In this guide we will introduce you to the Strategic Business Management exam. We will cover what the Strategic Business Management exam is, the format of the exam, the topics covered in the exam and tips for success.
View the other guides in this series:
If you are preparing to resit the Strategic Business Management view this guide for guidance on how to prepare.
The syllabus for the Strategic Business Management exam states the aim is: “to enable students to demonstrate quantitative and qualitative skills, in order to make realistic business recommendations in complex scenarios.”
The key word here is ‘recommendations’, the exam is not just a test of knowledge of theories, techniques, rules and regulations. These have already been tested at Certificate and Professional Level. You need to put yourself in the position of a qualified finance professional advising a client on the best course of action. Their advice needs to be technically correct and precise, but it should focus on issues and risks that are specific to the client, it should be commercially credible and professionally communicated. You need to ask yourself the question “would a client pay for this advice?”
The Strategic Business Management exam is a fully open book 3.5 hour long exam containing two questions – split approximately 60% and 40%. Each question contains a ’real-life’ scenario of an organisation at a point of strategic transition – such as launching a new product, selling a division or expanding into a new territory. Allocating the 210 minutes between the two questions implies that the questions should take around two hours for question one and 1.5 hours for question two. It is therefore not surprising that the questions have long, detailed and wide ranging scenarios which require thorough analysis. The examiner’s advice is that students attempt the exam in the order set (both the two questions and each component).
Each of the two questions will contain a number of specific requirements relating to the overall issue which will contain a number of numerical and discursive requirements.
Looking at a typical Strategic Business Management question (Zatter in November 2020) the requirements were:
- Valuation of an acquisition assuming either a 100% or 80% stake
- Comparison of the benefits and risks of either acquisition approach and also consideration of acquiring a minority (15%) stake
- Explanation and evaluation of the accounting treatment of acquiring a 15% stake
- Explanation of the risks of the acquisition and due diligence procedures that could be performed
Performance evaluation of an acquisition target and strategic pros and cons of the marks available for each requirement are not disclosed, a key skill that you need to develop is estimating these marks and balancing you time across the requirements.
The workbook for Strategic Business Management is rather daunting at over 1,300 pages, however you will recognise a great deal of the content. The Strategic Business Management exam draws on much of your Professional level studies – whether from studying the Professional Level or from university courses that gave you exemptions. The key areas are:
- Financial Accounting and Reporting;
- Business Strategy and Technology; and
- Financial Management.
In addition some background knowledge based upon the strategic elements of the Business Planning: Taxation and the Audit and Assurance exams will also be required in evaluating the business and financial risks of reporting entities.
The weighting of subjects can be found in the syllabus available here.
The heart of many Strategic Business Management questions is a combination of Financial Management and Business Strategy and Technology namely a calculation (eg, a business valuation, or profit forecast) coupled with an analysis of the pros and cons of a course of action. It is therefore crucial that you have a good knowledge of these subjects.
However way these subjects are examined at Strategic Business Management Advanced Level is different to professional level. For example:
A typical Net Present Value calculation in Financial Management would be a complex and detailed calculation with many lines, and marks awarded as you build up the calculation. There may be one or two marks for an overall recommendation to go ahead. At Strategic Business Management the calculation may include significantly fewer steps, but the scenario may include non-standard elements, such as a moving foreign exchange rate, that forces you to adjust your standard approach. In addition Strategic Business Management may well award at least as many marks for the discussion of the calculation as for the calculation itself. You may be expected to identify the key risks in the calculation such as a very high up front outlay, or reliance on a high terminal value.
Turning to Business Strategy and Technology, the theories are examined in a subtle way in Strategic Business Management. There are rarely any marks for simply referring to or using models such as Ansoff. However Strategic Business Management regularly asks about the strategic and operational benefits and risks of a course of action. Therefore the factors that are generally generated by Business Strategy and Technology exams are included. For instance the examiner would expect you to select one or two key environmental risks (that would be included in PESTEL), or one or two significant resources from 9Ms.
There a small number of completely new areas in the Strategic Business Management syllabus. Look out for Modified IRRs, business reconstructions, multilateral netting, business valuation techniques such as free-cash-flows that build on NPV approaches and assurance techniques such as Due Diligence.
As well as a very good understanding of the basics, especially from Financial Management, you may need to explain how these techniques work to non-accountants which requires more than just familiarity.
The Strategic Business Management syllabus also includes Financial Reporting elements (such as explaining the impact on a business’s accounts of consolidating a new subsidiary). Again the approach is not to test the highly complex nuances of financial reporting, but to identify the relevant theories or accounting standards and explain, often to non-accountants, their criteria and impact.
Finally – do not forget your Management Information studies at Certificate Level. There are often relatively simple profit forecasts including aspects such as fixed a variable costs or break-even points.