WBS13 Business decisions and strategy

Lessons in WBS13

1. Corporate objectives and mission statements
   Mission: qualitative purpose and values. Corporate aims: long-term intentions. Corporate objectives: measurable targets. Judge a mission statement by whether it
2. Corporate strategy: Ansoff's Matrix
   Ansoff: market penetration (existing/existing), market development (existing products, new markets), product development (new products, existing markets), diver
3. Porter's Strategic Matrix: generic strategies
   Porter: cost leadership (broad, low cost), differentiation (broad, premium), cost focus and differentiation focus (narrow). A firm with no clear advantage risks
4. Portfolio analysis, strategic and tactical decisions, and resources
   Portfolio analysis aims for a balanced range of products to spread risk and fund growth. Strategic decisions are long-term, whole-business, senior and costly to
5. SWOT analysis
   Strengths and weaknesses are internal; opportunities and threats are external. SWOT should lead to strategy and is limited by being subjective, static and unwei
6. External influences: PESTLE and the changing competitive environment
   PESTLE: political, economic, social, technological, legal and environmental factors. Always explain the chain of effects on the specific business and judge its
7. Porter's five forces
   Five forces: rivalry, threat of entry, buyer power, supplier power, threat of substitutes. Strong forces reduce industry profitability; firms act to weaken them
8. Why businesses grow: economies of scale, market power and profit
   Growth can bring internal economies (purchasing, technical, managerial, financial, marketing), external economies, market power over customers and suppliers, a
9. Organic growth
   Organic growth uses the firm's own resources: new outlets, products, markets and capacity. Lower risk, keeps control and culture, but slow and limited by market
10. Inorganic growth: mergers, takeovers and integration
    Merger: agreement to form one business. Takeover: buying a controlling stake. Horizontal, vertical backward, vertical forward and conglomerate integration each
11. Problems of growth: diseconomies of scale, communication and overtrading
    Diseconomies of scale (coordination, communication, motivation, control) raise average cost in very large firms. Growth strains internal communication. Overtrad
12. Sales forecasting: time series and moving averages
    A moving average smooths a time series to show the trend. Three-period: average of three values, placed in the middle. Four-quarter: removes seasonality; centre
13. Sales forecasting: scatter graphs, lines of best fit and extrapolation
    Scatter graphs show correlation (not causation). A line of best fit follows the trend; extrapolation extends it into the future. Forecasts weaken with distance
14. Investment appraisal: payback and average rate of return
    Payback = time to recover the initial cost (part years: remaining / next year's cash flow x 12 months). ARR = average annual profit / initial cost x 100. Both i
15. Investment appraisal: discounted cash flow and net present value
    Discount future cash flows to present value (cash flow x discount factor). NPV = total PV of inflows - initial cost. Positive NPV: accept on financial grounds.
16. Decision trees and expected values
    Squares are decisions, circles are chance nodes. EV = sum of probability x outcome; net EV = EV - cost. Probabilities at a node sum to 1. Estimates, averages an
17. Critical path analysis
    Activities on arrows, nodes hold EST (top right) and LFT (bottom right). EST forwards (largest), LFT backwards (smallest). Total float = LFT - duration - EST. C
18. Contribution as a decision-making technique
    Contribution = price - variable cost per unit; profit = total contribution - fixed costs. Accept a special order if price > variable cost and there is spare cap
19. Corporate culture
    Culture: shared values and norms. Strong cultures give identity but can resist change. Power, role, task and person cultures. Culture is formed by leaders, hist
20. Stakeholder model versus shareholder model
    Shareholder model: maximise returns (share price and dividends). Stakeholder model: consider all stakeholders. Profit objectives often conflict with wider objec
21. Business ethics, pay and rewards, and corporate social responsibility
    Ethics: decisions based on moral principles. There is often a trade-off with profit, but ethics can also add value. Pay raises ethical issues (executive pay, lo
22. Interpreting financial statements
    Income statement: revenue - cost of sales = gross profit; - other operating expenses = operating profit; - interest = profit for the year. Balance sheet: assets
23. Ratio analysis: profitability and return on capital employed
    GPM = gross profit / revenue x 100. Profit for the year margin = profit for the year / revenue x 100. ROCE = operating profit / capital employed x 100. Compare
24. Ratio analysis: liquidity, gearing and the limits of ratios
    Current ratio = current assets / current liabilities. Acid test = (current assets - inventory) / current liabilities. Gearing = non-current liabilities / capita
25. Human resource measures: productivity, turnover, retention and absenteeism
    Productivity = output / employees. Turnover = leavers / average staff x 100. Retention = staff with 1+ year's service / staff a year ago x 100. Absenteeism = da
26. HR strategies to raise productivity and retention
    Four HR strategies: financial rewards (pay, piece rate, bonuses, profit sharing), employee share ownership, consultation and empowerment. Match the strategy to
27. Managing change: key factors and resistance
    Key factors: culture, size, speed of change, managing resistance and transformational leadership. People resist through fear, habit and distrust; communicate, i
28. Contingency planning: risk assessment and mitigation
    Risk assessment: identify likelihood and impact of natural disasters, IT failure and loss of key staff. Mitigation: business continuity plans and succession pla
29. WBS13 exam technique: Business decisions and strategy paper
    WBS13: 2 hours, 80 marks; Section A 40 (4, 4, 8, 12, 12), Sections B and C 20 each. Calculations: formula, figures, answer, units, 2 decimal places. Long answer

Next exams for WBS13

• January 2027: Mon 18 Jan 2027, morning, 2h 00m
• Summer 2027: Mon 24 May 2027, morning, 2h 00m

From Pearson's final timetables. All exam dates. Always confirm your entries with your exams officer.