Component 2: Strategy and implementation — Eduqas A-Level Business

Three features mark a decision as strategic rather than routine: it is long term, it commits significant resources, and it is expensive or slow to reverse. Those decisions sit at levels. At the top the board chooses which markets and industries to be in at all, which is why Unilever selling its spreads business and buying premium personal care brands is a portfolio decision, not a marketing one. Direction is the product and market question that Ansoff maps. Below the board, a business unit decides how it will compete in its own market, typically through cost leadership, differentiation or focus in Porter's terms. Below that, marketing, operations, finance and people plans turn the chosen route into supply contracts, factory layouts, budgets and recruitment. The test in an answer is whether the levels are consistent with one another.

Tactics are the short term, lower cost, easily reversed moves that deliver a longer plan, usually taken by middle managers within an agreed budget. Greggs deciding over several years to become a food on the go business, opening later, adding delivery and reworking its supply chain, is the plan; a limited edition product or a meal deal price cut is a tactic inside it. The relationship is two way, because tactics deliver the plan but can also wreck it. Repeated discounting by a firm positioned on differentiation teaches customers to wait for the offer and drags the brand towards being stuck in the middle, which Porter warns earns neither a price premium nor a cost advantage. In an answer, use reversibility, cost, time horizon and who decides as the four tests, then judge whether the tactic in the case actually serves the stated direction.

A corporate plan is the written document that converts purpose and targets into actions, budgets, named responsibilities and deadlines, usually over three to five years. It does four jobs. It coordinates, so marketing does not promise volumes operations cannot make. It communicates, so staff can see where their department fits. It controls, because budgeted figures become the benchmark for variance analysis month by month. It reassures outsiders, since banks and investors rarely lend against an idea with no cash flow forecast behind it. The trade off is rigidity. In a volatile market a detailed plan ages quickly, planning can decay into an annual ritual, and Mintzberg's point that much real strategy emerges from what the organisation learns is the strongest evaluative line available here.

Two of the four boxes look inward at what the firm controls, brand strength, skilled staff, spare capacity, high gearing, weak cash flow, and two look outward at what it does not, an ageing population, a new entrant, an interest rate rise, tighter packaging law. The value is not the grid but the matching that follows: use a strength to seize an opportunity, and fix the weakness that a named threat would expose. Pull the evidence from the case, so gearing as non current liabilities divided by capital employed expressed as a percentage, or labour turnover as leavers divided by the average number employed expressed as a percentage, become the entries rather than vague adjectives. Its blind spots are where evaluation marks sit, because the grid gives no weighting, no priority order and no decision, and it is a snapshot that dates the moment conditions move.

The framework asks how much profit an industry will allow anyone to keep, judged through the threat of new entrants, the bargaining power of buyers, the bargaining power of suppliers, the threat of substitutes and the intensity of rivalry between existing firms. Apply it to United Kingdom grocery and the picture is harsh: switching costs for shoppers are near zero, the discounters kept expanding, rivalry runs on price, and operating margins for the large chains sit in the low single figures. That diagnosis then guides action, because a firm facing strong buyer power builds loyalty schemes and own label ranges, while one facing weak entry barriers invests in scale or brand. Its blind spots are complements, government and regulation, cooperation with rivals, and the speed at which digital entrants rewrite an industry, and it says nothing at all about a firm's internal resources.

Three questions carry most of the marks. Is it suitable, meaning does it answer the position the evidence describes, the industry forces, the market trend, the internal strengths? Is it feasible, meaning can the firm fund and resource it, which is where gearing as non current liabilities divided by capital employed, spare capacity and payback as the time taken to recover the initial outlay all enter the argument? Is it acceptable, meaning does the expected return justify the risk for owners, lenders and staff, tested with average rate of return as average annual profit divided by initial investment expressed as a percentage, or with net present value, the discounted future net cash flows less the initial cost. A conclusion needs a condition attached, since almost every plan is right under one set of assumptions about demand, costs and competitor response and wrong under another.

The grid sets products against markets and produces four growth routes, each carrying more risk than the last. Selling more of what you already make to the customers you already have relies on knowledge the firm possesses. Taking the existing product to a new region or a new customer group adds market risk. Developing a new product for existing customers adds technical and cost risk. Doing both at once is diversification, the route where most value is destroyed because neither the product nor the customer is familiar. Netflix is a clean illustration, moving from posting discs to streaming, then into original production and gaming. The purpose is to make the risk of each option visible before committing funds, which is exactly what the grid is blind to, since it says nothing about competitor reaction, resources, or how any of it is to be implemented.

