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A LEVEL BUSINESS - TH > 3.1b analysis & considerations > Flashcards

3.1b analysis & considerations Flashcards

1
Q

what is a SWOT analysis?

A

a strategic tool
-a business performs an internal and external audit before the business develops and implements a strategy

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2
Q

what does SWOT stand for?

A

S - strength
W - weakness
O - opportunities
T - threats

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3
Q

SWOT:
(internal aspects)

A

strengths, weaknesses

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4
Q

SWOT:
(external aspects)

A

-opportunities
-threats

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5
Q

what does internal refer to in a SWOT analysis?

A

things that are attributes of the business

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6
Q

internal audit:

A

could include collecting opinions of employees, assessing skills shortages or reviewing different departments

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7
Q

external audit:

A

might involve a thorough investigation into the economy, market conditions and the actions of competitors through market research

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8
Q

key points about swot analyses:

A

-unique to each business
-dynamic (must regularly update)

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9
Q

what are the strengths of a business?

A

what the business is good at

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10
Q

examples of strengths in a swot analysis:

A

-qualities that separate the business from rivals
-internal resources such as skilled staff or a particular innovation
-assets such as capital, patents or intellectual property
-a loyal customer base
-effective leadership

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11
Q

what are the weaknesses of a business?
(swot analysis)

A

what the business does poorly

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12
Q

examples of weaknesses in a swot analysis:

A

-ways that the business lags behind competitors
-resource or capital limitations including labour and finance
-lack of a competitive advantage
-lack of a USP

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13
Q

what are opportunities?
(SWOT analysis)

A

options a business may exploit to enjoy further success

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14
Q

examples of opportunities in a swot analysis:

A

-few competitors exist
-a changing legal or political environment positively impacts on business processes and decisions
-social developments create an emerging need for the businesses products

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15
Q

what are threats?
(swot analysis)

A

hazards that could damage business performance

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16
Q

examples of threats in a swot analysis:

A

-new or emerging competitors are gaining market share
-a changing legal or political environment negatively impacting on business processes and decisions
-social or technological developments threaten obsolescence of products
-negative press coverage
-changing customer attitudes towards the business

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17
Q

benefits of swot analysis:

A

-helps strategy making
-low-cost & simple
-can be combined with other decision-making models

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18
Q

drawbacks of swot analysis:

A

-classification is subjective
-doesn’t offer clear solutions
-using one to develop strategy doesn’t guarantee success (there could be poor implementation)
-quick environmental change could make the actions taken after the analysis null

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19
Q

what is a pestle analysis?

A

examines the external factors that are likely to impact a business

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20
Q

what does PESTLE stand for?

A

P - political
E - economic
S - social
T - technological
L - legal
E - environmental

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21
Q

explanation of political
(pestle)

A

the extent to which local and national government is expected to influence the business

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22
Q

examples of political effects:

A

-fiscal policy (government spending & taxation)
-trade restrictions

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23
Q

explanation of economic:
(pestle)

A

the extent to which economic indicators are expected to directly impact business

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24
Q

examples of economic factors:

A

-inflation
-exchange rates
-cost of living
-the stage of the business cycle
-unemployment levels / customer income levels
-interest rates

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25
Q

explanation of social:
(pestle)

A

the extent to which personal attitudes and values, culture and demographic change are expected to affect the business including

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26
Q

examples of social factors:

A

-demographic changes
-lifestyle changes
-trends, fashions and tastes

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27
Q

explanation of technological:
(pestle)

A

the extent to which technological change and innovation are expected to impact the business

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28
Q

examples of technological factors:
(pestle)

A

-production and distribution processes
-online presence
-e commerce
-ability to reduce costs (automation)

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29
Q

explanation of legal:
(pestle)

A

the extent to which changes in law and regulations are expected to impact the business including

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30
Q

examples of legal factors:
(pestle)

A

-minimum wage
-health & safety
-equality act

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31
Q

explanation of environmental
(pestle)

A

the extent to which changes in attitudes and government policy towards environmental protection impact the business

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32
Q

examples of environmental factors:
(pestle)

A

-changing infrastructure (eg: change to lean towards green transportation networks)
-green technology
-carbon emissions
-supply chain
-disposal of waste
-changes in climate

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33
Q

what does ‘changing competitive environment’ mean?

