Situational tools: used to assist managers and entrepreneurs in assessing aspects of internal

and external factors affecting their business.

Planning tools: used to assist managers and entrepreneurs in preparing and implementing
specific projects and developments.
Decision-making tools: used to assist managers and entrepreneurs to make informed choices
and judgements by considering different quantitative and/or qualitative factors
A particular tool can apply to more than one of the classifications

SWOT analysis
An analytical tool used by businesses to identify
-​ Internal strengths and weaknesses
-​ External opportunities and threats
Effective SWOT analysis can help senior managers to understand the current business position
and future changes that may occur, so that appropriate strategic decisions may be made.

Factors Considered in a SWOT Analysis

Strengths Weaknesses

What the business does well or possesses What the business lacks or performs poorly in
that gives it a competitive advantage: compared to competitors:

-​ Unique qualities that separate the -​ Areas where the business lags behind
business from rivals rivals
-​ Skilled, motivated, or highly experienced -​ Limited resources (financial, human,
staff technological)
-​ Strong brand loyalty or a large, loyal -​ Poor online or digital presence
customer base -​ Lack of a unique selling proposition
-​ Effective and visionary leadership or (USP)
management -​ Weak leadership or internal
-​ Possession of valuable assets (e.g. mismanagement
capital, patents, IP) -​ Low staff morale or high turnover
-​ Efficient internal processes or innovative -​ Operational inefficiencies or outdated
technology systems
-​ Strong corporate image or reputation -​ Poor brand reputation or weak marketing
-​ Financial strength and resource strategy
availability -​ Dependency on a single product or
-​ High productivity or cost advantage market
 Opportunities Threats

Favourable external trends or conditions that External challenges or risks that can harm
the business can exploit: business performance:

-​ Emerging or developing markets for -​ New or emerging competitors gaining

specific products market share
-​ Few or weakening competitors in the -​ Economic downturns or unfavourable
market indicators (e.g. inflation, recession)
-​ Technological or social trends creating -​ Legal or political changes that create
demand for the business’s offerings barriers to operations
-​ Favourable economic indicators (e.g. -​ Negative media coverage or public
GDP growth, lower interest rates) perception
-​ Legal or political changes that benefit -​ Technological changes that make
business operations products obsolete
-​ Potential for positive media or public -​ Shifts in consumer behaviour away from
exposure the business’s offerings
-​ Strategic partnerships, mergers, or -​ Supply chain disruptions or rising input
expansion opportunities costs
-​ Consumer trends shifting in favour of -​ Environmental risks, natural disasters, or
the business’s products or values global crises (e.g. pandemics)
-​ Price wars or intense competitive
pressure

Strategic options based on SWOT

Strentgh + Opportunity → Offensive → Maximise benefits of

favourable conditions

Strength + Threat → Defensive → Use internal strengths to

counter external threats

Weakness + Opportunity → Reorientation → Adapt operations to seize

external opportunities

Weakness + Threat → Survival → Minimise damage, avoid

collapse
Pros
-​ Helps in competitor analysis, risk assessment, and strategic planning
-​ Aids in reviewing market position and corporate strategy
-​ Encourages holistic and logical thinking
-​ Assists in aligning internal capabilities with external conditions
Cons
-​ Can be overly simplistic or lack depth
-​ Risk of bias or subjectivity from managers
-​ Often lacks quantitative data (e.g., cost of weaknesses or gain from opportunities)
-​ A static model doesn’t capture rapidly changing environments
-​ Does not prioritise issues or suggest an actual strategy
 -​ Must be used with other tools (e.g., decision trees, force field analysis)

Factors that affect SWOT’s usefulness (Paper 3)

-​ Quality & Relevance of Data: Poor or outdated data leads to inaccurate conclusions and
ineffective decisions.
-​ Objectivity & Bias: Personal opinions or selective information can distort the analysis.
-​ Depth of Analysis: Superficial SWOTs overlook complex or critical business factors.
-​ Stakeholder Involvement: Involving diverse perspectives (e.g., managers, staff,
customers) gives a fuller picture.
-​ Dynamic Business Environment: Rapid market/tech changes can make SWOT findings
quickly outdated without regular review.

