3.1 - Business Objectives and Strategy Flashcards
Define Aims
Are things the business intends to do in the long term
Define a mission statement
What is its use
Is a formal statement which explains the overriding purpose and values of a business
Done to make a commitment to its customers and used to bring a firms workforce together with a shared purpose
What will different stakeholders look for in a mission statement (6)
Owners - will want to maximise shareholder value
Managers - will look to core aims and objectives to lead their employees with
Employees- will look for motivational statements that make them feel proud to work for the business
Pressure groups- look for a clear environmental/ethical message
Customers - look to see ethical core principles
Competitors- look to see of the business is competitive, organised and innovative
What are the possible limitations of mission statements
Can be unrealistic
Can be a waste of management and time
Can lead to conflicts if not properly written
Can become obsolete as the business develops
Define corporate objectives
Are objectives of a medium to large sized business as a whole with a corporate vision
Define departmental and functional objectives
Are objectives of a department within a business
Define corporate strategy
Is a medium to long term plan for achieving the corporate objectives
Define Ansoff’s matrix
Is a marketing model that can be used to help a business decide its strategic direction in terms of growth
Describe Market penetration Market development Product development Diversification In terms of Ansoffs matrix
Market penetration - existing product in a existing market
Market development - existing product in a new market
Product development - new product in a existing market
Diversification- new product in a new product
Define Market penetration in Ansoffs matrix
Advantages and disadvantages
Is a growth strategy where the business focuses on selling existing products into existing markets
A:
Good knowledge of customers and consumers
Easier to sales forecast
D:
Lack of ambition may demotivate employees
Define Market development in Ansoffs matrix
Advantages and disadvantages
Is a growth strategy aimed at expanding the market through new users
A: Huge potential Economies of scale
D: Means changes in distribution channels, legislation and managing staff
Define Product development in Ansoff’s matrix
Advantages and disadvantages
Is a growth strategy involved in bringing a new product to the market.
A: Avoid decline stage of the product life cycle
D: High risk level, can be expensive
Define Diversification in Ansoff’s matrix
Advantages and Disadvantages
Is a growth strategy aimed at reducing risks by expanding the range of products sold
A: Motivates employees, can lead to drastic growth if successful
D: Very high risk, may effect performance of existing products in other markets
Define Porters strategic matrix
What are the three factors of the matrix
Identifies the sources of competitive advantage for a business
Cost Leadership
Differentiation
Focus (cost and differentiation)
Explain Cost leadership as a strategy in porters matrix
Involves striving to be the lowest cost provider in the market to increase profits and market share
Explain differentiation as a strategy in porters matrix
Involves a business operating in a mass market but adopting a unique position through quality, design and customer service to charge a premium price
Explain Focus strategy as a strategy in porters matrix
Cost focus - emphasis on minimum costs within a niche market
Differentiation focus - pursuing different strategies within a focused market
Define Kay’s theory of distinctive capabilities
Is that a business has a valuable capability that it possesses but other firms have difficulty replicating
What are the types of distinctive capabilities
Architecture- refers to the contracts and relationships with an organisation to grow
Reputation- refers to the positive associations a business builds , linking closely to brand image
Innovation- refers to a new product or process to grow
Define portfolio analysis
Is a method of categorising all the products of a firm to decide where each fits within the strategic plans (boston matrix)
Define SWOT analysis
Is an analysis of the internal strengths and weaknesses of the business and the opportunities and threats presented by its external environment
Explain an Internal Audit
What are examples of what it includes
Is an analysis of the business itself and how it operates , identifying the strengths and weaknesses.
Products and their costs and quantity
Finance, profit, assets and cash flow
Production, capacity and efficiency
Explain an External Audit
Give examples of what it includes
Is an analysis of the environment in which the business operates
Size and growth potential of the market
Characteristics of customers in the market
Number and size of competitors
PESTLE factors
Explain strengths as a part of SWOT analysis for a business
Give examples
Are positive aspects of the business that may be identified , what helps make the business successful.
