Strategy, Risk and Managing Change

What Strategy, Risk and Managing Change covers

Strategy, Risk and Managing Change is examined in Component 03, Strategy, risk and managing change. It covers business planning and the reduction of risk, the uses and limitations of a business plan, business strategy and the interdependence of business decisions, SWOT analysis, PEST analysis, the Ansoff matrix, Porter's five forces, opportunity cost, risk and uncertainty in decision making, the stages of making a business decision, corporate planning from objectives to evaluation, Handy's four organisational cultures, the payback period, average rate of return, net present value and discounted cash flow, judging an investment decision, contingency planning and disaster recovery, crisis management and the response to a crisis, insurance and the protection it gives a business, internal and external causes of change, the effects of change on a business, barriers to change and resistance, Lewin's force field analysis, critical path analysis and the critical path, total float, free float and the use of a network, monitoring change with quantitative and qualitative data, ethical treatment of workers and suppliers, ethical marketing and community engagement, consumer and employee protection law, pollution, waste and the environmental audit, sustainability, net zero and the circular economy and ESG reporting.

The 31 subtopics

Each one has its own page.

• Business planning and the reduction of riskRecall questions on what business planning is, how it reduces risk, why it matters most to a start-up, and what risk means in this context.Open →
• The uses and limitations of a business planRecall questions on what a business plan is and why lenders and investors ask for one, the resources and financial forecasts it sets out, scenario planning, how plans support objectives and recruitment, and why a plan never guarantees success.Open →
• Business strategy and the interdependence of business decisionsRecall questions on business strategy and the difference between a strategy and a tactic, strategic and operational decisions, and how decisions in marketing, operations, finance and people depend on one another.Open →
• SWOT analysisRecall questions on what SWOT stands for, which elements are internal and which external, examples of each, and why the distinction is useful.Open →
• PEST analysisRecall questions on what PEST stands for, political, economic, social and technological influences on a business, how a PEST analysis feeds into strategy, and its limitations for multinational and short-term decisions.Open →
• The Ansoff matrixRecall questions on the axes and four growth strategies of the Ansoff matrix, market penetration, product development, market development and diversification, the risk in each quadrant, and the matrix's uses and limitations.Open →
• Porter's five forcesRecall questions on Porter's five forces, the threat of substitution and of new entry, buyer and supplier power, competitive rivalry, how a business uses the model to improve its position, and its limitations.Open →
• Opportunity cost, risk and uncertainty in decision makingRecall questions on opportunity cost in business decisions, the difference between risk and uncertainty, the relationship between risk and reward, reducing risk in a decision, and how owners' attitudes shape the choice.Open →
• The stages of making a business decisionRecall questions on the four stages of a structured decision-making process, defining the problem, researching the context, analysing and evaluating solutions, qualitative factors, and the benefits and drawbacks of a formal process.Open →
• Corporate planning from objectives to evaluationRecall questions on corporate planning and its six stages from gathering information and setting objectives to implementation, monitoring and evaluation, and the benefits and criticisms of corporate planning.Open →
• Handy's four organisational culturesRecall questions on organisational culture and Charles Handy's power, role, task and person cultures, which culture suits different businesses, the drawbacks of each, and why culture is hard to change.Open →
• The payback periodRecall questions on the payback period and its formula, calculating payback with constant and uneven cash inflows, why cash-short and fast-changing businesses favour it, and its main weaknesses as an appraisal technique.Open →
• Average rate of returnRecall questions on the average rate of return and its formula, calculating average annual profit and ARR, comparing ARR with a criterion rate or interest on deposit, and its advantages and weaknesses compared with payback.Open →
• Net present value and discounted cash flowRecall questions on net present value and the time value of money, discount factors and present values, calculating NPV and interpreting positive and negative results, choosing a discount rate, and the advantages and limitations of NPV.Open →
• Judging an investment decisionRecall questions on investment decisions, comparing payback, average rate of return and net present value, qualitative factors, forecast quality and sensitivity, opportunity cost, and why a business may accept a project with a poor appraisal.Open →
• Contingency planning and disaster recoveryRecall questions on business continuity, contingency plans and disaster recovery plans and the difference between them, risk assessment, testing a continuity plan, and the costs, benefits and limitations of contingency planning.Open →
• Crisis management and the response to a crisisRecall questions on crises in business and the management, communication and operational responses to them, speed and honesty in communication, product contamination and recalls, and the long-term impact of handling a crisis well or badly.Open →
• Insurance and the protection it gives a businessRecall questions on the purposes of insurance, premiums and excesses, premises, vehicle, employers' liability and public liability insurance, which cover suits different businesses, and why not every risk can be insured.Open →
• Internal and external causes of changeRecall questions on internal causes of change such as growth, poor performance, new owners and new leaders, external causes such as competition, government policy and ethical expectations, and temporary shocks versus permanent shifts.Open →
• The effects of change on a businessRecall questions on how significant change affects decision making, competitiveness, employees, the marketing and operations functions, cash flow, shareholders and customers, and why its effects are felt unevenly.Open →
• Barriers to change and resistanceRecall questions on the common barriers to change, why employees resist it, weak leadership support, unclear vision, insufficient resources and culture as barriers, and how communication and training reduce resistance.Open →
• Lewin's force field analysisRecall questions on Lewin's force field analysis, driving and restraining forces for change, how forces are scored and presented, why weakening restraining forces is preferred, and the benefits and limitations of the analysis.Open →
• Critical path analysis and the critical pathRecall questions on critical path analysis and networks, calculating earliest start and latest finish times, identifying the critical path and minimum project duration, the effect of overruns, and the benefits and limitations of the method.Open →
• Total float, free float and the use of a networkRecall questions on total float and free float, how each is calculated and how they differ, float on the critical path, the effect of delays on completion, and using a network to manage resources and project cash flow.Open →
• Monitoring change with quantitative and qualitative dataRecall questions on why change is monitored after implementation, the quantitative and qualitative measures used, and calculating productivity before and after.Open →
• Ethical treatment of workers and suppliersRecall questions on business ethics, pay gaps, working conditions, diversity, equity and inclusion, legal and ethical obligations to employees, transparent procurement, payment terms for small suppliers and ethical sourcing.Open →
• Ethical marketing and community engagementRecall questions on unethical pricing, misleading promotions and hidden fees, targeting vulnerable customers, transparent pricing, community engagement, employee volunteer programmes, local sponsorship and criticisms of corporate charitable giving.Open →
• Consumer and employee protection lawRecall questions on the standards goods and services sold to consumers must meet, the costs and benefits of consumer protection law, the national minimum wage, working time rules, employment contracts, health and safety duties and fair and unfair dismissal.Open →
• Pollution, waste and the environmental auditRecall questions on air, water and noise pollution, climate change and environmental destruction caused by business, the problems and costs of waste, environmental audits, and how reducing environmental impact can lower costs.Open →
• Sustainability, net zero and the circular economyRecall questions on sustainability and its three pillars, supply chain transparency and traceability, net zero and carbon offsetting, the circular economy and the three Rs of waste, nature positive approaches, green technology and misleading eco-claims.Open →
• ESG reportingRecall questions on what ESG stands for, the governance element, ESG reporting and the environmental measures and responsible sourcing it discloses, its use by investors, its benefits, costs and criticisms, and greenwashing.Open →

