(2)Business Objectives And Strategy Flashcards
What is a mission statement?
Overall purpose of the business
What is a business aim?
What you are trying to achieve over time
What is a business objective?
More specific and short term
What are the point of objectives,aims and mission statements?
- remind people why the business exists
- to motivate staff
- makes businesses look good
- Unique selling point for the business
Example of a business aim?
Maintain long term sustainable growth
What is a strategic objective?
Slightly longer term - “to reduce costs by 10%”
What is a tactical objective?
Very short term and very specific - “to sell 100 units this month” concerned with the day to day running of the business
What are SMART targets?
Specific Measurable Achievable Realistic Timed
What are PIGSS targets?
Profit
Increase market share
Growth
Survival
What is a co-operative?
- owned by its members
- seek to provide a service that its members need
- members seek to keep prices affordable
- availability is high
- members get a % of the profit
What are the four factors of production?
- Land
- Labour
- capital
- enterprise
What is an external audit?
Looks at the opportunities open to the business and the threats which it faces in its external environment
What is the primary sector?
Land based , production and extraction of raw materials.
What is the secondary sector?
Capital based , Manufacturing the raw materials into products
What kids the tertiary sector?
Service based selling the products that the secondary sector produces
What is a social enterprise?
Often called the “third sector”
- it is a business that exists to help people
What are the benefits of CSR?
Forces innovation
Efficiency
What is a corporate social objective (CSR)?
- being seen as a business that cares
- environment and the community.
Why do businesses set CSR?
- many customers expect it
- moral thing to do
- media expects this
- long term reduces costs
What are the disadvantages of being CSR?
Costs a lot
Time consuming
It is relevant?
Need more staff
What is a business plan?
Is a plan of action. It tells you exactly what you are going to do over the next 12 months
What are the benefits of business planning?
- helps guide you through the first year of a business
- helps control costs
- helps in applying for a bank loan
- helps you think carefully about whether there is a market for your product
- helps achieve aims and objectives
What are the drawbacks of a business plan?
- doesn’t guarantee success
- plan may be too rigid
- high expectations may cause over spending
- may exaggerate goals
What is a quantifiable risk?
Risks that can be measured (financial)
What is a non-quantifiable risk?
Cannot be measured (emotional)
What is porters 5 forces model?
Is a tool for analysing competition of a business
It examines five forces that determine the competitive intensity of an industry in terms of profitability.
What are the five forces in porters model?
- threat of new entrants
- threat of substitutes
- bartering power of buyers
- bargaining power of suppliers
- degree of rivalry
What is an opportunity cost?
The cost of the next best alternative that is given up.
What is contingency planning?
A plan devised for if there os an outcome other than what is in the usual (expected) plan
What is forecasting?
Using existing data to predict future trends
What is qualitative forecasting?
Opinion based - Delph technique (expert opinion)
- Brainstorming
- consumer tastes and opinions
- leading academic opinions
- staff opinions
What is time series analysis?
Calculates the average over a time period
E.g. seasonal changes
What are the limitations of forecasts?
- doesn’t guarantee future success
- doesn’t take into account changes in business objectives
- cant assume past trends will continue
What is a decision tree?
Mathematical model used too help managers make decisions.
It uses estimates and probabilities to calculate likely outcomes
Helps to decide whether the net gain from a decision is worthwhile
What are the benefits of using decision trees?
- Potential options and choices are considered at the same time
- the “risk” of the options can be addressed
- easy to understand results
What are the disadvantages of decision trees?
- probabilities are just estimates
- uses quantitative data and ignores qualitative
- doesn’t actually reduce the risk
Examples of some decision making tools?
- SWOT
- PEST
- Ansoffs matrix
- Market research
What does SWOT stand for?
Strengths, weaknesses, opportunities and threats
Is a new product is entering an existing market then what is it called in Ansoffs matrix?
Product development strategy
Existing market and existing product - market penetration strategy
New market new product - diversification strategy
New market existing product - market development strategy
What is another word for business functions?
Departments
What are different business functions?
Marketing Production and operations Accounting and finance HR Customer service
What are the benefits of international trade?
- larger target market
- Economies of scale
- international trade
- business growth
What are the disadvantages of the EU?
- No global trade
- increases costs (minimum wage)
- problems with free movement of people
- too much red tape
- membership fees
What are the benefits of the EU?
- removal of trade barriers
- reduction of business costs
- greater business efficiency
- elimination of anti-competitive practices
- extended growth
What are the problems with exporting abroad?
- legal restraints
- transportation
- payment methods
- language barriers
- different cultures
What factors effect globalisation?
- technological change
- cost of transportation
- deregulation of business (privatisation)
- Liberalisation of trade
- consumer tastes
What are the disadvantages of globalisation?
- weakens cultures
- inequality
- inflation
- trade imbalances
- unemployment
What is a joint venture?
Where two or more businesses pool their resources and expertise to achieve a particular goal. The risks and rewards of the enterprise are also shared
What are the disadvantages of joint ventures?
