6.1 Business management HL tools

SWOT separates internal strengths and weaknesses from external opportunities and threats.

It is useful only when each point is evidenced and linked to a choice.

Classify the factor by control and source, then turn it into an action.

A strong delivery network is a strength; a new regulation is a threat.

Do not list vague positives without evidence.

Ansoff compares market penetration, product development, market development and diversification by market/product novelty.

Risk usually rises as the business moves farther from known customers and capabilities.

Locate the proposal, then state the main uncertainty and capability gap.

Selling the current drink to current customers is penetration; a new drink for a new market is diversification.

The matrix is a risk lens, not a guaranteed growth ranking.

STEEPLE scans social, technological, economic, environmental, political, legal and ethical forces around a business.

It turns external change into scenarios and strategic questions, not predictions.

Identify the force, time horizon and affected decision.

A data law changes the design of a customer app and its compliance cost.

Do not treat all factors as equally likely or controllable.

BCG maps products by relative market share and market growth into stars, cash cows, question marks and dogs.

The categories suggest cash allocation but ignore synergies, margins and future uncertainty.

State the axes and decide whether investment, harvest or exit is justified.

A high-share, low-growth product may fund a high-growth question mark.

A dog is not automatically worthless if it supports another product.

A business plan connects the opportunity, strategy, operations, finance, risks and milestones.

Its value comes from coherent assumptions and review, not length.

Trace one assumption through market, resources, cash and implementation.

A launch plan links 2,000 units to staffing, stock, promotion and a cash buffer.

A plan is not proof that funding or demand will occur.

A decision tree represents choices, uncertain outcomes and payoffs so expected values and risks can be compared.

Probabilities and payoffs are assumptions; expected value does not show dispersion or ethics.

Label branches, multiply payoff by probability, sum outcomes and test sensitivity.

A launch with 0.6 chance of $100k and 0.4 chance of −$20k has expected value $52k before cost.

The highest expected value is not always the safest choice.

Mean, median, mode, range and standard deviation summarise a dataset; each reveals a different feature.

Outliers and skew can make the mean misleading, while a summary hides individual cases.

Choose the statistic that matches the distribution and decision.

Delivery times of 2,2,3,3,20 minutes have median 3 but mean 6; the outlier matters for capacity.

A summary is not causation or a forecast.

Use the full authorized set deliberately. Mean = sum of values ÷ number of values; median is the middle ordered value; mode is the most frequent value. Quartiles split ordered data into four parts and show position and spread; standard deviation measures typical dispersion around the mean, so a larger value indicates less consistency when datasets use comparable units and scales. Bar charts compare discrete categories, pie charts show parts of a whole when totals and proportions are meaningful, and infographics communicate selected findings but can distort through scale or omission. For 2, 2, 3, 3, 20, the mean is 6 and median is 3: report the outlier and choose the summary that fits the decision.

Circular models keep products and materials in use through repair, reuse, remanufacture, sharing or recycling while reducing waste.

Design, incentives, reverse logistics and customer behaviour determine whether value actually circulates.

Trace the product after use and identify the revenue and recovery mechanism.

A tool company leases durable drills, retrieves them, repairs them and leases them again.

Recycling alone may destroy more value than reuse or repair.

Distinguish the five specified models. Circular supply replaces finite inputs with renewable, recyclable or biodegradable ones; resource recovery captures useful materials or energy from outputs and waste; product life extension repairs, upgrades, refurbishes or remanufactures products; sharing models increase utilization by enabling access among users; product service systems sell access or performance rather than ownership. A drill subscription with take-back may combine product service and life extension, but a circular claim is credible only when design, reverse logistics, incentives and recovered value close the loop without shifting greater impacts elsewhere.

Force field analysis maps driving and restraining forces around a proposed change.

It clarifies where action can strengthen support or reduce resistance, but weights are subjective.

Name each force, rate its influence with evidence and choose an intervention.

Training strengthens a new software rollout while workload concerns are reduced by phased implementation.

The scores are not objective measurements.

A Gantt chart places project tasks on a timeline, showing duration, overlap, milestones and progress.

