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LO6 - Using information to make and justify business decisions - Coggle…
LO6 - Using information to make and justify business decisions
6.1 - How to use business decision-making tools
Internal organizational audit: key strengths and weaknesses of business before decisions are made, includes attitude to risk, core competencies, portfolio analysis (Boston), market research, SWOT analysis.
External business environmental audit: examining all external factors ie legal, ethical, economic, political, social, environmental and technological.
Competitor analysis: study on a businesses competitors inc strength of competition, market share, behavior of competition, to find strength and weakness of competitors so strategies can improve business
Steakholer analysis: info gained from steakholder interests and potential conflict between groups, especially business owners and customers to enable businesses to meet needs in the best way for long term survival.
Ansoff's matrix: marketing tool determines long term growth strategy by deciding whether to sell its current or new products in existing or new markets, business split between market penetration or development or product development or diversification
6.2 - How different strategies are used to help a business achieve a competitive advantage in different circumstances
Joint venture: businesses teaming up to share each others advantages
Diversification: high risk, entering new or declining market, large costs, business needs to gain understanding and enter with innovative product.
horizontal and vertical integration: businesses entering new market gain knowledge and skills or market share and growth, involving merging, aquiring or taking over businesses in same or different stage of production.
change of product or service provision: business operating in mature or declining market changes way its products reach customers, differ in channels of distibution
change market positioning: customers changing perception on a business through comparative advertisements to persuade consumers on best brand
Rebranding: changing customer perception of a brand in mature or declining market by extensive marketing campaigns (celebrities')
retrenchment: cutting expenses, withdrawing from less profitable markets and downsizing operations, changing direction.
6.3 - How to make business decisions
Identification: issues or causes of why change is necessary are listed, ie slowdown in sales due to economy. also for contingency so by looking at potential problems
Prioritizing decision criteria: look at aiming to increase profit, use resource time and money wisely, use a risk register to prioritise.
Analysis and synthesis of supporting info: primary and secondary info analysed etc using charts and tables, look at what information is showing and for conclusions and trends.
Synthesis: process of combining info from different sources for conclusion, ie results from SWOT combined with an internal audit of business budgets to see what opportunities can be taken
Use of desicion making tools for solutions: such as Ansoff's matrix, bostons and porters to provide solutions, used with market data and internal and external audits
Matching solutions with decisions: best option not always cheapest, cash flow problems may need short payback periods, ambitious businesses favour diversification, internal constraints inc funding and skills, external inc legislation and economic factors
respect to other peoples contributions: internal acceptation requires managers to listen and respect employees, employees otherwise will be demotivated
external: stakeholders such as customers, community and shareholders, business should be responsible and sustainable to succeed
present rationale and conclusions: to explain why decision is being made, in relation to business objectives, inc finance, skills or culture or external factors. persuades stakeholders
6.4 - How to justify a business decision
Appropriateness
Feasible, a practical idea and viable? so its able to generate enough cash to fund its costs and make profit
Desirable, help business meet long term goals? help improve reputation and relationship with stakeholders
Success, high chances of it? use decision tree and Ansoff's matrix, high rewards may come with risks but success must be possible.
Awareness of other perspectives
Internal and external stakeholder groups, being knowledgeable of their interests helps weigh up consequences of not meeting their needs, cant please everyone, just accept most influential stakeholders
Evidence based
Drawn from primary and secondary research, balanced qualitative and quantitative data, internally and externally, valid and reliable.