- expensive to turn the idea into reality
- often better if you did it alone
- bad PR is the alliance fails or breaks down
What is a strategic alliance?
An arrangement between two companies that have decided to share resources to undertake a specific, mutually beneficial project and less permanent than a joint venture
What are the advantages of Ansoffs matrix?
- focused approach
- growth potential
- presentable to stakeholders
- sets aims and objectives
What are the disadvantages of Ansoffs matrix?
- isolationist approach
- simplistic and overly optimistic theory
- paralysis from analysis
- doesn’t take into account competitors and market conditions
What does the operations department do?
They plan and organise production manufacturing .
What might be an operations objective?
To break even
What factors may affect operations objectives?
- size of the business
- the economy
- the performance of the competition
What is adding value?
An improvement or addition to something that makes it worth more
What is job production?
What are the advantages and disadvantages of Job?
Making a unique and specific product to the customers order
Advantages - giving a unique service, meets individual requirements
Disadvantages - takes time, expensive, need to train staff
What is batch production?
What are the advantages and disadvantages of batch?
Making a specific quantity of a product
Advantages - no storage, quicker than job production, economies of scale
Disadvantages - down time between batches, timings have to be correct
What is mass/flow production?
What are its disadvantages and advantages?
Making very large quantities of the same product on the one machines
Disadvantages - expensive machinery
Staff needs to be retrained
Limited product choice
Advantages - economies of scale, more output, more efficient and reduces labour costs
What is specialisation?
Where a firm or country focuses on the production of a small range of products
What is the division of labour?
Where production is split up into sections and an individual worker would undertake that particular section in production
What are the Advantages and disadvantages of division of labour?
Advantages - more efficient, higher output, higher quality
Disadvantages - staff need training, a bad person effects everyone, lack of replacements, lack of creativity
Why is good customer service good?
- increased sales
- customer retention
- enhanced public image
What are the problems in providing good customer service?
- It may be taken as standard (not Usp)
- costs money
- need extra staff
- gives customers a sense of entitlement
What is contingency planning?
A plan B in case something goes wrong
What is critical path analysis?
Measures the most efficient way of completing a project
What are the advantages and disadvantages of critical path analysis?
Advantages - reduces the risks and costs
Encourages careful assessment of the project, helps identify which activities have float
Disadvantages - relatability of CPA is based on estimates, does not guarantee the success of the project.
What is PERT?
Program
Evaluation
Review
Technique
How is the estimated duration of a project calculated?
(Optimistic time + 4) x (likely time) + (pessimistic time)/6
How could productivity be increased?
- make the workplace more efficient through ergonomics
- reduce the number of distractions
- offer support and set realistic goals
- have the right equipment for the job
Examples of internal economies of scale?
- purchasing
- marketing
- managerial
- financial
- risk
Example of external economies of scale?
- transport
- relocation of suppliers
What are diseconomies of scale?
When a very large business activity makes your average costs go up
How do you work out break even?
Fixed costs + variable costs
What is margin fo safety?
How many products are you above the breakeven point
What is quality control?
Checking the quality once the product has been made - sampling
What is quality assurance?
Putting systems in place in advance to guarantee the quality whilst the product is being made
What is lean production?
Being as efficient as possible with minimum wastage time, money, stock. Helps ensure efficiency and minimum cost
What is JIT production?
Involves keeping stock to a minimum and the raw materials ordered when they are needed. It means only buying supplies when you need them
What is total quality management (TQM)?
Everybody is involved in checking quality when they work. The product will move down the line when it heads been through checks
Advantages and disadvantages of TQM?
Advantages
- lowers costs
- reduces problems with customers
- increased customer satisfaction
Disadvantages
- increases time
- increases labour costs
- machinery may be expensive
How do you calculate the average level of stock?
Max level + min level of stock/2
What are examples of external standards?
BS,EN and ISO
BSI - ensures the quality of the product
EN - made within the EU
ISO - so the consumer knows its gone under quality checks
What is bench marking?
Comparing a business with that of a competition that is usually the market leader, in order to improve its own practices. It involves setting standards for the performance of the business.
How do you work out wastage rate?
Rejects/total number of products x 100
What is zero defects?
Where the system is so efficient, there is a guarantee of zero mistakes
What are quality circles ?
Team of workers review last weeks performance and suggest Improvements.
What is capacity utilisation?
What % of potential output is the business currently using
How do you work out capacity utilisation?
Actual output/potential output x 100
How do you work out productivity?
Number of goods produced/average number of employees x 100
What are the advantages of being at full capacity?
- production costs may fall
- prevents wastage
- increases the profitability of the business
What are the disadvantages of being at full capacity?
- customers may have been turned away
- communication problems
- no flexibility for extra demand
What is logistics?
Controls the effective flow and storage of goods between the point of origin and the point of consumption
What is procurement?
The process of selecting suppliers whom you can buy from, establishing the payment terms and negotiating the contracts and actual purchasing goods
What is outsourcing and subcontracting?