It supports coordination but does not by itself show task dependency or resource conflicts well.

Check sequencing, owners and slack, then update actual progress.

A website launch shows design before testing, with a milestone for approval.

A bar on a chart is not a completed outcome.

Hofstede’s dimensions compare broad cultural tendencies such as power distance and individualism to prompt cross-cultural questions.

Country-level averages are not rules for individuals; context, generation and within-country variation matter.

Use a dimension as a hypothesis, then validate with local evidence and stakeholders.

A manager checks whether a participative meeting format fits local expectations instead of assuming it does.

Do not stereotype employees from a national score.

Porter’s strategies are cost leadership, differentiation and focus; each requires a coherent source of advantage.

Trying to pursue incompatible advantages can leave a firm stuck in the middle.

Identify target scope, advantage and activities that reinforce it.

A focused premium bicycle maker differentiates for one segment rather than matching mass-market cost.

A slogan is not a strategy without supporting activities.

Contribution per unit = selling price − variable cost per unit; total contribution = sales revenue − total variable costs. Contribution costing assigns variable costs to units and treats fixed costs separately for the period, while absorption costing includes an allocated share of fixed production overhead in each unit's full production cost.

Contribution costing shows how each sale covers fixed costs and profit and supports short-run product, pricing, capacity and make-or-buy choices when relevant fixed costs are identified. Absorption costing gives a fuller unit production cost for inventory valuation and longer-run pricing, but the overhead allocation method can change apparent product profitability without changing total business cost.

For make-or-buy, compare cost to make = avoidable fixed cost + internal variable cost per unit × quantity with cost to buy = supplier price per unit × quantity + relevant purchasing costs. Then evaluate capacity released, quality, reliability, control and supplier dependence; exclude allocated overhead that remains under both options.

A product sells for $15 with variable cost$9, so contribution is $6 per unit. At 2,000 units total contribution is$12,000; after fixed costs of $8,000, profit is$4,000. If absorption allocates $3 fixed overhead per unit, full production cost is$12, but that allocation is not automatically avoidable in a make-or-buy decision.

Contribution is not profit until fixed costs are covered, contribution costing is not the same as absorption costing, and a lower supplier quote does not prove buying is cheaper when relevant transaction costs and strategic effects are included.

Critical path analysis identifies the longest dependent sequence of project activities and the minimum completion time.

A delay on a critical activity delays the project unless resources or sequencing change; non-critical tasks have slack.

List durations/dependencies, find earliest/latest times and focus control on zero-slack work.

If A→B→C takes 3+4+5 days, that path takes 12 days and is critical unless another path is longer.

The critical path can change when durations or dependencies change.

Complete a supplied network by moving forward to calculate earliest start times and project duration, then backward to calculate latest finish times. Total float = latest finish time − earliest start time − activity duration; activities with zero total float form a critical path. Free float = earliest start time of the next activity − earliest start time of the current activity − duration, using the earliest relevant following start when there is more than one successor. If an activity starts earliest at day 3, lasts 4 days and may finish latest at day 9, total float is 9 − 3 − 4 = 2 days. Drawing the diagram is not expected, but completing and analysing the provided diagram is; a changed duration can change the critical path.

Simple linear regression estimates the relationship between one explanatory variable and an outcome using a fitted line.

The slope describes association in the data, not proof that X causes Y; extrapolation is risky.

Inspect scatter, fit and residuals, then use the line only within a defensible range.

Past advertising spend may predict sales, but a new market shock can make the old relationship fail.

A high correlation does not establish causation.

Begin with a scatter diagram: upward patterns indicate positive correlation, downward patterns negative correlation, and diffuse points weak or no linear correlation. A line of best fit summarizes the estimated linear relationship and can be written as an outcome predicted from one explanatory variable; inspect unusual points and how closely observations follow the line. Interpolation within the observed range is usually safer than extrapolation beyond it because the relationship may change. Correlation describes association, not causation, so a fitted advertising-sales line cannot by itself prove that advertising caused the sales change or that the relationship will continue in a new market.