Docstoc

Edexcel 4a

Document Sample
Edexcel 4a Powered By Docstoc
					Edexcel Revision Session 4a


A-Z Business Training 2010
        Planning to Succeed


   Marks:
   Time:
   Strategy:
       10 minutes for real dissection of the case
       10 minutes for the numerical data, including
        calculations, plus time to put numbers to
        words
       Stick rigidly to a mark a minute; then you‟ll
        have 5 minutes at the end in case Q4
        overruns
Keys to Success

   Thorough revision of all the left-hand
    topics on the spec. This should be a 3-
    stage process
       What is it?
       How does it fit?
       Why does it matter?
   Plenty of practice with past AQA Unit
    5W papers (old spec) and with
    possible questions based on the
    material provided
       To get an A


   Push the revision beyond Level 1
    (definitions and formulae) to Level 2 (how
    and why)
   Take enough time to master the material
   Get the timing right
   Be willing to use teacher/textbook as an
    aid, not a crutch (X Factor moment: don‟t
    be wooden; be yourself; have confidence)
 What are the most distinctive
 characteristics of Brompton Bikes?

1.

2.

3.

4.

5.
     Lessons from January

   Investment appraisal was fully covered,
    so it‟s very unlikely in Section B …
   … much more likely are the company
    accounts and/or decision trees … but do
    watch out for a special order decision
    and CPA (in part A)
   Effectively ruled out are corporate
    culture, contingency planning and factory
    location
    Over to you: Should JVG accept this
          special order decision?
   JVG sells 300 units a day at £20 each. It
    is operating at 75% of its capacity.
   JVG‟s variable costs per unit are £6;
    fixed costs are £3,000 and total unit
    costs are £16
   Now a buyer from Brazil wants to place
    an order for 100 units a day at a set
    price of £15. The Finance Director is
    furious at the thought: “sell for £15
    when they cost us £16. Are you mad!”
Decision Trees


A-Z Business Training 2010
Decision Trees

   To consider risk, reward and the
    chance of success and failure
   One diagram showing the estimated
    upside, plus the worst case, plus the
    probabilities of success or failure
   An attempt to quantify the
    unquantifiable – the „value‟ of a
    decision
Using Evidence H – ‘Consolidate’
              0.3      Good £200,000
              0.4      Moderate £100,000
  C    1
              0.3      Poor £10,000


              0.2      Good £50,000
  D
       2      0.2      Moderate £20,000


              0.6      Poor £10,000
Using Evidence H
             0.3           Good £200,000
             0.4           Moderate £100,000
  C    1
             0.3           Poor £10,000




              £200,000 x 0.3 = £60,000

              £100,000 x 0.4 = £40,000
               £10,000 x 0.3 = £3,000
             Expected value = £103,000
Using Evidence H
£103,000       0.3   Good £200,000
               0.4   Moderate £100,000
   C       1
               0.3   Poor £10,000


               0.2   Good £50,000
   D
           2   0.2   Moderate £20,000


               0.6   Poor £10,000
Over to You

   Calculate the expected value of
    Option D
   If Decision C costs £80,000 to
    implement and Decision D costs
    £10,000, which would you
    implement?
   Show your decision on the diagram
    Brompton SWOT – look for 4 points in
    each category

   Strengths

   Weaknesses

   Opportunities

   Threats
Analysing a balance sheet


A-Z Business Training 2010
              Balance sheets

   Give an indication of a firm‟s size &
    financial muscle
   Reveal a firm‟s financial health
   Allow for comparisons over time
   (With P&L Account) show a firm‟s
    efficiency, by using financial ratios
   But ratio analysis relies on accurate data
    (as Brompton is a private co, no
    pressure to window-dress)
     Ratios:

   Help unpick the masses of data within
    annual reports
   Allow measurement, analysis and
    evaluation of a firm‟s strength,
    efficiency and financial performance
   Raise questions, don‟t answer them
   But are not facts; they may have dated
    Measures of financial health

