Business Mock Dec Flashcards
What is a mission statement
Formal summary of the aims and values of an organisation
What is the hierarchy of business objectives
Mission statement and general aims —> corporate objectives —> department objectives
What are the benefits of a mission statement
Can be used to communicate the nature of the organisation to the stakeholders
- can be used to focus strategies and energy of the business in a specific direction
Mission statement drawbacks
- biased, from their point of view
- just a public relations tool and are not useful as a basis for corporate objectives
- customers may not even know or care about the mission statement (are they even useful?)
What are corporate objectives
Flow from the mission statement and corporate vision
Usually set by senior management or directors for the whole company
Aimed at satisfying the shareholders so may be related to profit or dividends
Objectives need to be smart
Example of corporate objective
Increase operating profit 4% over the next 24 months
Or
Increase dividends by 2% over the next three years
What are smart corporate objectives
Specific
Measurable
Achievable
Realistic
Time bound
What are department objectives
- in larger businesses they might divide up the work or objectives into departments or functions e.g. sales, marketing, Human Resources, operations, finance etc
- each department will set their own objectives, that should flow from the corporate objectives
Uses of mission statements
Focus- helps to focus and involve all employees in the business
Profitability- helps to motivate employees to become more efficient which could have an impact on profitability
Identity- helps to create an identity in a competitive marketplace, shows how the company’s products or services align with their core values e.g. innovation
Limitations of mission statements
- unrealistic & over optimistic
- waste of management time and resources
- lead to conflicts & inconsistencies when not properly written
- ambiguous
Reasons for businesses to grow and expand
- achieve economies of scale
- Increased market power over customers and suppliers
- increased market share and brand recognition
- increased profitability
What is organic growth
Process of growth which comes from internally within the business
Difference between organic and inorganic growth
Inorganic growth means a business has grown by a merger, a takeover, a joint venture
Organic growth means the business has grown internally; through increasing product range, opening more branches, taking on more staff, increasing production
What are methods of growing organically
- new product launches= increased revenue and profits
- opening new stores or branches=
- expanding into foreign markets= could extend product lifecycle and expand organically by selling into new foreign markets
- expansion of the workforce= taking on new staff, as the business expands it will need more capacity to produce or provide the product or service . Taking on new staff will also spread workload.
Advantages of organic growth
- avoids all the risks and pitfalls of merging with another business
Cheaper than merging
Retains company culture
Higher production levels means economies of scale and lower average costs
More influence comes with more market share, can start setting prices for the industry
Disadvantages of organic growth
- very high risk strategy, opening multiple stores and taking on new staff is very risky and capital intensive
- long period between investment and return on investment
- growth may be limited and is dependent on reliability of sales forecasts
- new markets and countries can be dangerous to enter into without buying a business already operating in that company
What is a shareholder
A person, business or organisation that owns at least one share of a company
What is a stakeholder
Anyone who has an interest in the business, or who may be affected by the activities of the business
What is an internal stakeholder
Those inside a business who may be affected by corporate decision making ; employees, managers, owners
How are employees impacted by business decisions
Employees directly involved in the running of the business
Satisfaction of employees is a way to judge how well a company stra is working
Employees carry out the tasks given them by managemtn
How are managers impacted. By business decisions
They are told the strategic direction of the business by the directors and must translate this in pro operational objectives and goals
They then need to communicate this to the employees so the strategy is carried out
How are owners impacted by business decisions
Considered initial investors who are mainly interested in the business value and profitability
Board of directors is usually made of the top most management of the organisation and they are the policy makers of the company
What are external stakeholders
Outside the organisation who are affected by sections made by the business:
- customers= primary stakeholders because they face risk if the business fails to perform
- competitors = remain competitive by being aware of the practices and products of their rivals and responding properly
- suppliers = interested in the excellent performance of the business since it assures them of regular orders and prompt payments which keep them in the business
- local community= have a duty to ensure the safety, health and economic development of the communities around them
- pressure groups- can influence activity and policies of companies e,g, environmentally friendly
- unions = organised group of employees who act in the common interest of all the employees of the business
- government = collects taxes from the business, also protects needs of the employees through employment legislation
- shareholder
Stakeholder mapping steps 1-3
- Identify stakeholders of the business, these will be internal and external
- Rank the stakeholders power over decisions, either low, medium or high
- Rank the stakeholders level of interest in the business; low medium or high
