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
explanation of social: (pestle)
the extent to which personal attitudes and values, culture and demographic change are expected to affect the business including
26
examples of social factors:
-demographic changes -lifestyle changes -trends, fashions and tastes
27
explanation of technological: (pestle)
the extent to which technological change and innovation are expected to impact the business
28
examples of technological factors: (pestle)
-production and distribution processes -online presence -e commerce -ability to reduce costs (automation)
29
explanation of legal: (pestle)
the extent to which changes in law and regulations are expected to impact the business including
30
examples of legal factors: (pestle)
-minimum wage -health & safety -equality act
31
explanation of environmental (pestle)
the extent to which changes in attitudes and government policy towards environmental protection impact the business
32
examples of environmental factors: (pestle)
-changing infrastructure (eg: change to lean towards green transportation networks) -green technology -carbon emissions -supply chain -disposal of waste -changes in climate
33
what does ‘changing competitive environment’ mean?
the structure of the market in which a business operates is likely to change over time
34
different ways that a market can change:
-new entrants -new products -consolidation -growth of the internet -changes in consumer tastes -legal changes -globalisation
35
changes in market structure: new entrants
as new entrants arrive the market will become more competitive
36
changes in market structure: new products
businesses will need to innovate in order to keep up with rivals
37
changes in market structure: consolidation
-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
changes in market structure: growth of the internet (+example)
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
changes in market structure: changes in computer tastes (+ examples)
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
changes in market structure: legal changes
the legislation (laws) may change likely leading to fewer (or more) barriers to entry for new businesses
41
changes in market structure: globalisation (+ example)
-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
3 main types of market structure:
-highly competitive markets -uncompetitive markets -oligopoly
43
what is a highly competitive market?
-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
what is an uncompetitive market?
may exist where one business dominates - a monopoly
45
what is an oligopoly?
-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
who devised porter’s five forces?
michael porter
47
what are porter’s five forces?
the reasons for fluctuations in profitability in different markets / framework for analysing the nature of competition within an industry
48
list out each of porter’s five forces:
-threat of new entry -bargaining power of buyers -bargaining power of suppliers -threat of substitutes -industry rivalry
49
how does porter’s five forces benefit a business?
-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
p5f: what will happen if new entrants movie into an industry? (threat of new market entrants)
if new entrants move into an industry they will gain market share & rivalry will intensify
51
p5f: barriers to entry (threat of new market entrants)
-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
what are barriers to entry?
the costs or other obstacles that stop new competitors from easily entering an industry
53
p5f: when is the threat of new entrants high? (threat of new market entrants)
if barriers to entry are low (high barriers = low threat if market entrants)
54
p5f: what is the effect of a high threat of market entrants?
-the market will contain a large number of rival businesses -lower market share, profits and prices
55
examples of barriers to entry:
-economies of scale → reduced prices (price wars) -patents/copyright -customer/brand loyalty -exclusive distribution channels
56
markets that are easy to enter vs difficult to enter
easy: tutoring, hairdressing difficult pharmaceuticals, sports clothing
57
p5f: what is the bargaining power of buyers?
the power that buyers have to negotiate terms and prices
58
p5f: when are buyers powerful?
-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
p5f: buyers power when there are few of them: (bargaining power of buyers)
-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
p5f: is high or low bargaining power of buyers favourable for a business?
low
61
p5f: ways to overcome high bargaining power of buyers:
-develop a USP / differentiate -lower prices to attract customers. -find new customers
62
p5f: what is bargaining power of suppliers?
the power suppliers have to negotiate terms and prices
63
p5f: when is the price of supplies likely to fluctuate?
if the supply of a commodity fluctuates
64
p5f: when is supplier’s bargaining power high?
-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
supplier power: a business has a lot of choices
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
p5f supplier power: few suppliers / scarce supply
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
p5f: how does high supplier power affect a business?
if the supplier forces up the price paid for inputs, profits will be reduced
68
p5f: ways to overcome high supplier power
-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
what is a substitute?
a product or service that meets the same customer need
70
p5f: what is threat of substitution?
the ability of a customer to switch to buying a similar product from a different business
71
p5f: when is the threat of substitutes high?
-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
p5f: what does a high threat of substitutes lead to for a business?
lowered demand → could lead to a need to lower prices which could cause further issues
73
p5f: when is the threat of substitutes low?
where substitution is unlikely
74
p5f: what does a low threat of substitutes lead to for a business?
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
p5f ways for a business to overcome high subsritute power:
-develop customer loyalty -develop a USP -lower prices to attract/keep customers (cost leadership) -try to meet customer needs better than competitors do
76
example of the threat of substitution in a market: (smartphones)
-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
p5f: what is intensity of rivalry?
the level of competition and rivalry between businesses within the market
78
p5f: when are businesses likely to enter a market?
as markets grow and become more attractive, new businesses may enter the market, increasing the competitive rivalry
79
p5f: when is competition high in a market?
-easy entry to matkets -easy customer switching -little differentiation of products -slow growth of the market -low customer loyalty
80
p5f: key issues with highly competitive markets:
-profit margins are squeezed -prices may have to be decreased
81
p5f: ways for businesses to overcome being in competitive markets
-lower costs of production and prices to compete (cost leadership) -differentiating -takeover, merger or strategic alliance -increase marketing
82
characterstics of low profit industries:
-strong suppliers -strong (buyers) -low entry barriers -many opportunities for substitutes -intense rivalry
83
examples of low profit industries:
-cafes -airlines
84
characteristics of high profit industries:
-weak suppliers -weak buyers -high entry barriers -few opportunities for substitutes -little rivalry
85
examples of high profit industries:
-pharmaceuticals -soft drinks