Strategic drivers and operational levers

Accounting Ahead | Original study resource | accountingahead.com.au

Strategic drivers and operational levers

MODULE 5 | 5.2.1 | STUDENT COMPANION

The gaps found in the strategic analysis (where the environment is moving one way and the organisation's

capabilities or results point another) become the strategic drivers: the issues the strategy must address to

create or protect a competitive advantage. A driver without the capability to act on it is just a wish, so

having, building or acquiring capabilities is part of the strategy.

Peak Indoor Climbing (imagined) runs three gyms in Brisbane. Indoor climbing is booming among young

adults and families, and customers expect to book and pay on their phones. But Peak still takes bookings by

phone and at the desk, two gyms are crowded at peak times and empty during the day, and a well-funded rival

has opened nearby.

From strategic drivers to strategic initiatives

Strategic drivers

The choices that set us apart: markets and products, customer value, channels, and internal capabilities and operational excellence

Operational levers

Revenue, costs and growth; efficiency

and effectiveness; flexibility

People and organisational

levers

Structure, skills and capabilities

Product and service levers

New products, new markets, and the

value and benefits customers receive

Strategic initiatives

Specific actions with owners, deadlines, budgets and measures; managers spot and close capability gaps

Peak: launch the booking app by March; owner, operations manager; budget $80,000; target, half of bookings online within six months

A good initiative names an owner, a deadline, a budget and a measure, so everyone knows what success

looks like and who is responsible for it.

GLOBAL STRATEGY AND LEADERSHIP | M5 | 5.2.1 | STUDENT COMPANION

1

Accounting Ahead | Original study resource | accountingahead.com.au

Strategic options under each driver

Industry

A fast-growing industry, or a newer, riskier

one. Peak: guided outdoor climbing trips

Markets

Concentrate on one market, or take the

offer to new places. Peak: a fourth gym in

a growing suburb

Products and services

Add related services, or drop those that

don't fit. Peak: yoga and strength classes;

drop the tired retail corner

Customers

A new customer group, or a shift to

full-price customers. Peak: school and

corporate programs for quiet weekdays

Channels and operations

Online presence, round-the-clock service,

social media, referral rewards, or

exceptional traditional channels. Peak: a

booking app

Peak's booking app and the operational drivers

Revenue

More bookings and memberships, at

any hour; prices that vary by time of

day fill quiet hours

Costs

Upfront investment and ongoing fees,

offset by less staff time on the phone

and at the desk

Growth

A channel to younger customers who

rarely pick up a phone

Watch-out: too little personal contact could weaken loyalty, so pair the app with a staffed welcome desk at busy times

Two options compared on the operational drivers

Driver Booking app Fourth gym

Revenue More frequent bookings; time-of-day pricing A whole new catchment of members

Costs Upfront build and ongoing fees; less desk

and phone time

A lease, a fit-out of perhaps $2 million and a

new team

Growth Younger customers A new market

Watch-out Loss of the personal welcome If it is too close to an existing gym, members

simply switch: model how many are genuinely

new

GLOBAL STRATEGY AND LEADERSHIP | M5 | 5.2.1 | STUDENT COMPANION

2

Accounting Ahead | Original study resource | accountingahead.com.au

Options affect each other

Off-peak prices can fill weekdays, but if too generous they move existing customers from busy times to

cheaper ones, cutting revenue.

The same weekday wall space can't host a school group and an adult class at once, so the two options

compete for capacity, and managers must decide which earns more or how to schedule both.

Sizing an operational effect: school programs

Students per weekday morning 60

Days a week 4

School weeks a year 40

Price per student $12

New revenue per gym: 60 x 4 x 40 x $12 $115,200

Walls and staff already exist, so most of this revenue flows to profit

Case note: Domino's turnaround

By 2009 Domino's had a poor reputation for taste in the US, and its US same-store sales had fallen in 2007 and

2008. On 27 December 2009 it launched a new recipe with advertising that openly admitted customers'

complaints. US same-store sales jumped 14.3% in the first quarter of 2010 and 9.9% for the year. It also kept

investing in digital ordering: the online Pizza Tracker arrived in January 2008, and digital channels passed half

of US sales by the end of 2015 and 85% in 2025. The share price, under US$10 throughout 2009, first passed

US$400 in August 2020 (buybacks and dividends played a part too). A better product (revenue) and a cheaper,

faster channel (costs and growth) worked together.

