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BTEC Business Studies Unit 7: Business Decision Making

(International spec)
Learning Aims

Examine the business principles and practices that determine business decisions

Review and interpret business data and information

Formulate decisions and solutions to business problems

Prepare business documents to present business decisions

Specification

Examine the business principles and practices that determine

business decisions
BTEC Business Studies Unit 7: Business Decision Making

Glossary
Influences of the Business Environment
Businesses go through a range of stages in their development from start-up to more established
businesses. As businesses grow their focus changes as a result of a range of internal and external
factors.

Start Up businesses are new businesses established by an entrepreneur who believes that there
will be demand for a product or range of product ideas. Start up’s have a high level of risk as
there is no established customer base and as a result of high start up costs and low revenue,
sources of finance come from investment and loans.

At this stage, ideas and objectives are heavily influenced by the interests and skills of the
entrepreneur, product innovation, finding gaps in the market, current trends and likely demand.

A Developing Business is one that has survived the first two years. They may be beginning to
establish a customer base and have a stronger idea of customer wants and needs and where their
brand fits in the market.

At this stage, ideas and objectives are influenced by changes in external factors such as social
trends and the economy. Entrepreneurship may be replaced by intrapreneurship and decisions on
changes to the product portfolio and new markets to enter will be made.

Businesses in maturity may have an established customer base and strong brand. They will
likely broad product range but there may be a lot of competition.

At this stage, ideas and objectives will be influenced by the need to develop new products.
Changes may be made to processes such as production, inventory management, procurement and
sales may be developed. Organisational structures will need to be revised as a business expands.

Business Ideas and Objectives

Classification

 development of new products,

 innovations;
 changes to processes,
 production processes; changes to systems,
 sales and procurement; changes to structure,
 changes to management responsibilities
 organisation of the workforce.

Criteria Used to Justify

 costs (financial and non-financial)

 returns (financial and non-financial)
  contribution of a business idea to a business’s objectives and long-term strategy.

Purpose and Structure of a Business

 Aims and objectives

 Influence of aims and objectives on ownership
 Influence of aims and objectives on structure
 Influence of aims and objectives on location

Business Practices and Operations

Activities to Consider in Business Decisions

 Human resources
 Physical resources
 Financial resources
Processes to Consider in Business Decisions

 Management Information Systems

 Quality processes

Impact of Legislation and Regulations on Decision Making

 health and safety at work

 data protection
 employment rights and protection
 consumer rights and protection.
The Features and Application of Business Models in the Decision Making Process

Porter’s Five Forces

Porter’s Five Forces is an analysis tool used to assess the level and threat of competition in a
market. Businesses can use this tool to better understand their position and establish their
competitive advantage. The five forces are

1. Competition in the industry

2. Threat of new entrants
 3. Power of suppliers
4. Power of customers
5. Threat of substitutes

5 Cs
The 5 Cs is an analysis tool used to investigate marketing decisions by focusing on the areas of
company, customers, competitors, collaborators and climate.
Company - determine the companies position. What are their strengths and weaknesses? Can
they adapt to meet the needs of the customer?

Customers - Research the needs of the customer? How satisfied are they with the current
products? Are their needs likely to change in the future?

Competitors - Who else is selling rival products to you? Are there any new competitors
emerging? How can a business differentiate itself from competition?

Collaborators - Who else does a business work with? How can those relationships be improved?
E.g. deals with suppliers and lenders.

Climate - What external factors may affect a business? E.g. social trends, changes to technology
and environmental concerns.

The Boston Matrix

The Boston Matrix is a model that businesses can use to analyse their product portfolio and make
decisions on investment, promotion and withdrawal of products. The aim is to achieve a well
balanced portfolio of products. To use this model, products are categorised on their market share
and the growth of the market.
Question marks have a low market share in high growth markets. High growth markets have a
lot of potential customers but having a low market share means the business is small compared to
competition. Larger competitors may have a stronger brand image, more money for investment
and benefit from economies of scale. As there is a high risk that these products may not be
successful, managers need to consider whether they are worth the large investment necessary to
grow them.

Rising stars are products in high growth markets with a relatively high market share. They are
strong compared to competition. Sales will be high, but costs will also be high at this stage due to
the large investment required to maintain their market position. If they can maintain their market
position when market growth slows down, they can become cash cows.

Cash cows have a high market share in low growth markets. Cash cow products are more
mature, are well known to consumers, have a high level of sales compared to rivals and as a
result require little investment in marketing and R&D. Cash cow products are profitable and
profits can be reinvested into developing question mark and rising star products.

