OCR Business Studies - file · Web viewOCR Business Studies. Unit F297- Strategic Management. F N Lyte Cases Ltd (LCL) Revision Toolkit 2010

OCR Business Studies

Unit F297- Strategic Management

F N Lyte Cases Ltd (LCL)

Revision Toolkit 2010

OCR A2 Business Studies- June 2010 Toolkit F297

Contents

Contents

Exam Overview......................................................................................................................................................................................................... 3

Case Study Commentary........................................................................................................................................................................................... 4

Financial Analysis.................................................................................................................................................................................................... 10

Application Analysis & Evaluation........................................................................................................................................................................... 16

Exam Technique Advice.......................................................................................................................................................................................... 22

Key Case Study Terms............................................................................................................................................................................................. 27

OCR F297 June 2010 Mock Paper............................................................................................................................................................................ 28

www.tutor2u.net


Exam OverviewUnit F297- Strategic ManagementPre-release Case Study Toolkit- Lyte Cases Ltd (LCL)

“This unit is compulsory and designed to complete the Advanced GCE A-Level in Business Studies. The unifying theme is choosing and justifying strategy and as such candidates are expected to demonstrate an analytical and evaluative approach to content introduced in the unit, and to that introduced in the AS GCE units F291 and F292. Candidates are also expected to draw upon, where appropriate, the knowledge which they acquire through their study of one of the A2 optional units (F293 – F296).”

Source: OCR GCE Business Studies Specification

Exam Structure

30% of Advanced GCE marks 2 hour written paper 90 marks Four questions based on pre-release case study material One of the four questions will contain a numerical element 120 UMS marks available

Question style (based on specimen paper)

4 longer length essay style questions Marks range from 13 to 23 (Q4) Q1 comprised of two parts a) and b) Q1 a) the numerical element, no evaluation marks available. 28 evaluation marks spread evenly amongst the remaining questions.

www.tutor2u.net


Case Study Commentary

The commentary that follows explores, lightly, some of the issues raised by the stimulus. Analysis and evaluation of the most pertinent issues will follow later in the toolkit.

Text from Case Study (all quoted directly) CommentaryGeorge is the major shareholder (with 60% of the equity), Chairman and Managing Director of LCL.

…he likes to spend the working day with people. On any given day he is more likely to be walking around the shop floor chatting to the business’ highly skilled craftsmen. George prides himself on knowing something about each of the company’s 20 staff.

George’s philosophy is that businesses are about people, and that you only get the best out of people by developing trust and respectful relationships.

The business designs, engineers and manufactures aluminium flight cases for a bewildering array of applications… anyone with a delicate and precious product which needs to be protected when being transported is a potential customer.

LCL was established nearly 30 years ago…and more by serendipity than strategy.

George holds considerable power in the business, especially given that he is the majority shareholder.

George appears, initially to be a people person. Keen to engage with his workforce (democratic/paternalistic leadership). Workers likely to feel more valued when managers take an interest in their work- Herzberg two factor theory.

George clearly runs a people orientated business- person culture. With a person culture the person is the centre point – “George has created a person culture at LCL to the extent that he and LCL are intertwined”.

LCL operates in a relatively specialised market place although covering a range of different customers e.g. IT companies, musicians, scientific instruments.

Established business that has grown by accident (serendipity) rather than an established strategy.

www.tutor2u.net


In 2009 nearly 45% of output (by value) was exported, with the EU, USA and Australasia being LCL’s main markets.

George would like to see this percentage rise to 50% by 2011 so as to spread the risk.

With many of LCL’s customers becoming more ethically aware George knows that it is important that LCL can show it always acts with integrity and honesty.

The manufacturing area at LCL has something of the air of an operating theatre about it, both physically and in terms of its ambiance.

…the CAM machinery is almost new…

Production is arranged in cells, with each team of three taking responsibility for quality and output.

Cases are either made for stock or for ordering depending on current demand.

Over the years the business has built a reputation for quality and, as such, many of the standard cases featured in its on-line catalogue sell

LCL is an export led firm operating in a range of geographically diverse markets. Clearly a spread of economic risk across the globe.

In uncertain economic and political times (particularly domestically) a strategy to export more spreads risk yet further.

