7. Analysing the strategic position of a business Flashcards
Influences on the mission of a business
Size of the business
Nature of owners and other important stakeholders
Changes over time
Business performance
External factors
Social responsibility
Internal and external influences on corporate objectives and decisions
Pressures for short termism
Business ownership
External and internal environment
Strategy
Medium to long term plan to achieve objectives
Tactics
How strategy is carried out
Corporate aims
Long term targets and plans to fulfill mission statement
Corporate objectives
Medium to long term quantifiable targets to fulfill mission statement
Corporate strategy
Actions taken by the business to achieve objectives
Business tactics
Actions taken on day to day business to support strategy
Strategic decision making
Strategic decision making concerns general direction and overall policy of an organisation
Functional decision making
Short to medium term and concerned with specific functional area rather than overall policy
Value of SWOT analysis
Strengths - internal
Weaknesses - internal
Opportunities - external
Threats - external
Balance sheet
Financial document that summarises net worth of business at given point in time
Income statement
Financial document that summarises firm’s trading activities and expenses to show whether firm has made profit or loss over specific period
Balance sheet contents
Assets
Liabilities
Net current assets
Net assets
Share capital and reserves
Trade credit
Working capital
Liquidity
Depreciation
Allows value of fixed asset to be spread over its useful life
Ratio analysis
Compares one piece of information with another
Ratios are more meaningful if you have at least two years to compare, so that you can identify a trend
Ratio analysis equations
Profitability
Liquidity
Gearing
Efficiency
Published accounts
Good source of finance, they allow a structure for comparisons over time and with other firms can be an aid to decision making
Core competencies
Fundamental areas that firm is good at and separates it from another firm
Leads to competitive advantage
Assessing short and long term performance
Decisions made in short term may allow firm to improve performance in long term but have negative impact in short term
Elkington’s triple bottom line
Model designed to encourage sustainability
Elkington’s triple bottom line key components
Profit
People
Planet
Kaplan and norton’s balanced scorecard
Strategic system used to plan and manage firm’s activities to its vision statement
Kaplan and norton’s balanced scorecard key areas
Finance - measures financial capability
Learning and growth - HR requirements
Customer - expectations being met
Political environment
Government actions that impact on strategic and functional decisions made by a firm
Can be local, national or international authorities
Legislation
Creating and enacting laws in order to protect individuals, firms and society
Competition law
Promotes fair competition in markets and stops abuse of consumers by firms due to monopoly power
Competition policy
Seeks to improve competitive nature of markets
Protects interests of consumers and society
Competition policy impacts
Innovation
Lower prices
Improved quality
Labour market law
Protect worker from discrimination within workplace
Equal pay act
Both sexes should be treated equally at work
Sex discrimination act
Outlaws discrimination based on gender for recruitment, promotion, training and dismissal
Race relations act
Illegal to discriminate based on colour
Disability discrimination act
Illegal to discriminate against disabled people
National minimum wage
Minimum hourly wage rate introduced
Wage discrimination
Business pay workers different wage rate for same job
Labour market reforms
Impact on trade unions with reduction in trade union power and influence
Environmental law
Influence behaviour of individuals and businesses in order to reduce negative impacts on natural environment
SMEs
Small and medium size enterprises
Regulation
Undertaken by government to create competitive markets
De-regulation
Opening up of markets to new competition through removal of rules and regulations that created barriers to entry
Infrastructure
Governments will look to improve infrastructure to help firms operate more effectively
The environment
UK and EU governments use environment policy to control levels of pollution, waste management and climate change
International trade
International trade is exchange of goods and services between countries
Taxation
Process of imposing changes on business and individuals by government
Direct taxes
Taxes imposed on individual or property e.g. income tax, national insurance
Exchange rates
SPICED - Strong pound - Imports cheaper - Exports dearer
WPIDEC - Weak pound - Imports deader - Exports cheaper
Inflation
General rise in prices or fall in value of money
RPI
Retail Price Index - measure of ‘basket’ of goods and services representative of what people buy in UK
CPI
Consumer Price Index - similar to RPI but mainly excluding housing costs
Fiscal policy
Manipulation of government, spending, taxation and government borrowing to influence level of economic activity
Fiscal policy aims
Keep inflation on 2%
Maintain stable economic cycle
Stimulate economic growth and employment during times of recession
Monetary policy
Manipulation of rate of interest, money supply and exchange rates to influence level of economic activity
Main target is to maintain low rate of inflation
Free trade
No restrictions on flow of goods and services between countries
Protectionism
Policies imposed by governments to restrict free movement of goods and services between countries
Globalisation
Integration of international economies leading to world market in goods and services
Globalisation Adv vs Disadv
Adv:
Cheaper labour costs abroad
Cheaper raw materials from low cost countries
Opportunities to sell in new markets
Disadv:
Communication and transport problems
Increased competition
Can gain bad rep for making UK workers redundant
Characteristics of globalisation
Increased investment flows
Increased migration
Emerging economies
Emerging market is a country with low to middle average income per person
Urbanisation
General movement of people towards cities and away from rural areas
Migration
Movement of people between countries
Changes in consumer lifestyle and buying behaviour
Technology
Viral marketing
Social media
Emotional branding
Health care
CSR (Corporate social responsibility)
Continuous commitment by firm to behave ethically and contribute to economic developments
Carroll’s corporate social responsibility
Highlights 4 aspects of corporate social responsibility, society experts firms
Carroll’s corporate Social Responsibility Pyramid
Economic responsibilities
Legal responsibilities
Ethical responsibilities
Philanthropic responsibilities
Technological change
Ongoing development of invention, innovation and sharing of technology or processes
Porter’s five forces
Buyer power
Supplier power
Substitute threat
Entry threat
Rivalry
Entry threat (barriers to entry)
Any factor that stops a firm from entering a market
Buying power
Large firms are in a dominant position when buying from suppliers
Supplier power
Suppliers extremely powerful in marketplace as they supply the products they have exclusive access to
Rivalry
Monopoly - one firm dominates market
Duopoly - two firms dominate market
Oligopoly - small number of firms are in industry
Monopolistic - many firms compete in industry selling differentiated products
Perfect competition - many firms in industry with no influence on market price
Substitute threats
When firm within industry faced with threat of similar product from another industry
How 5 forces shape competitive strategy
5 forces look at impact of each force on profit of industry and how this is shared out between firms