   Short-term: liquidity (acid test)
   Long term: gearing
These ratios help raise questions like:
   Is it a safe investment/employer/
    debtor?
   Has the firm got the resources to
    respond to opportunities or threats?
  Brompton’s financial health

                      2007      2006
Current ratio          4.9       4.6
Acid test ratio        3.1       2.8

Gearing ratio          0%        0%
  Profitability

Measuring the % return generated:
 Gross and net margins
 Return on Capital Employed

These ratios raise questions like:
 Are prices high enough? Are admin costs
  rising too fast?
 Are the rewards big enough for the
  risks?
    Brompton’s profitability

                                          2007    2006
Gross profit margin                       38.4%   36.5%
Net profit margin                         15.1%   11.6%
Return on Capital                           -       -

2007 % sales increase: -
2007 % profit* increase: -
*Profit before tax, i.e. (net) operating profit
       BUT DON’T FORGET:
   A strong balance sheet but a weak market
    position (French Connection) leads nowhere
   Brompton has a very strong position, but
    needs investment (Butler-Adams says in
    capacity; I‟d say in patentable R&D)
   PLCs have the pressure of expectations:
    Ltds can be constrained by big shareholders
   To understand a business, accounts are not
    enough – marketing and people matter
Making a strategic decision


A-Z Business Training 2010
           Ansoff’s Matrix

           Existing                               New

Existing

                        Market        Product
                      Penetration   Development



                    Market
                                    Diversification
                  Development
 New
           Ansoff’s Matrix

           Existing                                   New

Existing

                        Market        Product
                      Penetration   Development



                    Market
                                    Diversification
                  Development
 New                                                  High RISK
      Market Penetration

   boosting share of existing market with
    existing products
   the safest and most common strategy
   options: find new customers, e.g. Daily
    Express attempt to attract younger
    readers
   or increase usage by existing customers,
    e.g. Unilever‟s Timotei “frequent wash”
    shampoo
      Product development

   Boosting share of existing market with
    new products
   Quite high risk, despite advantages of
    market knowledge & distribution power
   Options: build on existing strengths,
    e.g. Nestle‟s new „After Eight Orange
    Thins ‟
   or develop new niches, side-stepping
    the opposition, e.g. the Apple iPhone
       Market development

   Finding a new market for your existing
    product
   Quite high risk, as you may lack market
    knowledge (and under-estimate this)
   Options: reposition your product, e.g.
    Johnson‟s Baby Powder: babies
    women
   …Or move abroad, e.g. Top Shop in U.S;
    Primark in Spain; Tesco in China etc.
       Diversification

   Grow by developing new products/services
    in a new market (to spread risk!!!)
   A Harvard B.R. survey showed that new
    corporate ventures average 4 years of
    severe losses, 8 years to pay back and 12
    years to match company average
    profitability
   Options: greenfield (Nintendo); sub-
    contracting (Virgin); seedcorn; takeover
     Key factors in Business Strategy


   Corporate objectives - long or short
    term? Focus or diversification?
   Opportunities (growth markets, growth
    sectors, new sectors and step-changes)
   Resources and constraints
   Culture - entrepreneurial or risk averse?
    (key issues - personality &
    cannibalisation)
      Objectives in Exam Answers

   At the root of all questions on strategy,
    i.e marketing strategy          marketing
    objectives         company objectives
   Key distinctions (scope for analysis):
        - long v. short term
             - profit v. other
             - core v. diversification
   N.B. the objectives may prove mistaken
  Porter’s Generic Strategies

  Strong          A struggle to survive         Strong




       Cost leadership            Differentiation


           Focused cost              Focused
            leadership            differentiation

Super-Strong                                 Super-Strong
      Sources of Competitive Advantage

   Cost leadership, e.g. Asda

   Differentiation, e.g. Waitrose/Booths

   Focused cost leadership, e.g. Aldi;
    Iceland

   Focused differentiation, e.g. Whole Foods
    Market

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:20
posted:7/6/2011
language:English
pages:33