Minimum Wage Rate Current nmw rates

There are different levels of NMW, which depend on your age. The rates from 1 October 2008 are:

• adults (which means people aged 22 and over) receive the full rate of £5.73 an hour

• workers aged 18 to 21 inclusive, receive a rate of £4.77 an hour (often known as the developmental rate)

• young people receive £3.53 an hour (often known as the youth rate)

A young worker is someone who is older than school leaving age and younger than 18. You are under school leaving age until the end of summer term of the school year in which you turn 16.

Source: www.direct.gov.uk

ANSOFF MATRIX

Definition

The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy.

Looking at my business – “Victorio Cakes” it is difficult to say what sector it should go to. From one point of view, it cannot go into the market penetration sector, because those businesses that go into this sector sell existing products into existing markets, where there are barriers to entry due to high initial investments needed for promotion, and where there are many big firms trying to compete on quality, brand loyalty and anything they can, as well as carrying out aggressive promotional campaigns. This could be suitable for such large firms, but not “Victorio Cakes”.

Neither “Victorio Cakes” can go into the market development sector, because my business is not seeking to create a new segment on the custom-made cake market, sell existing products into existing markets and use various pricing strategies to encourage more customers.

“Victorio Cakes” could have been fitted in the product development sector, because it is trying to introduce slightly different products into existing markets, but my business has not entered the development stage yet, because I has not even been started yet, which makes it impossible to put it in this section too. However, this is the closest example that nearly fits my business- “Victorio Cakes”.

There’s also the forth sector called diversification, which involves those businesses inventing new products and trying introducing them in completely new markets, which although it is risky, can actually be very effective. However, this doesn’t fit “Victorio Cakes”, because it doesn’t involve inventing a completely new product, neither it involves entering a completely new market.

It is very difficult to judge what category “Victorio Cakes” suits best, because ideally it doesn’t fit any category at all, because I haven’t started up this business yet, and it’s too yearly at this stage to decide what particular sector it should go into, because it is also unclear how much of the investments might be needed to finance my project.

The Matrix Itself The Boston Matrix categorizes opportunities into four groups, shown on axes of Market Growth and Market Share:

Similarly to the Ansoff Matrix, with Boston Matrix it is also very difficult to decide where my business- “Victorio Cakes” should go to. For instance, it cannot go to the ‘Stars’ cell, because it includes large businesses with high growth, which have very big budgets, compete heavily with the other firms on the market and invest a lot of money into their development, in order to gain as much shares in the market in order to dominate. From this it can, therefore, be seen that “Victorio Cakes” aim is clearly different from what those firms that are in the ‘Stars’ cell.

Also, “Victorio Cakes” cannot be put into the ‘Cash Cows’ cell, because this cell is for firms that are very similar to those in the ‘Stars’ cell, but with a much lower rate of growth, and they need a lot of investments in order to keep themselves going and preventing losing a share on the market they are at. These firms tend to be very large, also with huge budgets, which “Victorio Cakes” isn’t.

Neither “Victor Cakes” fits into the ‘Dogs’ cell, because it doesn’t go into the category of those firms that are not really worth investing into, where firms have very low shares on the market with a low growth or very niche market. Such businesses can still make some profits, but they will be relatively low, and just covering the break-even point or total costs of the production. The cycle of such firms is not very long, and they usually exist for a certain period of time until they reach the point of penetration of the market or see no interest or very low demand for their goods and services, which forces them to bankrupt or close down. “Victorio Cakes” clearly isn’t that type of business.

One of the cells that “Victorio Cakes” is most close to fit into, is ‘Question marks’, because it involves such firms and businesses that have relatively low share on the market they are at, have relatively limited budgets, and exist in the highly growing markets, where a certain degree of investment is needed, in order for such businesses to be competitive in relation to the other firms on the market.

Dogs - Unsurprisingly, the term "dogs" refers to businesses or products that have low relative share in unattractive, low-growth markets. Dogs may generate enough cash to break-even, but they are rarely, if ever, worth investing in.

Using the BCG Box to determine strategy

Once a company has classified its SBU's, it must decide what to do with them. In the diagram above, the company has one large cash cow (the size of the circle is proportional to the SBU's sales), a large dog and two, smaller stars and question marks.

Conventional strategic thinking suggests there are four possible strategies for each SBU:

(1) Build Share: here the company can invest to increase market share (for example turning a "question mark" into a star)

(2) Hold: here the company invests just enough to keep the SBU in its present position

(3) Harvest: here the company reduces the amount of investment in order to maximise the short-term cash flows and profits from the SBU. This may have the effect of turning Stars into Cash Cows.

(4) Divest: the company can divest the SBU by phasing it out or selling it - in order to use the resources elsewhere (e.g. investing in the more promising "question marks").