U7 W4 MEA

Business Decision Making
Unit 7
Week 4
Lead Lecture

Wear your

lanyards

FREDIE

Loughborough College promotes and celebrates equality,
diversity and inclusion. As a college, we embrace the FREDIE
values, of

Fairness – All individuals will be treated fairly, consistently
and equally by ensuring everyone has a voice.

Respect – Everyone will be treated with respect and
decency throughout their time at Loughborough
College.

Equality – Everyone will be given the same opportunities
throughout their time at Loughborough College.

Diversity – The College will work towards being diverse by
ensuring all people are represented and have role
models to aspire to.

Inclusion – Loughborough College will create an
inclusive environment that celebrates everyone’s
individuality.

Engagement – Loughborough College will ensure a more
diverse and engaged community by ensuring effective
communication, representation, feedback and
collaborative working.

We are all responsible
for ensuring that all
individuals receive
the same
opportunities to
develop, grow and
achieve their full
potential, regardless
of personal
circumstances and
individual differences.

To report an issue contact us at:[e-mail]

On-trend skills.

 Can You tell me the skills you want to work on

this week.

 Give me reasons why you want to work on

these, how do they support you to achieve?

 Have you added these to your ILP? If not why

not?

 Set yourself a smart target on your ILP stating

which on-trend skill you are going to be working
on

Decision making

Professionalism

Resilience

Objectives
for this
week:
Recap
over online
lesson

Complete a mock task in preparation for your 3-hour
mock assessment, in January
Complete

Explain the main types of research and their relevance
to business decision making
Explain

Describe when a range of research methods may be
used to support business decision making
Describe

Research and analyse the effect of competitors on a
range of businesses

Research

and

analyse

Recognise current trends related to businesses and the
decisions they make
Recognise

Learning Outcome C

Use of research to justify the marketing of a business (Link
to unit 2)

C1- Types of research

 Primary research:

 Secondary research:

C2 - Competitor analysis

 Research and analyse the effect of competitors on the

business:

 The effect on the product/service to be offered, pricing
strategies, location.

C1 – Types of research

Think back to last year, now tell me as many types of research
that you can remember.

 Primary
 Secondary

Main Types of Research you will be required
to refer to in your external assessment.

 Interviews

 Observation

 Back Data

 Industry Reports

 Government Data

 Consumer Reviews

 Mystery Shopper

 Published Reports

 Surveys

 Focus Groups

Which of these are

primary and which are
secondary?

➢Primary
➢Primary
➢Secondary
➢Secondary
➢Secondary
➢Secondary
➢Secondary
➢Primary
➢Secondary
➢Primary
➢Primary

Why do businesses need to complete
research?

 How do the results help businesses to make decisions?

 Gives businesses an accurate

view of their customer needs,
wants and expectations.

 Gives you an understanding of

how your customers perceive
you in relation to your
competitors

 It can help uncover issues and

concerns your customers have,
that you may not be aware of

 It can help businesses decide

whether a new product or
service may be successful

 It can support wise product,

packaging and promotional
decisions

 It can support a business to

develop a good market
strategy by providing a fact-
based foundation for
estimating sales and profibility.

 It could be the difference

between making wise
decisions that drive the
business forward and poor
decisions that could damage
a business.

C2 – Competitor
Analysis

In your external assessment you
will be required to look at the
case study, which will include two
different business options. You will
need to refer to their competitors
and analyse the effect these can
have on the businesses and their
operations.

This Photo by Unknown author is licensed under CC BY-SA.

Keeping an eye on
your competitors is
an essential part of
a business' market
research and
should be carried
out at relevant
stages of the life
cycle of a
product/service to
support business
decisions.

This Photo by Unknown author is licensed under CC BY-SA.

Businesses need to take an interest
in knowing what sells, what doesn't
and the risks, based on the
competition.

Watching your competitors
closely can support your decisions
in relation to product development,
product launch and pricing.

Completing an in-depth competitor
analysis will allow you to justify your
decisions

When developing a
new product or
service, a business will
carry out a competitor
analysis to identify its
potential competitors,
their strengths and
weaknesses.

These will include a
range of areas that will
need to be analysed

 Effect on product or service offered:

Any business needs to have a clear
understanding of who its
main competitors are in its target
market to ensure that it does not
lose market-share.

Analysing its competitors will enable a
business to formulate ways in which to
establish a competitive
advantage, e.g. a business might
choose to reduce the price of
the product or service or focus on
developing the brand image of the
product or service it offers.

This Photo by Unknown author is licensed under CC BY-SA.

This Photo by Unknown author is
licensed under CC BY-SA-NC.

This Photo by Unknown author is licensed
under CC BY.

Think about the following businesses, who
are their main competitors?
What strategies do these businesses use to
be ahead of their competitors?