On the surface future strategy seems to be based around increasing export markets with ethically developed products.

Clean working conditions important in many motivational theories e.g. Herzberg two factor and Maslow’s Hierarchy of Needs.

Computer Aided Manufacture

Cell production divides production up into self-contained teams of workers. Workers in the team do a range of tasks to get the job done. They don’t get stuck on the same repetitive task. Evidence of TQM (total quality management) whereby each team is responsible for quality of production/output.

Demand influences type of stock control system in use. Just in time production may have to be adopted during certain peak times, when existing stock levels run low.

Marketing on a non-price basis. Evidence of strong brand loyalty and word of mouth advertising.

www.tutor2u.net


steadily through the year- with little marketing need.Each week the senior team meet to discuss the coming month’s production schedule.

Chris will review stock levels of finished standard cases and so advise Dave of what batches need to be made to replenish the stock of finished goods.

Chris will also tell the weekly meeting of any bespoke cases provide a greater margin than standard cases.

Although price is important, Geroge believes that quality and product integrity matter far more.

He [George] is fastidious about quality, even to the extent that Dave and Shelia feel that some LCL products might be over-engineered.

Both George and Chris are proud of LCL’s customer retention and loyalty.

With the London 2012 Olympics on the horizon, Chris has been targeting media companies.

Thus far, he has not secured any firm orders but has had lots of

Senior team comprises MD, Production Manager, Marketing Manager and Finance Director. Important that all functional areas of the business are represented so that forthcoming production schedule is realistic (SMART).

Clear system of stock control charts in place.

Job production in place for certain tasks.

LCL believes that their product is price inelastic; their marketing is based on non-price factors.

Over engineering of products may mean that costs of sales are higher than they need to be. The Gross profit margin (Table 1) is still below the industry average.

This over-engineering of products perhaps is highlighted by the extent to which customers are dealt with before products are manufactured.

New market segments and opportunities opening up for LCL.

LCL will need to work hard on the marketing front in order to secure

www.tutor2u.net


expressions of interest.Major Doodes wants to place an order for 20 bespoke cases of various sizes, to be delivered in 3 weeks time.

Chris has had an informal chat with Shelia and Dave, both of whom are keen to try to win the order, especially as there was a promise of possible future orders- if the delivery date is met.

Shelia has worked out the order will make a gross margin of 38.7%.

…helping LCL reach its objective of increased profitability.

However, all three know that the sticking point will be George whose pacifist/anti-military views are well known.

In many ways LCL is George, and sometimes the other members of the senior team feel his views dominate too much and can, occasionally, hold LCL back.

Approaching his retirement, some stakeholders are beginning to question what will happen to LCL if George leaves in two years time.

these orders. This could prove a lucrative market for LCL.This will require LCL to engage in job production.

This gross profit margin is than the average LCL achieved on all production in 2008. This margin is still below the industry average of 40.15% (Table 1).

Is this objective SMART? To what extent does LCL what to improve profitability? How will it judge profitability improvements.

There is some discussion amongst other senior managers as to whether Major Doodes will be using the bespoke cases for military purposes “You’d get a Stinger anti-aircraft missile in each of the largest 10 cases”.

There is a clear risk that George is too involved in the business and lacks trust with regards to his senior managers. Senior managers may become demotivated as a result and in the worse case scenario look for employment with other rival firms. George may also be making decisions not necessarily in the best interests of the business as he lacks the knowledge that his managers in fact have.

Stakeholders are any individuals or groups of individuals who are effected by the actions of LCL e.g. banks, employees, local residents,

www.tutor2u.net


Amongst these [stakeholders] is LCL’s bank, as well as some of the minority shareholders. Both of these stakeholders feel George is being unprofessional in not thinking beyond his own personal circumstances.

The last time George met with the Business banking advisor, Alison Steadman, he was told that the bank would not automatically renew LCL’s overdraft facility when it was next reviewed.

George was rather taken aback when Alison produced an analysis of LCL’s financial performance, commenting that “Some things don’t look too good, especially when compared to recent industry averages.”