Highly motivated and loyal workforce
A product with a USP
Loyal customer base
Explain weaknesses as a part of SWOT analysis for a business
Give examples
Are negative aspects of a business that may be identified , undermining the performance of a business
Poorly motivated workforce with high staff turnover
Poor cash flow and high debt
Outdated capital
Explain Opportunities as a part of SWOT analysis for a business
Give examples
Are the options that a business may be able to exploit that could result in improvements
New overseas markets opening up
Fall in the cost of a raw material
Fall in the exchange rate
Explain Threats as a part of SWOT analysis for a business
Give examples
Are the possible hazards that have the potential to damage the performance of the business
New entrant in the market
A looming recession
New legislation
What are the advantages and disadvantages of SWOT analysis for a business
A Source of information for strategic planning Helps in setting objectives Maximises response to opportunities Minimises level of threat
D
Time consuming
Can be expensive
What can PESTLE analysis be used for
Shows the impact of external influences on a business
What are political examples which can effect a business (3)
Members leaving or joining the EU, disrupting the financial markets
Improved national security restricts the movement of goods
Pressure groups who aim to reduce the consumption of a product
What are economic examples which can effect a business (3)
Falling unemployment might increase demand for a product
Lower interest rates makes borrowing cheaper and encourages investment
Some businesses may suffer during a recession
What are social examples which can effect a business (3)
More people going to university increases workforce quality
Increased migration makes recruitment easier
People becoming healthier creates opportunities for certain businesses
What are technological examples that can effect a business (3)
Changes in technology can shorten product life cycles
Developments in technology allows capital to replace labour, lowering unit costs
Development of social media improves communications with customers
What are legal examples which can effect a business
Businesses in the food industry are under pressure to reduce sugar in salt
Advertising on cigarettes has been banned
Legislation can effect tax laws
What are environmental examples which can effect a business
People are buying more ethical and environmentally friendly goods
New ways of generating power using renewable sources
Trends in using recycled resources in production
What is a competitive market
What are the positive and negative outcomes for a business
Is where there is a large number of buyers and sellers, where products are close substitutes.
Positive outcome -> Increased productivity (employees are more motivated) , increased innovation (product and process)
Negative outcome -> Increased costs (advertising, promotions, customer service, training), decreased revenues, decreased profit
What is a uncompetitive market
What are the positive and negative outcomes for a business
Is where a market is dominated by a single producer (monopoly) or a few large businesses (oligopoly)
Positive outcome -> Decreased costs, Increased revenues, increased profits
Negative outcomes -> X-inefficiency, less innovation , government observation for monopolies, collusion for oligopolies
Explain Porters five forces model
What is its impact on a business
Is a framework for analysing the nature of competition within a industry.
The ultimate aim of the competitive strategy is to cope with and potentially change the factors in favour of the business to boost returns
List Porters Five Forces
Bargaining power of suppliers Bargaining power of buyers Threat of new entrants Substitutes Rivalry amongst existing firms
Explain Bargaining power of suppliers as part of Porters Five Forces Model
Describes the power suppliers have over a business. Limiting the power, by seeking out new suppliers to increase competition or growing vertically to become a supplier, will improve the competitive position of the business.
Explain Bargaining power of buyers as part of Porters Five Forces Model
Describes the power customers and businesses have over suppliers. If businesses have considerable market power they will be able to force suppliers to offer lower prices.
Explain the Threat of new entrants as part of Porter Five Forces
Describes how easy it is for new firms to enter the market a business is operating in, barriers to entry. Firms can deter new entrants by creating patents/landmarks or developing strong brand loyalty
Explain Substitutes as part of Porters Five Forces Model
Describes the amount of similar products sold by competitors. A firm can reduce substitutes through research and development to develop a USP and also predatory pricing to drive substitutes out of the market.
Explain rivalry among existing firms as part of Porters Five Forces model
Describes the degree of rivalry which determines prices and profits for every single firm in the market. Firms can reduce this by collusion, mergers or instead bringing out new products
