3.1 Business Objectives and Strategies

Question 1

define mission statement

Answer 1

• An expression of a business’s overall aim as well as its core values and context
• Informs the development of corporate and functional objectives
• Often expressed in inspirational terms to provide direction and a common purpose for employees

Question 2

define aim

Answer 2

• What the business is looking to achieve in the long term?
• Often expressed as an overall vision and describes the businesses reason for being

Question 3

define corporate objectives

Answer 3

• The specific performance goals set by senior management for the business to achieve over time
• Derived from the firm’s overall aim and mission statement
• Corporate objectives may focus on achieving specified levels of market share , profit, sales growth or new product/market development

Question 4

define functional objectives

Answer 4

• The day to day goals of functions or departments within the business, derived from corporate objectives
• Functional objectives must be carefully aligned across departments so that all parts of the business are working towards the shared goal

Question 5

what is SMART objectives

Answer 5

Specific
measureable
achievable
realisitic
time bound

eg: increase the volume of annual subscriptions by 12% during Q3 2023

Question 6

choice of short term vs long term objectives

Answer 6

• Financial position
• Market position
• Economic Conditions
• Government Policy
• Bad publicity & Social change

Question 7

conflicting objectives

Answer 7

• Growth vs. Profit – To grow in size a business will need to spend more money which will reduce profit
• Profit vs. Employee Welfare – It is often expensive for a business to ensure that its workers are well looked after
• profit vs social responsibility/ considerations

Question 8

list stake holders and conflicting interests

Answer 8

individuals or groups who are affected by the actions of the business
* Employees
* Local community
* Customers
* Suppliers
* Shareholders Society

• Shareholders key aim is to make a profit this may be in conflict with employees who want a stable job and training
• Shareholder interests may also be in conflict with suppliers as to increase profitability prices to suppliers would have to decrease
• Shareholders and the local community could be in conflict – it is not necessarily profitable to help the local community

Question 9

advantages of mission statements and corporate aims

Answer 9

• Should lead to easier decision making as problems can be compared with business objectives.
• Helps motivate staff
• Powerful way of uniting a workforce
• Encourages strong corporate culture

Question 10

disadvantages of mission statements and corporate aims

Answer 10

• Not always supported by actions of the business
• May be unrealistic and therefore ignored or regarded cynically by staff
• May be out of date
• May not be supported wholeheartedly by senior management

Question 11

what is the heirarchy of objectives

Answer 11

1. Mission statement
2. Corporate aims
3. Corporate objectives
4. Departmental/functional objectives.

Question 12

4 theories of corporate strategies

Answer 12

• Ansoff’s matrix
• Porter’s strategic matrix
• The Boston matrix
• The distinctive capabilities mode

Question 13

outline of features of Ansoff Matrix

Answer 13

**It was developed to help suggest different methods for growth. Each strategy has varying levels of risk and reward:
**
Market penetration - trying to sell more of the existing products to existing customers. Used to gain market share from competitors. Used by Coca-Cola, M&S, Heinz. (LOW RISK)
Market development - attracting new customers to buy existing products. Used when the current market is saturated or in decline. Businesses may enter into a new geographical range or use a new distribution channel. Used by Walmart and Starbucks. (MEDIUM RISK)
Product development - selling new and better products to existing customers. Exploits the current (loyal) customer base when there is competition. May help a business gain first mover advantage. Used by Toyota, Ford, Innocent and Dyson. (MEDIUM RISK)
Diversification - selling new products to new customers . It is used to achieve substantial growth and increase in profits. Allows for the spread of risk and will be very beneficial if successful. Used by BP, Samsung. (HIGH RISK).

Question 14

outline features of porters strategic matrix

Answer 14

There are 4 corporate strategies that a business could follow, two for mass markets and two for niche markets:

Cost leadership - the business aims to be the lowest costs operator in the market. This could be done through lowering costs and not altering prices or lowering costs and reducing prices. E.g Toyota.
Differentiation - the business will make products or services more attractive and distinctive from competing products.The business will need close relationships with customers to find out what factors they place the most value on (quality, low price, branding, design, after-sales service etc). E.g. Mercedes, Apple, Dyson
Cost focus - the business seeks a lower costs advantage in a niche market. The product will be basic but acceptable to sufficient customers.
**Differentiation focus **- the business will focus on a niche market and try to offer something different within it, developing a close relationship with customers in the process.

Question 15

define what porter meant by being stuck in the middle

Answer 15

Porter stated that there were two overall corporate strategies: low cost operations and product uniqueness. If a company is neither, or tries to be both, its is said to be stuck in the middle. This exposes it to considerable competitive pressures and customers are not quite sure what the company stands for. Examples: Blackberry, M&S, Morrisons and BA.
IKEA is a good example of a company who have made being stuck in the middle work to their advantage.

Question 16

outline the features of the boston matrix

Answer 16

it classifies a business’ products or services into four categories based on combinations of market growth and market share:

Stars - high market share in a fast growing market. A business needs to maintain this product and defend its position from potential rivals.
**Question marks **- low market share in a fast growing market. A business will need to invest in these products to ensure that market share increases and they turn into stars.
Cash cows - very high market share in a low growth market. A business will need to use the cash generated by these products to defend market share and promote question marks and stars.
Dogs - low market share in a low growth market. A business will need to cease production on these products or introduce an extension strategy.

Question 17

advantages of boston matrix

Answer 17

• Examines all the business’ products together
• A quick and easy way to make general decisions.
• Helps with marketing planning as it ensures that a balanced portfolio is created.

Question 18

disadvantages of boston matrix

Answer 18

• Tells the business very little about future prospects
• Strategies suggested by the Boston matrix may not suit all businesses

Question 19

define distinctive capabilites

Answer 19

Distinctive capabilities are the characteristics, resources, experience and skills, of a business which are better than its rivals and cannot be easily be copied.

Question 20

outline the features of the distinctive capabilities model

Answer 20

1. Architecture - the managerial skills that help build good relationships with staff, customers and suppliers. Branding and corporate culture are important.
2. Reputation - the product quality, customer experience, value for money and reliability. Technical and managerial skills are important.
3. Innovation - the ability of a business to relate well to its customers and provide them with new and improved products. Technical skills and market orientation are important.
Distinctive capabilities lead to competitive advantages and the more distinctive capabilities a business has, the more sustainable their competitive advantage.

Question 21

define competitive advantage

Answer 21

A competitive advantage is a feature of a business’ product that allows it to perform more successfully than others in the market.