Alison continued by saying “We’ve had a few enquiries from your suppliers banks about LCL’s liquidity…”

“…they worry that LCL is too reliant upon you. With someone else running LCL, well they’d be a lot more demanding”.

rival firms. (A deeper analysis of stakeholder issues will take place later in the toolkit).

Shareholders may become unnerved by this and look to withdraw their investment. Likewise the bank may look to withdraw some the financial facility available to LCL because they are concerned about the long term prospects of the business.

The tightness of credit that still exists in the financial sector may well impact on LCL, this would especially be the case if the bank was concerned about the future direction of LCL. “ In effect the bank is seeking assurances about the long term viability of LCL without George at the helm”. As alluded too earlier George is LCL and this may be dangerous to the long term prospects of the business.

A detailed look at Table 1 is provided in the financial analysis section of the toolkit. The bank though would view it that LCL was underperforming in relation to its rival firms and would therefore be concerned about future demand for its products and its prospects for serving the overdraft facility (£53,000).

Liquidity determines a firm’s abilities to pay its bills. Current and acid test ratios (measure of liquidity) both below industry average.

If George wants to guarantee long term success of the business after his retirement he needs to make adjustments to his management style to gain the trust of both suppliers and managers.

www.tutor2u.net


After his meeting with Alison, George reflected that his idea of what running a successful business means is not universally shared.

He is sure his staff prefer being paid by salary

…he has heard a few grumbles about LCL closing for holidays at set time.

…returned from his three weeks at his Spanish villa to find LCL in chaos. In his absence his managers had been reluctant to make any meaningful decisions. Without his clear leadership, and without his “personal touch” with customers, things had not gone well.

Salary is an annual sum paid in 12 equal monthly instalments. By paying salaries George is perhaps limiting the financial methods of motivation available to him.

With increasing numbers of workers looking to work more flexible hours to fit around family commitments this may limited the pool of applicants for jobs advertised with LCL.

Again evidence that George’s lack of trust in his managers has and could prove problematic for the business.

www.tutor2u.net


Financial Analysis

Table 1- Comparative financial ratio performance-LCL and industry average

www.tutor2u.net


What do the ratios show?

It is important that before you analyse the contents of Table 1 you have a good understanding as to what the ratios actually show.

Ratio ImportanceReturn on capital employed To assess whether the business is making a satisfactory level of profit from the capital it has

available to itNet profit margin A measure of profitability calculated by dividing the operating profit by turnover.Gross profit margin A measure of profitability calculated by dividing the gross profit by turnover.Return on equity A measure of the financial reward that shareholders receive from their investment.Gearing Measures how reliant the business is on borrowed money which in turns allows the business to

analyse the impact of a change in interest rates and hence cost. Banks would be interested in establishing how highly geared a business in fact his. The more highly geared the more borrowing it has and the less likely it will be to lend it money.

Interest cover A ratio that highlights how easily a company can pay the interest on any outstanding debt.Current ratio A measure of liquidity and will highlight whether the business has sufficient liquid assets in the

short run. If this is the case it is likely that cash flow (working capital) problems may result.Acid test Considers short term liquidity of the business but excludes stock as a form of liquid assets (there

is no guarantee that stock will always be sold). Highlights potential working capital problems.Asset utilisation A measure of how efficiently a firm uses its assets to generate turnover.Fixed asset utilisation A measure of how efficiently a firm uses its fixed assets to generate turnover.Stock days How well a firm turns stock into revenue.Debtors days Average time that the firm’s customers take to pay outstanding debt.Creditor days Average time taken for the business to pay its debts to its payable.

www.tutor2u.net


LCL Performance 2006 – 2008 compared with Industry average

ROCE has fallen steadily since 2006. An indication that the firm is becoming less effective/efficient at generating revenue from capital. ROCE is 4% below industry average.

This trend is continued with return on equity falling across the time period, again below the industry average. This could put potential investors off if they are considering investing in the sector as rival firms may appear to be a more attractive investment proposition.

Net profit margin has fallen, consistently below the industry average. These ties in with LCL’s latest objective of trying to improve profitability.

Gross profit margin has remained fairly stable across the time period. This indicates that cost pressures have come from increased overheads for the firm. Figure is below industry average by around 5%.

Gearing has fallen by around 3% over the time period; LCL became less reliant on borrowing. Its gearing ratio is slightly below industry average.

