3.7 - STRATEGIC POSITION OF BUSINESSES Flashcards
1
Q
business mission
A
- mission statements aim to set out the organisations purpose
- there are many influences on a businesses mission statement
2
Q
Mission statement - influence
A
- culture
- ethics & values
- shareholders
- stake holders
3
Q
Corporate objective?
A
- overall business objectives designed to steer a business towers achieving its overall mission
4
Q
Influences on corporate objectives?
A
- short-termism
- business ownership
- internal business environment
- external business environment
5
Q
Strategy
A
- strategic approaches are long-term plans which require many resource & can be difficult to reverse once implanted
6
Q
Tactics
A
- short-term plans which often require few resources & can be stopped/reversed if required
7
Q
Link between a mission, corporate objective & strategy
A
- mission will inform the choice of corporate objective as corporate objectives will be designed in such a way to meet the overall mission
- businesses can use satrapies to work towards their overall corporate objectives
8
Q
Difference between strategic and functional decisions
A
- strategic decisions made by businesses will influence departmental/functional decision making as every function within a business must support the overall organisation
9
Q
SWOT analysis
A
- used to explore internal stream this & weaknesses and external opportunities & threats facing the business
10
Q
SWOT - Internal strength
A
- may include a trusted and reputable brad recognised by many
- strength from within the business
11
Q
SWOT - internal weakness
A
- weakness form in the business
- eg cashflow concerns
12
Q
SWOT - external opportunity
A
- opportunity from outside the business
- eg expanding market nationally
13
Q
SWOT - external threat
A
- threat from outside the business
- may include declining market/increased competition
14
Q
Ratios - return on capital employed
A
- allows a business to compare operating profit with total capital employed by a bussiness
- operating profit/total capital employed x 100
- capital employed = total equity + NCL
15
Q
Ratios - current ratio
A
- allows businesses to explore its liquidity by comparing current asses with current liability
- current assets/current liabilities
16
Q
Ratios - gearing
A
- can be used to calculate proportion of long-term funding which comes from debt
- NCL/capital employed x 100
17
Q
Ratios - payable days
A
- used to calculate time taken for business to pay those it owes money to
- payables/cost of sales x 365
18
Q
Ratios - recieveable days
A
- can be used to calculate time taken for a business to collect the Money its owed
- receivables/revenue x 365
19
Q
Inventory turnover
A
- measures how efficiently a company uses its inventory
- cost of goods/average inventory held
20
Q
Advantages of finacial ratios
A
- allows a business to compare performance across years
- allows a business to compare to competitions (if available)
21
Q
Disadvantages of financial ratios
A
- doesn’t take non-financial information into consideration
22
Q
Core competences
A
- refers to a business ability to combines its skills, knowledge & processes to provide to with an advantages over competitors, knows as competitive advantage
23
Q
Core competences - competitive advantage
A
- a businesses unique combination f skills, knowledge and prices will drive a USP, which is difficult to imitate by competitors
24
Q
Advantages of core competences
A
- can attract & retain customers
- can add value throughout production process
- eg apple can add value because they have a reputation for having innovtve technology
25
Disadvantage of outsourcing non-core competences
- outsourcing products can lead to quality issues as some production processes are passed to third parties who may seek to cut costs during production at the expense of quality
26
Ellington tripe bottom line - profit
- profit considered an important element I determining business success
- however Ellington states that such profit should also be used to support the community
27
Elkington’s triple bottom line - people
- business impact on people affected by the business, such as employees and customers is considered as an important element determining overall performance
28
Elkingtons triple bottom line - planet
- businesses impact n the planet (environment) is considered an important factor when determining overall performance
29
Elkington’s triple bottom line theory
- people, planet, profit
- provides managers & leaders with a framework to assess performance in these areas
30
Impact of political & legal change
- can present businesses with opportunties & threats
- can affect decision making at the corporate & functional & departmental level
- eg introducing national living wage presented a threat for many businesses as total costs increased
31
Competition legislation
- legislation about competition practices can effect a business
- competition laws ban businesses from acquiring/taking over other businesses if competition will be substantially reduced
32
Labour market legislation
- employment regulations - working time regulations + equality act state provisions a business ,must make for supporting and protecting employees
33
Environmental legislation
- laws around pollution provide guidance in terms of the pollution created by businesses and these laws must be complied with
34
Political environment affecting legislation
- enterprise is a political factor which involves national & local schemes to support new, start up businesses
- regulators exist to ensure businesses are following industry rules & consumers aren’t taken advatage of
35
Economic environment - economic growth (GDP)
- value of goods & services produced by a country during a certain period
- changes in GDP can affect a businesses decision making as GDP growth is likely to coincide with an increase in demand
36
Economic environment - taxation
- tax paid by business own any profits made
- increased taxation will reduce profit potentially effecting strategic decisions
37
Economic environment - exchange rates
- value of one currency expressed in terms of another currency
- changes in the change rates can affect the decision-making process of a business which imports/exports to a country with a differnt currency
38
Economic environment - inflation
- refers to the general increase in price levels and the reduction in the real value of money
- changes in inflation can affect the decision-making process of a business became rising costs may mean that a business had to increase its prices to maintain its profits at the same level
39
Economic environment - government policies
- fiscal policy refers to the use of gov expenditure & taxation to influence demands
- monetary policy refers to the controlling of Money supply & interest rates to control econmic activity
40
Trade & protectionism
- open trade & protectionism refer to the ability of countries to trade either with/without barriers to trade
- protectionist measures can reduce international trade which can affect a businesses decision importing and exporting goods & services
