3.1 Business objectives and strategy Flashcards
List the hierarchy of objectives from top to bottom
Aims
Mission statement
Corporate objectives
Functional objectives
What is an aim?
What the business is looking to achieve in the long term
What is a mission statement?
An expression of a businesses overall aim as well as its core values and context
What is a corporate objective?
The specific performance goals set by senior management for the business to achieve over time
What is a functional objective
The day to day goals of departments within the business, often derived from corporate objectives
What does the acronym SMART stand for
Corporate goals should be…
Specific
Measurable
Agreed
Realistic
Time-bound
Why do functional objectives need to be carefully aligned across departments
So that all parts of the business are working towards the same shared goal
What is competitive advantage
Anything that gives a company an edge over its competitors
What is Ansoffs matrix?
A tool for businesses with a growth objective
What is Ansoffs matrix used for?
To identify an appropriate corporate strategy and identify the level of risk associated with the chosen strategy
What are the axis of Ansoffs matrix?
Horizontal- Market (existing and new)
Vertical- The product (new and existing)
What are the 4 strategies to achieve growth in Ansoffs matrix?
Market penetration (existing product in an existing market)
Market development (existing product in a new market)
Product development (New product in existing market)
Diversification (New product in new market)
What is the least risky strategy to achieve growth (according to Ansoffs matrix)
Market penetration
What is the most risky strategy to achieve growth (according to Ansoffs matrix)
Diversification
What is market penetration
Selling more (existing) products to existing customers by encouraging more regular use of the product, increased usage of the product and brand loyalty of customers
What is brand loyalty
Where consumers continue to buy the same brand of goods rather than competing brands
What is market development
Finding and exploiting new market opportunities for existing products.
This can be done by entering new markets abroad or repositioning the product and selling to different customers
What is product development
Selling new or improved products to existing customers
This can be done by developing new versions or upgrades and redesigning packaging
What is diversification?
Targeting new customers with entirely new or redeveloped products.
For example Greggs launching a range of clothing products.
What is the use of porters generic strategic matrix?
To identify a range of strategies a business might adopt considering its source of competitive advantage and the scope of the market which they operate in
What are the two axis of porters generic strategic matrix
Market scope (Niche and mass)
Competitive advantage (Cost and differentiation)
What does SWOT stand for?
Strengths
weaknesses
opportunities
Threats
What is SWOT used for
To identify internal strengths and weaknesses of a business. As well as external opportunities and threats
What is a strength (SWOT)
What the business is good at
What is a weakness (SWOT)
What the business does poorly
What are opportunities for a business (SWOT)
Options a business may exploit to enjoy further success
What are threats to a business (SWOT)
Hazards that have the potential to damage business performance
What is PESTLE used for
To examine the external factors that are likely to impact the activities and outcomes of a business
What does the acronym PESTLE stand for
Political
Economic
Social
Technological
Legal
Environmental
How can managers use PESTLE to help the business
They can use the information gathered to understand the potential threats and to identify future difficulties so that they can take action to help avoid and eliminate them
What is meant by a political factor in PESTLE analysis
The extent to which local and national government is expected to influence the business
What is meant by economic factor in PESTLE analysis
The extent which economic indicators are expected to directly impacted business performance. e.g. inflation or exchange rates
What is meant by the social factor in PESTLE analysis
The extent to which personal attitudes and values, culture and demographic change are expected to affect the business. e.g. Education and religion
What is meant by the technological factor in PESTLE analysis
How technological change and innovation are expected to impact the business. e.g. research and development
What is meant by the legal factor in PESTLE analysis
How changes in laws and regulations are expected to impact the business. e.g. Taxation and red tape
What is meant by the environmental factor in PESTLE analysis
How changes in attitudes and government policy towards environmental protection is expected to impact the business. e.g. How materials are disposed and how expensive/available energy is
Why might a structure of a market change over time?
New and old businesses join and leave the market
globalisation
changes in consumer tastes
Growth and innovation of technology
What is meant by barriers to entry
Conditions that make it difficult/ expensive for a firm to enter a market to compete with he existing suppliers
What does porters five forces identify
Identify and analyse an industrys competitive forces
What are the five forces (porters five forces)
Threat of new entry
Buyer power
Threat of substitution
Supplier power
Industry rivalry
What is meant by the force industry rivalry (porters five forces)
Many competitors selling similar products means the business has less power
If it offers products in an industry with little competition then it has more power and cam dominate the market
What is meant by the force threat of new entry (porters five forces)
If new competitors can enter an industry quickly and without investing a lot of money, then the barriers to entry is low and the threat of new entrants is high and the opposite
What is meant by the force buyer power (porters five forces)
If a business sells to a small number of customers then the customers have more power to negotiate lower prices
or if a business sells to a high number of customers then the customers have less power
What is meant by the force supplier power (porters five forces)
When a business has a lot of choices over the suppliers then it can choose who it buys from
or supplier can hold significant power over a business if it offers a specialised component that not many suppliers in the market have
what is meant by the force threat of substitution (porters five forces)
Where customers can easily swap a business products for those of a rival
or where a substitution is unlikely
