L6M2 Paper 1 FREE

A strong answer analyses four distinct areas the strategist must assess, applying each to the declining firm:

• Strategic capabilities and resources — the resources, competences and capabilities the organisation holds, benchmarked against rivals. A SWOT analysis (strengths and weaknesses) gauges whether capabilities are adequate to compete and where under-investment has eroded performance.
• The external environment — factors beyond the organisation's control, analysed through STEEPLED (social, technological, economic, environmental, political, legal, ethical, demographic). This reveals external pressures contributing to the decline (e.g. new regulation, economic shifts).
• Stakeholder expectations — the needs and influence of stakeholders. The Mendelow power/interest matrix prioritises key stakeholders (e.g. owners, major customers, lenders) whose expectations must be satisfied to restore confidence.
• Cultural and historical influences — the organisation's paradigm, past events and reputation, which shape how it is perceived and constrain the strategic options that will be accepted internally.

The best answers explicitly link each factor back to reversing the performance decline rather than describing the models in the abstract.

📋 LO: 1.1 — Evaluate characteristics of global strategic decisions in organisations.

📑 Indicative content: 1.1.4 The strategic position; 1.1.5 Strategic choices and capabilities to support.

A strong answer explains the purpose and components of each framework and how each is applied:

• STEEPLED (macro-environment analysis) — examines factors outside the organisation's control: Social, Technological, Economic, Environmental, Political, Legal, Ethical and Demographic. Used to scan the wider environment of a global supply chain (e.g. political risk and tariffs in a sourcing country, economic/currency conditions, environmental regulation), enabling the organisation to anticipate external threats and opportunities.
• Porter's Five Forces (industry/competitive analysis) — assesses competitive intensity through: competitive rivalry, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and threat of substitutes. Used to understand the attractiveness and power balance within the supply chain's industry, informing where the organisation can build or defend competitive advantage.

The distinction should be drawn: STEEPLED analyses the macro environment, while Porter's Five Forces analyses the industry/micro competitive environment; together they give a fuller picture.

📋 LO: 2.1 — Assess methods to analyse the global supply chain.

📑 Indicative content: 2.1.1 The macro environment and the STEEPLED framework; 2.1.2 Competitive forces: Porter's Five Forces Framework.

A strong answer explains and evaluates each of the three SAF criteria:

• Suitability — does the option fit the strategic/corporate objectives and address the organisation's position? It tests strategic alignment and whether the option exploits the organisation's capabilities and the opportunities in its environment.
• Acceptability — is the expected performance acceptable to key stakeholders? Assessed against return (e.g. payback period, ROI), risk, and stakeholder reactions. An option may be suitable yet rejected if returns are too low or risk too high.
• Feasibility — will the option work in practice? It tests whether the organisation has, or can obtain, the resources and capabilities (finance, people, technology) to implement it.

Evaluation (higher marks): the criteria are complementary screens rather than a mechanical scorecard — they involve judgement and trade-offs, results can conflict (a suitable, feasible option may be unacceptable), and they rely on the quality of the underlying environmental and capability analysis.

📋 LO: 3.2 — Evaluate how organisational strategy can be implemented in supply chains.

📑 Indicative content: 3.2.2 Strategy evaluation: suitability, acceptability and feasibility.

A strong answer examines four distinct hedging methods, explaining how each mitigates foreign-exchange (FX) risk for the importer:

• Forward contracts — an agreement to buy currency at a fixed rate on a future date. It locks in the cost of the imported materials, removing uncertainty and aiding budgeting, though the organisation cannot benefit if the rate moves favourably.
• Futures contracts — standardised, exchange-traded contracts to buy currency at a set price. They offer a liquid, transparent hedge (with margin requirements) but are less flexible than tailored forwards.
• Currency options — give the right, but not the obligation, to exchange currency at a set rate for a premium. They cap downside risk while retaining upside if rates move favourably — useful when future demand/exposure is uncertain.
• Swaps or contracts for difference (CFDs) — derivative arrangements to exchange cash flows / trade the difference between opening and closing rates, allowing the organisation to manage exposure without physical delivery.

Credit is also given for natural hedging (e.g. invoicing/sourcing in the home currency). The best answers weigh certainty against lost upside and apply the methods to protecting the importer's margins.

📋 LO: 4.3 — Evaluate different tools, techniques and financial products for managing financial risks within global supply chains.

📑 Indicative content: 4.2.5 Foreign exchange risk; 4.3.2 Using forward contracts, options, swaps and futures to hedge financial risks.