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Business---------------------------- > 3.1 Business Objectives and Strategy > Flashcards

3.1 Business Objectives and Strategy Flashcards

1
Q

a corporate objective is

A

an objective of a medium to large sized business as a whole

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2
Q

How is Departmental and Fundamental Objectives defined?

A

The objectives of a department within a business.

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3
Q

How is Mission Statement defined?

A

A brief statement, written by the business, describing its purpose and objectives, designed to encapsulate its present operations.

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4
Q

How is Objective (or goal) defined?

A

A target of or outcome for a business that allows it to achieve its aims.

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5
Q

How is SMART defined?

A

Acronym for the attributes of a good objective; specific, measurable, agreed, realistic, timed.

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6
Q

What are Business Aims?

A
  • ultimately, aims are what the business is striving to achieve
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7
Q

What is a Mission Statement?

A
  • A mission statement declares the business’s overriding purpose, but may also reflect its goals and values
  • a firm may share a mission statement to make a commitment to its customers or to be used to bring a company’s workforce together with a shared purpose
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8
Q

What are SMART Objectives?

A

-Specific –> objectives clearly sets out what the business is aiming to achieve and refer to a particular aspect or function of the business ( easily defined)
-Measurable –> quantifiable and can be measured. Most corporate objectives will have a finance or quantifiable element because this makes it easier to measure the success of the business
-Agreed –> everyone responsible for achieving the objective agrees on what the target is and what needs to be done.
-Realistic –> ensure that the objective can be met within the resources available and the market conditions. if an objective is too unrealistic and it failing is likely to have a negative impact on the business
-Time - Bound –> based on explicit timescale. All objective must have an end point to ensure urgency and a point at which the objective can be assessed

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9
Q

What are Departmental and Functional objectives?

A
  • these are more specific than corporate objectives which set the day-to-day goals and may include human resources, finance, operations, logistics and marketing.
    -these all refer back up the hierarchy to the corporate objective and missions statements, so that the goals and activities of the business are consistent
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10
Q

How is Corporate strategy defined?

A

The plans and policies developed to meet a company’s objectives.

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11
Q

How is Distinctive Capability defined?

A

john kays distinctive capabilities are sustainablef forms of competitive advantage because it cannot easily be replicated by a competitor.
1. architecture
2. innovation
3. reputation

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12
Q

How is Portfolio Analysis defined?

A

A method of categorising all the products and services of a firm to decide where each fits within the strategic plans.

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13
Q

What is Business Strategy?

A
  • Strategies are plans which include details of what should be done to achieve the businesses objectives.
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14
Q

What is Ansoff’s Martrix?

A

a strategic tool that firms use to help them assess the factors that will determine their corporate strategy.

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15
Q

What does Ansoff’s Matrix look like?

A
  • A Matrix with Product on the x-axis and Market on the y-axis. With Existing and New as the two titles
  • From top left to bottom right the sections are:
  • Market penetration
  • Product devloepment
  • Market development
  • Diversification
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16
Q

What is Market Penetration in Ansoff’s Matrix?

A

the purpose of market penetration is to achieve growth in existing markets with existing products. there are several ways a business can achieve it:
- Increase the brand loyalty of customers
- Encourage consumers to use the product more regularly

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17
Q

What is Product Development Ansoff’s Matrix?

A
  • Product development is concerned with marketing new modified products in existing markets
    -this might be an appropriate strategy to adopt where the product life cycle is traditionally short or where trends or technology change quickly
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18
Q

What is Market Development in Ansoff’s Matrix?

A
  • Market development involves the ,marketing of existing product in new market. The most basic form of the strategy is entering geographically new markets.
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19
Q

What is Diversification in Ansoff’s Matrix?

A
  • Diversification occurs when new products are developed for new markets. It enables a business to move away from reliance upon existing market and products, thus allowing the company to spread risk and increase safety.
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20
Q

What is Porter’s Strategic Matrix?

A
  • developed by Michael Porter to identity the source of competitive advantage that a business might achieve in a market.
    -Porter stated that any business that does not adopt one of these generic strategies is ‘stuck in the middle’ and unlikely to succeed
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21
Q

What does the Porter’s Strategic Matrix look like?

A

A triangle with the points labelled:
- Focus (cost focus and differentiation focus)
- Cost leadership
- Differentiation

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22
Q

What is Cost Leadership in Porter’s Strategic Matrix?

A
  • This involves striving to be the lowest- cost provider in the market.
  • This does not necessarily mean that the business will offer the lowest price, the firm that is able to operate as the lowest-cost provider in a market
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23
Q

What is Differentiation in Porter’s Strategic Matrix?

A

-This involves a business operating in a mass market but adopting a unique position instead of the lowest-cost position.

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24
Q

What is Focus in Porter’s Strategic Matrix?

