Business objective and strategy 3.1

Question 1

What is a mission statement?

Answer 1

This is a statement written by the heads of the business which states the sole purpose of the business and the values of the business. It is aimed at all stakeholders of the business and states the overall direction of the business

Question 2

What are the 2 main reasons why a mission statement may be valuable to a business.

Answer 2

1) Encourage customers of the values of the business to entice them
2) Bring the workforce together so that employees feel involved and fully committed to the business

Question 3

What are corporate objectives?

Answer 3

These are objectives that are set out by the head of the business about the aims that a business has and how they are going to achieve them. The may show the history of the business and how the business wants the future of the business to be like.

Question 4

What is meant by SMART corporate objectives?

Answer 4

Specific - the objective is direct and how it will be carried out and what the business wants to achieve
Measurable - the objective may use quantitative data in order to back up how this objective can be carried out and what the outcome may be
Agreed - must show that stakeholders agree to this otherwise if they haven’t motivation may fall
Realistic - this states that the business is able to carry out this objective given the resources that they have
Time-specific - a corporate objective must have a frame time period that this will be carried out between

Question 5

What are departmental/ functional objectives?

Answer 5

These are objectives that stem from the corporate objectives and allow the corporate objective to be met.

Question 6

What is meant by a critical appraisal?

Answer 6

Critical appraisal ensure that the mission statement of the business and any corporate objectives made are relevant to the business and are true. If one finds that they are not a true representation of the business and history of the business they can be tested.

Question 7

What may be 3 potential questions that are asked when doing a critical appraisal of a mission statement/corporate objective

Answer 7

What is the purpose?
Who is the intended audience?
Are the aims realistic and achievable?

Question 8

Describe Ansoff’s Matrix

Answer 8

Ansoff’s matrix shows 4 strategies that a business may want to adopt that they want to adopt. These include: Market penetration, market development, product, development and diversification. They look at existing and new products in existing or new markets.

Question 9

What is Market penetration?

Answer 9

This is when a business tries to achieve growth in an existing market with an existing product. For example, a business may increase the brand loyalty of customers, how frequently consumers consume the good and to consume more it.

Question 10

What is market development?

Answer 10

This involves implementing the same products into a new market. This could be done by relocating the business into a location with increased demand.

Question 11

What is product development?

Answer 11

This is simply when the business decides to increase the number of products in its portfolio but implements into an existing market. For example, when product life cycles are short or technology changes, adding a new product will allow a business to stay ahead of the competition

Question 12

What is diversification?

Answer 12

This is implementing a new product into a new market. This is the most riskiest of all strategies. They are usually done by large firms that want stability in other market if one of their product fails and because they have the finances to diversify.

Question 13

What is porter’s strategic matrix?

Answer 13

One strategy otherwise they will be stuck in the middle which means the business is unlikely going to suceed

Question 14

What are the strategies that the business would want to adopt in order to suceed?

Answer 14

1. Cost-leadership - being the lowest cost producer within the market. This means they negotiate with suppliers prices and have large scale production allowing them to benefit from economies of scale.
2. Differentiation - a business may consider adding value to their brand by standing out from competitors. This could be by changing the design of some of their products for example.
3. Focus - similar to a niche market where a business focuses on a segment of the market to gain a better understanding.

Question 15

What is meant by a business gaining a competitive advantage?

Answer 15

This is when a business is able to stand out from competitors by a factor that a competitor may find to imitate

Question 16

What is a distinctive capability?

Answer 16

This is when a business has an edge that cannot be replicated by another business

Question 17

What are examples of distinctive capabilities that a business may have?

Answer 17

1. Architecture (the relationship the business has with employees)
2. Reputation
3. Innovation

Question 18

What is the difference between strategies and tactics?

Answer 18

Strategies set out the long term direction that a firm will take whereas tactics are short term opportunities stemmed from threats or opportunities in the market.

