3.1 Flashcards
Define corporate aim
The long-term intentions of a business. Broad and not necessarily quantified.
Define corporate objectives
quantifies the business mission statement and sets measurable targets for the whole organisation
Also
Specific, measurable goals that help achieve corporate aims. Usually medium-to-long term.
Internal factors affecting corporate objectives
- Poor performance
- New leadership
- Business ownership
- Culture
- Growth
External factors affecting corporate objectives
- Economic conditions
- Competition action
- Global prices
- Social change
- Technological change
Define mission statement and give influences
Mission statement- sets out the purpose of a business, why does it exist, values and long term aims
Infleunces on mission statement
- Values of founder
- Industry
- Views on society
- Size of business
- Culture
Usefulness of mission staemement/corporate aims
- Understanding of aims/objectives= increases motivation as eg sets targets
- Sets direction and focus
- Attracts investors/stakeholders
- Can improve brand image and reputation
- Human,ethical and ecological values can be shown=shows they care about external factors not just numbers= increased sales and profits
Limitations of mission staement/corporate aims
- Unrealistic statement can cause demotivation
- Can be ignored by staff if not meaningful or genuine
- They are criticised to be ethically right to attract customers
Focuses of corporate objectives and mission statement
Focuses of corporate objectives:
- Innovation
-growth
-shareholder value
-socail responsibility
-profit
-sustainability
Focuses of mission statement
-values
-scope of business(area of operation)
-long term aims
-impact on society
-importance of shareholders
Define ansoff matrix and give diagram
Ansoff matrix- strategic tool that businesses use to help choose the market they wish to operate in and the products to sell in it
Market penetration adv and dis
Selling more of existing products in existing markets)
ADV
-Low risk — familiar market and product
-Business has expertise in it
-Limited investment needed
-Can exploit economies of scale
-Quick to implement (e.g. promotions, loyalty schemes)
DIS
-Limited growth potential
-Vunerability if limited innovation
-Market may already be saturated
-Doesn’t spread risk — over-reliance on current market
Product development adv and dis
Product Development(Launching new products in existing markets)
ADV
-Can respond to changing customer needs
-Builds on existing customer loyalty
-Can increase market share if successful
-Familiar with customers
DIS
-Takes time for new ideas
-High costs (R&D, testing, marketing)
-Risk of product failure
-Can reduce sale of existing products- product cannibalisation
-May not be accepted by loyal customers
Market development adv and dis
Market Development(Selling existing products in new markets)
ADV
-Growth potential
-No need for expensive product development
-Opens up new revenue streams
-May offer first-mover advantage in new regions
-Useful if current market is saturated
DIS
-May require heavy investment (marketing, distribution)
-Competitors may already be established
-limited expertise in market
Diversification adv and dis
Diversification(New products in new markets)
ADV
-Spreads risk across products and markets
-Can lead to rapid growth
-May create synergies with existing operations
-Can tap into fast-growing industries
Disadvantages:
-Highest risk strategy
-Requires significant investment
-Little or no experience in the market
-Harder to manage and coordinate
Porters strategic mix-
Cost leadership-being the lowest cost producer in the industry eg ryan air
Differentiation- offering unique products
Cost focus-Targeting a niche market, using either cost or differentiation
Differentiation focus-Targeting a niche market, using either cost or differentiation
Rolex (differentiation focus), Aldi (cost focus)
Boston matrix
Boston matrix- tool which catagorises a companies product portfolio with characteristics to aid strategic decisions about them
STARS-
-High growth, high market share
-Invest heavily to maintain or grow share (e.g., new tech products)
CASH COWS
-Low growth, high market share
-Maximize profits (e.g., classic consumer goods)
QUESTION MARKS/PROBLEM CHILD
-High growth, low market share
- Invest to increase market share or divest (e.g., new product lines)
DOGS
-Low growth, low market share
-Consider discontinuing (e.g., outdated products)
Aim of Portfolio Analysis:
-Identify which products need more investment, which should be divested, and which should be maintained for profitability.
-Balance risk by managing a mix of products in different stages of growth.
What is a distinctive capability
A distinctive capability refers to a unique strength that enables a business to outperform competitors.
What are keys distinctive capabilities
-Innovation-ability to create new and unique products/services
>market development may be suitable
-Architecture- relationships within a business eg with suppliers,customers employees
>low cost strategy may be possible
-Reputation- brand values,quality and how business is viewed,takes years to develop
>differentiation strategy is likely to be suitable
@Factors lead to comp adv as they are unique and take time to achieve
Define strategy and what’s its impact on resources
Strategy- long term plan or approach a business takes to achieve objectives, proactive decision making
>involves major commitment to resources
Impact on Resources:
-Human Resources: May require hiring new skills, restructuring, or managing workforce changes.
-Physical Resources: Investment in new factories, machinery, or infrastructure.
-Financial Resources: Requires large capital investment, potentially altering the company’s cash flow, debt, and profits.
Define tactics and give impacts on resources
Tactics- day to day decisions taken by middle managers, reactive to comp
> involveves fewer resources but taken to achieve the strategic decision/direction
Impact on Resources:
Human Resources: Changes in workload, temporary staffing, or training.
Physical Resources: Small adjustments (e.g., stock levels or logistics).
Financial Resources: Small adjustments to budgets, cost reductions, or reallocations.
What is SWOT
SWOT analysis- strategic tool that a business can use to analyse its current position and the external factors that might affect it
Strengths- internal
Weaknesses- internal
Opportunities- external
Threat- external
Strength + Opp = helpful
Threat+weakness= harmful
Adv and dis of SWOT
ADV of SWOT
-low cost an dsimplet o use
-assist thinking in structural way
- improves decision making
DIS of SWOT
-doesnt offer solutions
-subjective-opinions fo managers
-lack of focus on the most critical issues.
Pestle
PESTLE- way of analysisng external factors that impact businesses
- Political- political stability,regulation,subsidy,tax rates
- Economic- exchnage rates,inflation, IR
- Social- social influences(taste), demographic
- Technological- new machinery,innovation
- Legal- laws,health acts, human rights
- Environmental- pollution permits
Reasons for changes in structure of markets over time
-New entrants/ or exit
- Legislation
-Globalisation
-substitutes
-consumer expectation
-technological advancements
Porters 5 forces
Porter’s Five Forces model helps analyze the competitive forces in an industry. It helps businesses understand the intensity of competition and its profitability potential.
Porters 5 forces
-threat of new entrants
-industry rivalry
-bargaining power of suppliers
-bargaining power of suppliers
-threat of substitutes
Explain porters 5 forces
-The Threat of New Entrants-The ease with which new competitors can enter the market and challenge existing businesses
-The Bargaining Power of Suppliers-This refers to the power that suppliers have over a business. If there are few suppliers or if the supplier’s product is essential, they can charge higher prices, affecting the business’s profitability.
-The Bargaining Power of Buyers-This refers to the power customers have to influence prices. If buyers have many choices or can easily switch suppliers, they have higher bargaining power.
-The Threat of Substitute Products-This refers to the availability of alternatives that can replace the product or service a business offers. If substitutes are easily available, competition increases.
- Industry rivalry-This refers to the intensity of competition among existing competitors in the market. High rivalry can lead to price wars, increased marketing costs, and lower profit margins.