Igor Ansoff's growth grid crosses products, existing or new, against markets, existing or new, giving four routes: market penetration, product development, market development and diversification. The grid only earns marks once it is pinned to the named firm, so the skill is to read the case for evidence of which box a proposed move sits in, then say what that box demands of the business. Penetration leans on assets the firm already owns, such as a loyalty app or price promotion, and carries the least risk because the customers and the product are both known. Diversification asks a firm to learn a new product and a new customer at the same time, which is why Greggs adding vegan lines is product development while a supermarket launching a bank is diversification. Judgement comes from linking the chosen box to the firm's cash, capability and competitive position.

The grid is cheap, quick and communicates a risk gradient that a board can argue over, and it forces managers to say out loud whether a plan changes the product, the customer or both. That is its value, and evaluation marks come from what it cannot see. It is a still photograph: it says nothing about rivals, so it needs Porter's five forces beside it; it attaches no money, so payback, average rate of return or net present value must still be run; it assumes products and markets divide neatly when a streaming service or a bank often blurs them; and it is silent on implementation, culture and the change management that Kotter and Schlesinger address. It also treats diversification as one thing when related and conglomerate diversification carry very different risk, and it never asks whether growth is the right objective at all.

Two firms can combine sideways or up and down the supply chain, and the direction changes the motive entirely. Sideways means joining with a firm at the same stage of the same industry, so the Vodafone and Three mobile combination buys market share, scale and one fewer rival. Up and down means joining with a firm at a different stage of the same chain: moving towards suppliers is backward, as when Tesco bought the wholesaler Booker or when Netflix began producing its own shows instead of licensing them, while moving towards the customer is forward, as when a brewery buys the pubs that sell its beer. The test in an exam is to identify the stage each firm occupies before labelling the deal, because the same acquisition can look sideways until the supply chain is drawn out.

Joining sideways buys share, scale and one fewer competitor, so unit costs fall through purchasing and technical economies and duplicated head office roles disappear. The price is regulatory risk, since the Competition and Markets Authority can block a deal or force disposals, plus culture clash and diseconomies as the enlarged firm becomes harder to coordinate. Moving up the chain secures supply, controls quality and captures the supplier's margin, while moving down the chain guarantees a route to market and the customer relationship, which is why brewers buy pubs. The price is capital locked into activities outside the core competence, less freedom to switch to a cheaper supplier, an internal supplier that faces no competitive discipline, and management stretched across unfamiliar operations.

Growth from within means a firm expands using its own activities, reinvesting retained profit into extra outlets, more capacity, new products or new markets, the way Greggs adds shops year after year. Growth from outside means combining with other firms through a merger, a takeover, a joint venture or franchising, the way Just Eat Takeaway acquired rivals to gain coverage. The distinction matters because it decides four things a case study will always test: speed, since buying a competitor delivers share overnight while building it takes years; control, which stays with existing managers internally but is shared or contested after a deal; financing, since one is typically funded from retained profit and the other from cash, shares or debt; and risk, which rises sharply once another firm's culture and liabilities come with the purchase.

Building from within keeps the pace manageable, the culture intact and control in existing hands, and because it is usually funded from retained profit it leaves gearing, calculated as non-current liabilities divided by capital employed and expressed as a percentage, largely untouched. Managers also learn as they go, so mistakes are small and recoverable. The cost is time: while a firm opens one store at a time, consolidating rivals can take share in a single deal, and a slow builder can arrive at a market that is already saturated or find a patent or brand it needed is no longer for sale. Rapid internal expansion has its own trap, overtrading, where sales grow faster than working capital can fund them and a profitable firm runs out of cash to pay suppliers.

A merger is an agreed combination of two broadly equal firms into one entity; a takeover means an acquirer buys a controlling stake, more than half of the voting shares, and can be hostile if the target board objects. Alongside these sit joint ventures, where two firms create a shared separate business to spread the cost of entering a market, and strategic alliances, which share activity without exchanging equity. The attraction is speed and access to things that cannot be built quickly: brands, patents, distribution, skilled staff and market share. The cost is the premium paid above market value, integration expense, culture clash, diseconomies of scale, competition authority scrutiny and, where debt funds the deal, a sharp rise in gearing. A large share of acquisitions never deliver the synergies promised.