Ansoff’s matrix
- A strategic planning tool to identify growth strategies for a business.
- Helps businesses choose how to grow based on existing/new products and existing/new-
markets.
- Assess the risk level associated with each strategy.

Market penetration (low risk) Product development (moderate risk)

Focus: Existing products in existing markets.​ Focus: New products in existing markets.
Goal: Increase market share.​ Goal: Meet changing needs of existing
Methods:​ customers.
- Encourage more frequent use.​ Methods:
- Improve advertising and pricing.​ - Innovate or upgrade existing products.
- Customer loyalty schemes.​ - Redesign packaging.
Advantages:​ - Reintroduce heritage products.
 - Familiar market and product → low risk.​ Advantages:
- Lower costs for market research.​ - Existing customer base is familiar.
Disadvantages:​ - Can build on brand loyalty.
- Risk of price wars with competitors.​ Disadvantages:
- Limited by market saturation. - High R&D costs.
- New product might fail.

Market development (moderate risk) Diversification (high risk)

Focus: Existing products in new markets. Focus: New products in new markets.
Goal: Tap into new customer bases. Goal: Spread risk, unlock new revenue
Methods: streams.
- Enter overseas markets. Types:
- Reposition product (e.g., B2B instead of - Related diversification: Enters new area
B2C). within same industry.
- Explore complementary locations. - Unrelated diversification: Enters a different
Advantages: industry.
- Product is already tested. Advantages:
Disadvantages: - Risk spreading across sectors.
- Risk of cultural misfit or failure in foreign - Growth beyond saturated core business.
markets. Disadvantages:
- Very high risk due to unfamiliarity.
- Potential brand damage (e.g., Virgin Cola,
Harley-Davidson perfumes).

Pros
-​ Encourages structured strategic thinking.
-​ Simple visual layout for comparing growth options.
-​ Promotes awareness of risk levels.
Cons
-​ Doesn’t quantify risk/reward (unlike decision trees).
-​ Doesn’t recommend one strategy over another
-​ Needs to be used alongside other tools like SWOT or STEEPLE.
-​ Assumes markets/products are clearly defined, which may not always be the case.

Steeple analysis
- analyses external factors that may impact a business
- Helps managers make strategic decisions by understanding the macro-environment
- Stands for: Social, Technological, Economic, Environmental, Political, Legal, Ethical
STEEPLE
S- Social Factors
-​ Social attitudes, demographics, values, culture, religion, education, health
-​ Examples: More university graduates → better-skilled workforce, Increased health
awareness → rise in demand for fitness products
T- Technological Factors
-​ Innovation, automation, R&D, communication, product life cycle, digital presence
-​ Examples: Advanced communication tech → less business travel, Faster tech
advancement → shorter product life cycles
E- Economic Factors
-​ Economic indicators like inflation, interest rates, GDP, unemployment, exchange rates
-​ Examples: High inflation → reduced disposable income, Low unemployment → hard to
recruit skilled workers
E- Environmental Factors
-​ Climate change, sustainability, green policies, energy use, recycling regulations
-​ Examples: Green product demand → new markets, Strict waste disposal laws → higher
business costs
P- Political Factors
-​ Government stability, taxation, trade policy, public services, national security
-​ Examples: Increased national safety → tourism boosts
L- Legal Factors
-​ Laws and regulations related to health, safety, labour, advertising, taxes, compliance
-​ Examples: Sugar tax → reformulation of food & drink products, Minimum wage rise →
increased wage costs
E- Ethical Factors
-​ Business ethics, CSR, fairness, transparency, discrimination, treatment of staff/suppliers
-​ Examples: Fair trading and timely payments, Supermarkets enforcing stricter ID checks
on alcohol/tobacco

Uses of STEEPLE Analysis

Product Development
-​ Helps assess if a product should be sold in a specific region
-​ Considers consumer preferences, regulations, and tech trends
Workforce Planning
-​ Identifies upcoming changes in job markets and skills required
-​ Assesses effects of education, migration, and economic trends
Strategic Business Planning
-​ Provides a broad overview of external risks and opportunities
-​ Informs setting of growth targets, brand strategy, and risk assessments
Marketing Planning
-​ Identifies external influences on consumer behaviour and media usage
-​ Helps shape targeting, messaging, and pricing strategies

