A level-readyAll subjects · Business · WBS13 Business decisions and strategy
Portfolio analysis, strategic and tactical decisions, and resources
Edexcel IAL Business · WBS13 Business decisions and strategy
The rest of 3.3.1 asks why businesses analyse their product portfolio, how strategic decisions differ from tactical ones, and how a strategy affects a firm's human, physical and financial resources.
The aim of portfolio analysis
A business with several products or divisions needs to decide where to invest. Portfolio analysis reviews the range of products (or business units) to achieve a balanced portfolio: some products earning cash now, others growing to earn cash in future. The Boston Matrix (covered in Unit 1) classifies products by market growth and relative market share into stars, cash cows, question marks and dogs.
The aims are to:
- spread risk so the business does not depend on one product;
- use cash from mature products to fund new ones;
- decide which products to build, hold, harvest or divest;
- plan new product launches before current products decline.
Strategic and tactical decisions
| Strategic decisions | Tactical decisions | |
|---|---|---|
| Time scale | Long term (several years) | Short to medium term |
| Made by | Senior management (directors) | Middle and junior managers |
| Scope | Whole business, its direction | One area or department |
| Resources | Large commitment, hard to reverse | Smaller, easier to reverse |
| Information | Uncertain, often incomplete | More certain, routine |
| Example | Enter a new country; take over a rival | Run a price promotion next month |
Impact on resources
Every strategy uses or changes the business's resources:
- Human: new skills, recruitment, training, redundancies or relocation; staff morale and resistance to change.
- Physical: premises, machinery, technology, stock and capacity. A growth strategy may need new factories or outlets.
- Financial: the cost of the strategy and how it is funded (retained profit, loans, share issue), and the effect on cash flow, gearing and liquidity.
A strategy that the firm does not have the resources to deliver is likely to fail, so resource audits are part of strategic planning.
Worked example
A phone maker decides to stop making budget handsets and focus on premium models. Is this strategic or tactical? Explain its likely impact on human resources.
- It changes the long-term direction and target market of the whole business, decided by senior management, and is hard to reverse: strategic.
- Human resources: workers on budget lines may need retraining or may be made redundant; designers and engineers with premium skills may be recruited.
- Morale may fall if job losses are expected, so communication matters.
Answer: Strategic; it changes the skills the business needs and may mean retraining, redundancy and recruitment.
Check yourself
- What is the main aim of portfolio analysis?
- To calculate the profit of each product
- To set prices for each product
- To decide the legal structure of the business
- To achieve a balanced range of products that spreads risk and funds future products
Show answer
To achieve a balanced range of products that spreads risk and funds future products. Balance: cash generators fund future growth.
- Which of these is most likely to be a strategic decision?
- Changing the shelf layout in one store
- Taking over a supplier in another country
- Offering a weekend discount
- Choosing next month's staff rota
Show answer
Taking over a supplier in another country. It is long-term, costly and affects the whole business.
- Which feature is typical of tactical decisions?
- They set the long-term direction of the business
- They are always made by the board of directors
- They involve very high levels of uncertainty
- They are short to medium term and easier to reverse
Show answer
They are short to medium term and easier to reverse. Tactical decisions carry out the strategy in one area.
- A strategy is funded by a large bank loan. Which resource effect is most direct?
- Gearing rises and interest payments affect cash flow
- Staff need retraining
- The firm's premises become smaller
- Labour turnover falls
Show answer
Gearing rises and interest payments affect cash flow. Loans raise non-current liabilities and need interest payments.
- Which is an example of the effect of a growth strategy on physical resources?
- A fall in staff morale
- A higher gearing ratio
- The need to buy new machinery to raise capacity
- A change in the mission statement
Show answer
The need to buy new machinery to raise capacity. Machinery and premises are physical resources.
- Explain one way a strategy to open 50 new stores could affect a firm's human resources.
Show answer
The firm would need to recruit and train many new staff and managers, which raises costs and may stretch the human resources department.. Name the HR effect (recruitment, training) and a consequence.
Sources
Last updated 8 November 2026. Spotted a mistake? Tell us.