -huge again for your support I m relieved I stumbled across you before signing up with one of the mainstream training Regards,Marc Marc ThomasPassed September 2011 I could not recommend this service strong enough and honestly feel this was the reason for my successful pass Paula RobertsPassed November 2009 Governance YJ have a Non-executive Chairman and 5 Non-executive Directors good, and aligned with good practise under the combined code Health, Safety and Environmental issues are well managed and controlled important for risk management There is a CSR policy Most key directors are shareholders (new CEO also seeking to buyshares) aligning interests with shareholders Little evidence in the case of other key governance issues.

5 Theyare only listed on the AIM market and so do not have to abide by the UK s combined code. However as a guide to good practise it might be good to look out for weaknesses in the unseen in areas such as: Committees of Non-execs Audit, remuneration, nomination Disclosures of directors and pay Financial reporting and control Information for directors All directors involved in decision making Regular meetings with institutional shareholders Good use of the AGME thics and CSRE thics is 10 marks in the exam and hence is a very important areaKey ethics issues mentioned in the preseen are: Bribery This is particularly relevant in the African and Asian markets they operate within which it is the cultural norm. In the exam you must recommend that bribery is NOT undertaken even though in the real world it might be tacitly accepted Environmental issues Health and safetyOther issues could include: Staff issues (possibly related to new CEO) Disclosure issues ( of reserves) Critical Success FactorsThe case states that company must prove themselves to win licences in the following areas: Technical ability to bring oil and gas field into production Awareness and track record in relation to environmental record Financial capacity to bring the oil and gas fields into productionOther critical success factors could include.

6 Innovation keeping ahead of competitors in a fast changing industry ( fracking technology) Good project management Supplier/outsourcer relations and management Government relations and management (re licences)Stakeholder mapping Doing a stakeholder map as an appendix in the exam is almost always something which is useful to do. An appendix and done well will usually gain 2 marks possibly more. You must update the map for changes in the unseen, and add all new stakeholders which are in your top 4 issues Refer to your map in the main body of your text, adding a comment to say what the position of that stakeholder on the map means in relation to this specific issue ( a key player should be involved fully through regular meetings, and incorporating their views into the final decision)Stakeholder Analysis Mendelow s MatrixKey Players (Keep close)CEO and ChairmanMajor outsourcers ( drilling companies)Keep satisfiedMost institutional shareholdersBanks Governments with licencesIndustry regulatorsHigh PowerKeep informedSmaller Suppliers/outsourcersMost employees and minor directorsCommunities around Oil FieldsRegular customers (if any!)

7 Minimal interestEmployees of suppliersOccasional customers (sales primarily on market only to a range of customers)Low PowerHigh InterestLow InterestPosition could vary. Look for interest levels expressed in unseen to decideStrategic Analysis the rational modelNext we need to analyse the current position of the businessThis helps us ensure the strategies we decide upon are appropriate to the business current position and issues they face in the industry and more broadlyThis position is summed up in a SWOT analysisNOWB usiness EnvironmentInternalanalysisS WO TPEST5 ForcesProduct Analysis -Product life cycle-BCG matrixSWOT On the following page you ll find my SWOT Analysis . Remember that you MUST do a SWOT Analysis as Appendix 1 in your answer. You will score 1 mark in the technical section for this, and up to 3 further marks in the application section -if done well.

8 You must update this SWOT for unseen issues (underline or bold these in your exam script), and should aim to include ALL your top 5 issues in your SWOT. A CIMA student script review I read, also made it clear that 2-3 word points in the SWOT will not score as well as points made in more depth, so it is worth writing 5-6 words for each point in your SWOT AND aim for 4-5 points per uncertainty in existing and new prices for Oil and Gas fall (they are hugely variable which will make a big impact on revenues) disaster issues business failure, poor service, cause environmental technologies ( Fracking) oil and gas fields currently under of funds for future developments (per CEO) uncertainty that could be caused by the new CEO making in relation to some competitors may be difficult to compete for new licenses against larger companies (although no problems so far) IT systems may be out of date (they are 8-9 years old).

9 Being off-the-shelf they are not tailored to specific business , cash generating and AIM listed (good for investors and future funding) strategy and approach have successfully grown business no need to change unless staff Surveying team and board of directors non-execs proven HSE risk management and use of outsourcers ( drilling) to leverage their expertise and keep number of employed staff numbers potential new sites under investigation, and 4 license applications made should provide for future growth if successfulWeaknessesStrengthsAstranti TOPCIMA Mock Exams and mini-mocksThe biggest criteria for success in my opinion is practising mock exams. These are key since: They help you with Time Management, the critical problem for most students They enable you to practise a range of issues that you may see in the real examThe astranti Mock exams on this Case can be purchased at Hi Nick,I passed my CIMA T4 Part B with 26 credits.

10 To say that I am extremely happy is a gross understatement!I would like to thank you for helping me cross that bridge (not an easy one) and achieve another milestone in my life. Your mocks made a big difference and really helped me -this was my 3rd attempt. There is something very right in what you are up the good work!Kind Regards,Edmore Chinhakwe Passed November 2011 PEST Analysis On the following page you ll find my PEST Analysis . The PEST Analysis is always an optional appendix in this exam, although this is one of the best case studies for a long time for this model as there are so many relevant points. Do aim to add one or two additional issues from the unseen into your PEST if you do one in the exam You MUST cross reference your PEST in your script however, and many students do not do this well. Aim to do this 2-3 times in your scriptPEST Analysis New technologies will be key to continued efficiencies and maximising outputs ( Fracking) Technological Increasing awareness and focus on sustainability and safety Consumption levels (current forecasts are for rising consumption) Natural gas considered cleanest fossil fuels (per preseen)Social (inc sustainability) Worldwide economic position affecting oil and gas prices Exchange rate impacts for overseas operations Changing market prices for oil and gas out of control of YJEconomic Political issues political power of governments, uncertainty in some Oil rich nations ( Iran, Iraq, Libya).