Liquidity position both in terms of current ratio and acid test (excludes stock) remained stable. Both though below industry average. Acid test between 0.75 and 1 usually satisfactory but industry dependent. Current ratio between 1.5 and 2 satisfactory but again industry dependent.

Asset utilisation figures stable and consistent with industry average. Stock days have remained stable but, on average, around 10 days higher than competitors. Debtors days consistent with industry but creditor days considerably higher (50 days higher!). LCL clearly has good credit terms with it

suppliers and thus assists its working capital position.

Summary

Strengths WeaknessesLess reliant on borrowing Gross and net profit margins fellStrong credit terms with suppliers ROCE 4% below industry averageStable liquity/working capital Return on equity fallen

Appendix 2- Estimated Balance Sheet and Profit & Loss, year ending 2009

www.tutor2u.net


www.tutor2u.net


www.tutor2u.net


Ratio Analysis Year Ending 2009

Ratio LCL- 2009 LCL- 2008 Industry AverageReturn on capital 16.1% 14.23% 18.79%Net profit margin 2.63% 5.74% 3.40%Gross profit margin 35.00% 35.64% 40.15%Return on equity - 20.87% 18.79%Gearing 23.9% 36.00% 25.30%Current ratio 1.19 1.28 1.31Acid test 0.76 0.85 1.03Asset utilisation 1.80 2.11Fixed asset utilisation - 6.7 7.2Stock Days - 56.1 52.1Debtors days - 63.3 63.4Creditor days - 81.9 44.8

www.tutor2u.net


Application Analysis & Evaluation

We have developed the key issues raised in the commentary in the pages below. The following analysis is not intended to be an exhaustive list of all the potential issues – everyone reading the case study will identify their own points about issues they believe are important.The key point to remember: an effective exam answer in F297

(1) addresses the specific question asked (you must answer the question)

(2) is directed to evidence in the case study (application) rather than making general points or lists

(3) develops a small number of well-argued points in sufficient detail (analysis)

(4) expresses an opinion on the question posed, supported by a balanced appraisal of the analysis

George’s leadership style and Motivational Techniques

To what extent has George’s leadership style proved a hindrance to the business?

Georg has taken a very paternalistic approach to his leadership style (especially by not really trusting senior managers). Early on in the case study it makes reference to how George likes to spend considerable time on the shop floor, rather than being in his office.

Spending time on the shop floor is very good for the motivation of his workers but is George sacrificing time that could be better spent on the long terms strategy of the business?

George operates a person culture within LCL. With the move towards his retirement will senior managers have a manage a change in culture which some workers may be resistant too.

Although weekly production meetings take place involving senior managers, George makes the final decision as to exactly what will be produced, rather than giving autonomy to production manger. Theory X management?

www.tutor2u.net


George is bordering obsessive with regards to quality. Senior managers at times feel that products may be over-engineered, adding further to cost of sales. (Hence gross profit margin below industry average).

George has not embraced flexible working practices, with workers having to adhere to set holidays and being paid a salary rather than a wage. Would the introduction of wages provide a financial motivation? Likewise flexible working practices may attract a different calibre of worker, or a strong pool for any jobs advertised. Is this a standard procedure in the industry or one that is unique to LCL?

George’s leadership style means that on many occasions senior managers lack the confidence to make decisions without George’s approval. This is worrying with the prospect of George retiring. The shackles being removed may though enhance the motivation and decision making abilities of the managers and help the firm achieve increased profitability.

Customers may also have become over reliant on George, in terms of customer service, design requirements etc. Without this personal touch customers may be loss- conflicts as well with the objective that George has set Shelia (Finance Director) of maximising the bookvalue of LCL by 2012.

There is clearly a variety of strengths and weaknesses to George’s leadership style. There is a fine balance in terms of addressing some of George’s traits that perhaps negate the long term prospects for the business but at the same time retaining loyal customers and gaining additional ones, particularly potentially lucrative 2012 media companies.

The Strategy of increased export volume of ethically produced products

Aim of LCL is to improve upon their strong export position. It is currently the case that nearly 45% of output (by value in 2009) was exported, with the EU, USA and Australasia being LCL’s markets.