What you need to know

Answer each one before you reveal it.

Take Strategy, Risk and Managing Change further

The same content, four other ways.

Commonly confused

Pairs that lose marks when they are blurred together.

• Strategy vs Tactic

  Strategy: the long-term direction of the whole business, set by senior management, committing a large share of resources and hard to reverse. Tactic: a short-term action taken to help deliver the long-term plan, decided lower down the business and easily changed.

• Product development vs Market development

  Product development: launching a new or improved item to the customers the business already sells to. Market development: taking an existing item to a new group of buyers, such as another country, age group or customer type.

• Payback period vs Average rate of return

  Payback period: the length of time a project takes to generate enough net cash inflow to cover the cost of the initial investment. Average rate of return: the mean annual profit of a project across its whole life, stated as a percentage of the money put into it.

Questions from this topic

Each one with the model answer underneath.

1. 1

   What is business planning?

   Model answer

   Business planning is the process of setting out in advance what a business intends to achieve and how it will use its resources to get there.

2. 2

   How does planning ahead reduce the risk a business faces?

   Model answer

   It forces the owners to test their assumptions about demand, costs and cash before money is committed, so problems are found on paper rather than in the market.

3. 3

   Give two ways in which planning makes a business more likely to succeed.

   Model answer

   It sets a clear direction so effort and money are not wasted on activities that do not serve the objectives, and it anticipates resource needs so shortages do not interrupt trading.

4. 4

   Why is planning especially valuable to a start-up?

   Model answer

   A start-up has no trading history to fall back on, so the plan is the only structured test of whether the idea works before the owner's savings are committed.

5. 5

   State what is meant by risk in the context of business planning.

   Model answer

   Risk is the chance that actual results differ from those expected, leaving the business with a loss it had not allowed for.

6. 6

   How can planning reduce the risk of a business running out of cash?

   Model answer

   A forecast shows the months in which outflows exceed inflows, so an overdraft or other finance can be arranged before the shortfall arrives.

What is inside Levo

Six ways to work the same material.

Strategy, Risk and Managing Change revision questions

What does Strategy, Risk and Managing Change cover in OCR A-Level Business (H436)?

31 subtopics: business planning and the reduction of risk, the uses and limitations of a business plan, business strategy and the interdependence of business decisions, swot analysis, pest analysis, the ansoff matrix, porter's five forces, opportunity cost, risk and uncertainty in decision making, the stages of making a business decision, corporate planning from objectives to evaluation, handy's four organisational cultures, the payback period, average rate of return, net present value and discounted cash flow, judging an investment decision, contingency planning and disaster recovery, crisis management and the response to a crisis, insurance and the protection it gives a business, internal and external causes of change, the effects of change on a business, barriers to change and resistance, lewin's force field analysis, critical path analysis and the critical path, total float, free float and the use of a network, monitoring change with quantitative and qualitative data, ethical treatment of workers and suppliers, ethical marketing and community engagement, consumer and employee protection law, pollution, waste and the environmental audit, sustainability, net zero and the circular economy and esg reporting. Each one has its own page with questions and model answers.

How is Strategy, Risk and Managing Change organised?

By the OCR H436 specification, subtopic by subtopic, so it matches the order you are taught it in.