Business environments and strategies Flashcards
what are the benefits of environmental scanning
identifies threats before imminent
identifies possible gaps in market
monitor competitors
make short and long term strategies to protect business
what are the two types of environmental scanning
before business is started-
continuous environmental scanning
why do you scan environment before you start your business
- show you viability of product or service
- strength of competitors
- size of potential market
- stability of resources
why do you do continuous environmental scanning
PESTLE, SWOT , value chain analysis, identify TBL and other effects business is having on community, analyse factors to adjust planning
what are 3 sectors of economy
- primary
- secondary
- tertiary
what is the primary sector
raw materials (mining and forestry)
what is the secondary sector
raw materials processed, production
tertiary
goods and services being sold
what is a consumer good
convenience (bread or milk), select goods ( shoes or clothing) , sPECIALITY goods (cars)
what is industrial good
used in manufacturing of other goods ( raw materials, machines and equipment)
types of services
personal (hairdresser) and professional( doctor)
what are auxiliary services
tertiary sector, transport, storage, insurance, grading and standardisation
8 steps n implementing a management strategy
- define vision, mission goals and objectives
- analyse business environments
- look at possible issues that the business should consider (ROI, potential for business growth, business image, BBBEE, CSI)
- identify strategic options available depending on type and size, aims of business
- evaluate and analyse viability of strategic options, prioritise them
- plan implementation of strategy, consider all factors
- implement chosen strategy , align with business objectives
- monitor and control strategy, ensure it is flexible
what is a vision statement
encompasses what the business would like to achieve in the future
what is a mission statement
sets business apart from other businesses helps establish goals and objectives , describes market, customers , differentiating qualities as well as social and environmental concerns, needs to be continuously revised
what are long term and short term objectives
long term- improving ROI, improving market share, employee development, TBL improvement
short term- depends on business current situation what business wants to achieve in near future
what is choice of strategy based on
competitive advantage of business identified in environment analysis
what is the culture of the business
values and attitudes shared within organisation, personality of business, needs to motivate people, must be inline with business strategy
what are business resources
physical, financial, human capital
what are the 8 business functions
General M financial HR Marketing production puchasing admin PR
what are examples of internal strengths
strong brand consumer loyalty strong management team patent rights product or service know how
examples of internal weaknesses
poor access to distribution channels
unreliable product or service
financial resources
high costs
examples of external opportunities and threats
change in cutosmer preference change legislation change tax rates tech advance political stability new competitors, products , substitute products economic factors
what is a resource based approach
- based on idea that effective and efficient application of resources helps to determine competitive advantage of business
what makes a resource relevant
- valuable- bring value to business
- rare- unique strategy to gain competitive advantage
- unique- sources of sustained competitive advantage
- non substitutable- cant be replaced by other valuable resource
what are the elements of the market environment
customers suppliers competitors NGOS strategic alliances intermediaries industry regulators trade unions government departments
market environment scanning methods
SWOT
Porters
what is Porters 5 forces
level of rivalry availability of substitutes threat of new entrants power of suppliers power of buyers
explain level of rivalry
business best interest to gather info on competitors
location, financial performances, products, market share, promotion strategies
make competitor profile because it is not illegal
explain availability of substitute products
products that are different but satisfy same needs
explain threat of new entrants
future competitors
diminished with barriers like brand loyalty, government policies, huge capital outlay, limited distribution channels
explain the power of suppliers
need a good relationship with suppliers, need right quantity and quality , right time, right price to keep competitive advantage
if business is out of stock- loss of production, loss of profit, no discounts, customer goodwill lost
explain power of buyers (includes intermediaries)
important to know who buyers are (demographics)
target market
MARKET SEGMENTATION
needs to satisfy needs of buyer so they don’t buy from competitor
what are the distribution channels
producer- consumer
producer- retailer- consumer
producer- wholesaler-retailer- consumer
producer-agent-wholesaler-retailer-consumer
what is the power of competitors
consumers are fickle , competitors with competitive advantage have power to take away consumers
when analysing competition what is important
identify from of market
- oligopoly : few strong players who control market , contend with strong players
- perfect competition: many suppliers and buyers with supply and demand ruling market, seldom exists, trends determine if your business is disabled or not
what is power of substitute products
what other products there are , why consumers are using them (cost factor, availability, convenience)
must do market research
what is the power of new entrants
can be small or large corporates who develop and increase their market share , unpredictable, steal consumers. must be aware of subtle changes in market.