LCL is an export led business and it clearly needs to be fully aware of changing economic conditions (external factors) as these are likely to significantly influence demand for LCL’s products.

Global recession over last three years has slashed world export demand and LCL has done well to weather the financial storm.

Diversified markets, all areas recovering but some faster than others.

www.tutor2u.net


Export growth target by 2011 of 50%.

London 2012 should provide a superb opportunity to increase export revenues and provide long term customers.

Ethically produced products are more costly to produce and thus decisions need to be put in place to decide the combination of growth and ethical products.

By only producing bespoke cases for what George deems ‘ethical industries’ e.g. non-military, are they limiting potential business opportunities and customers?

Stakeholder Analysis

Who are LCL’s main stakeholders?

Bank

Minority shareholders

Customers

Employees

Rival firms

Customers

Evaluate which stakeholder group will be most influential in securing the long term success of LCL.

The issue of stakeholders arises in the case study due to the ever imminent retirement of George- “stakeholders are beginning to question what will happen to LCL if George leaves in two years time.

www.tutor2u.net


Minority shareholders and the bank think that it is unprofessional that George is not thinking beyond his own personal circumstances. This ties in with a criticism found elsewhere in the case study that highlights that may view LCL as George. Equally George finds it very hard to let go, even when away on holiday. There is a lack of trust of senior managers.

Senior managers, another stakeholder group are also becoming increasingly frustrated with George’s behaviour- “other members of the senior team feel his views dominate too much and can, occasionally, hold LCL back”. Looking ahead to the future Senior Managers will want the reassurance that when George does step away he does not interfere on a daily basis. Is George a Theory X manager?

The bank is also becoming concerned with George’s succession. They are a stakeholder as they provide and overdraft facility to LCL. In tight credit conditions such as the ones being experienced in the UK economy presently banks want reassurance that any outstanding credit will be paid back. The bank is clearly questioning whether LCL will be as successful with George at the helm. They are questioning the ‘long term viability of the business’.

Alison Steadman produced an analysis of LCL’s financial performance, commenting that “some things don’t look too good, especially when compared to recent industry averages. Rival firms may also have undertaken similar analysis of LCL and realise that they are outperforming in many areas. Likewise they may realise the importance of George to the business and the fact that these financial figures may in fact worsen further post succession. Alternatively it may be known in the industry that George does not always take decisions in the best interests of the firm and post succession the business may become more competitive thus impacting directly on them.

Customers as a stakeholder group are going to prove vital to the long term success of the business. George’s retirement will be within months of the Olympic Games. Marketing Manager Chris Hodder is currently targeting firms, especially media companies, who will be transporting expensive equipment to and from London 2012. Although there have been expressions of interest in LCL’s products as yet there have been no firm orders. One feels that securing orders from firms for London 2012 is vital for the long term success of the business. This will give current senior managers and employees a clear strategy and ties in with the objective of increased profitability. Likewise it could prove a stepping stone away from the George ‘era’.

Although potentially a stormy time for the business shareholders should be reassured by the fact that LCL’s return on equity figure is still higher than the industry average. They may be concerned with regards to their investment as George’s retirement draws ever closer.

In summary much is tied up, for all stakeholders, with George’s retirement in two years time. Banks, shareholders, managers and employees need reassurance about the future, securing contracts for London 2012 may provide this.

www.tutor2u.net


Strategic changes that need to occur before George’s retirement

George’s imminent retirement in two years time is at the heart of the case study. It is felt by many concerned that George IS LCL and given the inseparable identity of the two his retirement will bring considerable problems to the business.

Before his retirement the following issues need to be addressed:

The person culture dominated by George. Will a change of culture and if so how will it be managed?

The ability of senior managers to make decisions independently and without a father figure in place e.g. production decisions.

The securing of contracts for media firms involved in London 2012.

Improved book value and profitability in line with objectives set. The case study does not directly state the desired level.

To reassure stakeholders particularly the bank and minority shareholders as to the long term viability. LCL cannot risk having credit withdrawn through the loss of an overdraft facility.

Improved performance against other firms in the industry. Important that LCL tries to keep pace with rivals even with a competitive edge in terms of quality.