A
  • The strategy involves targeting a narrow range of customers in one of two ways. A focus strategy is closely aligned to niche marketing. it tends to be used by small or very specialist firms.
  • by targeting a small market segment it can understand its customers specific need and create high level of customer satisfaction and loyalty.
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25
Q

what are the 3 types of distinctive capabilities?

A
  • distinctive capability is a form of competitive advantage that is difficult for competitors to understand or alone imitate
  • The three types of distinctive capability are: Architecture, reputation and Innovation
26
Q

How is Architecture a Distinctive Capability?

A
  • refers to contracts and relationship within and around an organisation
  • these include relationship between the business and its employees, and the collaborative relationship it has with partners, suppliers and customers.
  • These effective relationships allow a business to add value by being more efficient through easy ope transfer of-knowledge and information.
27
Q

How is Reputation a Distinctive Capability?

A
  • closely linked to brand image and takes time for a business to build
28
Q

How is Innovation a Distinctive Capability?

A
  • often a sustainable competitive advantage will arise when a business is able to innovate by developing a new product or process in the production of a product
29
Q

What is the Aim of Portfolio Analysis?

A
  • it is a method of categorising all of the products and services of a firm (its portfolio) so as to decide where each fits within the strategic plans.
30
Q

What is the Boston Matrix?

A
  • a tool that assists portfolio analysis
  • they catagorise products into one of four different areas based upon their current and potential market share or market growth.
  • The 4 areas are –> Stars, Cash cows, Question marks (problem child/ wildcats), Dogs.
  • The Boston Matrix may be used to assist a business in identifying which strategy to adopt.
31
Q

What is the Star in the Boston Matrix?

A
  • are high-growth products that are strong compared to those of competitors .
  • Star require investments but the hope is that they will become cash cows
32
Q

What is the Cash Cow in the Boston Matrix?

A

are low-growth products with high market shares.
- They generate more cash than they consume, and so can provide a return for investors and can fund investment in other areas

33
Q

What is the Question Mark in the Boston Matrix?

A
  • are products with low market shares in high- growth markets.
    -they consume a lot of cash, but give little return.
    -however they have the potential to turn into stars, Keeping these lines requires a belief that there is a potential for growth
34
Q

What is the Dog in the Boston Matrix?

A
  • are products with low market share in low-growth markets.
    -They may break-even, but nevertheless take up time and effort with little prospect of future growth.
    -They should be sold or divested
35
Q

What is the difference between Strategies and Tactics?

A
  • Strategies set out the long-term direction that a firm will take to achieve its objective
  • Tactics are short-term responses to an opportunity or threat in the market.
36
Q

How is SWOT analysis defined?

A

An analysis of the internal strengths and weaknesses of the business and the opportunities and threats presented by the external environment.

37
Q

How is Trade Association defined?

A

An organisation whose members are all involved in the same industry or trade. The organisation pursues the interests of these businesses.

38
Q

What are Strengths as part of the SWOT analysis?

A

These are the positive aspect of a business that may be identified from the internal audit. For Example:
- a respected, intelligent and inspirational leader
- loyal and motivated workforce
- a product with USP
-a loyal customer base

39
Q

What are Weaknesses as part of the SWOT analysis?

A

These are the negative aspects of a business that may be identified from the internal audit. For example:
- A high staff turnover with poorly motivated workforce
- A organisation structure with too many layers
- A product range that is out of date
- Poor cash flow and debt

40
Q

What are Opportunities as part of the SWOT analysis?

A

these are options or opening that the business might be able to exploit that are identified by the external audit. For Example:
-a new overseas market opening up following political changes
-a fall in the cost of essential raw material
- low interest rates, which provide cheap finance for investment
- a fall in the exchange rates, which will make export cheaper

41
Q

What are Threats as a part of the SWOT analysis?

A
  • These are the possible hazards or perils that have the potential to damage the performance of the business which have been identified by the external audit. For Example:
  • a new entrant in the market
  • a rival appoint a new and highly successful CEO
  • a looming recession
    -new legislation aimed at improving right of employees
42
Q

When may SWOT analysis be used?

A
  • To make a decision about which newproduct to launch
  • Help design a new marketing strategy
43
Q

How is Monopoly defined?

A

a market dominated by a single businesses

44
Q

How is Oligopoly defined?

A

a market dominate by a few large businesses

45
Q

How is PESTLE Analysis defined?

A

analysis of the external
political
economic
social
technological
legal
environmental
factors affecting a business

46
Q

What is PESTLE analysis?

A
  • The impact of external forces on a business can be both positive and negative, but also substantial.
47
Q

What is the Political factor in PESTLE analysis?

A

Some Political factors are:
- Members joining and leaving Trade Blocs
- Measured designed to improve national security restrict movement of goods, people and capital
- Pressure groups such as Action on Smoking and Health (ASH) may affect businesses in the tacbacco industry such as persuading the government to increase the tax on tobacco
- Changes in government - could be pro- business

48
Q

What is the Economic factor in PESTLE analysis?