Pros
 -​ Encourages long-term, strategic thinking
-​ Provides a broad view of external opportunities/threats
-​ Helps businesses prepare for future challenges
-​ Useful for market entry, product launch, risk planning
Cons
-​ Relies on predictions – may not be fully accurate
-​ External environment can change rapidly (e.g., tech, politics)
-​ Can cause information overload if not focused
-​ Descriptive, doesn’t give direct solutions like other tools (e.g., decision trees)

BCG matrix
- A strategic tool used to evaluate a company’s product portfolio.​
- Helps managers make decisions about product investment, development, or divestment.​
- Based on two criteria:
- Market share (High or Low)​
- Market growth rate (High or Low)

Strategic Options in the BCG Matrix

- Build
Invest in question marks to turn into stars.
Focus on increasing market share.
- Hold
Maintain current market share, usually for cash cows.
Minimal investment due to low market growth.
- Harvest (Milk)
Maximise short-term profits with minimal investment.
Extract as much profit as possible, often from cash cows.
- Divest
Sell or discontinue dog products.
Reallocate resources to higher-potential products.

Star Cash Cow

- High market share + high market growth. - High market share + low market growth
- Requires significant investment to maintain
(mature market).​
market position.
- Generates steady and significant cash flow.​
- Generate strong revenue.
- Expected to become cash cows over time. - Low investment needed.​
- Marketing Strategy: Focus on brand building
- Used to fund stars and question marks.​
and increasing market dominance.
- Marketing Strategy: Maintain brand loyalty

and extend product life cycle.

Problem Child / Question Mark Dog

- Low market share + high market growth.​ - Low market share + low market growth.​
- Uncertain future—could become stars or
- Little to no profit generation.​
dogs.​
- Often considered for divestment or
- High investment needed to increase market
share.​ phase-out.​
- Main consumers of cash in the matrix.​
- Marketing Strategy: Minimal or none unless
- Marketing Strategy: Aggressive promotion,
extension strategies are feasible.
analyse viability.

Pros
-​ Provides a visual overview of the product portfolio.
-​ Assists in resource allocation and strategic planning.
-​ Encourages balanced portfolio management.
-​ Helps identify which products need investment or elimination.
Cons
-​ doesn’t account for market dynamics.
-​ Assumes market share = profitability (not always true).
 -​ Doesn’t explain why products are in specific quadrants.
-​ Can’t predict future trends (e.g., unexpected demand surges like COVID-19 PPE).
-​ Should be used alongside other tools (e.g., Ansoff Matrix).

Business plan
A business plan is a formal, written document outlining a business idea, how it will operate, and
how it aims to achieve its objectives. It is a planning tool that evaluates marketing, human
resources, finance, and operations, especially helpful for start-ups or business expansions.

Contents of a Business Plan

The business -​ Name, address, and type of business organisation
-​ Start-up and premises costs
-​ Owner details and experience
-​ Clear business objectives.

The product -​ Description of products/services.

-​ Evidence of demand (customer value).
-​ Production methods and equipment needed.
-​ Supplier details and cost of resources.
-​ Pricing methods.

The market -​ Forecasted number of customers/sales.

-​ Market segmentation and customer profiles
-​ Market growth expectations.
-​ Competitor analysis (market share, strengths, weaknesses).

The marketing -​ Promotional mix.

-​ Distribution strategy.
-​ Unique or distinctive selling point (USP).
-​ Market research and test marketing.

The finance -​ Proposed sources of finance (e.g., loans, equity).

-​ Break-even analysis.
-​ Collateral/security for loans.
-​ Cash flow forecasts and strategies.
-​ Forecasted profit and loss account.
-​ Forecasted balance sheet.
-​ Expected return for investors.

The personnel -​ Number and roles of employees.

-​ Organizational structure.
-​ Pay systems and remuneration packages.
Pros
-​ Reduces uncertainty and improves planning.
-​ Helps secure loans/investments.
-​ Provides strategic focus and direction.
-​ Supports organizational growth and change.
-​ Encourages integration of BMT tools.
-​ Helps track performance and KPIs.
Cons
-​ Time-consuming and expensive to create.
-​ Forecasts may be inaccurate.
-​ External factors (e.g. pandemics) can disrupt plans.
-​ Start-ups may lack experience and data.
-​ Static plans may not adapt quickly to change.
-​ Having a plan doesn’t guarantee success.

