Analyse Strategi Position Of B Flashcards
Mission statement
Overall meaning
Core
Ie tesla- accelerate the worlds transition to sustainable energy
Make corperate obj to achieve this
Short termism
PLC’s- they’re profits are ST, all go to investors and dividends
PESTLE affecting corperate objectives
Political
Economic
Social
Technological- advancement
Legal
Ethical
Enicormental- recent changes
Strategy
Medium to long term achieving obj
Tactics
Shorty term plans to carry out strategy
Strategic vs Functional decision making
Strategic- managers, directors
Functional- department heads
Balance sheet
Snapshot for financial data
Assets and liabilities
Non current assets-
Longer than one year
Current assets
Turned into cash within one year
NCL
Debts due to be repaid after one year
CL
Debts paid in one year
Working capital
Current asses-current liabilities
Purpose of balance sheet
Helps to judge the size of a business in monetary terms
• To show what a business owns and what it owes
• Gives an insight into how a business is managed
• Identify potential liquidity problems
• Understand the extent to which a business is funded by equity or debt capital
• Judge the risk of investing in or lending money to a business
Purpose of income statement
To see if a business is profitable or not
• To judge how efficient a business is in generating profits
• To monitor sales
• To monitor costs
• Judge progress towards targets
• To judge the extent to which an organisation is investing for long term profitability
Allows shareholders to compare investments
• Judge performance over time
• Different purposes for different stakeholders - employees, customers, shareholders
Income statement
Costs
Revenue
GP
OP
POY
Enterprise policies
Gov helping small business
-Young enterprise scheme
- in areas of high unemployment, ‘enterprise zones’, gov support
Role of regulators
Ie OFSTED, ensure businesses are acting in best interest of consumers
Monitor, set targets of improvement
Political environment - infrastructure
Physical systems
Opportunities
- jobs
-lower cost of production for businesses
-increases effiency
Threats
More in certtain areas than others
International trade -political
Total exports and imports into country’s
And FDI (foreign direct investment) - factory overseas
Advantages of international trade
Increase customers
Gain economies of scale e
Increases competitiveness drive
Assess to new tech
Access lower cost production environments
- however
Increased costs as a result of diseconomies of scale
Increase in comp
Need to differentiate products from different market s
Competitive markets
Supermarkets
Sains
Tesco
Etc
More choice
Lower prices
Enviornmental legislation
Fiscal policy
Gov spending
Direct taxes
-income tax
-corporation
Affect incentives to work
Indirect taxes
- VAT
Ie cigarettes, so less likely to buy
Monterey policy
Managing supply of money in order to influence economy
Interest rates
Open trade v protectionism
Open trade- no restrictions placed on transactions between 2 countries
Protectionism - protecting domestic countries
Tariffs
Additional taxes on imports- making them more expensive
Quotas
Limit on how many things allowed to be imported
Subsisdes
Gov gives me only to domestic to help protect , export oversea
Globalisation
More international trade
Falling transport costs allow this
Tech advancements
Reduction in protectionism
Rising world incomes and living standards
Emergence or global supply chain- import from all over the world
Importance of globalisation
Finance - increase revenue from ability to sell overseas
Fall in cost of imported raw materials/increases in competition in the supply chain
Marketing- emergence of global brands
Cost of ad
Promotional campaigns -social media
Operations
- falling transport costs, global supply chains
People-
Reduced communication costs
Increased labour opp
Opportunities of globalisation
Specialisation- leading to USP
Increase comp and choice
Lower prices, more innovation, improved service and quality
Economies for scale, cost competitive
More efficient suppliers
Opp for internatial expansion
Threats of globalisation
More comp from cheaper producers
Diseconomies for scale
Unemployment in domestic markets
Increased environmental impact
Unethical— bad rep- CSR
Opportunities for emerging economies
Large young populations, increasingly wealthy
• Emergence of a ‘middle class’
• Demand for foreign goods
• Removal of protectionist barriers
• Potential ‘first mover advantage’
• Outsourcing opportunities cutting costs of production
Threat for emerging economies
Protectionist measures on imports
Cancel
•••
Card 34 of 34
Done
Competition from low cost / high quality producers
Threat for emerging economies
+
Legal protection - i.e. breach of copyright laws
[Answer]
Lower production standards than in developed markets
• Volatile economies spreading
Carole’s CSR pyramid
Philanthropic responsibilities
Ethical responsibilities
Legal responsibilities
Economic responsibilities
Carolls CSR - economic
Need a profitable base in order to survive and therefore benefit society in the long term
Want to do more than just make a profit, want to make a contribution towards society
Eg cant invest in solutions like climate change, if not profitable
Carolls CSR- legal
Minimum requirement, have to adhere to laws and regulations
Treat customers, employees and society to at least the lowest acceptable standards
Carolls CSR- ethical
Optional - but may attract ethical customers
Ie - workers in developing countries are being treated well, not working in bad conditions
Carolls CSR- philanthropic
Giving time, resources, effort, money to society at large
Tensions with CArolls CSR
Engaging with Philantrhropic responsibilities- could take cash away from profit of the business
But
Better rep
Attract more ethical customers
Growing trend to be more ethical
Technological change impact on strategic decision making - FINANCE
Ie - electronic payment systems, reduce of carrying cash
Instant payment
Ie- accounting systems and computer software, reduced human error , easier analysis, better record keeping
Technological change impact on strategic decision making - MARKETING
Websites- increased data on individuals, more personalised ads
Lower cost advertising
Conduct market research
Ie -social media, real time promotion
Technological change impact on strategic decision making - OPERATIONS
Stock management systems- reduced cost of holding raw materials
Introduction of JIT methods
Closer relationships with supplier
Mass customisation- do online then send through to business
