A2 Business Studies Objectives and Strategy Unit 6 Decision-making to achieve objectives

Decision-making models Models are used to assist firms in important decision-making at every level It varies from short-term and long-term, tactical and strategic decisions Decisions are constrained by internal and external factors Often there is risk involved There are a number of models we will look at: Scientific decision making and Ansoff’s Matrix

Scientific Decision-making 1. Set Objectives 5. Implement and review decision In line with what want to achieve within a given time-scale 2. Gather data 4. Select a strategy /make a decision Has the outcome succeeded in achieving the objectives? Primary+secondary research 3. Analyse data Based on data analysis Using methods such as investment appraisal, cost-benefit analysis, critical path analysis, decision trees

Scientific Decision-making Advantages: A systematic process which removes ‘hunch’ decisions, bias and subjectivity It ensures decision are well researched which reduces risk Disadvantages: It can be a slow process and often reduces creativity Does not guarantee the right decision is made

Ansoff’s Matrix Decision-making model/tool for corporate planning. It provides companies with strategic choices (options) each with different degrees of risk. Igor Ansoff

e.g. Mars Ice cream,Cadbury’s CreamEgg bar Ansoff’s Matrix EXISITING NEW PRODUCTS Enter a new market with an existing product in new geographic locations or market segments e.g. Johnson's baby shampoo targeting adults, Kellogg’s Cornflakes at different times of day, or a new band trying to make it in America E X I S T N G W M A R K MARKET PENETRATION CONSOLIDATION WITHDRAWAL DO NOTHING New product in a new market e.g. 1990s Nokia moved from car tyres to mobile phones and is now market leader PRODUCT DEVELOPMENT Modifications or additions to a product, which maintains differentiation e.g. Mars Ice cream,Cadbury’s CreamEgg bar Increasing risk MARKET DEVELOPMENT DIVERSIFICATION Increasing risk

Existing product, Existing markets Market penetration - Promote growth in same market and develop further brand loyalty Consolidation - Concentrate on activities in which have a competitive advantage, maintain market share Withdrawal - Pull out of market usually with very low demand Do nothing - Continue with the same strategy only appropriate in short term

Student Activity 1. Complete the A-Z activity on Ansoff’s matrix 2. Read the Hornby case study page 480 Which of the strategic options in Ansoff’s matrix have benefited Hornby? (20 minutes) Pictures sourced from www.ansoff.com, www.levongroup.net and www.hornby.com