Dogs have a low market share in low growth markets. There is little potential for dogs so
managers should consider removing them from the market. If there is remaining stock, they may
want to try using sales promotions to clear it. There may be options to reposition the product into
a growing market, but it is more likely that investment in a new product will have more success.

Product Life Cycle

The product life cycle is the stages a product goes through from development, launch, maturity
and decline. Different marketing strategies are appropriate at different stages of the life cycle,
e.g. informative advertising at launch, reminder advertising at maturity and discounts to clear
stock during decline.

Competitor Analysis

A competitor analysis is an investigation into the activities and performance of key rivals. This
can help establish a firm’s standing in the market and explore opportunities and gaps. The
analysis will first identify key rivals and then their strengths and weaknesses. As competitor
actions change regularly, a competitor analysis is an ongoing function of a marketing
department.

The Influence of economic, market and social trends on business decision making
Economic trends refer to indicators that show how a country is doing financially. Key economic
indicators include gross domestic product (GDP), unemployment, consumer price index (CPI),
balance of payments and interest rates. Businesses should monitor economic trends as they can
affect the way in which consumers spend. When the economy is doing well, consumers are more
likely to demand luxury goods and services such as restaurant meals. In an economic downturn,
demand for luxuries is likely to decrease and demand for cheap staple items such as bread and
rice may increase as people eat at home more to save money.
Market trends refer to observations about consumer behaviour and buying habits. Firms may
predict trends by looking at past data and extrapolating, conducting market research into
consumer preferences and monitoring the behaviour and innovations of competitors. Recent
trends in buying habits include a rise in demand for wearable devices such as fitness trackers, pet
products and face masks.
Social trends refer to the changing patterns of behaviour people tend to participate in. Changes
in the way in which consumers live their lives affect the goods and services they want and need.
Examples of current trends include more focus on mental health, interest in the environment and
climate change and the rise in online communication.
The Main Features of a Marketing Plan

 7 Ps
 USP
 Target market
 Market Segmentation

P1 Explain factors that influence the development of a business idea or objective.

P2 Explain factors that influence the formulation of a business idea or objective in a specific
context.
M1 Analyse the factors that will need to be taken into account when formulating a business
decision in a given context.

D1 Evaluate the relative importance of different factors that may influence the outcome of a
business decision.

Review and interpret business data and information

BTEC Business Studies Unit 7: Business Decision Making

Glossary

Sources of Data and its Presentation

 Primary and Secondary Sources

 Interpretation of Business Data
 The Value and Limitations of Extrapolation
Techniques to Analyse Data Effectively
  Representative Values
 Frequency Distributions
 Measures of Dispersion
 The Use of Quartiles

P3 Extract appropriate data from a given data set to aid decision making.

P4 Explain the current context of a business organisation using given data.

M2 Analyse the current context of a business organisation using given data.

D2 Evaluate the current context of a business organisation using given data.

Formulate decisions and solutions to business problems

BTEC Business Studies Unit 7: Business Decision Making

Glossary

Analysis and Interpretation of Financial Projections

 Review financial data

 Forecast business performance
 Justify business decisions
Analysis and Interpretation of Financial Statements

 Analyse statements
 Predict consequences
 Suggest and justify solutions

Interpreting the Outcome of Investment Appraisal

Review the outcome of investment appraisal and make recommendations on
investment

 Net present value

 Discounted cash flow
  Internal rates of return

P5 Explain the main influences on business performance from a given set of data.

P6 Explain reasoning for formulating the outcome of a business decision.

M3 Assess the relative importance of business data and information extracted from a given data
set when formulating a business decision with a supported rationale

D3 Justify a logically consistent case for the preferred outcome, and its implications, of a
business organisation’s strategy with a detailed, supported rationale, using a comprehensive
report and concise presentation slides prepared to a professional standard.

Prepare business documents to present business decisions

BTEC Business Studies Unit 7: Business Decision Making

Glossary

Classifications of Risk

 Legal
 Financial
 Reputation
Identifying threats, risks and opportunities
 What if scenarios and sensitivity analysis
 Analysis, comparison and evaluation of data to predict consequences, alternatives and
justify solutions
 Contribution of critical path analysis and gannt charts
The Role and Purpose of Contingency Plans

 Features of contingency plans

 Processes involved in formulating contingency plans

Use of IT Skills to Create Appropriate Documentation

 Format, layout and purpose of business documents: formal reports, executive summary and
presentations.
 Presentations and report writing: utilisation of appropriate formats, presentation software
and techniques.
  Programmes/software packages for the production and manipulation of financial
information, including the generation of graphs.


P7 Produce a report with recommendations to aid business decision making.

P8 Prepare presentation slides with speaker notes, using appropriate software, to summarise key
outcomes of a business decision.
M4 Prepare a detailed business report, with concise presentation slides, in an acceptable business
format that provides a reasoned rationale for a business decision set against other alternatives
relating to the future direction of a business organisation.

