3.1 Flashcards
what is a mission statement
sets out the purpose and primary objectives of a business
what does SMART stand for
specific
measurable
achievable
relevant
timed
what are the limitations of mission statements
can be unrealistic and over optimistic
waste of management time and resources
lead to conflicts and inconsistencies when not properly written
can be ambiguous
can become obsolete as the business develops but the mission statement stays the same
what are porter’s 4 generic strategy models
cost leadership
cost focus
differentiation leadership
differentiation focus
what is differentiation leadership
involves making your products/services and business different from your competitors
what is cost leader
aim is to become the lowest cost producer in the industry, increasing profits by reducing costs to increase market share by charging lower prices while still making a profit
what is cost focus
when a business takes a lower cost advantage in one or more market segments
what is differentiation focus
a business seeks to differentiate its products in one or more target market segments
what are the 4 main components of ansoffs matrix
market penetration
market development
product development
diversification
what is diversification
when a business markets a new product in a new market
what is market development
uses an existing product trying to be sold in new markets
what is market penetration (eg)
increasing sales in an existing market (eg loyalty schemes)
what is product development
new product/service developed for an existing market
what are the advantages of ansoffs matrix
takes into account internal & external factors
builds on strengths
explores opportunities
what are the disadvantages of ansoffs matrix
depends on situation, objectives and resources
what are the 4 components of boston matrix
star
cash cow
dog
question mark/problem child
why should a business use the boston matrix
it can tell a business where to invest their budget and whether their products are worth continuing
what is a question mark/problem child
products with low market share but high market growth they have often just been launch so are building customer loyalty so should be invested in as they could become a star
what is a cash cow
products with high market share but low market growth, they have reached maturity but should still be continued until they become dogs
what is a dog
products which have low market share and low market growth, these should be discontinued as they likely won’t be making a profit
what is a star
products with high market share and high market growth, these will continue to grow and gain market share increasing sales as they develop
what are the limitations of the boston matrix
there can be a middle ground making some products hard to categorise
the market is not clearly defined
high market share doesn’t equal high profits
what are focus strategies (porter)
concentrate on particular niche markets and by understanding the dynamics of that market and the unique needs of the customers within it
how do you calculate capacity utilization
current output/maximum output x 100
what is architecture
a structure of relational contacts within or around the organization with customers, suppliers and with employees
why can you not have a reputation without first having architecture
it is built on architecture
what is a reputation
this includes customers own experience, quality signals, guarantee, word of mouth, warranty, association with other brands and staking the reputation once it’s established
what is swot analysis
a method for analysis a business, its resources and its environment, commonly used as part of strategic planning
what does SWOT stand for
strengths
weaknesses
opportunities
threats
what are the advantages of swot analysis
identifying the strengths of the business
identifying threats
help the business prioritize issues that are key to success
look at opportunities that are available for the business
what are the limitations of using swot
identifies threats doesn’t give solutions
may oversimplify problems
takes time & money to conduct
what does the P stand for in pestle
political- tax policy, trade restrictions, tariffs, political stablilty
what does the first E stand for in pestle
economic- economic growth, interest rates, exchange rates, inflation rates
what does the S stand for in pestle
social- health consciousness, population growth rate, age distribution, career attitudes
what does the T stand for in pestle
technology- R&D activity, automation, technology incentives, rate of innovation
what does the L stand for in pestle
legal- employment laws, trading laws, marketing restrictions, up and coming laws
what does the second E stand for in pestle
environment- environmental regulations, eco-customers, wastage, recycling laws
what are porters 5 forces
competition, bargaining powers of customers, threat of new entrants to the market, threat of substitute products, bargaining powers of suppliers
what influence does competition have on the market
price wars, investment in innovation + new products, intensive promotion, higher spending on advertising -> all of these increase costs & lower profits
what influence does bargaining power of customers have on the market
pressure to drive down prices, increase quality -> reduce overall profits in an industry
what influence does threat of new entrants to the market have on the market
if new businesses enter the market they will gain market share and rivalry will intensity, the position of existing firms is stronger if there are barriers to entering the market, barriers to entering determind the threat of new entrants
what influence does threat of substitute products have on the market
this is a product that can be regarded as something that meets the same need, the extent of the threat depends upon; how well the price and performance match that of the industries product, the willingness of customers to switch -> customer loyalty -> switching costs
