Evaluate the usefulness to TK's directors of the strategic choice data in Appendix 1 as they make the decision 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. [3] Knowledge: Strategic choice is part of strategic management and involves the process of identifying and deciding between different options.
2. [3] Knowledge: Strategic choice techniques such as Ansoff's Matrix, decision trees, force field analysis and investment appraisal.
3. [3] Knowledge: Strategic choice techniques help evaluate the risks and rewards from different strategic options.
4. [3] Knowledge: Understanding of different choice techniques:
5. [3] Knowledge: Investment appraisal: payback and ARR. How quickly investment is recovered and the average profitability of the investment.
6. [3] Knowledge: Decision trees – inclusion of probability to calculate the monetary outcomes from investments and make choice based on quantitative data
7. [3] Knowledge: Force field analysis – considers driving and restraining factors in a decision
8. [3] Knowledge: Ansoff's matrix – considers risk of growth strategies with reference to product and market
9. [3] Knowledge: Quantitative and qualitative factors.
10. [3] Knowledge: Reference to strategic analysis techniques when preparing for choice such as SWOT, PEST, Boston matrix, Porter's 5 Forces, Core competencies and others.
11. [3] Application: Use of the techniques/factors for two options – Appendix 1 examples.
12. [3] Application: Ansoff's matrix
13. [3] Application: Option 1 is product development or market development
14. [3] Application: Option 2 is product development or diversification.
15. [3] Application: Option 2 has higher probability of success - less risk
16. [3] Application: Option 1 has higher EMV and ARR
17. [3] Application: Option 1 capital cost is $1.5m greater – link to high gearing of 50%
18. [3] Application: Driving and restraining forces.
19. [3] Application: Complementary product for option 2
20. [3] Application: Economic growth and demand for luxury restaurants
21. [3] Application: High competition in restaurant market in Europe
22. [3] Application: Not using core competence in option 2
23. [4] Analysis: How techniques may be used and the advantages and disadvantages.
24. [4] 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 those restraining forces.
25. [4] Analysis: Better decision making by considering the quantitative aspects of the choices.
26. [4] Analysis: Use of probabilities in decision trees reducing risk for TK of option choice.
27. [4] Analysis: ARR enables TK to choose option with highest return which may be important to shareholders as will influence dividends.
28. [4] Analysis: The use of techniques to analyse aspects of the options.
29. [4] 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 diversification and therefore higher risk than option 1 so is therefore a better option
30. [4] Analysis: How information identified might guide strategic choice, e.g. short-term impact of higher initial cost of option 1 balanced against higher risk of failure, but higher EMV
31. [4] Analysis: How SC techniques, linked with data, might guide strategic choice.
32. [4] Analysis: Advantages/disadvantages of using qualitative and quantitative techniques
33. [10] Evaluation: Judgement/evaluation about usefulness of strategic choice techniques supported by e.g.
34. [10] Evaluation: Is Ansoff useful in this case as risk more influenced by factors such as economic growth impacting incomes.
35. [10] Evaluation: Subjective nature of Force Field Analysis
36. [10] Evaluation: Limitations of using only quantitative or qualitative techniques.
37. [10] Evaluation: Elements that the evaluation/judgement might depend on such as:
38. [10] Evaluation: Accuracy of estimates for quantitative techniques
39. [10] Evaluation: Importance of understanding where the business is now in order to move forward with strategic choice
40. [10] Evaluation: Other information
41. [10] Evaluation: Evaluation of other factors that influence choice such as:
42. [10] Evaluation: Attitude of directors
43. [10] Evaluation: Attitude to risk
44. [10] Evaluation: Influence of strategic analysis
45. [10] Evaluation: Corporate objectives of TK
46. [10] Evaluation: Impact of different strategies on stakeholders
47. [10] Evaluation: Long-term v short-term impacts
48. [10] Evaluation: Other information that might be useful
49. [10] Evaluation: Capital available.
50. [10] Evaluation: Justification of most useful technique(s) with supporting argument.
51. [10] Evaluation: Techniques encourage directors to consider the possible quantitative outcomes of each strategy. This will help decide which is the best and therefore reduce risk.
52. [10] Evaluation: Evaluation that strategic choice on its own is not enough to fully support a decision.
53. [10] Evaluation: TK operate in a dynamic environment so analysis may quickly become outdated.