Evaluate whether the data in Table 3 is sufficient for the managers of C4T as they make the strategic choice between option 1 and option 2.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2020). The mark or mark type is shown in brackets.

1. [Knowledge] Meaning of strategic choice, link with strategic analysis and strategic management techniques.
2. [Knowledge] SWOT and PEST, Porter's 5 forces, Boston Matrix, Core competencies, vision and mission statements, as strategic analysis techniques when preparing for choice
3. [Knowledge] Ansoff, force field analysis, decision trees as SC techniques
4. [Knowledge] Understanding of SC techniques
5. [Knowledge] DTA provides quantitative data on which to choose the option with the highest average profit
6. [Knowledge] Force field analysis provides qualitative data on the decision
7. [Application] Option 1 is probably a product development or market development and Option 2 diversification. Accept alternative interpretation if justified
8. [Application] Option 1 is further 'social enterprise' activity, whereas Option 2 may be seen as more profit motivated.
9. [Application] Use of the techniques/factors for two options – Table 3 data.
10. [Application] Option 2 has a higher capital cost (+$300000)
11. [Application] Option 1 has a higher probability of success (+15%)
12. [Application] Option 1 can be completed significantly quicker that Option 2 (8 months sooner)
13. [Application] Comparison of options using the Table 3 and the techniques. For instance, comparison of likely risks/returns
14. [Application] Government ban in 2022 of single-use carrier bags
15. [Application] Table 3 provides elements of Decision Tree Analysis and force field analysis
16. [Application] Reference to gearing as factor affecting choice. Currently 60%.
17. [Analysis] Building chains of arguments which demonstrate the usefulness and limitations of the data / SC techniques in Table 3 and other information / strategic management techniques that would be useful
18. [Analysis] Decision Tree data:
19. [Analysis] Higher probability of success favours option 1 as it suggests there is a lower level of risk and this is supported by Ansoff (diversification v product / market development)
20. [Analysis] EMV shows the average monetary outcome for each option, as such, it focuses on profit and favours option 2 which is important to the decision as more profit may help C4T achieve its social objectives
21. [Analysis] Probability of success helps C4T assess risk. May prefer option 1 which has a higher probability of success and therefore less risk of failure. Minimising risk could help C4T ensure that is able to continue to achieve its social objectives.
22. [Analysis] As option 1 can be implemented more quickly this will help with C4T's cash flow. This may be important as C4T's gearing is quite high, making bank borrowing riskier.
23. [Analysis] Option 1's initial cost is lower. Therefore, it may be easier to finance and as C4T has high gearing lower initial cost is desirable.
24. [Analysis] (Lewin's) Force Field Analysis. Commentary on significance of driving and restraining forces:
25. [Analysis] High level of competition in market for luxury case will make success more difficult (reflected in 65% probability of success). This may require C4T to spend more on marketing or set lower prices to penetrate the market.
26. [Analysis] Shortage of recyclable materials could halt production of Bag4Ever project making the project unviable.
27. [Analysis] High added value of luxury travel cases will increase profit which is desirable as it enables C4T to fulfil its social objectives
28. [Analysis] How might SWOT, PEST and other SA techniques be used to find out where the company is now?
29. [Analysis] Techniques such as Ansoff's Matrix might help in comparing the options and making the choice as this highlights risk. Ansoff suggests that diversification is highest risk and this fits with option 2.
30. [Evaluation] Evaluation/limitations of techniques
31. [Evaluation] DTA only gives quantitative data. However, primary limitation concerns the accuracy of that data. Based on estimated probabilities and predicted outcomes. Aid decision making but cannot replace either the consideration of risk or the impact of qualitative factors on a decision
32. [Evaluation] Ansoff does not account for market factors such as level of competition
33. [Evaluation] Opinions may vary when developing FFA as to the driving forces and restraining forces. Subjective nature of the technique.
34. [Evaluation] Very new market, many ‘unknowns'
35. [Evaluation] Other information that could be useful?
36. [Evaluation] Investment appraisal
37. [Evaluation] External factors
38. [Evaluation] Data does not provide the worst-case scenario outcome within the DTA, i.e. will a loss or profit be made if the project 'fails'. Important to know if Kris and Andy are risk averse.
39. [Evaluation] FFA doesn't include the numerical weighting of forces. (However, weighting is subjective)
40. [Evaluation] Significance of management objectives and attitudes
41. [Evaluation] Long- and short-term impacts
42. [Evaluation] To what extent is information sufficient?