Evaluate the strategic choice techniques that would be most useful to UBH when deciding between strategic option 1 and strategic option 2.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2022). The mark or mark type is shown in brackets.

1. [1] (Knowledge) Strategic choice techniques help evaluate the risks and rewards from different strategic options.
2. [1] (Knowledge) Strategic choice is part of strategic management and involves the process of identifying and deciding between different options.
3. [1] (Knowledge) Strategic choice decisions are usually long term and difficult to easily reverse.
4. [1] (Knowledge) Strategic choice techniques such as Ansoff Matrix, Decision trees, Force Field Analysis and investment appraisal.
5. [1] (Knowledge) Understanding of different choice techniques: Investment appraisal: payback and ARR. How quickly investment is recovered and the average profitability of the investment.
6. [1] (Knowledge) Decision trees – inclusion of probability to calculate the monetary outcomes from investments and make choice based on quantitative data.
7. [1] (Knowledge) Force field analysis – considers driving and restraining factors in a decision.
8. [1] (Knowledge) Ansoff's matrix – considers risk of growth strategies with reference to product and market.
9. [1] (Knowledge) Reference to strategic analysis techniques when preparing for choice such as SWOT, PEST, Boston matrix, Porter's Five Forces, Core competencies and others.
10. [1] (Knowledge) Quantitative and qualitative factors.
11. [1] (Application) Use of the techniques/factors for two options – Table 4 examples.
12. [1] (Application) Ansoff's matrix – Option 1 – market development as existing product being sold in new market.
13. [1] (Application) Option 2 - how to categorise? Product needs to be adapted as customers are different. Is it a new market and new product?
14. [1] (Application) Option 2 has higher probability of success. Less risk.
15. [1] (Application) Option 2 has higher net return and ARR – link to shareholder returns.
16. [1] (Application) Option 2 capital cost is $4m greater – link to gearing.
17. [1] (Application) Likely increase in interest rates from 2% to 4% in 2023.
18. [1] (Analysis) Techniques encourage directors to consider the possible quantitative outcomes of each strategy. This will help decide which is the best and therefore reduce risk.
19. [1] (Analysis) How techniques may be used and the advantages and disadvantages.
20. [1] (Analysis) Force field analysis encourages managers to consider different aspects of a decision. By identifying restraining forces action can be taken to mitigate the negative effects of.
21. [1] (Analysis) Better decision making by considering the quantitative aspects of the choices.
22. [1] (Analysis) Use of probabilities in decision trees therefore reducing risk for UBH of option choice.
23. [1] (Analysis) Option 2 has a higher probability of success and a higher EMV suggesting this is the more desirable option.
24. [1] (Analysis) ARR enables UBH to choose option with highest return (option 2) which may be important to shareholders.
25. [1] (Analysis) In calculating the returns account should be taken of the likely economic outlook and other factors that will impact the success of the strategy.
26. [1] (Analysis) Interpretation of Ansoff's matrix to compare the relative risk of each option therefore guiding decision making. e.g. Option 2 might be considered to be market penetration and therefore lower risk than option 1 so is therefore a better option.
27. [1] (Evaluation) Is Ansoff useful in this case as not clear how to categorise each option and risk more influenced by factors such as political instability and market growth.
28. [1] (Evaluation) Weighting of the driving and restraining forces is subjective.
29. [1] (Evaluation) ARR and Payback don't take into account the time value of money so should be used in conjunction with NPV.
30. [1] (Evaluation) Justification of most useful technique with supporting argument.
31. [1] (Evaluation) Effective integration of analysis and choice techniques will be important.
32. [1] (Evaluation) Other information that could be useful?
33. [1] (Evaluation) Impact of management objectives and attitudes.
34. [1] (Evaluation) Long- and short-term impacts.