 Marks and Spencer

 Aldi

 John Lewis

 Costa Coffee

 JD Sports

 Primark

 B&Q

Open Ended

What strategies do the following business use to stay ahead of competition? Research one and answer below. List: Marks and Spencer, Aldi, John Lewis, Costa Coffee, JD Sport, Primark, B&Q

Pricing strategies:

These will include;

cost-based pricing – a set percentage
mark-up based on cost of product/service

competitor-based pricing - market price
in line with all competitors (businesses
compete on other factors such as quality)

Customer-based pricing

penetration pricing = ´setting a low price when the product/service first enters the market.  ​

price skimming = setting a high price
before new competitors enter the market

loss leaders = price redution as part of
sales promotion campaign

psychological pricing = charging £3.99
rather than £4 can seem better value to the
customer

Multiple Choice

What is Price Skimming?

• setting a high price
  before new competitors enter the market

• Half fat Milk pricing

• Only having the price end in 1

• price reduction as part of
  sales promotion campaign

 Location:

 Market research and competitor

analysis can help businesses spot market
opportunities in
particular locations which currently have
few competitors but a large potential
market.

 The location of a business is increasingly

becoming less important, in terms
of accessing the market, since
the internet presents opportunities for all
businesses to sell their products nationally
and internationally.

This Photo by Unknown author is licensed under CC BY.

This Photo by Unknown author is licensed under CC BY-NC.

This Photo by Unknown author is licensed under CC BY-SA.

Mock Week

 In your seminar and

workshop class, you will
complete your mock
assessment. This will be a
chance to look at a practice
paper and complete task 1.

 Be on time, bring your laptop

and be prepared.

 Why is it important that you

complete this task to the
best of your ability?

 Activity 1: The report

 For this first activity, candidates are required to use the information

provided and prepare a report about the two options being
considered.

 The report must address both options and include:

• rationales supported by data

• consideration of risks

• key factors and risks

• recommendations on the option candidates feel to be most appropriate.

Examiners are looking for

1.

Information and data interpretation (Relevance to case study)

2.

Implications of the decision being made (Effects on the overall)

3.

Implication for resources based on decision made (Effects on resources)

4.

Financial forecasts (gain or loss)

5.

Key factors, risk and alternative options. (analytical skills)

6.

Supported decision-making (good recommendation)

7.

Presentation and structure (does it follow through)

How to get distinction?

 There is a piece of ‘evidence’ from the case study in

EVERY paragraph

 The argument you are making is following a clear line of

thought (PANEL)

 You have used MULTIPLE theories and content in the right

places, not just thrown in.

 You make suggestions and back them up using ‘evidence’ from the

case study.

 Your recommendations have ‘width’ so are not just focused on one

area

PANEL

✓P= Point:
✓AN=

Analyse:

✓E= Example:
✓L= Link:

One reason, One benefit, I
suggest,

This is because, This means that

For example, (refer to case study)

As a result, Therefore

How to structure the report

1.

Introduction:

2.

Current Business Position:

3.

Implications for Resources:

4.

Key factors and Risk related to Option 1

5.

Key factors and Risk related Option 2

6.

Financial Consideration

7.

Additional Consideration

8.

Conclusion and recommendations

Introduction

Set out the current situation the business is in

Identify the options that the report will cover

Remember to write in the context of the

scenario

How to write Introduction

1. Any background information (Ownership,

Products/ Services, Location, Mission and vision)

2. Briefly explain the options.

3. State how you will write the report, you could

also explain which models you may use to
justify information in the report.

2. Current Business Position

Set the context of the business, identifying any of the following
referenced in the case study:

● Current situation; e.g. market they operate in, products/services

etc.

● Market trends; e.g. market growth / decline, skills gaps etc.

● Competition; e.g. position in the market, threats, closest

competitors etc.

How to write market situation

 What is their position?

 Are their products on low price or high price?

 Are they leading in the market?

 Are their products services doing well or not (Boston,

Ansoff)

How to write current trends

Is their any growth in the market? Any new

trends?

Any decline in the sales?

Is there any change in consumers fashion and

taste?

How to write about competition

Who are their main competitors?

What are competitors doing? (Strategies: price

skimming , undercutting, diversifying, developing
new product, going online using e-commerce)

3. Implications for resources by

 Implications for HR

The implications on HR; e.g. recruitment, training upskilling etc.

 Implications for physical resources

The implications on physical resources; e.g. premises, vehicles,
equipment etc.

 Implications for financial resources

How much will each venture cost? What sources of finance are
needed / available?

 Implications for time

How long does each venture take to launch / become lucrative?

Implications for HR

 What is their organisational structure ( Flat or Hierarchical

)

 How many staff do the businesses have?

 Do they have enough workers?