D3 Justify a logically consistent case for the preferred outcome, and its implications, of a
business organisation’s strategy with a detailed, supported rationale, using a comprehensive
report and concise presentation slides prepared to a professional standard.
Sources of Data

Primary sources.
Secondary sources.
Storage: security of information, legislative, regulatory and ethical issues.
Analysis, comparison and evaluation of data to predict consequences, provide
reasonable alternatives and justify solutions.

Data Sources
Your case study will present data to you, which you'll need to use to support your analysis and decisions.
You'll also be expected to possibly critique some of this research, as it is not going to be perfect and you may want to
suggest additional things they research.
What are the advantages & disadvantages of primary v secondary research?

https://www.bls.gov/TUS/CHARTS/LEISURE.HTM

Activity:
The data needs to be used to identify threats or opportunities to the business idea, especially when it
comes to making a justification.

What industries would the above information be an opportunity and which industries would it be a
weakness?
Data Storage
If the business has data or is considering collecting data, it needs to be stored appropriately, especially if it
is an online business using account information.

Research the legislative needs of the data protection act alongside ethical issues in collecting and using
data.

What is the Data Protection Act (DPA)?

https://www.csoonline.com/article/2130877/data-breach/the-16-biggest-data-breaches-of-the-21st-century.html

Uber paid hackers to keep data breach quiet

Related Article: How could the following article relate to both research and data protection, if a business
considered introducing a loyalty card?

As soon as Tesco said it was cutting some of its Clubcard rewards, customers started venting their anger. "Kick
people while they're down," said one. Another called it a "blow" after saving up the vouchers for two years. The
supermarket has now backtracked and delayed the cut until the summer.
But experts believe the move is part of a wider trend, and said the days of shoppers using plastic loyalty cards and
collecting supermarket reward vouchers are numbered. "This concept of swiping a card at the till is dated. It's not

what attracts us to a supermarket," says retail analyst Natalie Berg of Planet Retail. It is no coincidence that Aldi and
Lidl, the UK's two fastest-growing supermarket chains, do not have loyalty
 Porter’ five forces model.
 5Cs analysis.
 Ansoff Matrix.
 Boston Matrix.

What factors would relate to each box, and how will it influence long term success?
What is a significant factor in the 21st century which is increasing intensity of rivalry?

Porter's Model of Industry Rivalry (Five Forces)

5C's analysis
 Company—The company analysis studies an organization’s vision, strategies, capabilities, product line,
technology, culture, and objectives. It is useful in understanding the existing and potential problems with the
company’s business.
 Customers—Understanding customers is a key part of situation analysis. It involves knowing the target
audience, their behavior, market size, market growth, buying patterns, average purchase size, frequency of
purchase, and preferred retail channels.
 Competitors—Competitor analysis is critical in understanding the external environment in which the firm
operates. This analysis involves knowing the competitors’ strengths, weaknesses, positioning, market share,
and upcoming initiatives.
 Collaborators—Collaborators are the external stakeholders who team up with the organization in a mutually
beneficial partnership. Agencies, suppliers, distributors, and business partners are typical collaborators. It is
important to understand their capabilities, performances, and issues to better identify business problems.
 Climate—Climate analysis is the evaluation of the macro-environmental factors affecting the business.
PESTEL analysis can be used to analyze climate—political, economic, social/cultural, technological,
environmental, and legal scenarios are included in PESTEL.
 https://www.smstudy.com/article/5c-analysis

What risks are attached to the different strategies of growth?

Oreos in China (Example of Product Adaptation Strategy in Global Marketing)

How might apple use the Boston Matrix to help its strategic direction?
Representative values:
o mean, median, mode
o calculation from raw data and frequency distributions using appropriate software
o using the results to draw valid conclusions.
• Measures of dispersion: standard deviation for small and large samples, typical uses (statistical process: control, buffer stock levels).
• Calculation: use of quartiles, percentiles, correlation coefficient.

Representative Values
When presented with data you need to understand what it is telling you to help develop an appropriate plan.

The mode is the value that appears the most.

The median is the middle value.

The mean is the total of the numbers divided by how many numbers there are.

Calculate the mean, median and mode for the following data set of average spend
per customer for two different shops.

Shop1 - £30, £33, £40, £33, £50, £37, £28

Shop 2 - £5, £10, £13, £15, £15, £60, £80

Calculate the mean, median and mode for the following data set of average customers:
Why would this information be useful?

Consider how the following examples would relate to analysing data:

> Income levels in the UK
> Busyest time of day
> Sale levels during the week or year
> Salary/wages
Factors to consider with the different data sets
Measures Dispersion

What does dispersion mean?