Descriptive statistics
- Summarizes and presents numerical data.
- Helps managers make informed, objective decisions.
- Reduces risk in decision-making by revealing patterns and trends.

Mean
Average (Add all values, divide by total number of values)
If most data is close to the mean:
-​ The business performance is stable and consistent.
-​ Example: If the average monthly sales are $50,000 and most months are close to that,
sales are predictable, helping in planning inventory, staffing, and budgeting.
If data points vary greatly from the mean:
-​ Indicates fluctuations or irregularities.
-​ Could signal seasonal trends, inconsistent performance, or external disruptions.
Median
Middle number when data is ordered
If most values are close to the median:
-​ The dataset is symmetrical and balanced.
-​ Useful when there are outliers (e.g., one unusually high sales month). Median gives a
more realistic picture than mean.
-​ Example: In salary data, if most employee salaries are near the median, it suggests a
fair pay structure.
If values vary far from the median:
-​ Indicates unequal distribution or possible skewness in the data.
Mode
Value that appears most often.
If many data points equal the mode:
 -​ There is a clear trend or preference.
-​ Example: A product that appears as the mode in sales data means it’s the most
consistently popular among customers.
If the mode is very different from mean/median:
-​ It may misrepresent central tendency if there are extreme highs or lows elsewhere.
Standard Deviation (SD)
Measures spread of data around the mean.
Low SD (values close to mean):
-​ Business performance is predictable, less risky, and easier to manage.
-​ Example: In manufacturing, low SD in production time = efficient, reliable process.
-​ Helpful for forecasting and resource planning.
High SD (values spread out):
-​ Indicates volatility or inconsistency.
-​ May require contingency planning, flexible budgets, or risk management.
Quartiles
Divides data into 4 equal parts.
Q1 = 25%, Q2 (median) = 50%, Q3 = 75%, Q4 = 100%
Interquartile Range (IQR) = Q3 − Q1
If most values lie within a narrow IQR (close together):
-​ Business operations are consistent.
-​ Example: If delivery times for products fall in a tight middle range (e.g., 2–3 days), the
company is reliable in logistics.
Wide IQR (large spread):
-​ Indicates variability within the core 50% of data.
-​ May suggest differences across locations, departments, or time periods.
Bar Charts
-​ Show discrete, independent data.
-​ E.g., Sales per store.
Pie Charts
-​ Show proportions of a whole.
-​ E.g., Apple’s revenue breakdown by product category.
Infographics
-​ Visually appealing data presentation.
-​ Combines text, numbers, charts, and images.
-​ Makes complex data easier to understand.
-​ Example: Mars infographic for internal performance metrics.

Factors Influencing Choice of Descriptive Statistics:

-​ Accuracy: Higher accuracy requires more detailed and costly methods.
-​ Cost: Limited data or expensive access can limit the methods used.
-​ Time: Older data might be outdated or irrelevant.
-​ Context: Charts/graphs may not show the reason behind the data; context is essential.
Pros
-​ Provides clarity and simplification of large datasets.
-​ Facilitates comparison and pattern recognition.
-​ Useful in presentations and stakeholder reports.
-​ Supports objective and evidence-based decision-making.
Cons
-​ Lack of context: Doesn’t explain “why” behind the data.
-​ Outdated info: Data may become irrelevant over time (e.g., COVID-19 cinema revenue
drops).
-​ Visual bias: Graphs and infographics may mislead or oversimplify.
-​ Inaccuracy risks: Averages (like mode) may hide fluctuations.
-​ Cost and time: Collecting accurate, relevant data can be expensive and time-consuming.

Circular business models

Linear Business Models: focuses on producing, selling, using, and discarding products, with
little to no consideration of the environmental impacts of business activities.

Circular Business Models: decision-making tools that emphasise the environmental

consequences and sustainability matters related to all aspects of business activities.
It contrasts with traditional business models that focus on costs, revenues and profits. CBMs
enable businesses to reduce, reuse and recycle waste.

