Analyse a growth decision using case constraints

A growth decision answer tests each option against the constraints in the case, then recommends one and says what would change the answer. It uses what you learned about internal and external growth, scale, ownership and management and the stated ownership form.

How do you analyse a decision step by step?

1. List the options the case offers.
2. List the constraints: money, time, control, demand, skills.
3. Test each option against each constraint, using a figure where possible.
4. Compare the options on the constraints that matter most.
5. Decide and state the condition under which another option would be better.

The business case-answer planner follows the same chain, so it is a useful way to plan before you write.

Worked example

Puan Rosnah runs Dapur Sedap Catering as a sole trader in Shah Alam. Her kitchen can handle 30 events a month, but demand is 40, so she turns away 10.

Each event earns RM600 profit. She has RM90,000 in cash. She wants to be ready before the wedding season in 4 months, and she wants to keep personal control of food quality.

• Option A (internal): build a second kitchen for RM150,000. The case states it takes 8 months.
• Option B (external): buy Katering Mesra, a small rival with a ready kitchen, for RM110,000. It already handles 12 events a month with its own customers.

Step 1, funding gap. A: RM150,000 − RM90,000 = RM60,000, which is 40% of the cost (60 ÷ 150). B: RM110,000 − RM90,000 = RM20,000, which is 18.2% of the cost (20 ÷ 110, to one decimal place).

Step 2, time. A takes 8 months and the season starts in 4, so it misses the deadline. B has a working kitchen, so it can be ready in time, provided the purchase is completed quickly.

Step 3, extra profit and recovery. A would use the 10 turned-away events: 10 × RM600 = RM6,000 a month, or RM72,000 a year, so RM150,000 ÷ RM72,000 is about 2.1 years. B adds 12 events: 12 × 600 = RM7,200 a month, or RM86,400 a year, so RM110,000 ÷ RM86,400 is about 1.3 years. These figures assume Katering Mesra’s customers stay.

Step 4, control and quality. A keeps everything under Puan Rosnah’s own methods. B brings in another kitchen’s staff and habits, which may weaken her control.

Step 5, judgement. Option B is the stronger choice for Dapur Sedap because it is the only option that is ready before the wedding season and it needs a smaller funding gap. It is worth choosing only if Katering Mesra’s customers stay after the takeover and Puan Rosnah can keep quality under control. If most of those customers would leave, Option A becomes the better long-term route even though it is late for this season.

The mistake to watch for

A weak answer lists pros and cons and then stops, or decides using one constraint only.

Mistaken answer: “Option A is better because Puan Rosnah keeps control. Option B is faster. Both have advantages.”

There is no test against the deadline or the cash, and no verdict.

Correction: “Option A keeps quality in her hands, but the 8-month build misses the 4-month deadline and leaves a RM60,000 funding gap. Option B costs RM110,000 and is ready sooner, so it is preferable provided the customers stay.”

Check yourself

1. A business has RM40,000 cash. An option costs RM65,000. What is the funding gap, and what share of the cost is it?

2. Name two constraints in the Dapur Sedap case that favour Option B.

3. Finish this conclusion with a condition: “Option B is more suitable than Option A because …”

Where this leads next

Now try the full growth, scale and ownership practice set, and keep a mistake log of where your reasoning drops the case. Then move on to objectives and stakeholders, where the same constraints meet competing interests.

When you can analyse the facts but struggle to commit to a verdict, our teachers can work through that with you in online one-to-one Business tuition.