41
Globalisation
- the increasing trend for individuals markets to become unified & worldwide
42
Globalisation advantage
- offered businesses opportunities to expand & target international market’s
43
Globalisation disadvantage
- increases competition for local business & this can reduce market share & sales revenue
44
Targeting emerging economies
- can help a business to extend the product Life cycle for its goods & services
- emerging economies offer business new markets to target which can increase sales volume
- emerging economies offer increased access to labour resources often at a reduced cost
45
International businesses and globalisation
- TNC’s help globalisation to spread and also take advantage of the economic liberalisation that has come with globalisation
46
Glocalisation (globalisation&localisation)
- TNCs use globalisation to help spread globalisation
- means they adapt their products to the needs of local consumers
- eg lots of global food TNCs offer a different menu in India where beef is not eaten
47
Glocalisation reflecting laws
- Glocalisation reflects the different laws in different countries
- eg BMW makes right-hand drive cars for UK and left-hand in Germany
48
Urbanisation
- describes people moving from rural areas to urban areas
- people usually move to urban areas because there are more job opportunites there
49
Migration
- describes people moving from one country to another, with the intention of accessing employment
50
Consumer lifestyle changes
- occur when buying habits or spending patterns change
51
Social changes in lifestyle
- can include the growth of e-commerce & the changes in buying habits as people begin to expect the availability of e-commerce platforms to complete online transactions
52
Demographic factors - ageing population
- UK population is ageing and as healthcare improves people live longer, demand for products & services can change
- eg holidays with package holidays for older people may need to increase capacity (saga holidays)
53
Demographic factors - rising birth rates
- UK population is expanding as birth rates continue to increase
- an expanding population will increase demand for products & services & businesses must be blue to respond to these increases to maintain market share
- as the population increases, food producers must be able to increase production to meet demand
54
Demographic factors - migration
- movement of people between countries can affect demand for products and services
55
Lifestyle - healthy eating
- healthy eating awakes continues to grow and consumers are demanding healthier food
- eg McDonalds made a Healthier kids meals in June 2018
56
Lifestyle - emphasis on wellness
- consumer awakes of wellbeing & fitness is increasing and therefore so is consumer demand for fitness products
- eg Fitbit demand
57
E-Commerce
- as consumers take advantage of technological advance like e-commerce, demand for online shopping will increase and businesses must be responsive to these changes
58
Lifestyle - social media
- businesses must adapt to costumer service procedures to customer expectations due to social media
59
Corporate social responsibly
- CSR is a term used to describe an approach whereby businesses seek to exceed basic legal requirements by considering their impact on society
60
Advantages & disadvantages of CSR
- can increase a businesses costs through paying for initiatives, offering employees fair wages and agreeing to pay suppliers fair prices
- though initially increasing costs, can attract customers to the business and increase market share & sales revenue in the long term
61
Carrolls CSR pyramid
- econmic
- legal
- ethic
- philanthropic
62
CSR pyramid - economic
- being profitable is the foundation of the hierarchy and allows the business to move through additional responsibilities
63
CSR pyramid - legal
- business should fulfill all legal responsibilities
- eg paying employees the national minimum wage
64
CSR pyramid - ethical
- moral decisions should be fulfilled
- eg agreeing to pay employees more than legal regiment to meet their living standard
65
CSR pyramid - philanthropic
- business supports society & community, eg through supporting charities
66
The shareholders concept
- states that businesses have a responsibility only to raise value for shareholders through increasing share prices and paying dividends & that profit maximisation is only for of the business
67
The stakeholder concept
- states that as well as satisfying shareholder needs the business must place equal emphasis on satisfying the needs of all other stakeholders including employees, customers and suppliers
68
Porters five forces
- a model that allows you to analyse the competitiveness of a buisness environment
- bargaining power
- barriers to chnage
- barriers to entry
- substitutes
- Rivalry
69
Five forces - bargaining power
- relates to how much power suppliers in the market have
- more power may mean the market is less attractive as suppliers can charge higher prices
- relates to how much power buyers in the market have, more power from buyers may be less attractive as buyers can demand a lower prices
70
Five forces - Barriers to entry
- relate to how easy it is for a new business to enter the market
- if barriers are low the market will be more competitive with new businesses entering
71
Five forces - substitutes
- threat of likely substitutes relates to weather customers are likely to buy an alternative product
- if threat is high the market is less attractive as customers are likely to shop elsewhere
72
Five forces - rivalry
- rivalry with existing competitors refers to how much competition currently exists within the market have
- greater competition means a less attractive market
73
Five forces - advantages
- allow business to understand the competitiveness of the market and make decisions about their own competitiveness
- model allows new entrants to consider how profitable a market may be
- good framework to identitfy SWOT
74
Investment appraisal
- process of appraising to working out whether an investment is likely to meet objectives of business project
75
Use of investment appraisal
- allows businesses to work out white and investment is profitable/if the payback id quick enough
- allows a business to compare one project with another & decide which is most suitable for the businesses needs
76
Investment appraisal -net present value
- NPV is expressed using a real value
- a negative NPV suggests that a project will not make a business any Money where as a positive NPV suggests there will be a return on the project
77
Investment appraisal - ARR
- expressed as a percentage
- average net return/investment x 100
- higher ARR means a higher return on the project compared to original investment
78
Investment appraisal - payback
- expressed as a period of time
- amount of time it takes for cashflow to be equal as the initial cost of project
- a shorter payback means the business recover quicker from original investment
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