3.1 Flashcards
What is a mission statement
The overriding purpose of the business supports its vision for the future
Criticisms of mission statements
-Often too vague and general
-Not always supported by actions of the business
Define Corporate objectives
Specific performance goals derived from a firms overall aim, provide strategic focus, measure performance and inform decision making
Define Functional Objectives
Day to day goals of departments derived from corporate objectives. Must be carefully aligned across departments so everyone is working towards a shared goal.
Factors influencing business objectives
Size and age of the business, legislation, competition etc
What is Ansoff’s matrix?
Tool for business with a growth objective, used to identify an appropriate corporate strategy and identify risks.
What are the 4 areas of Ansoff’s matrix?
-Market penetration
-Product development
-Market development
-Diversification
Define Market penetration
Existing products into existing markets - least risky strategy
What is the aim of market penetration?
To increase market share by:
-getting existing customers to buy more
-widen range of existing products
Evaluating market penetration
-Businesses focus on markets and products it knows well
-Exploits insights on what customers want
-Unlikely to need market research
Define product development
A growth strategy where a business aims to introduce new products into existing markets
Evaluating product development.
-Plays on strengths of an established business
-Emphasis on effective market research and innovation
-Exploits existing customer bases
Define market development
A growth strategy where the business seeks to sell its existing products into new markets
Approaches to market development
-Entering new geographical markets
-Reposition product
-Seek complementary locations
Evaluating market development
-Logical strategy where existing markets are saturated or in decline
-Existing products may not suite new markets
Define Diversification
Where a business markets new products in new markets
Evaluate Diversification
-Risky strategy as no experience, few economies of scale
What are some approaches to diversification?
-Innovation and R&D
-Acquire a new business in the market
Define competitive advantage
An advantage over competitors gained by offering consumers greater value by means of lower prices or by providing greater benefits and services that justifies higher prices
What is a low-cost strategy?
Become the lowest-cost operator. Involving producing on large scale enabling the business to exploit economies of scale.
Features of low-cost operators
-high levels of productivity & efficiency
-High capacity utilisation
-Bargaining power
What is differentiation?
Aiming to offer a product that is distinctively different from competition, with the customer valuing the differentiation
What are some ways to achieve differentiation?
-Superior product quality
-Branding
-Wide distribution channels
-Sustained promotion
What is swott analysis
It helps a business assess its competitive strengths and the nature of its external environment
What does swot stand for?
-Strengths
-Weaknesses
-Oppotunities
-Threats
How do you assess opportunities and threats?
-How to take advantage of opportunities
-How to protect against threats
-Role of risk management
Advantages of SWOT analysis?
-Logical structure
-Focuses on strategic issues
-Encourages analysis f external environment
Weaknesses of swot
-Lacks focus
-Becomes out of date quickly
How can we asses strengths and weaknesses?
-Competitive advantages
-Key performance indicators
What are strategic objectives?
Focused on long-term, higher risk & uncertainty, difficult to change, likely to involve significant investment
What are tactical objectives?
Focused on short term, relatively low risk, realistic & achievable, Easy to change
Key benefits of cost efficiency
-Lower unit costs
-Improved cash flow
-Higher return on investment
Employee welfare objectives
-Staff retention
-Quality of customer service
What are customer satisfaction objectives?
-Customer service
-Quality
What are social objectives?
-Corporate social responsibility
What is PESTLE analysis?
A framework for assessing the key features of the external environment facing a business
What does PESTLE stand for?
Political, Economic, Social, Technological, Legal, Ethical/Environmental
PESTLE: Example of political factors?
Competition policy, Industry regulation, Gov spending & tax policies.
PESTLE: Economic factors
Interest rates, Consumer spending & income, Exchange rates, Business Cycle (GDP)
PESTLE: Social factors
Demographic change, Impact of pressure groups, Consumer tastes & fashions, Changing lifestyles.
PESTLE: Technological factors
Disruptive technologies, Adoption of mobile technology, New production process.
PESTLE: Legal factors
Employment law, Minimum wage, Health & Safety laws, Environmental legislation
PESTLE: Ethical/ Environmental factors
Sustainability, Tax practises, Ethical sourcing, Pollution & carbon emissions
What are Porters 5 forces?
Power of suppliers, Threat of substitutes, Power of customers, Threat of new entrants, Intensity of rivalry
SWOT: Examples of strengths
Trusted, reputable brand recognised by many
SWOT: Examples of weaknesses
-Cash flow concerns
-Lower profits than competitors
SWOT: Examples of opportunities
Expanding markets
SWOT: Examples of Threats
-Declining market
-Increased competition
What is a Cost Leadership approach?
An approach taken by business that compete on price, and seek to be cheapest retailer or producer within the market
What is the differentiation focus approach?
An approach taken by businesses which compete in terms of benefits offered to customers from the purchase of its products or services
Benefits of Porters 5 forces model
-Helps gain competitive advantage
-Shows potential market entrants & how profitable the market is & where best to position
Define Star product
High growth rate and high level of market share
-Require ongoing investment if they want to be cash cows
Define Cash cow product
-Low growth market with high market share
-Can be used to fund development of other products
Define Question marks
-High growth low market share
-Requires significant investment
-Risk they may become dogs
Describe Dog products
-Low growth market with low market share
-Divest/phase out products
-Use remaining profit to be reinvested in business
Define Distinctive capability
When a businesses has a particular strength it is very difficult for competitors to copy
Examples of distincitve capabilities
-Operational skills & expertise in the business
-Relationships & networks
-Reputation and image of the business
