3.1 Flashcards
what is the point of corporate objectives?
Aims and objectives serve as a guide for the businesses’ overall strategy and direction, helping to focus efforts and resources toward a common purpose
what is an aim?
What the business is looking to achieve in the long term?
Often expressed as an overall vision and describes the businesses reason for being
What is a Mission Statement?
An expression of a business’s overall aim as well as its core values and context
Often expressed in inspirational terms to provide direction and a common purpose for employees
what is a corporate objective
The specific performance goals set by senior management for the business to achieve over time
Corporate objectives may focus on achieving specified levels of market share , profit, sales growth or new product/market development
what is a functional objective
The **day to day goals **of functions or departments within the business
what does the SMART stand for in smart objectives
Specific
Measurable
Agreed
Realistic
Time-bound
what is Ansoff’s matrix?
Ansoff’s Matrix is a tool for businesses with a** growth objective**
It is used to identify an appropriate corporate strategy and identify the level of risk associated with the chosen strategy
ansoffs matrix
market penetration
- existing products existing market
- done by encouraging : More regular use of the product
Increased usage of the product - least risky
ansoffs matrix
Market development
- new market same product
- can be done by : repositioning and seeking complementary locations
pro: know the product -> expertise allows for more effective marketing and sales strategies in the new market.
con: risky ->lose money
ansoffs matrix
Product Development
- new product existing customers
pro: meets changing customer needs -> enhance customer loyalty -> repeat purchase
con: lots of r and d -> expensive -> may not make that money back
ansoffs matrix
diversification
- new product new market
pro: spread risk -> protects business from product and market related downturns -> less dependancy on single revenue stream
con: High Complexity and Cost: -> requires most investment and research (building new distribution channels) -> cash flow problems / covering day to day expenses
what is porters strategic mix
Porter’s Generic Strategic Matrix identifies a range of strategies a business might adopt considering price product anf scope
porters strategic mix
cost leadership
-** cost** compentitive advantage
pro: By minimizing costs -> company can offer lower prices than competitors -> attracting price-sensitive customers -> potentially increasing market share.
pro: create significant barriers to entry for new competitors-> as they may struggle to match the low costs and prices.
con: emphasis on cost-cutting may limit the company’s ability to invest in innovation and new product development -> potentially leading to stagnation.
differentiation
- differentiation competitive advantage
pro: can foster brand loyalty among customers -> can lead to repeat purchases and positive word-of-mouth -> repeat purchases and less money on marketing
con: can be costly, as it may require investment in research, development, design, marketing, and branding -> This can erode profit margins and increase the risk of financial strain. ->** bad dividends / cant sustain differentiation **
what is portfolio advantage
carrying out a detailed evaluation of its full range of products in order that appropriate strategies may be identified and pursued
what is the boston matrix
** portfolio analysis tool** that considers the relative market share of a firm’s products and the rate of growth within the market in which each product is sold
pro:helps evaluate their product portfolio by identifying which products generate the most value and which ones may require further investment or divestment.
con:can be subjective and may vary depending on the criteria used for measurement. Different interpretations or biases may lead to inconsistent results and decision-making.
what is a distinctive capability?
When a business has a particular strength that is very difficult for competitors to copy, it has a distinctive capability
The Effects of Strategic Decisions on Resources
Withdraw an obsolete product from the sale
- Fewer workers required as output is likely to be lower -> so redundancies may be needed -> Redundancy payments or retraining of staff may incur significant short-term cost
The Effects of Strategic Decisions on Resources
Merge with a competitor
- Where staff roles are duplicated redundancies or redeployment may be required
- Duplicated capital equipment and property may be sold to create income
- Techniques and knowledge can be shared between former rivals
what is SWOT analysis
SWOT Analysis is an analytical tool used by businesses to identify:
- Internal strengths and weaknesses
- External opportunities and threats
pros of swot analysis
- Strategic Planning: highlights their strengths and weaknesses -> more informed decision making -> less risk
cons of swot analysis
- lack of prioritasion ->spread too thin to make an impact -> no competitive advantage
what is PESTLE?
PESTLE analysis examines the external factors that are likely to impact the activities and outcomes of a business
what does pestle stand for?
Political
Economic
Social
Technological
Legal
Environmental
pro of PESTLE analysis
PESTLE analysis provides a comprehensive overview of external factors affecting a business ->helps businesses gain a holistic understanding of their operating environment -> enabling informed decision-making and strategic planning -> proactive approach allows businesses to adapt to changes in the external environment and capitalize on emerging trends, -> long-term sustainability and competitiveness.
con of PESTLE
can be overwhelming and time-consuming
Analyzing each factor comprehensively requires significant resources and expertise
may lead to analysis paralysis or superficial assessments, limiting its effectiveness
suboptimal strategies and missed opportunities
what are porters 5 forces?
Porter’s Five Forces identify the key pressures on an industry that impact the ability of a business to compete with rivals
porters 5 forces
Industry Rivalry
When there are many competitors selling similar products, the business will have little power
Many rivals are trying to get a more significant share of the market
Customers have a lot of choices and can shop around
When a business offers products in an industry with little or no competition it has more power, can use premium pricing and dominate the market
porters 5 forces
Threat of New Entry
If new competitors can enter an industry quickly and without investing a lot of money, then the barriers to entry is low and the threat of new entrants is high
The market is likely to contain a large number of rival businesses
Individual businesses are likely to have little power
Where the barriers to entry are too high for new businesses to gain a foothold and compete in the market the threat of new entrants is low
porters 5 forces
Buyer Power
porters 5 forces
Buyer Power
When a business sells to a small number of customers those **customers have significant power to negotiate lower prices **
The business has few options when it comes to customers
It will have to price and sell products according to customer demands
porters 5 forces
Supplier Power
Wher business has lot of choices
It is likely to be able to shop around for lower price
Where supplier has significant power over business as a result of offering a specialised component or where there is a small number of suppliers in the market business has little choice over the source of its suppliers
It is likely to have to pay high prices for its components and accept suppliers’ terms and conditions
Threat of Substitution
Where** customers can swap** a businesses products for those of a rival the business has little power
The business is likely to have to compete on price or invest heavily in developing a USP
Where substitution is unlikely a business has significant market power
It is likely to be able to charge a high price for its products and may be less inclined to innovate
