Evaluate the strategic choice techniques that could help WTZ choose between option 1 and option 2.

Mark scheme

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

1. Strategic choice is part of strategic management and involves the process of identifying and deciding between different options.
2. Strategic choice techniques such as Ansoff Matrix, Decision trees, Force Field Analysis and investment appraisal.
3. Strategic choice techniques help evaluate the risks and rewards from different strategic options.
4. Understanding of different choice techniques:
5. Investment appraisal: payback and ARR. How quickly investment is recovered and the average profitability of the investment.
6. Decision trees: inclusion of probability to calculate the monetary outcomes from investments and make choice based on quantitative data
7. Force field analysis: considers driving and restraining factors in a decision
8. Ansoff's matrix: considers risk of growth strategies with reference to product and market
9. Quantitative and qualitative factors.
10. Reference to strategic analysis techniques when preparing for choice such as SWOT, PEST, Boston matrix, Porter's Five Forces, Core competencies and others.
11. Application
12. Use of the techniques/factors for two options – Appendix 2 examples.
13. Ansoff's matrix:
14. Option 1 is diversification (new product development)
15. Option 2 is market development.
16. Option 2 has higher probability of success and less risk
17. Option 1 has higher net return and ARR
18. Option 2 capital cost is $10m greater – link to gearing 63.6%
19. Amandi is willing to take risks
20. Driving and constraining forces:
21. Competition in country S but risk is still estimated to be lower
22. High cost of option 1 and link to gearing.
23. Analysis
24. Techniques encourage directors to consider the possible quantitative outcomes of each strategy. This will help decide which is the best and therefore reduce risk.
25. How techniques may be used and the advantages and disadvantages.
26. 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 those restraining forces.
27. Better decision-making by considering the quantitative aspects of the choices:
28. Use of probabilities in decision trees therefore reducing risk for WTZ of option choice
29. ARR enables WTZ to choose option with highest return which may be important to shareholders as will influence dividends.
30. The use of techniques to analyse aspects of the options.
31. 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 development and therefore lower risk than option 1 so is therefore a better option
32. Evaluation
33. Judgement/evaluation about usefulness of strategic choice techniques supported by e.g.:
34. Is Ansoff useful in this case as risk more influenced by factors such as potential regulation and market growth.
35. Subjective nature of Force Field Analysis
36. Limitations of using only quantitative or qualitative techniques.
37. Elements that the evaluation/judgement might depend on such as:
38. Accuracy of estimates for quantitative techniques
39. Other information
40. Evaluation of other factors that influence choice such as:
41. Attitude of directors
42. Attitude to risk
43. Influence of strategic analysis
44. Corporate objectives of WTZ
45. Impact of different strategies on stakeholders
46. Long-term v short-term impacts
47. Other information that might be useful
48. Capital available.
49. Justification of most useful technique(s) with supporting argument.