6.1 The Business Management Toolkit (DP IB Business Management)

A corporate strategy is the approach taken by a business to achieve its objectives.

The Ansoff Matrix is a strategic planning tool used to devise strategies for future growth.

True.

Ansoff's Matrix includes market penetration, product development, market development, and diversification.

Market penetration involves increasing sales of existing products to existing markets.

Product development involves selling new or improved products to existing customers.

Market Development involves selling existing products to new markets.

Diversification involves targeting new customers with new or redeveloped products.

The most risky growth strategy in the Ansoff Matrix is diversification.

STEEPLE Analysis is an analytical tool that examines external factors likely to impact a business.

True.

STEEPLE stands for Social, Technological, Economic, Environmental, Political, Legal, and Ethical.

True.

An example of a social factor in STEEPLE Analysis is social mobility.

The main purpose of STEEPLE Analysis is to support effective decision-making by understanding external factors.

False.

Climate change is an example of an environmental factor in STEEPLE Analysis.

True.

Inflation rates are an example of an economic factor in STEEPLE Analysis.

True.

The UK’s decision to leave the EU in 2016 is an example of both an economic and a political factor.

A product portfolio is the range of products offered by a business.

The BCG Matrix is a tool used by businesses to analyse their product portfolio and make strategic decisions.

False.

The BCG Matrix classifies products into four categories:

• Cash cow

• Star

• Question mark

• Dog

Cash Cows are products with a high market share in a low growth market.

A Star is a product with a high market share in a high growth market.

A Question Mark is a product with low market share in a high growth market.

A dog is a product with low market share in a low growth market.

The main purpose of the BCG Matrix is to help businesses allocate resources more effectively and develop marketing strategies.

Market share in the BCG Matrix indicates a product's relative competitiveness in the market.

Market growth in the BCG Matrix indicates the potential for expansion and profitability.

A business plan is a formal written document detailing the goals, strategies, and actions for a business.

True.

A business plan includes financial projections.

Market analysis is the examination of the market in which a business operates to understand its size, trends and competition.

The executive summary is a brief section at the beginning of a business plan that highlights its key points.

True.

A business plan should be updated regularly.

Competitive advantage is a unique characteristic that allows a business to outperform its competitors.

USP stands for Unique Selling Proposition.

True.

A SWOT analysis is usually part of a business plan.

A target market is a specific group of potential customers at which a business aims its products or services.

A marketing strategy is a plan to reach and persuade potential customers to buy a product or service.

A decision tree is a visual, quantitative method of tracing the outcomes of a decision so that the most profitable decision can be identified

True.

Decision trees use research-based estimates and probabilities to calculate likely outcomes.

The four key elements in a decision tree diagram are:

• Decision points

• Outcomes

• Probabilities

• Expected monetary value

False.

In a decision tree, points where there are different outcomes are represented by circles called nodes

A probability of 1 is a certain outcome in a decision tree diagram.

False.

In a decision tree, the outcome with the highest expected value is the most attractive option.

Formula.

False.

Decision trees do not take into account qualitative elements such as human resource impacts.

The mean is where all the numbers in a data set are added, and then divided by the amount of numbers.

The mode is the value that occurs most often in a set of data,

The standard deviation is a measure of the spread of numbers within a set of data.

Quartiles are the values that divide a list of numbers into quarters.

True.

Analysis of data using quartiles allows a business to see the distribution and spread of data.

False.

The top quartile is the highest 25% of a list of numbers

Infographics are easy to understand visual representations of data.

Pie charts illustrate how a whole is divided into different elements.

False.

Bar charts show data that are independent of each other.

The median is the middle value in a list of numbers.

A circular business model aims at eliminating waste and the continual use of resources.

The main goal of circular business models is to extend the lifecycle of products.

Closing the loop refers to recycling and reusing materials to create a closed system.

Product life extension is a strategy to prolong the life of a product through maintenance, repair and upgrades.

Remanufacturing means refurbishing used products to a like-new condition.

Upcycling is the process of transforming by-products, waste materials or unwanted products into new materials or products of better quality.

Sustainable sourcing involves integrating social, ethical and environmental performance factors into the process of selecting suppliers.

The aim of design for disassembly is to create products that can be easily taken apart at the end of their life for recycling or reuse.

Biomimicry is the use of nature-inspired design principles to create products and processes that mimic natural systems, resulting in greater sustainability.

Force field analysis is a tool for analysing the forces that drive change, and cause resistance to change in an organisation.

False.

Driving forces support change.

Restraining forces are factors that cause resistance to change.

True.

Identifying restraining forces can help in developing strategies to reduce their impact.

False.

Driving forces and restraining forces are weighted from 1 to 5 in terms of their relative importance, with 5 being the most important and 1 being the least important.

Current state is the existing situation before any change is made.

The desired state is the situation that an organisation aims to achieve after implementing change.