Introduction of changed working practices to adopt more flexible conditions e.g. no fixed holidays, introduction of wages for shop floor workers as a financial motivation.

Production methods and stock control

Another fundamental functional area of the business highlighted by the case study is that of production:

Weekly production meetings taken place involving, sensibly, representatives from all areas of the business. George still holds the power in terms of the final production decision in terms of what will be produced.

www.tutor2u.net


Quality is still number one in production with price coming second. Can George justify this in an ever increasing market and sluggish global economy? Gross profit and net profit margin still below industry average.

Dave and Shelia feel some products being over-engineered- thus efficiency levels not as good as they could be impacting upon cost of sales.

Significant labour costs involved before production of a product commences. If customer is unable to travel to LCL base a team of three will visit customer directly. They are prepared to travel overseas if potential value of order exceeds travel expenditure. In an age of instantaneous communication is there a need for three staff to go? Again an impact upon cost of sales and overheads.

Visit to potential customers is slowing down the effectiveness and speed of production as a system of cell production is used. When customer visits take place that sell effectively has to shut down. ( The team visiting customers comprises one member of the senior team, member of the design department and one shop floor craftsman).

Customer retention and loyalty high amongst existing customers but the firm will have to work hard to gain new customers especially media companies associated with London 2012. Will changes need to be made to pre-production meetings to ensure costs do not spiral.

Production for bespoke products based on cell-production system (appendix 1), cells shut down when customer visits take place. Looking ahead to London 2012 this cannot be the most effective method of production.

www.tutor2u.net


Exam Technique Advice

The Case Study

Read it, read it and read it again. Then read it again. Learn it as much as you can – better knowledge of the case study will save you time in the exam and allow you to have a better discussion and understanding of the key topics.

Use the Case Study

The examiner spent a long time writing this case study – so it must be used effectively. Do NOT just give the ‘text-book’ answer, everything you write should be applied and put into the context of SRCL.

React to the question set

As an examiner, it is a great pity when we have to write NAQ (not answering question) on a pupil’s work. Make sure you read the question carefully and answer it!

Essay Plans

It is a good idea to make a brief plan – but plans should be brief – allocate a couple of minutes to organise your thoughts.

Timing

Timing is crucially important and this is one of the most common failings of students in the exam hall. Quality not quantity is what counts – it is not a race to fill the answer booklet and any supplementary pages!

Practice

www.tutor2u.net


There is no substitute for writing timed answers to practice essay questions and then having them marked your teachers. Knowing what you can realistically achieve for each question in a timed essay is hugely important before you step into the exam hall Mark schemes: Well before the exam you should become familiar with the marking schemes of the module. Although F297 is a new module, (and therefore has limited ‘past papers’). These past papers (also case study based) are available from the OCR website:

http://www.ocr.org.uk/qualifications/as_alevelgce/business_studies/documents.html

This is a ‘levels of response’ paper – in essays you must evaluate, with reasoned judgment, effectively for the top marks.

WritingGet a nice pen (splash out!), this will avoid the dreaded writers cramp – particularly with long essays as examiners hate illegible work! If possible practice a two-hour mock practice paper, your teachers can help you with this and it will benefit you in the long run.

Levels of ResponseSome reminders now about how you are assessed in the F297 exam.

According to OCR, candidates are expected to demonstrate the following in the context of the content described:

AO1 Demonstrate knowledge and understanding

Demonstrate knowledge and understanding of the specified content;

AO2 Apply knowledge and understanding

Apply knowledge and understanding to problems and issues arising from both familiar and unfamiliar situations;

AO3 Analyse Analyse problems, issues and situations;AO4 Evaluate Evaluate: distinguish between, and assess appropriateness of, fact and opinion, and judge information

from a variety of sources.

www.tutor2u.net

http://www.ocr.org.uk/qualifications/as_alevelgce/business_studies/documents.html


A typical F297 will allocate the 90 marks on offer as follows:

Insert F297 marking grid

More on AO3 - Analysis

Analysis involves making well-reasoned, step-by-step arguments using appropriate business studies tools & concepts. To get your marks for analysis, you will need to:

Make a point

Explain why the point is important

Explain the significance of this to ….