Types of Circular Business Models

1.​ Circular supply models: instead of using scarce resources, aim to use resources that
are Renewable, Recyclable and Biodegradable
• As well as aiming to reduce the number of new inputs into the production process
• e.g. use of solar power as a source of electricity
• e.g. Starbucks reusable cup
2.​ Resource recovery models: instead of throwing away waste from production, aim to
reuse this waste by either recycling it or reprocessing it
• e.g. reprocessing old cooking oil into biofuel
• e.g. paying deposits on cans to encourage recycling
3.​ Product life extension models: businesses aim to extend the product life cycle of
current products rather than produce new ones
• Instead of producing a whole new product, aim to upgrade parts of the existing product,
through Repair, Remanufacture and Resell
• e.g. Apple selling restored versions of older phones
• e.g. Patagonia will repair your clothes
• e.g. IKEA will buy back your furniture in exchange for store credit
4.​ Sharing models: a system whereby consumers of a product share the same product
rather than owning it individually
• Someone has an asset and shares it with another person (usually for a fee)
 • e.g. Vehicle sharing - Uber
• e.g. Property sharing - e.g. Airbnb
5.​ Product service system models: consumers can choose to rent or lease an asset
rather than buying it themselves
• The business is selling the use of the asset rather than selling it outright
• e.g. Short-term vehicle rental - Lime bikese
• e.g. Businesses that offer places to work

Pros
-​ Reduced waste & pollution
-​ Cost savings from reuse
-​ Enhanced brand image (CSR)
-​ New revenue streams (resale, leasing)
-​ Increased supply chain resilience
Cons
-​ High upfront redesign/investment
-​ Complex reverse logistics
-​ Behavioural change from consumers
-​ Supply chain restructuring required

Porter’s generic strategies

Porter's Generic Strategies is a decision-making tool that outlines three broad ways a business
can achieve sustainable competitive advantage:
-​ Cost leadership
-​ Differntitation
-​ Focus

Cost Leadership Strategy

A strategy where a business aims to be the lowest-cost producer in the industry.
-​ It reduces production costs but does not always mean lowest prices
-​ Used to gain market share or increase profit margins
Two types
 1.​ Cost leadership with parity: Lower production cost, same price as rivals, Higher profit
margin
2.​ Cost leadership with proximity: Lower price than rivals, still lower cost, Price advantage
Note: Cost ≠ Price. A firm can keep price high but earn more profit by cutting cost.
Adv Disadv

-​ Economies of scale -​ Risky

-​ Competitive pricing -​ Quality concerns
-​ Barriers to entry

Differentiation Strategy
Making products distinctive and appealing to customers in a way that adds value.
-​ Focus is on quality, innovation, and uniqueness.
-​ Allows firms to charge premium prices → higher margins
Ways to differentiate: Design, Branding, Features/Functions, Quality/Durability, Innovation,
Packaging and Customer service
Adv Disadv

-​ Premium pricing -​ High cost (R&D, marketing)

-​ Reduced rivalry -​ Constant innovation needed
-​ Increased customer loyalty -​ Risk of imitation by competitors
-​ Less price elasticity

Focus Strategy
Targeting a narrow/niche market rather than the mass market.
Two types
1.​ Cost focus: Low-cost strategy for a niche market
2.​ Differentiation Focus: High-end niche products
Adv Disadv

-​ High brand loyalty -​ Limited market size

-​ Less competition -​ Vulnerable if a large firm enters the
-​ Can charge premium prices niche

Stuck in the Middle

-​ A business with no clear strategy.
-​ Trying to mix strategies (e.g. high quality + low cost) leads to confused branding, poor
competitiveness.

Pros
-​ Clear strategic choices (mass vs niche; cost vs differentiation)
-​ Helps businesses focus and align strategies
-​ Can be adapted over time as environments change
Cons
-​ Hard to achieve (e.g., cost leadership needs scale)
-​ Large firms can successfully blend strategies (e.g., good quality + cost-efficient)
-​ Doesn’t guarantee success (esp. in hypercompetitive markets)
-​ Not always sustainable, easy to imitate, disrupted by tech/innovation

Contribution
Contribution is the amount each unit of output adds towards covering fixed costs and generating
profit.
-​ Contribution per unit = Selling Price − Variable Cost per Unit
-​ Total Contribution = Contribution per Unit × Quantity of Output
Helps in assessing profitability, break-even point, and decision-making (e.g., pricing, production,
outsourcing)

