3.1 - Business Objectives And Strategy Flashcards
What is an aim?
Generalised statement showing the direction of the business
What is a mission statement?
Passionate way of of expressing aims in order to motivate staff
What is a corporate objective?
Tasks that are put in place for the business to achieve its mission statement.
What is one benefit of mission statements?
Increases profitability so employees feel their job has a significant purpose.
How do mission statements provide direction for a business?
Provides a focus for the business.
What is a potential drawback of mission statements?
They can be ambiguous
Ambiguity in mission statements can lead to misunderstandings about the organisations purpose.
What can poorly written mission statements lead to?
Conflicts and inconsistencies
If not properly articulated, mission statements may cause disagreements among stakeholders.
What is a common issue with mission statements regarding realism?
They can be unrealistic and overly optimistic
Mission statements that are overly ambitious may not reflect the actual capabilities of the organisation.
What happens to mission statements as a business develops?
They can become obsolete
As businesses evolve, their original mission statements may no longer align with their current direction or goals.
What is a strategy in a business context?
A medium to long-term plan for meeting company objectives.
What does a strategy show a business?
It shows what steps they are going to take in order to achieve their corporate objectives.
What is a tactic in a business context?
A short-term plan to help achieve a short-term goal.
What are the four the four categories of Porter’s Generic Strategies?
- Cost leadership - lost cost product in the mass market
- Cost focus - low cost product is the niche market
- Differentiation leadership - differentiated product in the mass market
- Differentiation focus - differentiated product in the niche market
What is the primary objective of the cost leadership strategy?
To become the lowest-cost producer in the industry.
How can a company achieve cost leadership?
By producing on a large scale to exploit economies of scale.
What type of products are typically associated with cost leadership?
‘Standard’ products with little differentiation.
What is a characteristic of the lowest-cost producer?
High level of productivity.
Fill in the blank: Cost leadership often involves higher _______ utilisation.
capacity
What bargaining strategy do cost leaders typically use?
Bargaining power to negotiate lowest prices for production inputs.
What production method is commonly employed in cost leadership?
Lean production methods.
What role does technology play in cost leadership?
Effective use of technology.
What is important for distribution in a cost leadership strategy?
Effective distribution channels.
What is the primary goal of a business that adopts a cost focus strategy?
To seek a lower-cost advantage in one or a small number of market segments.
What type of product is typically offered by businesses with a cost focus?
A basic product that may be similar to higher-priced competitors.
In a cost focus strategy, how is the product positioned in relation to market leaders?
It is acceptable to sufficient consumers, often mimicking the market leader.
Fill in the blank: A business using a cost focus strategy aims to provide a product that is _______ to sufficient consumers.
[acceptable]
True or False: A cost focus strategy involves offering a premium product with high features.
False
It involves offering a basic product at a lower price cost
What is differentiation leadership?
When a business sells a differentiated product to the mass market in order to gain competitive advantage.
This approach focuses on unique positioning to meet buyer criteria.
What does differentiation leadership involve?
Considering needs and wants of consumers in a market and positioning the business uniquely to meet these criteria’s.
This helps to create a unique value proposition.
List methods to achieve differentiation leadership.
- Superior product quality
- Branding
- Distribution across all major channels
- Consistent promotional support
These methods enhance the perceived value of the product or service.
True or False: Differentiation leadership is usually associated with charging lower prices due to reduced costs.
False
It is usually associated with charging premium prices due to added value.
Fill in the blank: Differentiation leadership aims to achieve competitive advantage through _______.
[differentiation]
This entails developing unique attributes that set the business apart from competitors.
What is the classic niche marketing strategy?
Differentiation focus
How can many small businesses establish themselves in the market?
By using a niche marketing strategy
What is a key characteristic of products in a differentiation focus strategy?
Higher prices than undifferentiated products through special expertise
What do businesses aim to provide in a differentiation focus strategy?
Products that are clearly different from competitors
What are the the four categories of Ansoff’s Matrix?
- market penetration - existing product, existing market
- product development - new product, existing market
- market development - new market, existing product
- diversification - new market, new product
List ways to achieve growth in markets with existing products.
- Increase brand loyalty
- Encourage regular use of product
- Encourage to use larger quantity
These strategies focus on maximising the potential of current offerings.
What is the risk level of achieving growth in markets with existing products?
Lowest risk strategy
This approach leverages existing customer bases and products, minimising uncertainty.
Give an example of market penetration
Boots-Advantage Card
A loyalty program that rewards customers for their purchases, enhancing retention.
What is product development?
- new product in an existing market
- trends and technology change quickly
- associated with product innovation and continuous development
- requires large investment in R&D
- associated with medium level of risk
What is market development?
- new product in a existing market
- can be accomplished by: different customer segments, new areas of regions of the country, foreign markets
- e.g., entering new geographical markets - ikea in china
What is diversification?
- new product in a new market
- firm is outside its area of expertise
- high risk
What is SWOT analysis?
A tool use by businesses to collect the information about strength, weaknesses, opportunities and threats to design effective strategies
What does ‘SWOT’ stand for?
- S - Strengths; internal factors that helps to business to achieve in objectives e.g. loyal customer base
- W - Weaknesses; internal factors that prevent a business from achieving its objectives e.g. poorly motivated workforce with high staff turnover
- O - Opportunities; external business circumstances that can help it achieving its objectives e.g. low interest rates
- T - Threats; external problems that may prevent a business from achieving its objectives e.g. a rival firm appointing a highly successful CEO
What is meant by PESTLE?
- P - POLITICAL - how and what degree a gov intervenes in the economy
- E - ECONOMIC - the general state of the economy can have a huge impact on a business
- S - SOCIAL - areas that involve the shared belief and attitudes of population
- T - TECHNOLOGICAL - technological development because they provide new opportunities and improve efficiency
- L - LEGAL -gov provides legal framework in which businesses operate
- E - ENVIRONMENTAL - factors relating to the increasing scarcity of raw materials
What are Porters 5 forces?
- threat of new entrants - create barriers to entry to prevent new entrants, heavily advertise to build strong brands
- bargaining power of buyers - make it too expensive for a customer to switch, froward vertically integrate
- threat of substitutes - buy up patents of rivals and shelve to prevent product production, continuously invest in R&D and develop patents
- bargaining power of suppliers - limit power of suppliers by looking for new supplies, backward vertical integration and merge or takeover the supplier
- existing competitors - create a cartel - illegal but quite common place, buy up rivals through horizontal integration, continuously introduce new products to the market, heavily advertise to maintain market share