Your examiner will see that you are analysing when you are doing any of the following:

The causes are….the possible consequences are…..

www.tutor2u.net


The advantages for LCL are….the disadvantages for LCL are…..

On the one hand LCL may……on the other hand, they may…….

The data for LCL shows that…..on the other had, it may suggest……

This is likely to lead to……..but it may lead to………

In this case…..is an advantage because……

The likelihood of this happening is……Consequently the business must….

The trend in this case is…….shown by…… data

Analysis is about how you consider the ‘ifs and buts” as well as the “however and maybe”. You should view your written answers as your conversation with the examiner. Imagine how it would sound if you read a list of bullet points aloud - is this what you want your examiner to hear?

More on AO4 – Evaluation

Evaluation is the hardest skill of all. Very few candidates develop their skills of evaluation which is why it is awarded the highest grade when examiners see it. All questions (aside from the numerical element) require the candidate to undertake significant evaluation- 7 marks are available per question.

Evaluation means giving your final judgements after dismissing all other arguments and saying why the judgement you have made is superior to all others. To do this, you must be knowledgeable about all the other arguments over which you are claiming superiority. It is not enough to use a trigger phrase and to expect the examiner to award the highest mark – the examiner wants to see a robust, developed argument that weighs up the critical points and then come to a conclusion as to which is likely to be most significant – given the circumstances of the case study. You can demonstrate the skill of evaluation when, in the context of the case study, you:

Make a small number of points pointing out the options and/or the issues

Justify which of several arguments are more persuasive and why

Comment on the reliability of data or information given

www.tutor2u.net


Support your judgement with evidence and draw conclusions from the evidence

Consider limiting factors e.g. feasibility, impact and internal and external constraints

Consider long term and short term issues

Discuss how objectives, internal and external constraints constrain decision making

Examples of trigger phrases demonstrating evaluation include:• Overall, the greatest effect this will have on LCL is……because…• The extent of the impact will depend upon ….• Whether this happens depends upon ….• In the short run… but in the long run…• The most important issue/factor is… because… so…• In addition, LCL needs to consider …. and ….

Remember evaluation means weighing up options and making a recommendation. There is no ‘one best option’. It all depends on the circumstances of the LCL business in the case study.

Analysis and Evaluation Compared

Candidates often ask what the difference is between Analysis (AO3) and Evaluation (AO4):• Analysis assesses the causes and consequences of an issue and explains the likely impact and reaction of the firm. • Evaluation builds on analysis and involves candidates weighing up options and coming to a view on what the firm should do.For example – the question asks you to “discuss a strategy”:• Weighing up the evidence upon which a strategy would depend – AO3• Recommending one strategy based on analysis – AO4

www.tutor2u.net


Key Case Study TermsThis section highlights and defines the key business terms and phrases used in the case. Remember you can demonstrate your knowledge by making effective use of definitions.

Managing Director The manager of the firm on a day to day basis. He has overall control of the business but is accountable to the Chairman. In LCL’s case George is both the Chairman and MD

Ethically Produced Products produced in a morally and ethically sound way.

Cell production The production of a product or service involving a team of workers. Workers are not stuck doing the same repetitive task.

Customer retention The ability of a firm to keep customers so that they undertake repeat purchasing.

Production capacity The maximum amount that a firm can produce in any given time period.

Stakeholders An individual or group of individuals directly affected by the actions of LCL.

Overdraft A financial facility provided by a bank that allows the firm to overspend on the amount they have in their bank account.

www.tutor2u.net


OCR F297 June 2010 Mock Paper

1 a) Using appropriate ratios analyse the financial performance of LCL in 2009. [13]

b) To what extent does the future financial success of LCL depend upon them securing contracts from media firms for London 2012? [18]

2. Evaluate which stakeholder group should be most concerned about the current state of LCL. [18]

3. ‘LCL’s production methods and decisions’ are proving detrimental to the competitiveness to the firm in the UK market. [18]

4. To what extent do you agree that the long term performance of LCL will improve with the retirement of George Lyte in 2 years time? [23]

www.tutor2u.net

Documents

OCR Business Studies - file · Web viewOCR Business Studies. Unit F297- Strategic Management. F N Lyte Cases Ltd (LCL) Revision Toolkit 2010