Question 19

What is a major problem with tactics?

Answer 19

Because they are short term responses, they can be made poorly which means they not meet the corporate objectives of a business.

Question 20

What is an internal audit?

Answer 20

This is when a business analyses the strengths and weaknesses of its operations

Question 21

What is an external audit?

Answer 21

This is an analysis of the external environment outside of operations of which a business has not control over. It should also analyse the competition within the market.

Question 22

What are some examples of things that are analysed in an internal audit?

Answer 22

• Products and their costs
• Finance, assets and cash flow
• Production, efficiency, quality

Question 23

What are some examples of things that are analysed in an external audit?

Answer 23

• The size and growth of the market
• Current position of competitors
• Products in the market
• Pricing structure within the market

Question 24

Some examples of strengths and weaknesses that a business may encounter in their internal audit.

Answer 24

Strengths - Innovative business, motivated workforce, loyal customers, good, engaging leader
Weaknesses - lack of consumer interest, lack of productivity in the workforce, lack of communication in the hierarchy

Question 25

Some examples of opportunities and threats that may appear in the external audit.

Answer 25

Opportunities - new market overseas, Low interest rates, A fall in ER, cheaper raw material prices
Threats - new entrant in the market, a looming recession, new legislation

Question 26

What does SWOT stand for?

Answer 26

Strength, weakness, opportunity and threat

Question 27

What are the benefits of carrying out a SWOT analysis?

Answer 27

See how to improve the overall performance of a business, see whether they should launch new products, help design a new marketing strategy.

Question 28

What technique could a business use to analyse the impact of external influences?

Answer 28

PESTLE

Question 29

What does PESTLE stand for?

Answer 29

Political, economical, social, technological, legislation, environmental/ethical

Question 30

Briefly explain each of the factors of PESLTLE.

Answer 30

Political - how political decisions may impact the economy
Economical - how changes to the economy may impact
Social - Changes to society/populations/ages etc
Technological - Provide more opportunities of efficiency
Legal - New laws in place
Environmental - Concerns to protect the environment

Question 31

What are some of the impact of a changing competitive environment?

Answer 31

New entrants may cause business to change operations, lower prices to force new entrants out of the market
New products - businesses may add value to their products, increase marketing, lower prices, lower costs etc
Consolidation - Look at ways to increase market share and increase brand loyalty

Question 32

What are Porter’s 5 forces?

Answer 32

High bargaining power of suppliers, high bargaining power of buyers, threats of new entrants, substitutes, Rivalry amongst existing firms.

Question 33

Explain the difference between high bargaining power of suppliers and bargaining power of buyers

Answer 33

Suppliers with lots of control have the ability to charge higher prices to customers who will have to take on their prices, benefitting the supplier however, if the buyer has more power, they can negotiate lower prices with the supplier mainly because the supplier wants to be able to keep the big brand names as their loyal customers.

Question 34

What are some strategies to raise barriers to entry?

Answer 34

• Patents or trademarks
• Predatory pricing - economies of scale gain means some businesses can afford to make losses in the SR

Question 35

What are some strategies that influence buyer power?

Answer 35

• If a buyer increases quantity they want to buy for, they have more power because the supplier could lose a lot revenue if they don’t take the deal
• Smaller businesses can come together to form a buying group

Question 36

Some strategies that influence supplier power?

Answer 36

• Tie themselves into long-term contracts
• Can develop new products and protect them with patents

Question 37

Strategies to reduce the threat of substitutes?

Answer 37

• use strategies to increase customer loyalty
• Strategies to differentiate products to reduce availability of substitutes

Question 38

Strategies to reduce the threat of substitutes?

Answer 38

• Making it harder for customers to switch
• Use bigger promotional campaigns to attract more customers

Question 39

Drawbacks of using PESTLE and porter’s 5 forces?

Answer 39

• They only provide information in a given point in time - these influences are dynamic and could change over time