Evaluate whether the use of the techniques in Appendix 2 will eliminate risk for AC when choosing a growth strategy.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2021). The mark or mark type is shown in brackets.

1. [Level 3 Knowledge 3 marks] 3 marks Good understand-ing shown
2. [Level 3 Application 3 marks] 3 marks Good application to the case
3. [Level 3 Analysis 4 marks] 3-4 marks Good use of theory and/or reasoned argument to explain points made
4. [Level 3 Evaluation 10 marks] 7-10 marks Good judgement shown throughout with well supported conclusion/recommendation, focused on the business in the case
5. [Knowledge] Strategic choice techniques help evaluate the risks and rewards from different strategic options.
6. [Knowledge] Strategic choice is part of strategic management and involves the process of identifying and deciding between different options.
7. [Knowledge] Strategic choice decisions are usually long term and difficult to easily reverse.
8. [Knowledge] Understanding of different choice techniques: Investment appraisal: payback and ARR. How quickly investment is recovered and the average profitability of the investment
9. [Knowledge] Understanding of different choice techniques: Decision trees – inclusion of probability to calculate the monetary outcomes from investments and make choice based on quantitative data
10. [Knowledge] Understanding of different choice techniques: Force Field Analysis – considers driving and restraining factors in a decision
11. [Knowledge] Understanding of different choice techniques: Ansoff's Matrix – considers risk of growth strategies with reference to product and market.
12. [Knowledge] Reward can only be given for other techniques if there is also knowledge of the techniques/data in Appendix 2. Other techniques that might complement the strategic choice techniques such as PEST and SWOT analysis and core competencies.
13. [Application] Calculation of decision tree expected monetary value (OFR): Option 1 $5.4m
14. [Application] Calculation of decision tree expected monetary value (OFR): Option 2 $5.2m
15. [Application] Option 1 suggests profit of either $11m or a loss of $3m
16. [Application] Option 2 indicates profit of either $6m or $2m
17. [Application] Option 2 has higher chance of success but option 1 has higher profit if successful
18. [Application] Use of force field analysis information: Competition in option 2 acts as a barrier to entry
19. [Application] Use of force field analysis information: Capacity constraint means that AC may be unable to increase production much
20. [Application] Use of force field analysis information: Lack of managerial expertise (option 2) has recruitment implications for AC
21. [Application] Investment appraisal – ARR is higher for option 2
22. [Application] Payback is lower in option 1
23. [Analysis] Market development is less risky than diversification in Ansoff's Matrix. This favours option 1.
24. [Analysis] Quantitative comparison between options: Decision tree favours option 1 as does payback
25. [Analysis] Quantitative comparison between options: ARR favours option 2.
26. [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.
27. [Analysis] Force field analysis includes qualitative factors to aid decision-making. AC can use the information to respond to constraining factors and reduce their impact, thus reducing risk.
28. [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. Thus, risk is reduced.
29. [Analysis] Reward can only be given for the role of other techniques in reducing risk if there is also knowledge of the techniques/data in Appendix 2. Other techniques that might help reduce risk: Core competencies – if AC focuses on core competencies, then this may increase chances of success due to the strength the business has in certain areas
30. [Analysis] Reward can only be given for the role of other techniques in reducing risk if there is also knowledge of the techniques/data in Appendix 2. Other techniques that might help reduce risk: PEST analysis of markets such as country P is important to identify potential issues that the firm might need to overcome.
31. [Evaluation] Elements that the evaluation/judgement might depend on: Based on estimates so may be inaccurate.
32. [Evaluation] Elements that the evaluation/judgement might depend on: Depends on the quality of the information which the techniques use. This could depend on whether appropriate strategic analysis techniques such as PEST and SWOT analysis and core competencies have been done prior to the strategic choice.
33. [Evaluation] Elements that the evaluation/judgement might depend on: Dynamic business environment, so change is constant, thus impossible to eliminate risk completely.
34. [Evaluation] Elements that the evaluation/judgement might depend on: Implementation will be crucial to outcomes.
35. [Evaluation] Elements that the evaluation/judgement might depend on: Subjective nature of force field analysis. Can be manipulated to give the desired result.
36. [Evaluation] ARA