Improved machinery- capital intensive
Increase output and labour productivity
But impact on creativity
Technological change impact on strategic decision making - HR AND PEOPLE
Job training in building, online- reduce costs and better skilled
Laptops
Flexible working practices, working from home
Opportunities of tech on strategic decision making
Lower costs through fewer mistakes
Increase customer satisfaction through consistency and quality of production
Better communication it’s workforce- online
Improve knowledge of customers through collection fo big data
Threats of tech in strategic decision making
Costs of initial machine instalments
Impact on ability to customise / hand make products
High cost of investment in new tech
Training cost to use the tech
Labour feel disvalued, less motivated
Pressures to be socially responsible
Shareholders- dont want bad rep, could lower share price
General public- protest, want
Customer- prepared to pay premium price, ie fair trade chocolate, creates USP, improve brand image, create positive PR
But
Increased cost, raw materials, renewable energy
Cost of monitoring and managing
Porters 5 forces
Entry threat (barriers to entry)
Buyer power
Supplier power
Rivalry
Substitute threat
In competitive markets - analysis of this comp environment - can form a strategy
Power of suppliers
Impact on overall level of competitiveness - depends on the number of suppliers available for your product you need
If you need specific raw material for your production process , and there are very few suppliers who can provide this, they will have power to raise price,
If they’re late with delivery, cant do anything about it, unsatisfied customers
Suppliers have less power if- many of them, lots of choice - get discounts, better credit terms
Power of buyers
Not very threat if large market with customers who buy small amounts
But
Industries with only one or two buyers, then power of buyers will be high - ie company that makes army uniforms, and they decide they dont want your products anymore , threat to your business
Threat of new entrants
Determined by barriers to entry
Costs
- stop new business from coming into market
Ie- high start up costs
- economies of scale, cost advantages of getting bigger, employee more specialised people- cuts average cost of production - negotiate special deals with suppliers
-legislation, health and safety ie starting up airline , takes time and money
-existing brand loyalty
-specialist knowledge, need
Threat of substitutes
- if elastic, more likely to switch
Intestity of rivalry
Strategy to get around THREAT OF NEW ENTRANTS
Strategy: create high barriers to entry by -
MARKETING -create price Inelastic product, dont have to cut prices, compete on prices when new entrants into market
Creation of USP and strong brand image
FINANCE - allocate lots fo budget to marketing and R and D, make more difficult for new entrants
OPERATIONS- automate productions, gain economies of scale and specialist knowledge , position as handmade tailored product to create Barrie to entry
PEOPLE/ HR- investment in training and building skills
Impact on profit-
low barriers to entry=low profits , have to cut prices to compete with new entrants
High barriers to entry=higher profit, less choice, more premium pricing
Strategy to get around BUYER POWER
Reduce power of individual buyers by increasing ales to a greater number of customers
MARKETING - promote products more, advertising
FINANCE_ offering credit/ favourable terms for new customers
OPERATIONS - mass customisation to appeal to more customers
PEOPLE/ HR- increase training from sales team
Impact on profit
Fewer customers = lower profits (can negotiate favourable credit terms, econ of scale)
More customers= higher profits (less reliant on one customers, dont need to cut prices for them)
Strategy for SUPPLIER POWER
Reduce proportion of inputs to the production process provided by a single supplier - not reliant on one supplier
MARKETING - diversify product range , introduce new products that need different raw materials, can use other suppliers if ours puts up their pricing, help spread risk
FINANCE- increase gearing (borrowing) to reduce need to buy on credit , more cash , not looking for supplier that will offer credit terms, can rather go to any supplier
OPERATIONS- build relationships with new suppliers, increase amount of buffer stock so not reliant on particular suppler to hold stock for us - give more cost though
Impact on profits
Fewer suppliers = lower profits
More suppliers = higher profits
Strategy for THREAT OF SUBSTITUTES
Socialise in order to fulfil a particular need - gain brand loyalty, USP, so desirable that there are not many substitutes available - or price competitive, but will have to lower cost
MARKETING- increase market research into customer needs , develop product with particular USP
FINANCE-OPERATIONS - invest in specialist equipment
HR- train employees with key skills and unique attributes, customer service
Impact on profits
Fewer substitutes=lower profits
More suppliers=higher profits
Strategy for RIVALRY
Diversify into new areas and a USP
MARKETING- r and d, product development and creating strong brand image
FINANCE- reinvest profit into new product and market development, instead of short term to shareholders
OPERATIONS- mass customisation to create USP
HR- recruit and train staff to develop strong creativity and product development skills
Payback
Length for time it takes for the initials cost of investment is retuned to the business
Interpretation of Payback
Shorter pay back period= preferred, once payback occurs, this is when business scan strat making a profit
Longe payback means = more risk, more difficult to predict condition further into future
Assumes cash flow is consistent throughout year
+easy, more accurate as simply
-not calculate profitability, doesn’t account for seasonality
Interpreting ARR
Higher rate is better - higher return than interest rate is better
Investment appraisal
Technique managers use to assess the attractiveness of potential investments that compares to the expected cash outflows to the expected cash inflows
Sensitivity analysis
If cash inflows and cash outflows are accurate for investment appraisal
Best case scenario
Expected outcome
Worst case
Shows if investment is risky,
How confident they are
Assess of external environment
Calculate ARR
Net cash flow - initial cost
total net return/ no. of years
Average annual return / initial cost x 100
NPV calculation
Net cash flow x Discount factor
Add together
Return on NPV
NPV/ initial cost x100
