2 Stakeholder mapping HL, unit 1.4 Stakeholders Monitor (minimum effort) Main InterestsPower and influenceShareholdersProfit growth, Share price growth, dividendsElection of directorsBanks & other LendersInterest and principal to be repaid, maintain credit ratingCan enforce loan covenants Can withdraw banking facilitiesDirectors and managersSalary ,share options, job satisfaction, statusMake decisions, have detailed informationEmployeesSalaries & wages, job security, job satisfaction & motivationStaff turnover, industrial action, service qualitySuppliersLong term contracts, prompt payment, growth of purchasingPricing, quality, product availabilityCustomersReliable quality, value for money, product availability, customer serviceRevenue / repeat business Word of mouth recommendationCommunityEnvironment, local jobs, local impactIndirect via local planning and opinion leadersGovernmentOperate legally, tax receipts, jobsRegulation, subsidies, taxation, planningStakeholders are mapped on the chart below. This is used to decide who has the greatest priority and who has least priority.Level of interestLOW HIGHAMonitor (minimum effort)BKeep informedCKeep satisfiedDManage closelyHIGH LOWLevel of power
3 The Business CycleSL, unit 1.5 External environment Peak or boomEconomic activity at its highest levelConsumer expenditure, investment and export earnings are high.People receive pay rises as business make more profits.Business have good cash flowSlump or troughRecessionDip in level of economy for 2 consecutive quarters. (6 months)Declining aggregate demandLower investment expenditureFalling export salesRising unemploymentMost affected businesses are those sensitive to changes in income. (houses, cars, jewelery)Last stage of decline in the trade cycleVery high level of unemploymentVery low consumer spending, investment and export levelsPoor cash flow and liquidity…many close downLack of confidence in the economyNo job securityLow spendingSurvival strategies…?Reduces costsReduce priceNon – pricing e.g. after salesBrandingOutsourcingIncreased efficiency
4 PEST analysisSL, unit 1.5 External environment Political / LegalEconomicEnvironmental regulation and protectionEconomic growth (overall; by industry sector)Taxation (corporate; consumer)Monetary policy (interest rates)International trade regulationGovernment spending (overall level; specific spending priorities)Consumer protectionPolicy towards unemployment (minimum wage, unemployment benefits, grants)Employment lawTaxation (impact on consumer disposable income, incentives to invest in capital equipment, corporation tax rates)Government organisation / attitudeExchange rates (effects on demand by overseas customers; effect on cost of imported components)Competition regulationInflation (effect on costs and selling prices)Stage of the business cycle (effect on short-term business performance)Economic "mood" - consumer confidenceSocialTechnologicalIncome distribution (change in distribution of disposable income;Government spending on researchDemographics (age structure of the population; gender; family size and composition; changing nature of occupations)Government and industry focus on technological effortLabour / social mobilityNew discoveries and developmentLifestyle changes (e.g. Home working, single households)Speed of technology transferAttitudes to work and leisureRates of technological obsolescenceEducationEnergy use and costsFashions and fadsChanges in material sciencesHealth & welfareImpact of changes in Information technologyLiving conditions (housing, amenities, pollution)Internet!STEEPLEPESTLEPOLITICALECONOMICSOCIALTECHNOLOGICALLEGALENVIRONMENTALSOCIALTECHNOLOGICALECONOMICETHICALPOLITICALLEGALENVIRONMENTAL
5 SWOT analysisSL, unit 1.6 Organizational planning tools SWOT analysis is a method for analysing a business, its resources, and its environment.SWOT is commonly used as part of strategic planning and looks at:Internal strengthsInternal weaknessesOpportunities in the external environmentThreats in the external environmentSWOT can help management in a business discover:What the business does better than the competitionWhat competitors do better than the businessWhether the business is making the most of the opportunities availableHow a business should respond to changes in its external environmentThe result of the analysis is a matrix of positive and negative factors for management to address:The key point to remember about SWOT is that:Strengths and weaknessesAre internal to the businessRelate to the present situationOpportunities and threatsAre external to the businessRelate to changes in the environment which will impact the businessPositive factorsNegative factorsInternal factorsStrengthsWeaknessesExternal factorsOpportunitiesThreatsThere is no point producing a SWOT analysis unless it is actioned! SWOT analysis should be more than a list - it is an analytical technique to support strategic decisions
