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Businesses need to develop suitable strategies to deal with challenges in the business environment - NSC Business Studies - Question 5 - 2021 - Paper 1
Question 5
Businesses need to develop suitable strategies to deal with challenges in the business environment. Integration strategies could be implemented in response to findin... show full transcript
Worked Solution & Example Answer:Businesses need to develop suitable strategies to deal with challenges in the business environment - NSC Business Studies - Question 5 - 2021 - Paper 1
Step 1
Outline the steps in developing a strategy.
Answer
- Define Vision and Mission: Establish the organization's core purpose and long-term aspirations.
- Conduct SWOT Analysis: Assess the internal strengths and weaknesses, as well as external opportunities and threats.
- Set Objectives: Define clear, measurable goals that the organization aims to achieve within a specific timeframe.
- Develop Action Plans: Create detailed plans outlining the steps, resources, and timelines necessary to achieve the objectives.
- Implement the Strategy: Execute the action plans by allocating resources and assigning responsibilities.
- Monitor and Evaluate: Regularly review progress towards objectives and adjust strategies as necessary.
Step 2
Discuss THREE types of integration strategies.
Answer
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Forward Integration: This involves a business combining with or taking over direct distributors. It aims to gain control over the distribution of products, which can lead to increased profitability as the business captures a larger share of the market.
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Backward Integration: This strategy involves a business acquiring or merging with its suppliers to reduce dependency. By controlling raw material sources, the business can decrease costs and secure a steady supply.
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Horizontal Integration: Here, a business may expand by acquiring or merging with competitors in the same industry. This creates economies of scale and reduces competitive pressure by consolidating market share.
Step 3
Explain how businesses could apply the following Porter's Five Forces model to analyse their position in the market environment: Power of suppliers.
Answer
Businesses should identify the suppliers delivering high-quality products, as these suppliers may have more power. Assessing the number of suppliers and their influence on pricing is crucial; fewer suppliers often lead to increased control over prices. Businesses can proactively build relationships with multiple suppliers to enhance competition and mitigate risks.
Step 4
Explain how businesses could apply the following Porter's Five Forces model to analyse their position in the market environment: Power of competitors/Competitive rivalry.
Answer
To analyze their position, businesses should evaluate the number of competitors and the similarity of products. High competition can inhibit profitability, prompting businesses to differentiate their offerings. Monitoring competitor actions and market pricing strategies is essential for sustained competitiveness.
Step 5
Explain how businesses could apply the following Porter's Five Forces model to analyse their position in the market environment: Threat of substitution/Substitutes.
Answer
Businesses must determine if substitutes are available that can meet customer needs at lower prices. By assessing customer behavior and preferences, they can identify factors that weaken the threat of substitutes. Adapting product features or pricing strategies can enhance competitive advantage against substitutions.
Step 6
Advise businesses on the steps they should consider when evaluating strategies.
Answer
- Examine Underlying Basis: Review the rationale behind each business strategy to ensure clarity and alignment.
- Conduct a Performance Analysis: Compare actual performance against intended outcomes using quantitative and qualitative analyses.
- Measure the Business Results: Identify key performance indicators (KPIs) to evaluate how well strategies are achieving goals.
- Adjust Strategies as Needed: If deviations from expected performance are noticeable, revisit strategies for necessary adjustments.
- Set Specific Goals for Evaluation: Define the metrics that will dictate the success of the strategy.
- Draw Up a Comparison Report: This document should summarize the assessments to facilitate informed decisions.
- Decide on the Next Steps: Based on the evaluation, determine which strategies to continue, modify, or discontinue.