Equilibrium is the state where driving and restraining forces are balanced, resulting in no change.

False.

An example of an external driving force is changing demographic trends.

True.

If the relative weight of driving forces is greater than the relative weight of restraining forces, there is a good chance that a decision would be successful.

True.

Force field analysis does not account for how forces might change over time.

True.

Force field analysis is best used alongside other decision-making tools to ensure a comprehensive understanding of the situation.

A Gantt chart is a type of bar chart that illustrates a project schedule.

The main purpose of a Gantt chart is to plan, coordinate, and track the timing of specific tasks in a project.

A task in a Gantt chart is a specific activity or work item that needs to be completed within a project.

A milestone is a significant point or event in a project timeline.

False.

Dependencies between tasks can be shown in Gantt charts.

False.

Tasks to be performed are listed on the vertical axis.

True.

Gantt charts are useful for projects with well-defined timelines and dependencies.

True.

Gantt charts can be used for both small and large projects.

A baseline is the original project plan that is used to track deviations from the schedule.

True.

A key benefit of Gantt charts is that they provide visual clarity for those involved in delivering a project.

False.

Hofstede's Cultural Dimensions model is a framework for understanding the culture of a country based on its cultural values.

False.

Six different cultural dimensions are used for comparison.

Power Distance is the extent to which less powerful members of organisations within a country expect and accept that power is distributed unequally.

Individualism measures the degree of interdependence a society maintains among its members.

True.

Collectivist societies score low on the individualism dimension.

True.

A consensus-oriented society is one that focuses on caring for others and quality of life.

False.

Societies with high long-term orientation scores encourage modern education as a way to prepare for the future.

Uncertainty avoidance is the extent to which a society tolerates or avoids uncertainty.

The dimension of indulgence is the extent to which people try to control their desires and impulses based on the way they were raised.

True.

Using Hofstede's model can help a business determine suitable international expansion strategies.

True.

Hofstede's model is sometimes criticised for lacking nuance as it assumes all people in a country share the same characteristics.

Porter's Generic Strategies are a range of strategic options for gaining a competitive advantage in a market.

The three main strategies in Porter's model are:

• Cost leadership

• Differentiation

• Focus

False.

A cost leadership strategy focuses on reducing costs to offer products at lower prices.

A cost leadership strategy involves a business aiming to become the lowest-cost producer in an industry.

A differentiation strategy involves a business aiming to create unique and distinctive products or services in the market.

False.

A focus strategy involves targeting a narrow market segment.

The two factors considered in Porter's generic matrix are:

• The source of competitive advantage

• The scope of the market in which a business operates

Stuck in the middle refers to a situation where a company fails to achieve either cost leadership or differentiation.

A cost focus is a strategy that targets a narrow market segment with a cost leadership approach.

True.

Successful differentiation allows a business to charge a premium price and achieve a high profit margin,

A differentiation focus strategy involves offering specialised products within the niche market

Contribution is the difference between sales revenue and variable costs,

Formula.

Formula.

Uses of contribution analysis include:

• Make or buy analysis

• Contribution costing

• Absorption costing

Make or buy analysis is a process that helps to decide if a business product should be manufactured in-house or outsourced to a supplier.

Contribution costing is where direct costs are allocated to products or departments of a business.

Absorption costing determines the most appropriate way to allocate indirect costs to products or departments of a business.

Criteria that may be used to allocate indirect costs include:

• Floor area occupied by a product or department

• Sales volume or value

• Number of employees

• Output levels

Critical path analysis is a project management tool that uses network analysis to plan complex and time-sensitive projects.

True.

Critical path analysis identifies the critical project activities that, if delayed, will cause the project as a whole to over-run.

In critical path analysis, a node is a circle that represents a point in time where an activity is started or finished.

Activities are shown on the network diagram as a line which links nodes.

False.

Network analysis does not guarantee the success of a project.

The duration of a task is shown as a number of time units such as hours or days below the activity line.

LFT stands for Latest Finish Time.

On an analysis diagram, the critical path follows the nodes where the earliest start time and latest finish time are equal.

Float time exists where there is a difference between the earliest start time and the latest finish time.

Formula.

True.

Network analysis often relies on estimates and forecasts.

Scatter graphs allow businesses to compare two variables such as sales volume and advertising to establish if there is any correlation between them.

A correlation exists where there is a relationship or connection between two variables.

A positive correlation means as one variable increases, so does the other variable,

A negative correlation means as one variable increases, the other variable decreases.

A line of best fit is a visualisation of a correlation between two sets of data, drawn roughly through the middle of all of the points on a scatter diagram.

True.

A strong (positive or negative) correlation exists when data points sit close to the line of best fit.

Extrapolation assumes that what has happened in the past will be the same as what will happen in the future.

False.

Extrapolation works best when there is a strong correlation between the two data sets.