3.1 Business Objectives and Strategy Flashcards
What is a mission statement?
The main purpose and vision of a business. Its a short way of expressing the businesses intent
What is a corporate objective?
quantifiable statement of business aims which should include measurable targets
What is a department objective?
aims set by each department in order to achieve corporate objectives
What are uses of mission statements?
- provides focus and shows direction
- identity - helps establish market place position
- profitability
What are limitations of mission statements?
- can be unrealistic
- waste of management time and resources
- can lead to conflicts
- can be ambiguous
- can become obsolete as business grows
- can be seen as another pr tool
What is corporate strategy?
The course that a business follows to achieve it’s corporate objectives
What is market penetration?
Existing products in existing markets (growth strategy)
Lowest possible risk and therefore lowest potential reward
What is ansoffs matrix?
A tool that assesses the risk of 4 growth strategies
What is product development?
A growth strategy where a business useS a new product in an existing market
What is market development?
A growth strategy where a business uses on existing product in a new market
What is diversification?
A growth strategy where a business creates a new product for a new market.
Approaches to market penetration?
- Changes to the marketing mix
- gain market share from competitors
- encourage more consumption
- extension strategy
- least costly as they know the market
problems with market penetration?
- Competitor reaction
- relatively short term
- market may already be saturated
- cannibalisation
Approaches to market development?
- New geographical markets
- new product dimensions/packaging
- New distribution channels
- different pricing policies to attract different income customers
problems with market development?
- More risky than P development - overseas expansion
- existing products may not suit new markets
- may require high market research costs
- alienation of current customer
- business may not understand new markets
Approaches to product development?
- Launch substantially improved version of existing products (innovation)
- introduce new complementary products
- new product innovation
Dangers of product development?
- Cannibalisation
- may shorten PLC of existing products
- damage to brand
- high r&d costs
- requires development of new skills
- requires market research
Approaches to diversification?
- R&d into new products and market research into new markets
- acquisitions of other businesses
- highest potential reword
Dangers to diversification?
- Relies on heavy investment
- cultural differences
- brand name may be diluted (may also bring attention to it)
- riskiest strategy due to lack of information of new markets
What are the uses of ansoffs matrix?
- identify all current products /services and markets
- allows for consideration of future options
- shows risk and opportunity
- identify potential new markets / strategies
Limitations of ansoffs matrix?
- Only shows part of the picture
- oversimplifies the market
- large MNCs may need thousands of suboptions and strategies
- may need no do a swat / pestle analysis to gain a better idea of the full picture
What is porters matrix?
A matrix that categorises the marketing strategies a business con adopt to try and achieve a competitive advantage
What does porters matrix analyse?
Cost leadership and differentiation
What is the Boston matrix?
Planning tool that helps managers plan for a balanced product portfolio
Compares market share and growth.
Uses of Boston matrix?
- Good starts point when reviewing an existing product
- Strategise next step for product
- analyse future opportunities and problems with their market portfolio
- transfer earnings from cash cows to question marks.
Limitations of Bostons matrix?
- May not show true nature of product
- too simplistic
- high market share doesn’t always mean high profit (doesn’t account for costs)
What are the 4 quadrants of the Boston matrix?
- Question mark
- star
- cash cow
- dogs
What are the 4 quadrants of porters matrix?
- Cost leadership
- focused cost leadership
- differentiation
- focused differentiation
What is Kays idea?
3 capabilities could create added value and give a competitive advantage
what are Kays 3 capabilities?
- architecture
- reputation
- innovation
What are the terms for a strategic decision?
- long term direction of the business
- what the business will do to meet aims
- proactive decision making
- forward thinking, future planning
What are the terms for a tactical decision?
- short term decisions
- how strategy is implemented
- reactive to competitors
- present day thinking, what is happening now that needs dealing with
What does SWOT stand for?
strength
weakness
opportunities
threats
Advantages of SWOT analysis?
- logical structure
- focus on strategic issues
- encourages analysis of external environment
disadvantages of SWOT analysis?
- too often lacks focus
- can became easily out of date
- independent
What is pestle analysis?
a framework for assessing the key features of the external environment facing a business
What does pestle stand for?
political
economics
social
technological
legal
ethical
What is the political part of PESTLE?
- competition policy
- industry regulation
- govt spending
- tax policies
- business policy and incentives
What is the economic part of PESTLE?
- interest rates
- consume spending and income
- exchange rates
- business cycle
- inflation
- unemployment rates
What is the social part of PESTLE?
- demographic change
- impact of pressure groups
- consumer taste and fashion
- changing lifestyle
What is the technological part of PESTLE?
- disruptive technologies
- adoption of mobile technology
- new production process
- big data and dynamic pricing
What is the ethical/environmental part of PESTLE?
- sustainability
- tax practices
- ethical sourcing
- pollution
What is the legal part of PESTLE?
- employment law
- minimum wage
- health and safety laws
- environmental legislation
What is porters 5 forces?
framework for analyzing the nature of competition within an industry
why does rivalry vary between businesses?
- size
- structure
- profitability
- customer wants
- distribution channels
- product life cycle
- alternatives
what does a low profit industry entail?
- strong suppliers and customers
- low entry barriers
- many subs
- intense rivalry
what does a high profit industry entail?
- weak suppliers and customers
- high entry barriers
- few subs
- little rivalry
what are porters 5 forces?
- bargaining power of customers/suppliers
- threat of new entrants
- threat of subs
- rivalry among business
what are the barriers to entry?
- loyalty
- econ of scales
- vertical integration
- access to tech
- expertise
what are threat of new entrants?
- increased competition
- high barriers = strong market position
- low barriers = weak market position
what is the bargaining price of suppliers?
- sell at high prices
- squeeze industry profits
why are suppliers powerful?
- few suppliers
- selling scarce resources
- cost of switching is high
- customer is unimportant
- few subs
how can you limit supplier power?
- threaten to swap
- backward vertical integration
what is the bargaining power of a customer?
they exert pressure on having lower prices
how do you limit consumer power?
- forward vertical integration
- increase the cost of swapping
what is the threat of substitutes?
- more subs limit the pricing strategies that can be used
- lower profit
- customer loyalty and availability of subs limits the threat
- role of technology allows for rapid creation of subs
what are the determinants of rivalry?
- number of competitors
- market size and growth prospects
- product differentiation
- power of buyers and availability of subs
- capacity utilization
- cost structure of industry
- exit barriers