Sources: Domino's Pizza Form 10-K reports (2009 and 2025) and results releases (May 2010, March 2011); Domino's Pizza Tracker

release, January 2008; Pizza Marketplace, August 2020.

GLOBAL STRATEGY AND LEADERSHIP | M5 | 5.2.1 | STUDENT COMPANION

3

Accounting Ahead | Original study resource | accountingahead.com.au

Practice questions

MODULE 5 | 5.2.1 | TRY THESE BEFORE THE WORKED ANSWERS

Question 1 - Sort the options into drivers

Option for Bluegum Regional Airport (imagined) Strategic driver

(a) Build a freight hub for local farm exports

(b) Add direct flights to a second capital city

(c) Open a business lounge

(d) Sell season passes to fly-in fly-out mine workers

(e) Launch an app for parking bookings and flight alerts

(f) Lease spare land for a solar farm

(g) Close the loss-making souvenir shop

(h) Run summer flights to a nearby holiday island

(i) Win contracts with pilot-training schools

(j) Give locals free parking for referring friends

Question 2 - A cafe in every store

Pageturner Books (imagined) runs 12 bookshops and is considering a cafe in every store. Analyse the option

against revenue, costs and growth, and name one way it could interfere with the existing business.

GLOBAL STRATEGY AND LEADERSHIP | M5 | 5.2.1 | STUDENT COMPANION

4

Accounting Ahead | Original study resource | accountingahead.com.au

Question 3 - Fill the empty seats

Calculate the extra annual revenue from tickets and from the candy bar, and name two costs that would rise.

Item Starlight Cinemas (imagined)

Screens and seats 6 screens of 150 seats

Weekday daytime sessions About 20% full

Seniors and schools program 300 extra tickets each weekday (Monday to Friday)

Ticket price $11

Candy-bar spend $4 per extra ticket

Weeks a year 50

GLOBAL STRATEGY AND LEADERSHIP | M5 | 5.2.1 | STUDENT COMPANION

5

Accounting Ahead | Original study resource | accountingahead.com.au

Worked answers

MODULE 5 | 5.2.1 | WORKED ANSWERS - ATTEMPT THE QUESTIONS FIRST

Question 1 - Bluegum Regional Airport

Option Driver

(a) Freight hub; (f) solar farm Industry: moving into new industries (logistics, energy)

(b) Second capital city; (h) island flights Markets: new places

(c) Business lounge; (g) close the shop Products and services: add a related service; drop a misfit

(d) Mine workers; (i) pilot schools Customers: new customer groups

(e) App; (j) referral rewards Channels and operations

Question 2 - Pageturner Books

Driver Analysis

Revenue Coffee and food sales; longer visits that lift book sales; events such as author talks

Costs Fit-out and equipment, cafe staff, food waste, food-safety compliance, and the shelf space given

up

Growth New groups such as students and remote workers; a reason to visit more often

Interference The cafe takes space from higher-margin books, and customers may linger without buying. A

CPA should compare contribution per square metre for books and for the cafe.

Question 3 - Starlight Cinemas

Extra tickets a year: 300 x 5 days x 50 weeks 75,000

Ticket revenue: 75,000 x $11 $825,000

Candy-bar revenue: 75,000 x $4 $300,000

Total extra revenue $1,125,000

Costs that rise: the distributor's share of ticket sales, staff, cleaning, and marketing to seniors and schools

GLOBAL STRATEGY AND LEADERSHIP | M5 | 5.2.1 | WORKED ANSWERS

6