A

the structure of the market in which a business operates is likely to change over time

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34
Q

different ways that a market can change:

A

-new entrants
-new products
-consolidation
-growth of the internet
-changes in consumer tastes
-legal changes
-globalisation

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35
Q

changes in market structure: new entrants

A

as new entrants arrive the market will become more competitive

36
Q

changes in market structure: new products

A

businesses will need to innovate in order to keep up with rivals

37
Q

changes in market structure: consolidation

A

-at times businesses may fail and leave a market, others may then take control of the available market share
-businesses may also merge or be subject to a takeover
-when this happens the dynamic in a market can shift significantly

38
Q

changes in market structure: growth of the internet

(+example)

A

the growth of the internet has increased the number of competitors businesses face in the majority of markets

(example: until the early 2000’s UK supermarkets were dominated by a few giants (tesco, sainsburys and ASDA)
↳ the entry of businesses such as ALDI and LIDL has made the market more competitive

39
Q

changes in market structure: changes in computer tastes

(+ examples)

A

consumer tastes and preferences are changing more rapidly leading to short product life cycles and a requirement for businesses to innovate to compete

(example: the growth in fast fashion has meant that many clothing retailers must now constantly update their product ranges rather than rely on seasonally focused product selections)

40
Q

changes in market structure: legal changes

A

the legislation (laws) may change likely leading to fewer (or more) barriers to entry for new businesses

41
Q

changes in market structure: globalisation
(+ example)

A

-globalisation has increased competition with rivals from around the world

(eg: between 1970 and 2010 trade barriers around the world were reduced and customers were able to buy an increasing number of motor vehicle brands
↳ by 2015 more than half of all cars sold in the UK were manufactured by Japanese companies)

42
Q

3 main types of market structure:

A

-highly competitive markets
-uncompetitive markets
-oligopoly

43
Q

what is a highly competitive market?

A

-it exists where there is perfect competition
-this is where there are many firms who are able to compete on a number of levels through differentiating what they do

44
Q

what is an uncompetitive market?

A

may exist where one business dominates - a monopoly

45
Q

what is an oligopoly?

A

-where a few large businesses may dominate the market (oligopoly)
-there is a high level of interdependence
↳ the actions of one business will have a significant impact on its rivals

46
Q

who devised porter’s five forces?

A

michael porter

47
Q

what are porter’s five forces?

A

the reasons for fluctuations in profitability in different markets / framework for analysing the nature of competition
within an industry

48
Q

list out each of porter’s five forces:

A

-threat of new entry
-bargaining power of buyers
-bargaining power of suppliers
-threat of substitutes
-industry rivalry

49
Q

how does porter’s five forces benefit a business?

A

-porter argued that once a business fully understands the pressures in the context of their business, they can take strategic decisions to achieve and sustain a competitive advantage
-it can help a business to decide which strategy to use
-it can help a business to align their employees to a goal
-it can help a new business to decide whether a market is worth entering (profitable)

50
Q

p5f: what will happen if new entrants movie into an industry?
(threat of new market entrants)

A

if new entrants move into an industry
they will gain market share & rivalry will
intensify

51
Q

p5f: barriers to entry
(threat of new market entrants)

A

-the position of existing firms is stronger
if there are barriers to entering the
market
-if new competitors can enter an industry quickly and without investing a lot of money, then the barriers to entry are low and

52
Q

what are barriers to entry?

A

the costs or other obstacles that stop new competitors from easily entering an industry

53
Q

p5f: when is the threat of new entrants high?
(threat of new market entrants)

A

if barriers to entry are low

(high barriers = low threat if market entrants)

54
Q

p5f: what is the effect of a high threat of market entrants?

A

-the market will contain a large number of rival businesses

-lower market share, profits and prices

55
Q

examples of barriers to entry:

A

-economies of scale → reduced prices (price wars)
-patents/copyright
-customer/brand loyalty
-exclusive distribution channels

56
Q

markets that are easy to enter vs difficult to enter

A

easy:
tutoring, hairdressing

difficult
pharmaceuticals, sports clothing

57
Q

p5f: what is the bargaining power of buyers?

A

the power that buyers have to negotiate terms and prices

58
Q

p5f: when are buyers powerful?

