A2 Business StudiesObjectives 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

2. Gather data

1. Set Objectives

3. Analyse data4. Select a strategy/make a decision

5. Implement and review decision

Primary+secondary research

Using methods such as investment appraisal, cost-

benefit analysis, critical path analysis, decision trees

Based on data analysis

Has the outcome succeeded in achieving the objectives?

In line with what want to achieve within a given time-

scale

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

Ansoff’s Matrix

MARKET PENETRATIONCONSOLIDATION

WITHDRAWALDO NOTHING

PRODUCT DEVELOPMENT

MARKETDEVELOPMENT

DIVERSIFICATION

EXISTING

NEW

MARKETS

EXISITING NEWPRODUCTS

Increasing risk

Increasin

g risk

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

Modifications or additions to a product, which

maintains differentiation

e.g. Mars Ice cream,Cadbury’s CreamEgg

bar

New product in a new

market

e.g. 1990s Nokia

moved from car

tyres to mobile

phones and is now

market leader

Existing product, Existing markets

•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

•Market penetration - Promote growth in same market and develop further brand loyalty

Student Activity

2. Read the Hornby case study page 480Which 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

1. Complete the A-Z activity on Ansoff’s matrix