A

The general state of the economy can have a huge impact on business activity. Some examples may include:
- Falling unemployment might help to increase demand for many business
- Stable prices creates more certainty, which should encourage businesses to invest for the future
- A strengthening exchange rate could make exporting more difficult, in contrast imports become cheaper
- During recession businesses with products that are price elastic will have a big impact to their demand

49
Q

What is the Social factor in PESTLE analysis?

A

Over time there are likely to be changes in the way society operates, Although social and cultural changes tend to be gradual, they can still have an impact:
- increase in the quality of human resources which would benefit business
- ageing populating could affect demand patterns and create new opportunities for some businesses
- increasing migration might increase the size of potential workforce, making recruitment easier and may boost demand

50
Q

What is the Technological factor in PESTLE analysis?

A
  • Changes in technology can shorten product life cycles
  • Development in technology often mean that business can replace labour with capital. This is welcome by a business as human resources are often to be the most expensive and difficult to manage
  • The development of social media has helped to improve communication between businesses and customers –> allows business to keep abreast of changing consumer needs
51
Q

What is the Legal factor in PESTLE analysis?

A
  • EU legislation affect tax laws changing VAT etc.
  • Calls to ban the advertising of alcohol on television which could negatively impact the beverage industry
    -The government in the UK often state that it wants to reduce the amount of ‘red tape’ in business. This might benefit a wide range of businesses
52
Q

What is the Environmental factor in PESTLE analysis?

A
  • People are more inclined to buy ‘green’ goods. This provides opportunities for business that specialise in such products
    -New wats of generating power using renewable sources rather than by burning hydrocarbons are providing new opportunities
    -The trend towards recycling is gather pace in the UK. By using recycled resources, businesses can cut their costs.
53
Q

What are some features of a Competitive market?

A
  • Large number of buyers and sellers.
  • Low barriers to entry
  • Market can dictate pricing e.g. if a firms tries to charge more than its rival it is likely to lose nearly all of its business
54
Q

What are some features of Uncompetitive Markets?

A
  • Dominated by single or small number of suppliers –>Monopoly or oligopoly
  • High barriers to entry – infrastructure costs
  • Consumers have limited impact on prices
  • business are likely to engage in non-price competition such has advertising and promotion
55
Q

How can the Competitive Environment change overtime?

A
  • Governments try to encourage competitiveness in markets.
    Increased competitiveness is good for consumers as it drives down prices. This is through:
  • Business using price to encourage product trial
  • Drive to reduce costs in a business to maintain/increase margins
  • Development of new procedures (manufacture, materials, training)
  • Development of new products
    Governments can help by reducing regulation that can act as a barrier to entry, or force companies to make changes to allow others to enter market.
56
Q

What is Porter’s Five Forces Model?

A
  • An analytical tool looking at the nature and the strength of the competitive environment in which a business operates.
  • the success of the business will be governed by the strength of those forces. If the are in your favour, then a business would make above average returns
57
Q

What are Porter’s Five Forces?

A
  • The bargaining power of suppliers
  • The bargaining power of buyers
  • Threats of New Entrants
  • Substitutes
  • Rivalry among existing firms
58
Q

What is The Bargaining Power of Suppliers in Porter’s Five Forces model?

A

-The more power a supplier has over its customers, the higher the price it can charge and the more it can re-allocate profit from the customer to itself
- by limiting the power of the supplier improve the competitive position of a business and this can be done in a variety of ways:
- it can grow vertically ( backward vertical integration) either acquiring a supplier or setting it own business by growing organically upwards.
- Seek out new supplier to create more competition amongst suppliers
-it may also minimise the information provide to supplier in order to prevent the supplier realising its power over the customers

59
Q

What is the Bargaining Power of Buyers in Porter’s Five Forces Model?

A
  • Buyers want to obtain supplies for the lowest prices
  • If buyers or customers have considerable market power, they will be able to beat down prices offered by suppliers
  • One way to boost the power of buyers is through forwards vertical integration
  • Another way is to try to make it expensive for customers to switch to another supplier
60
Q

What is the Threat of New Entrants in Porter’s Five Forces Model?

A
  • If businesses can easily come into an industry and leave it again, if profits are low it makes it hard for existing businesses to charge high prices and make high profits
  • potential of taking customers
61
Q

What is the Substitutes in Porter’s Five Forces Model?

A
  • the more substitutes there are for a particular product, the fiercer the competitive pressure on a business making the product
    -Sometimes a business will buy the patent for a new invention from a third party and do nothing with it just to prevent it coming to market
  • Businesses also use market tactics to stop the spread of substitute products e.g. predatory pricing
62
Q

What is Rivalry among existing firms in Porter’s Five Forces Model?

A

-rivalry in a market will also determine prices and profits for any single fir
- Businesses can also reduce competition by buying their rivals –> again competition laws may intervene to prevent this happening but most horizontal mergers are allowed
- In industries well there are relatively few businesses. often business dont compete on prices
–> this allows then to maintain high profitability and compete with new products or advertising instead thus creating strong brands

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