3.1/3.2

Question 1

Mission statement and its aim

Answer 1

Written description of business aims- aim is to make stakeholders aware of what a business does and why.

Question 2

Benefits of a mission statement

Answer 2

-makes the business unique
-sense of shared purpose
-encourages employees to work towards common goals

Question 3

Drawbacks of a mission statement

Answer 3

• Businesses don’t have to prove that what’s in the statement is accurate
  -therefore it is bad practise and business reputation may become damaged
  -Doesn’t go into detail of how the mission is going to be achieved
• doesn’t set corporate strategies or results

Question 4

Corporate objective

Answer 4

Goals of the business as a whole

Question 5

Strategy

Answer 5

More long-term plan of action developed to achieve a business’ objectives.

Question 6

tactics

Answer 6

Short-term plans.

Question 7

4 sections in Ansoffs matrix

Answer 7

Market penetration, product development, market development, diversification

Question 8

market penetration

Answer 8

Means trying to increase your market share in an existing market.

Question 9

Product development

Answer 9

Selling new products in existing markets.

Question 10

market development

Answer 10

Selling existing products to new markets.

Question 11

Diversification

Answer 11

New products to new markets

Question 12

One adv and dis adv of ansoffs matrix

Answer 12

+ doesn’t just lay out potential strategies of growth it also forces mangers to consider the expected risks.
-fails to show that market development and diversification strategies also tend to require significant change in the day-to-day workings or tactics of the business

Question 13

Porters 3 strategies

Answer 13

Cost leadership, differentiation, focus

Question 14

Cost leadership

Answer 14

Calls for lowest cost of production for a given level for quality.

Question 15

Differentiation (porter)

Answer 15

This strategy requires a product with unique attributes which consumers beehive is better value then competitors. Can charge premium prices- business must have strong branding, innovative, and good quality products

Question 16

Focus

Answer 16

Concentrates on niche markets and either minimising costs or differentiation. Suits firms with lower resources who can target specific needs. Relies on customer loyalty

Question 17

benefits and limitations of the boston matrix

Answer 17

+ helpful in assessing where individual products are in their market growth and share
+helps business come up with strategies about product investment and if they need to apply an extension strategy
-simplified, only shows high and low share and growth- doesn’t account for the median products
- because a product has high market share does not mean its high in profits as it may have high costs.
-More factors that hint profitability not just growth and share

Question 18

SWOT analysis

Answer 18

four factor model that assess strengths, weaknesses, opportunities and threats

Question 19

benefits of SWOT analysis

Answer 19

-can be redone to take into account changing conditions which means the business can adapt to sudden changes
- lets the business know what their competitive advantage may be over rivals

Question 20

PESTLE analysis

Answer 20

Political - governmental policies on taxation and industry regulations can affect the business. e.g lowering corporation tax to help smaller businesses grow
Economic - include changes in consumer spending, interest and exchange rates
Social - changes in social trends may lead to changes in demand
Technological - have an influence on decision making, e.g decision to invest in new machinery may be delayed if there is a more efficient version coming out. Could also mean production processes or products that were previously not available now are
Legal - changes in law can impact the business e.g pollution laws
Environmental - customers more becoming conscious of damage to the environment, business may need to adapt to retain customers

Question 21

Porters 5 forces model

Answer 21

shows an industry being influenced by 5 competitive forces, analyses state of the market and helps owners figure what is the best strategy to gain a competitive advantage.

Question 22

Barriers to entry (porter)

Answer 22

How easy it is for new firms to enter the market
its in the interest of existing firms to make it hard for new firms to enter
High start up costs may be a deterrent
e.g use of trademarks , (vertically integrate) taking control of distribution channels so this becomes unavailable for new entrants , price wars with new entrants- well established business can afford to do this

Question 23

Buyer power (porter)

Answer 23

Buyers want as low as price as possible
Buyer have increased power when there’s fewer buyers and more sellers.
Buyers have more power when goods are standardised- business doesn’t have USP
Strategies to influence buyer power:
increases quantity of product they are buying will increase buyer power as it will hit the business more if they go to a rival and lose revenue
Forming a buyer group- buying bigger volumes so can demand better deal

Question 24

Supplier power (porter)

Answer 24

Suppliers want to get as high price as possible
Increased power when few suppliers and large customer base
Strategies to influence supplier power:
long term contracts
develop new products and protect them with patents- can charge premium

Question 25

Threat of substitutes (porter)

Answer 25

how likely customers are to buy an alternative
Strategies to reduce threat of substitutes:
Make it expensive or difficult for customers to switch e.g apple phone you are likely to use apple games
brand loyalty
design product around needs of customers

Question 26

Rivalry (porter)

Answer 26

How much competition there is
Strategies to reduce the effects of rivalry:
big promo campaigns
make it easy to customers to switch between goods e.g helping someone switch their debit card

Question 27

Reasons for growth

Answer 27

• increase profits
• increase market share
  -more recognisable
• econ of scale

Question 28

Inorganic growth

Answer 28

external, mergers or takeovers.

Question 29

Merger

Answer 29

when two businesses join together to form one business.

Question 30

Takeover

Answer 30

when one businesses buys over 50% shares so it now has control of the other business

Question 31

Horizontal integration

Answer 31

happens when a business combines with another business in the same production stage and industry. Reduces competition in the market

Question 32

Vertical integration

Answer 32

when a business combines with another business in the same industry but at different stages in the production process.

Question 33

Organic growth

Answer 33

expansion within a business

Question 34

benefits of organic growth

Answer 34

+can maintain current management style
+less risk
+can control how much the business will grow by
+efficiency, productivity and motivation stay high as there is less disruption

Question 35

limitations of organic growth

Answer 35

• takes a while to grow a business organically
  -market size isn’t affected ; can only increase market share
  -may miss out on opportunities for ambitious growth

Question 36

Problems with growing

Answer 36

• suffer from diseconomies of scale this where unit costs increase as the scale of production increases
  -harder to motivate as less close contact and staff may value themselves as less of an asset
  -internal communication slower and harder as the chain of command is longer
• increases risk of overtrading as the business will have less working capital as cash will be tied up in stock

Question 37

Problems with quick organic growth

Answer 37

• different businesses that have merged may have different cultures and objectives this could lead to clashes.
  -staff of merged business may need to learn new skills and adapt
  -staff redundancies as job roles may be duplicated
  -taking on liabilities of the other merged business
  -if takeover part of diversification strategy then the business may lack experience in new market. mistakes lead to losses in profit

Question 38

Reasons for staying small

Answer 38

• highly differentiated products or bespoke services may be unable to grow due to production processes not being suited to mass production and result in loss of USP
  -stating small can mean money can be invested in innovation rather than production
  -response to customer needs is easier as communication is quicker
  -close contact with staff means motivation levels can be easily monitored and the business objectives are always clear