3.7 - Analysing the Strategic Position of a Business Flashcards
What is a mission statement?
- A statement of the organisations purpose - what it wants to achieve in the larger environment
What are some internal influences on objectives?
- Finance
- Resources available
- nature of product
- HR
What are the external influences on objectives?
competition, change in demand, economy, legislation, shareholder pressure
What are the impacts of strategic decision making on functional decision making?
decisions influence each functional area of the business, specifically marketing, HR, finance, operations
What are the value of SWOT analysis
- identifies completion advantage and disadvantage
- identifies weaknesses, allowing them to be redressed
- reduces vast amounts of information a business into a manageable quantity
What are balance sheets?
accounting statements that provide a snapshot of a company’s financial position at a particular time
What are income statements?
A financial statement showing the revenue and expenses for a fiscal period.
What are the stages of an income statement?
gross profit
operating profit
profit before tax
profit after tax
What are profitability ratios?
Measures of the operating success of a company for a given period of time.
What are liquidity ratios?
Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.
What is gearing?
A long-term liquidity ratio that measures the percentage of a firm’s capital employed that comes from long-term liabilities, such as debentures and mortgages. Firms that have at least 50% gearing are said to be highly geared.
What are efficiency ratios?
indicate how well a firm’s resources have been used, such as the amount of profit generated from the available capital used in the business.
What is the formula for ROCE?
Operating profit / capital employed x 100
What is the formula for current ratio?
Current liabilities / current assets
What is the formula for gearing?
Non-current liabilities / total equity + non-current liabilities x 100
What is the formula for inventory turnover?
Cost of sales / inventories
What is the formula for receivable days?
Receivables / sales revenue x 365
What is the formula for payable days?
Payables / cost of sales x 365
What is the limitations of financial ratios?
-not useful in isolation
-hard for companies operating in multiple industries
-must be analyzed relative to one another
-determining a range of “acceptable” values can be difficult
What are the marketing measures of performance?
- Brand image
- Customer service
- Effectiveness of marketing campaign
- New product sales as a percentage of all product sales
What are the HR measures of performance?
- Labour turnover and retention
- Labour productivity
- Employee costs as percentage of turnover
- Labour cost per unit
What are the operations measures of performance?
- Capacity utilisation
- Quality
- Productivity
- Speed of response and flexibility
What are core competences?
Unique abilities a business possesses in order to gain a competitive advantage
Short term approach for business success?
- Insufficient spending on research and development
- Greater emphasis on providing shareholders with high dividends rather than retaining profits
- External growth rather than organic growth
Long term approach retains profit for investment in business success
- Research and development
- Staff training
- New machinery and technology
What is Elkington’s Triple Bottom Line?
Highlights that businesses may have different objectives, not just for profit. People, planet, profit
What is competition?
law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies
What is employment law?
- Pay
- Working conditions
- Equal opportunities
- Trade union representation rights
What is government policy?
The central ideas or principles that guide government in its work, including the kind of laws it passes.
What is Gross Domestic Product (GDP)?
A measurement of the total goods and services produced within a country.
What is fiscal policy?
Government policy that attempts to manage the economy by controlling taxing and spending
What is monetary policy?
Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.
What are the different forms of taxation?
- Income
- National insurance
- Value added tax (VAT)
- Excise duties
- Corporation tax
What are exchange rates?
a measurement of the value of one nation’s currency relative to the currency of other nations
What are the impacts of changing exchange rates
A high exchange rate means that the pound is worth more against other currencies. this means that UK goods are more expensive for foreign customers. a strong pound benefits UK firms that import foreign goods because they are now cheaper.
A low exchange rate has the opposite effect because the pound is worth less against foreign currencies. this results in UK exports being cheaper but imports being more expensive.
What is inflation?
a general increase in prices and fall in the purchasing value of money.
What is protectionism?
the theory or practice of shielding a country’s domestic industries from foreign competition by taxing imports.
What is open trade?
An economic policy of not discriminating against imports from and exports to other countries
What isn globalisation?
the process by which businesses or other organisations develop international influence or start operating on an international scale.
What is the importance for globalisation for businesses?
- comparative advantage
- increased competition
- migration
- global economic cycles
What are emerging economies?
Developing countries that over the past two or three decades have begun to develop a strong industrial base, such as Singapore and Hong Kong.