 Are workers skilled enough to execute new projects?

 Can they take on new project without recruiting new

staffs?

 If need to recruit, how can they recruit if required to take

on the proposed project.

 Make sure to compare both options and their

implication on human resource of the business.

Implications for physical resources

 Where is the business based

 Do they have a lot of branches?

 Do they own the building or are they renting the space/ premises?

 Do they have enough money to get a new place for the new

project if they need?

 Do they enough machinery if they want to take on new project?

 Do they need extra equipment?

 Do they have vehicles if they are transporting the product?

 Make sure to compare both options and their implication on

physical resource of the business.

Implications for financial resources

 How much will each venture cost?

 What sources of finance are needed / available?

 Do they need any extra finance to cover the cost of the new projects?

 What will be the benefit and drawback using that source of finance if they

are taking it?

 Can you suggest any alternative sources?

 What will be the affect of the source of finance (e.g. taking a loan) to the

business in the future if they execute those projects?

 What will be the impact of investing in these projects in the current financial

conditions of the business?

Implications for time

 How long does each venture take to launch / become lucrative?

 How long will it take to execute the project?

 Is it easy to do it in time?

 Will it take too long to complete the projects? Compare both.

 How long will it take to get some substantial return on the project

(ROCE, Payback)

4. Key factors and Risk related to
Option 1

 Complete SWOT analysis of option 1

(a minimum of 4 areas for each

element of the SWOT_ (Use PANEL)

 Throughout analysis of both options you should include:

 Links to the size and scale of the business

 Links to the timescale of the option

 Links to the aims and objectives of the business

 Links to the nature of the business, the market and competitiveness

 Use Porter, 5 C’s, Ansoff, if appropriate

5. Key factors and Risk related to
Option 2

 Complete SWOT analysis of option 2

 Throughout analysis of both options you should include:

 Links to the size and scale of the business

 Links to the timescale of the option

 Links to the aims and objectives of the business

 Links to the nature of the business, the market and competitiveness

 Use Porter, 5 C’s, Ansoff, if appropriate

6. Financial Consideration

Analyse the financial data provided for the

current situation:

Analyse any trends if it provides current and past

data e.g. profitability

Analyse any trends if it provides business and

market data e.g. revenue

Analyse the financial data provided for the
current situation:

 How much cash do they have (Cash flow statement)

 How much profit are they making (Calculate revenue)

 How much sales do they need to make to cover fixed costs (Break-

even analysis)

 Is there anything wrong in income statement?

 Is there anything wrong in statement of position?

 Any significant difference between net profit and gross profit?

Analyse any trends if it provides current
and past data e.g. profitability

 Net profit and gross profit margin over the years data.

 Sales data over the months or years.

 ROCE for the current investments.

 Check the liquidity ratio to find out whether they will be

pay liabilities or not.

Analyse any trends if it provides business and
market data e.g. revenue

 Any industry related data?

 What is the position of the business in the current market

(national, international, local, primary, secondary,
tertiary)

 Is there a big demand for the product or services they

are selling it to consumers?

7. Other Consideration

 External factors (PESTLE) and the impact on the business.

 Political

 Economical

 Social

 Technological

 Legal

 Environmental or ethical

 Maybe three of the points from PESTLE using PANEL

8. Recommendations AJIM

 Choose option 1 or 2 and make your decision clear

 Base your decision on the range of factors and risks you

have identified

 Possibilities include:

 Profitability (NPM, GPM, ROCE) and any other financial

indicators

 Competition

 Seasonality

 Timescale

 Human resources (e.g. workforce skills)

AJIM

✓A= Answer:
✓J= Justify:
✓I= It

depends:

✓M= Most

important:

Answer the question

Justify your response

It depends on what

Most important point

Answer the question

I recommend ……… as the best option going

forward……for the business…………compared to the
other option……..

Justify your response

 You will be looking at the advantages of your chosen project and comparing it with the

other option.

 This is because ……….. is struggling to manage ………………as well as that of the business.

Additionally, changing to …………………………. Means……………………………will have
…………. This means if the business fails …………………………….won’t be used to cover
debts.

 On the other hand, if the business choose other option…………..they will be

gaining…………..it will allow them to………………………………..which means
that………………………….

It depends on

 You will be looking at the missed opportunities.

 You be comparing the current situation of the business and how

your chosen method can benefit them compared to the others.

 Choosing/ deciding the option 1/ project a depends of if the

business………….. is willing to give up some control/ financial
benefits/ marketing or sales opportunities of ……………………...

Most Important

 Final or key reason for choosing that specific strategy or project.

 Even though the business…………… will sacrifice some control /

financial benefits/ marketing or sales opportunities of the business
…………they will gain new ideas/ profits/ sales/ competitive
advantage from her competitors………………………