Under a franchise agreement the owner of a proven format licenses its trade name, products and operating systems to an independent operator, who pays an initial fee and an ongoing royalty based on revenue and funds the outlet from their own capital. That is the point of it as a growth method: the brand owner adds hundreds of locations without raising the money to build them, so expansion is fast, capital light and run by owner operators who have their own savings at stake and therefore work harder than a salaried manager might. McDonald's, Domino's and Subway grew this way. The trade off is control and income: the franchisor earns fees rather than the full profit of each outlet, and a single operator cutting corners on hygiene or service damages a brand that every other franchisee depends on.

A judgement here needs criteria before it needs content: speed, capital required and how it is financed, control retained, risk, reversibility, cultural fit and regulatory exposure. Measure internal expansion, takeover, joint venture, franchising and licensing against those and the answer writes itself for the firm in front of you. A cash rich firm facing a consolidating market may accept the premium of an acquisition; a firm with a standardised format and little spare capital reaches for franchising; a firm entering an unfamiliar country shares the risk in a joint venture. Ansoff frames the direction and Porter's generic strategies frame the competitive basis, while the strongest evaluation questions whether growth serves the objective at all, given diseconomies of scale, overtrading and the crises Greiner describes.

Cutting a business back to a leaner shape, by closing sites, dropping product lines, merging departments or shedding staff so that fixed costs fall and the capacity that remains is worked harder, is the idea being tested. The trigger is usually a capacity utilisation figure, which is actual output divided by maximum possible output multiplied by one hundred and expressed as a percentage, sitting well below the eighty to ninety per cent range where fixed cost per unit is comfortable. The prize is a lower unit cost and a better return on capital employed. The price is redundancy payments, lease exit costs, lost flexibility if demand recovers, and a hit to the morale of the survivors that Herzberg would expect to show up as lower productivity and higher labour turnover.

Site decisions turn on a mix of quantitative and qualitative pulls. On the numbers side sit rent and land prices, wage rates, transport costs, government incentives such as regional grants and enterprise zone rate relief, and for an overseas move exchange rates, tariffs and corporation tax. On the qualitative side sit the supply of skilled labour, closeness to customers for a service or to bulky raw materials for a processor, infrastructure and broadband, planning permission, political stability and the owner preference that no spreadsheet captures. Firms normally shortlist sites and rank them with investment appraisal, comparing payback in years, average rate of return as a percentage and net present value in pounds, then adjust for the risk of losing experienced staff who will not travel.

A move or a cutback lands differently on each group with an interest in the firm, and good answers trace those effects rather than assert them. Shareholders may gain from lower unit costs and a higher return on capital employed, calculated as operating profit divided by capital employed multiplied by one hundred. Employees face redundancy, relocation expense or a longer commute, and the resulting drop in motivation is exactly what Herzberg and Maslow would predict when security is threatened. The local community loses the negative multiplier of wages withdrawn from shops and suppliers. Customers may see service improve or lead times lengthen. Judgement rests on timescale, on whether the decline in demand is cyclical or structural, and on how reversible the decision is.

Paying an outside contractor to make a product or carry out part of a process that the firm could have done in house is the arrangement in view here, and it is often called subcontracting. It is not the same as offshoring, which is about where an activity happens rather than who owns it, although the two frequently travel together. The commercial point is that it converts fixed costs, such as a factory and a permanent workforce, into variable costs paid only when orders arrive, which lowers the break even output and frees capital for core activities. Apple designs its devices and pays Foxconn to assemble them. The trade off is a loss of direct control over quality, lead times and labour standards in a plant the firm does not own.

In favour: a specialist contractor with greater scale achieves lower unit costs, capacity flexes with demand instead of standing idle, capital is released for marketing or product development, and the firm gains access to expertise it could not afford to build. Against: quality is harder to police at arm's length, lead times lengthen so inventory has to rise, intellectual property leaks, and a scandal over a supplier's pay or safety record damages the brand that carries the label. Porter's five forces is the natural framework, since a concentrated supplier base means high supplier bargaining power and weak terms at renewal. The verdict turns on whether the activity is genuinely peripheral, and on whether the saving survives transport, tariffs and coordination cost.