Have you heard of standard deviation before? What do you think it means?
Have you heard of normal distribution before? What do you think it means?
Why is this relevant to the data being presented to you?
Stock control is best explained using a diagram, for example a bar gate stock graph:
Calculation: use of quartiles
Consider how the following graphs relate to the above key terms.
 Calculation: percentiles

how quartiles, percentiles, and the correlation coefficient are

used to draw useful conclusions in a business context
In order to measure the spreadsheet of a data, the measures of dispersion are used. The measures of
dispersion are used by the business organization for the purpose of analyzing and scrutinizing the
effect of the investors and also the analyst which is based on the securities trading as well to study the
variability. Standard deviation can be used for the purpose of assessing measures of dispersion. The
measures of dispersion help in the following mentioned things:

 Helps in the comparison of variability between two or more series

 Aids in utilizing other statistical measures
 To monitor and control the variability
 Assessing the reliability on an average

The following measures of dispersion are used in order to study the variation:

 The Range
 Mean Deviation
 Standard Deviation
 The inter quartile range and quartile deviation

The standard deviations are utilized for the purpose of assessing the amount of variation or dispersion
from the average (Cizek, Hardle and Weron, 2011). The standard deviation helps to exhibit the
historical volatility. The square root of the variance helps to calculate the square root of the variance.
The standard deviation is used in order to calculate the standard deviation:

Mean can be defined as the average of all the numbers. Mean can be calculated with the help of the
following formula:

The middles score of a particular set of data can be termed as median.

The most frequent score in a specific set of data can be termed as mode. The mode represents the
highest bar in the histogram. The mode is used by the business organization for the purpose of
understanding the most frequent tendency in the profit and also the loss of the organization.
The quartiles are used by the business organization because they are very simple, transparent and
precise and also the practical period in order to track the major indication of the business which
includes the income cost, customer served, sales and also the number of the customer satisfied. Quartile
also helps in providing the time notice as well as it also help to spot the particular trend in order to
influence the result of the next quarter (C?iz?ek, Ha?rdle and Weron, 2011). There are three types of
quartile:
The number between the smallest number and the median in a particular set of data is known as first
quartile. The first quartile is also called 25th percentile.
The median in a set of data is known as the second quartile. The second quartile is also called
50th percentile.
The number between the median and the highest set of data is known as third quartile. The third quartile
is also called the 75thpercentile.
Percentile is defined as the positional estimation of a particular set of data. The business firms make
use of the percentile in order to analyse the data in order to acquire the regarding the need and the
requirement of the general people and thereby categorize them according to their need.
The correlation coefficient is defined as the statistical measurement of the linear relationship between
and independent. It helps to calculate the degree in which the movement of the two variables is linked
with each other. The correlation coefficient is calculated by the following formula:
Calculation: use of correlation coefficient

Why is being able to measure a correlation for sales data so important?

How does it relate to the Boston Matrix?

https://www.youtube.com/watch?v=jf-SIOFUuEo
B5 Software-generated information for decision making in a business

• Management information systems: computers and information processing

tools for operational, tactical and strategic levels of the business.
• Project management: networking and critical path analysis, Gantt charts.
• Financial tools:
net present value
discounted cash flow
internal rates of return.

Management Information Systems

What examples do you have of data you'd need to manage?

https://www.youtube.com/watch?v=qiLXJ0lhN2g

What examples of management info systems could you expect to see at Heinz?
The World's Largest Baked Bean Factory
B4 Appropriate formats for decision making in a business context
• Creation and interpretation of graphs using spreadsheets:
o line
o pie
o bar charts
o histograms.
• Scatter (XY) graphs and linear trend lines: extrapolation for forecasting (reliability).
• Presentations and report writing: utilisation of appropriate formats, presentation software and
techniques.

Sales Forecasting

Key words:
Correlation
Line of best fit

Extrapolation

How would the electric cars sales forecast relate to the following business terms?

> Product life cycle

> Boston Matrix

> Lean production

> Workforce planning

Critical path analysis

Why is this information useful?

https://youtu.be/_u_jm1211D4 - Excel Gantt Chart Tutorial - 2022 -

How to Make a Gantt Chart in Microsoft Excel 365
https://www.youtube.com/watch?v=9HtdWMzcU-M – Team gantt

NPV & IRR

How to Calculate NPV, IRR & ROI in Excel || Net Present Value || Internal Rate of Return

https://www.youtube.com/watch?v=19n-4yf9jlE – NPV & IRR functions

https://www.youtube.com/watch?v=qAhV3xG0i8s&t=27s - NPV and IRR in Excel 2010