6 Constructing the decision tree Decision treesHL, unit 1.6 Organizational planning toolsA tool to help businesses in their decision making processesProvides a pictorial approach to decision makingMaps out the different options available and the different outcomes of these optionsConstructing the decision treeProduct AProduct BHigh DemandLow Demand-£7m-2m£16m£6m£12m£4m0.70.30.60.4Chance nodes represent alternatives with probabilities attachedA decision nodes are indicated by a squareProduct BHigh Demand 0.6 x £12m = £7.2mLow Demand 0.4 x £4m = £1.6mExpected Value = £7.2 + £1.6m = £8.8mNet Expected Value = £8.8m - £2m = £6.8mProduct AHigh Demand 0.7 x £16m = £11.2mLow Demand 0.3 x £6m = £1.8mExpected Value = £11.2m + £1.8m = £13mNet Expected Value = £13m - £7m = £6mAdvantagesLimitationsEncourages a careful consideration of all alternativesSets out a problem clearly and encourages a logical approach to decision makingEncourages a quantitative consideration of chanceTakes risk into accountDiscourages gut reaction decision makingHard to get accurate or meaningful data for probabilitiesLess useful in the case of completely new problems or one-off strategic problemsEasy for management bias to enter, or for a manager to manipulate the dataIgnores the changing nature of the business environmentMay lead to managers taking less account of qualitative issues
7 The fishbone procedure Ishikawa’s Fishbone AnalysisHL, unit 1.6 Organizational planning toolsIs a model used to identify cause and effectAn issue is identifiedAnd then possible causes are identifiedOften the 4 M’s are usedManagementManpowerMachinesMaterialsThe fishbone procedureIdentify the problemConstruct diagram with possible categories of causesFor each ‘bone’ brainstorm the possible causes and place on the nodeConsider each possible cause and think about which are likely to warrant further investigation and circle these on the diagramOnce root causes have been identified then the appropriate strategies can be devised to deal with the problem
8 Ansoff’s Matrix SL, unit 1.6 Organizational planning tools The Ansoff Growth matrix is a marketing planning tool that helps a business determine its product and market growth strategy.Created by Professor Igor Ansoff ( ) It suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets.Market penetration(Selling existing products into existing markets.)Product development (A business aims to introduce new products into existing markets. )Maintain or increase the market share of current products –competitive pricing strategies, advertising, sales promotion, more resources dedicated to personal sellingSecure dominance of growth marketsRestructure a mature market by driving out competitors- aggressive promotional campaign, pricing strategyIncrease customer loyalty - e.g. loyalty schemesFocus on markets and products it knows well. It is likely to have good information on competitors and on customer needs. Little investment in new market research is needed.New competenciesNew skillsA successful product development strategy places the marketing emphasis on:R &D and innovationSubstantial market researchBeing first to marketDiversification A business markets new products in new marketsMore riskClear expectationsMust conduct risk assessmentMarket developmentMarket extension (seeks to sell its existing products into new markets.)Related diversificationThe business remains in the same industry in which it is familiar with. E.g. a cake manufacturer diversifies into a fresh juice manufacturer. This diversification is in the same industry which is the food industry.Unrelated diversificationUsually no previous industry relations or market experiences. A food manufacturer diversifies into a mechanical industryNew geographical marketsNew product dimensions or packagingNew distribution channels (e.g. moving from selling via retail to selling using e-commerce and mail order)Different pricing policies to attract different customers or create new market segmentsMarket development is a more risky strategy than market penetration because of the targeting of new markets.
9 Porter’s Generic strategies HL Unit 1.7 Growth and Evolution Michael Porter suggested that businesses could achieve a competitive advantage over rivals by following these strategies:Cost leadershipDifferentiationFocusCost leadershipDifferentiationThe lowest cost supplier within a marketCharge low pricesOften lower qualityHighly profitablePredatory pricing methods usedThese businesses do not compete with high quality providersFocus on quality over costPackagingBrandingUSPFocusTarget a niche or individual market segmentCost focusDifferentiation focusTo be the lowest cost operator in one niche marketAlso used by low cost specialised businesses such as small DIY shops…Aims to offer the best or most distinctive in a niche marketPorter argued that for a firm to be successful in the long run, they can only choose one generic strategy.Otherwise they will be stuck in the middle…Stuck in the middle
10 Force Field analysis steps Lewin’s force fieldHL Unit 1.8 Change and the management of changeMany factors drive change in a business.Lewin identified four forces: In Lewin’s model there are forces driving change and forces restraining it. Where there is equilibrium between the two sets of forces there will be no change. In order for change to occur the driving force must exceed the restraining forceLewin’s analysis can be used to:Investigate the balance of power involved in an issueIdentify the key stakeholders on the issueIdentify opponents and alliesIdentify how to influence the target groupsForce Field analysis stepsList the driving forces for change in one column, and the restraining forces against change in another column.Allocate a weight to each of these forces, from 1 (weak) to 5 (strong).Draw a diagram adding the weights to each driving and restraining force.Total the scores for the driving forces and the restraining forces.