Key Uses
Make or Buy Analysis
-​ Helps decide whether to produce in-house or outsource.
-​ Decision Rule:​
- If Cost to Make (CTM) < Cost to Buy (CTB) → Make​
- If CTB < CTM → Buy
-​ Formula to calculate required sales volume to cover fixed costs:
Required sales volume = fixed costs/CTB-CTM
Contribution costing
-​ Only direct costs allocated to products.
-​ Assumes fixed (indirect) costs remain regardless of output.
-​ Each product with positive contribution helps cover indirect costs.
Absoption costing
-​ Allocates both direct and indirect costs to products.
-​ Ensures full cost coverage and accurate pricing.
-​ Break even formula:
Break-even output = indirect costs / unit contribution

Qualitative Factors in Make or Buy Decisions

-​ Available Capacity – Staffing, space, equipment.
-​ Timeframe – Urgency and reliability of supply.
-​ Expertise – Skills required to produce in-house.
-​ Supplier Reputation – Quality, timeliness, trustworthiness.
-​ External Influences – Exchange rates, trade barriers.

Strategic Applications of Contribution Analysis

-​ Pricing Strategy: Helps set profitable prices above VC.
-​ Product Portfolio Management:
- High contribution → invest and prioritise.
 - Low contribution → needs high sales volume or removal.
-​ Make or Buy: Determines cost-effective production.
-​ Overhead Allocation: Fair cost distribution using absorption costing.
-​ Special Order Decisions:
- Assesses whether to accept low/high price bulk orders.
- Depends on total contribution, not just per unit.
-​ Break-even Analysis: Ensures TC = TR → No loss/no profit.

Pros
-​ Increase Sales Revenue: Better pricing, promotion, or market expansion.
-​ Reduce Variable Costs: Improve production efficiency, find cheaper materials.
-​ Reduce Fixed Costs: Negotiate rents, control admin expenses.
Cons
-​ Requires accurate and current data.
-​ Indirect costs must be fairly allocated to avoid bias.
-​ Doesn’t factor in qualitative aspects on its own.

Simple linear regression

A statistical decision-making tool used to study the relationship between two variables.
Helps managers make predictions and strategic decisions using trends from past data.
Especially useful in uncertain, complex, or volatile environments.

Scatter Diagrams: A graphical tool to display relationships between two variables.

-​ X-axis = Independent variable (predictor)
-​ Y-axis = Dependent variable (outcome)
Types of correlation
Strong Positive As X increases, Y increases significantly (e.g., training days vs sales)

Weak Positive As X increases, Y increases slightly

No Correlation No identifiable pattern

Weak Negative As X increases, Y decreases slightly

Strong Negative As X increases, Y decreases significantly (e.g., price of Coke vs demand for
Pepsi)

Line of Best Fit: A straight line that best represents the trend in a scatter diagram.
-​ Does not have to pass through all points
-​ Drawn so data is equally spread above and below
-​ Used to visualize correlation and predict outcomes
Closer data points are to the line → stronger correlation​
Used to estimate values (e.g., income based on years of experience)

Correlation & Extrapolation:

Correlation
-​ Measures the strength and direction of a relationship
-​ Important: Correlation ≠ Causation
-​ Example: Ice cream sales ↑ and shark attacks ↑ (due to summer, not causality)
Extrapolation
-​ Extending the line of best fit to predict future outcomes
-​ Assumes existing trend continues
-​ Used in sales forecasting, budgeting, etc.

Pros
-​ Helps managers identify trends and relationships between two variables (e.g., training
vs. performance).
-​ Simple and easy to visualize using scatter diagrams and line of best fit.
-​ Useful for making future predictions through extrapolation.
-​ Highlights the strength and direction of correlation (positive, negative, or none).
-​ Aids in data-driven decision-making and strategic planning.
-​ Encourages analytical thinking and the use of quantitative data.
Cons
-​ Assumes a linear relationship — not suitable for non-linear patterns.
-​ Correlation does not imply causation (can lead to false conclusions).
-​ Results are sensitive to outliers which can skew the trend line.
-​ Only examines the relationship between two variables at a time.
-​ May oversimplify complex business situations.
-​ Extrapolation beyond the given data range can lead to inaccurate predictions.