what is the power of suppliers
need prompt delivery of correct products an d services so don’t suffer a loss, need to have good quality
must have good relationship, open communication, regular reviews of responsibility, prioritization
what is the power of a consumer
you need to keep them happy so they don’t go to a competitor, do market research, supply quality goods and services which fulfil needs and wants, provide adequate return policy, look after customers
Trends
predictable changes which the business can plan for and adapt to although impact and rate of change difficult to predict (technological change, economic trends)
what is a crisis
unexpected and unplanned situations that can throw an economy, industry or business into an unstable position ( war, natural disasters, labour strikes)
what political factors are there
terrorism civil war affect of media on relations between countries corruption elections BBBEE budget political parties and policies
what are physical factors
geography, infrastructure, area, climate, accessibility
what are economic factors
inflation, economies of scale, competitor strategies, bop , unemployment rates , economic growth
what are environmental factors
global warming
recycling
pollution
deforestation
what are social factors
lifestyle choices demographics unemployment poverty crime
what are technological factors
new materials social media changing technology shorter production cycle online shopping
what are legal factors
LRA CPA BCE BBBEEE skills development employment equity
ethical factors
sweatshops
child labour
intercultural issues
fair trade
trends in a business environement
need to constantly scan environment, develop strategies to cope with changing trends, watch competitors, developed nations, similar industries and seasonal trends to help gain competitive advantage.
what is a crisis in the business environment
need to pre empt and plan for it , need to have a crisis management strategy
two crisis management strategies
risk management assessment strategy
decision trees
what is a risk management assessment startegy
business needs to decide what their risk tolerance and appetite is. Occupational Health and Safety act requires employers to take precautions and make provision for possible risks. insurance company uses this to assess a business’s possible risk.
what does a risk assessment include
- who would be in charge of an emergency
- other critical duties
- emergency equipment
- escape routes and procedures
- workers must be adequately trained
what is a decision tree
used for risk management , compare different options when making a decision. can see the probability of success for each option. shows the most logical route to follow
what is a strategy
very specific plan of action formulated to address an issue the business is confronting
what are the 4 different aproaches to strategies
- informal (short term uncomplicated)
- standard ( evacuation plans, induction plans)
- simple ( simple solution to problem)
- complex/ multi dimensional ( needs to be analysed implemented with department co ordination, management intervention, long term
what are the 5 advantages of strategies
- gives business direction, defines aims and objectives, management understands long term consequences
- ensures consistency in decision making
- differentiates managment roles and areas of responsibility
- puts business role into perspective
- anticipates change in and links environments, business continues to be aligned with strategy
what are 4 types of strategies
- corporate
- generic
- intensive
- other
what are the types of corporate strategies
- growth
- decline
- corporate combination strategies
what is a growth startegy
plan of action intended to increase business market share , focuses on resources to seize opportunity for growth , identify emerging trends and opportunities. Can lead to a business redefining business objectives. require increased R&D investments, reallocation of resources , recruiting and retaining skilled employees , more innovation, greater risk tolerance.
what is internal growth
emphasizing existing products or services
increased customer retention
new product developement
new market and channel developement
what is external growth
alliances, mergers etc
- adjust business core objectives
- existing products and services etc
what is a decline strategy
after a business experienced difficult time, decline in one area to grow in another , cut losses, withdrawing large amounts of cash from declining demand in industry, or business is sold or terminated
harvest strategy
decline strategy-limit market exposure by withdrawing large amount of of assets from industry where demand is declining
divestiture strategy
decline strategy- selling assets or parts of business, cut losses
liquidation strategy
decline strategy- business is sold or terminated
what is a joint venture
corporate combination strategy- business and stakeholders come together to achieve business goals and gain competitive advantage by joining resources, each business maintains its own identity, over a period of time i.e one business provides capital other provides skills
what is a merger
corporate combination strategy: businesses combine by mutual consent to advantage all involved. Involves one country buying most or all of targeted company. can be friendly or hostile.
what is a hostile takeover
no mutual agreement in merger, acquiring company purchases large stakes in targeted company until it reaches majority ownership
what are generic strategies
- low cost
- differentiation
- focus
what is a low cost strategy
gaining competitive advantage with lowest possible cost.
increasing profits by reducing costs
increasing market share of business
need to have sufficient capital to invest in innovation and technology
ability to lower cost of all resources
what is a differentiation strategy
involves making your product or service different and more attractive than your competitors. new features, brand image etc
what is a focus startegy
focus on particular market segment to create strong brand loyalty
what are intensive strategies
- market penetration
- product development
- market development
what is a market penetration strategy
aimed at giving business a a greater market share, when there are no new markets or products to develop explore etc. achieved through pricing, marketing , innovation iniatives.
what is a product development strategy
develop new products for existing market or familiar market because aware of existing challenges, have to constantly adapt product until it reaches a point of marketplace acceptance and success
what is a market development strategy
attempts to develop a new market for existing product or service, requires knowledege of current market to identify gaps in marketplace
what are 3 other strategies
- revise business mission
- establish or revise objectives
- allocate resources effectively or differently