11 The recruitment process HL Unit 2.1 Human resources planning Charles Handy’s ShamrockHL Unit 2.1 Human resources planningA Shamrock organisation will have:Core workforce/Core StaffFull time Staff -Vital but becoming an increasingly smaller groupFlex workers/Peripheral WorkersPart-time, casual, temporary and portfolio workersFreelance contractors/Outsourced WorkersWorkers not employed by the organisation but paid to complete specialist tasks
12 Cash flow forecastingSL unit 3.3 Accounts and Finance A prediction of the future flows of money in and out of the business for a specified period of time.A cash flow forecast shows, month by month, the money that it is anticipated will be coming into the business and the money that the business will be paying out.Uses of a cash flow forecastIdentifies potential shortfalls in cash balances in advance – think of the cash flow forecast as an “early warning system”. Makes sure that the business can afford to pay suppliers and employees. Spot problems with customer payments As an important discipline of financial planning – helps with planning the budget.External stakeholders such as banks may require a regular forecast. Reducing cash outflowsImproving cash inflowsSeeking alternative sources of financeThe causes of cash flow problemsOvertradingOverborrowingOverstockingPoor credit controlUnforseen changes
13 Porter’s 5 Force analysis HL, unit 4.2 Marketing planning The 5 forces analysis looks at assessing the nature of competition within an industryIt allows a manager to make decisions on how to improve his business.Marketing managers may use it to modify their strategies (Marketing Mix)Management guru!
14 Position Maps (perception or market map) SL, unit 4.2 Marketing planningThe position map illustrates the range of “positions” that a product can take in a market based on two dimensions that are important to customers.Examples of those dimensions might be:High price v low priceBasic quality v High qualityLow volume v high volumeNecessity v luxuryLight v heavySimple v complexLo-tech v high-techYoung v OldPosition maps are used to identify where there are “gaps in the market” – where there are customer needs that are not being met.
15 SL, unit 4.3 Marketing planning The Product lifecycleSL, unit 4.3 Marketing planningSalesTimeR&DIntroductionGrowthMaturitySaturationDeclineR&DNew ideas/possible inventionsMarket analysis – is it wanted? Can it be produced at a profit? Who is it likely to be aimed at?Product Development and refinementTest Marketing – possibly local/regionalAnalysis of test marketing results and amendment of product/production processPreparations for launch – publicity, marketing campaignIntroduction / LaunchAdvertising and promotion campaignsTarget campaign at specific audience?Monitor initial sales / Maximise publicity / High cost/low salesLength of time – type of productGrowthIncreased consumer awarenessSales rise / Revenues increaseCosts - fixed costs/variable costs, profits may be madeMonitor market – competitors reaction?MaturitySales reach peakCost of supporting the product declinesSales growth likely to be lowMarket share may be highCompetition likely to be greaterPrice elasticity of demand?Monitor market – changes/amendments/new strategies?SaturationNew entrants likely to mean market is ‘flooded’Necessity to develop new strategies becomes more pressing:Searching out new markets:Linking to changing fashionsSeeking new or exploiting market segmentsLinking to joint ventures – media/music, etc.Developing new usesFocus on adapting the productRe-packaging or formatImproving the standard or qualityDeveloping the product rangeDeclineProduct outlives/outgrows its usefulness/valueFashions changeTechnology changesSales declineCost of supporting starts to rise too farDecision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?Extension strategies aim to prolong the life cycle and often start in the saturation phase
16 SL, unit 4.3 Marketing planning The Boston MatrixSL, unit 4.3 Marketing planningExamines the likely financial performance of your product or business portfolioMarket shareHighLow(Growing)(mature)StarsProblem childrenMarket growthCash cow....moo!Dogs...woof..market growthStarsGenerate lots of cash!Competing in markets where they are strong compared with the competition.Need heavy investment to sustain growth. Eventually growth will slow and, assuming they keep their market share, Stars will become Cash CowsProblem ChildrenMay indicate poor marketingUse up a lot of cashManagement - which ones should they invest in? Which ones should they allow to fail or shrink?Potential, but may need substantial investment to grow market shareCash CowsThese are mature, successful products with relatively little need for investment.Need to be managed for continued profit - so that they continue to generate the strong cash flows that the company needs for its Stars..They also may run the risk of becoming dogs – extension strategies may be needed!DogsMay generate enough cash to break-even, but they are rarely, if ever, worth investing in.Too many dogs = liquidity problemsA criticism of the matrix…Higher profits do not always come from higher market share.The matrix fails to place products exactly in the grid.Should be used alongside Ansoff’s Matrix