A

-there is little difference between products offered by competitors and the business
-there are few buyers but many sellers
-it is easy for buyers to switch between competitors

59
Q

p5f: buyers power when there are few of them:
(bargaining power of buyers)

A

-when a business sells to a small number of customers those customers have high power to negotiate lower prices
-the business has few options when it comes to customers
-it will have to price and sell products according to customer demands

60
Q

p5f: is high or low bargaining power of buyers favourable for a business?

A

low

61
Q

p5f: ways to overcome high bargaining power of buyers:

A

-develop a USP / differentiate
-lower prices to attract customers.
-find new customers

62
Q

p5f: what is bargaining power of suppliers?

A

the power suppliers have to negotiate terms and prices

63
Q

p5f: when is the price of supplies likely to fluctuate?

A

if the supply of a commodity fluctuates

64
Q

p5f: when is supplier’s bargaining power high?

A

-few suppliers
-the supplier’s product is essential for production
-the supplier is able to integrate vertically and sell direct to the business’s customers
-low availability of substitute suppliers
-offering a scarce supply

65
Q

supplier power: a business has a lot of choices

A

supplier power will be low:
if the business has lots of supplier choices, it’s likely to be able to shop around for lower prices

66
Q

p5f
supplier power: few suppliers / scarce supply

A

the supplier has significant power:
-the business has little choice over the source of its suppliers
↳ it is likely to have to pay high prices for its components and accept suppliers’ terms and conditions

67
Q

p5f: how does high supplier power affect a business?

A

if the supplier forces up the price paid for
inputs, profits will be reduced

68
Q

p5f: ways to overcome high supplier power

A

-build strong relationships with suppliers
-agree on a long-term contract of supply with favourable conditions
-backward vertical integration
-maximise economies of scale → decrease cost per unit

69
Q

what is a substitute?

A

a product or service that meets the same customer need

70
Q

p5f: what is threat of substitution?

A

the ability of a customer to switch to buying a similar product from a different business

71
Q

p5f: when is the threat of substitutes high?

A

-a change in social changes causes an alternative product to be preferred
(eg: new healthy trend → coconut oil instead of sunflower oil)
-alternative products exist
-alternative prices fall
-customers can easily switch to a substitute

72
Q

p5f: what does a high threat of substitutes lead to for a business?

A

lowered demand → could lead to a need to lower prices which could cause further issues

73
Q

p5f: when is the threat of substitutes low?

A

where substitution is unlikely

74
Q

p5f: what does a low threat of substitutes lead to for a business?

A

the business has significant market power:
-it is likely to be able to charge a high price for its products
-it may be less inclined to innovate

75
Q

p5f
ways for a business to overcome high supplier power:

A

-develop customer loyalty
-develop a USP
-lower prices to attract/keep customers
(cost leadership)
-try to meet customer needs better than competitors do

76
Q

example of the threat of substitution in a market:
(smartphones)

A

-smartphones have become the substitute for a wide range of standalone goods including calculators, cameras and portable computers
-in the case of cameras many manufacturers have moved away from selling low price devices and now focus on high-end, specialist products for serious photography enthusiasts

77
Q

p5f: what is intensity of rivalry?

A

the level of competition and rivalry between businesses within the market

78
Q

p5f: when are businesses likely to enter a market?

A

as markets grow and become more attractive, new businesses may enter the market, increasing the competitive rivalry

79
Q

p5f: when is competition high in a market?

A

-easy entry to matkets
-easy customer switching
-little differentiation of products
-slow growth of the market
-low customer loyalty

80
Q

p5f: key issues with highly competitive markets:

A

-profit margins are squeezed
-prices may have to be decreased

81
Q

p5f: ways for businesses to overcome being in competitive markets

A

-lower costs of production and prices to compete (cost leadership)
-differentiating
-takeover, merger or strategic alliance
-increase marketing

82
Q

characterstics of low profit industries:

A

-strong suppliers
-strong (buyers)
-low entry barriers
-many opportunities for substitutes
-intense rivalry

83
Q

examples of low profit industries:

A

-cafes
-airlines

84
Q

characteristics of high profit industries:

A

-weak suppliers
-weak buyers
-high entry barriers
-few opportunities for
substitutes
-little rivalry

85
Q

examples of high profit industries:

A

-pharmaceuticals
-soft drinks

A LEVEL BUSINESS - TH (7 decks)

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