Outsourcing - paying a factory to do the work
Subcontracting - employing a firm or person outside the company to do the work
What is off-shoring and re-shoring
Off-shoring - some of the companies processes move abroad
Re-shoring - moving the business back to the country of origin
What are operational objectives?
Specific production targets set by an organisation to ensure that its company’s goals are achieved.
What are cost and volume targets?
Productivity and efficiency, unit costs per item.
What are quality targets?
scrap/defect rates
What is ergonomics?
The process of designing or arranging workplaces and systems so that they fit the workers who use them
What is waste management?
Actions required too manage waste from its inception to its final disposal
What is hazardous waste?
Waste with potential threats to public health or the environment.
What are problems with waste management?
Costs of green technology
Situations are long in the future
Waste management costs are high
Waste management is “a business” as well and need paying
When might you use porters five forces model?
When a business is thinking of moving into a new sector.
What is management by objectives?
System where managers and employees define and agree a series of objectives for the business
What are the advantages of Management by objectives?
- improve motivation of the employee
- involves management and employees in communication about the targets and increases interaction and involvement for both groups
What is internal audit?
- allows the business to assess its strengths and weaknesses in relation to its competitors across the whole of the business.
Why is setting objectives good?
- it provides a greater sense of direction for the business
- provides a possible motivational force for al employees
- provides an aide to controlling existing and future operations in the business
What is an objective?
Set for a business to reach a particular goal.
What is a strategy?
Is an action plan that the business puts in place to reach its objectives.
What does PEST stand for?
Political
Economic
Social
Technological
What is a business plan?
A formal written document that explains in detail how a business is going to achieve its objectives.
What are the benefits of a strategic review?
- enables analysis of the key performance indicators from all of the four functional areas in the firm
- enables a consensus among senior managers
- identification of “good practice”
Why is a plan important for the business’s stakeholders?
It allows them to see the direction and future plans of the business.
What are the advantages of a business plan?
- gives the business a sense of direction
- forces an evaluation of current strategic and tactical objectives
- forces senior managers to explicitly consider the constraints faced by the business in reaching its objectives
- encourages communication
What are the disadvantages of a business plan?
- opportunity cost
- time consuming
- may not allow flexibility
What is an opportunity cost?
The cost of the next alternative foregone. The opportunity cost of planning is that the time spent on it could have been spent on some other activity
What is a plan do review process?
A method used to achieve key departmental tasks which should mean that the business reaches its strategic objectives
What are the advantages of plan do review process?
- the approach is methodical
- more focused on achieving results
- means deviations from the plan can be identities and corrected
- encourages continuous improvement to the business
What are the disadvantages of plan do review process?
- lengthy process
- opportunity cost
- inflexible
- Some employees may dislike the ongoing review process of their work
What is contingency planning?
- planning for “what will happen if things go wrong?” This means that an agreed course of action is in place and is ready to be used if necessary.
What is “firefighting”
Where a manager spends time and other resources trying to fix unforeseen problems and “emergencies.” With appropriate contingency planning this sort of situation can be avoided
What are some solutions of a crisis?
- ensuring that insurance policies are up to date
- keeping spare cash
- private health care for key employee
What are the three elements in an effective response to a crisis?
Operational response
Management response
Communications response
What is uncertainty?
The inability to calculate the costs and benefits of a decision precisely.
What is risk and what is reward?
Risk - the chance or possibility to an adverse occurrence
Reward - the possible return that a particular activity may make
What is a quantifiable and unquantifiable risk?
Quantifiable - Likelihood of a predictable rise occurring. It is possible to put a value on this sort of risk
Unquantifiable - the risk of an event that is unexpected. Sometimes referred to as “the unknown unknowns” it is not possible to put a value on this sort of risk.
What are some examples of qualitative forecasting?
- Delphi technique (expert from information)
- brainstorming
What are the 4 different outcomes in Ansoffs matrix?
Market penetration
Market development
Product development
Diversification
What are the limitations of forecasts?
- any forecast will only be as reliable as the data that is used to formulate it
- past performance is only an indicator
- not 100% accurate
- doesn’t take into account any changes in the objectives of businesses
What is a decision tree?
Technique used to aid the decision making process
What are the two aspects of a decision tree?
- the probability of a particular outcome
- estimates monetary reward for the chosen choice
What is an advantage of decision trees?
- technique is usually drawn making it a visual presentation.
What do squares and circles represent in decision trees?
square - represents a decision
Circle - represents the possible outcomes once an option is selected
What are the benefits of using decision trees?
- it is simplistic and a visual method
- relatively quick and therefore cost effective
- takes into account the level of risk
What are the limitations of using decision trees?
- probabilities may be wrong (not 100% accurate)
- when picking probabilities management may favour one more than another
- EMV (estimated monetary value) may be difficult to estimate as other variables come into play.
In decision trees how do you calculate the “expected values”?
Estimated monetary value x probability
