3.1 Business objectives and strategy Flashcards
Mission statement
Sets out purpose and primary objectives of a business in the present
- Should be memorable
- Should be inspiring
Corporate aims
- Usually set by senior management for the whole company
- Aimed at satisfying shareholders so may be related to profit/dividends
Ansoffs matrix
Suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets.
- Market penetration - increase sales to existing markets
- Product development - new product/service developed for existing market
- Market development - Sell existing products into new markets
- Diversification - New products new markets (more risk)
Porters generic strategic
- Porter called generic strategies ‘cost leadership’, ‘differentiation’ and ‘focus’
Distinctive capabilities
and how they achieve competitive advantage?
- Architecture (relational contacts with customers, suppliers, employees)
- Reputation (customer experience, quality signals, guarantee, word of mouth, warranty etc)
- Innovation (new inventions to the market including new processes and ways of doing things)
SWOT analysis
A method for analysing a business, its resources and its environment. Commonly used as part of strategic planning
- Strengths, Weaknesses, Opportunities, Threats
PESTLE
- Political, Economic, Social, Technological, Legal and Environmental
Key framework for analysing key features of the external business environment
- Aids strategic/tactical decision making, objective setting and helps reach goals
Porters five forces
Analyses competition and what kind of influence a business has to deal with to beat them
- Competitive rivalry (this encourages price wars, investment in innovation, intensive promotion)
- Bargaining power of customers (they can drive down prices, increase required quality for same price, reduce profits)
- Threat of new entrants (they’ll gain market share & intensify rivalry, positioning would be stronger if there were barriers to the market)
- Threat of substitute products (depends on price and performance of substitute, willingness of customers to switch, customer loyalty and switching costs)
- Bargaining power of suppliers (they’ll exercise that power, sell products at higher price, squeeze industry profits)
SMART objectives
- Specific
- Measurable
- Achievable
- Relevant
- Time-related
Limitations of mission statements
- Can be unrealistic and over optimistic
- Can be waste of management time and resources
- Can lead to conflicts and inconsistencies when not properly written
- Can be ambiguous
Competitive advantage
Advantage over competitors gained by offering customers greater value, either by means of lower prices or by providing greater benefits and service that justify higher prices
Porters generic strategies - cost leadership
Aim to become the lowest cost producer in the industry. Typically involves;
- Increasing profits by reducing costs, while charging industry-average prices
- Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you’ve reduced costs
Porters generic strategy - differentiation leadership
Involves making products different from and more attractive than competitors
Typically involves features, functionality, durability, support and brand image
Porters generic strategy - cost focus
Takes a lower-cost advantage in one or a small number of market segments
Could be defined by demographics
Porters generic stratgy- differentiation focus
Classic niche market strategy, a company will seek to differentiate within just one or a small number of target market segments
