Business Objectives Flashcards
What is PESTLE?
A concept in marketing principles which are used as a tool to track the environment that they’re operating in and are planning to launch into
What does PESTLE stand for?
-Political
-Economic
-Social
-Technological
-Legal
-Environment
Examples of PESTLE:
-Political = taxes, trade, tariffs, political stability
-Economic = growth, interest rates, exchange rates, inflation rates
-Social = health consciousness, population growth rate, age distribution, career attitudes
-Technological = research and development, automation, rate of change
-Legal = employment laws, trading laws, marketing restrictions, new laws
-Environmental = regulations, eco consumers, recycling laws, wastage
What is competitive advantage?
An advantage over competitors gained by offering consumers greater value, either by lowering prices or offering more benefits to justify higher prices
What is Porters Generic Strategy?
-Cost leadership
-Cost focus
-Differentiation leadership
-Differentiation focus
What is the cost leadership strategy?
-No frills
-Aiming to be the lowest cost producer in the industry
-Involves increasing profits by reducing costs while charging industry average prices or increasing market share by charging lower prices while making profit due to lower costs
What is the differentiation leadership strategy?
-Creating a uniquely desirable product
-Involves making products different from competitors (USP)
-Usually involves support, functionality, durability or brand image
What are the pros and cons of cost leadership?
-Higher profits
-Price flexibility
However:
-May face reduced quality
-Reputation of lower quality
What are the pros and cons of differentiation leadership?
-USP
However:
-Higher risk
What is the cost focus strategy?
-Lower cost advantage in one or a small number of market segments
-Can define the market by demographics or sales channels
What is the differentiation focus strategy?
A company seeking to differentiate within just one or a small amount of target market segments
What is a focus strategy?
-Concentrating on niche markets
-Must understand the dynamics of that market and the unique needs of customers within it
-Developing uniquely low cost or well specialised products
What are the pros and cons of cost focus?
-Higher profits due to lower costs
-Can still charge higher prices
However:
-Can’t target wider audiences
-Must ensure the product is at market standard
What are the pros and cons of differentiation focus?
-People are willing to pay higher prices
-Customer loyalty
-Good customer relations
However:
-Can’t target wider audiences
-Even smaller market size
-Expensive market research
What is SWOT analysis?
Method of analysing a business, its resources and environment
-used in strategic planning
-aims to give businesses advantages over competitors
What does SWOT stand for?
Strengths, weaknesses, opportunities, threats
-strengths and weaknesses are internal factors (within the business)
-opportunities and threats are external factors (outside the business e.g market, economy)
What is the coherent strategy?
Maximising strengths and working to reduce/improve weaknesses
-can only be formulated when strengths and weaknesses are understood
What is a strategy?
Long term goals and how you plan to achieve them
What is a tactic?
Smaller steps done in a shorter time frame in order to reach a goal
What are the 4 key strategic questions?
-Where do we compete? (which market)
-What is the unique value?
-What are the resources and capabilities?
-Stabilisation
What are distinctive capabilities?
Organisations can only succeed in the long term if they use one of the three distinctive capabilities which add value and create a competitive advantage
-architecture
-reputation
-innovation
What is architecture?
The structure of a relational contract within or around the organisation with customers, employees and suppliers
What is reputation?
Dependent on the relationship with customers, employees and suppliers which involves guarantees, word of mouth, experience and quality
What is innovation?
Bringing new inventions to the market (may include new processes and new ways to do things)
What is the boston matrix?
Helping to classify an organisation’s products based on market growth and market share which help determine which products need future investment or which need to be abandoned or sold
-cash cow
-star
-question mark
-dog
What is a star?
-High market share, high market growth
-Could be in the growth phase of the product life cycle
-Continue producing and hold onto the product as it could become a cash cow
What is a question mark?
-High market growth, low market share
-Could have just been launched and is still building customer loyalty
-Continue investing
What is a cash cow?
-High market share, low market growth
-Could be reaching maturity in the product life cycle
-Already has customer loyalty
-Continue producing and harvesting the products until it goes into decline
What is a dog?
-Low market share, low market growth
-In the decline phase of the product life cycle and in a declining market
-Product should be removed from sale
What are the limitations of the boston matrix?
-Doesn’t clearly define the market
-Too simplistic
-High market share doesn’t always = high profits if production costs are high
-Some businesses may have middle market share
What is a mission statement?
Defines the fundamental purpose of an organisation briefly describing why it exists and what it does to achieve its vision
What is corporate vision?
Outlines what the organisation wants to be or how it wants the world it operates in to be
What is a functional objective?
A departmental objective which helps the business to achieve its mission
What is a SMART objective?
Specific, Measurable, Achievable, Realistic, Time-related
What are the limitations of mission statements?
-Can be unrealistic/over optimistic
-Cause conflicts
-May change as a business develops
-Too open/vague
What is Ansoff’s Matrix?
Suggests a business’ attempts to grow depending on whether its markets or products are new or existing
-creates an output showing a series of growth strategies which set the direction for the business strategy
-used for analysis to show how the business could grow
What is market penetration?
-Focusing on the market and products the business knows well
-Increasing the sales to the existing market
-Penetrating a market more deeply
-Sell more to the same customers
-Encourage people to buy more often
E.g. loyalty schemes
What is product development?
A new product/service developed for an existing market to sell to existing customers
-product must be differentiated in order to remain competitive
What is market development?
A growth strategy where a business aims to sell its existing products into new markets
-risky because it targets new markets
What is diversification?
A growth strategy where a business markets new products to new markets
-more risky as the business has less/no experience in the new market
How does Ansoff’s Matrix work?
By identifying all current products and their markets then considering future options using the matrix by considering opportunities, costs, benefits, risks
What are Porters 5 Forces?
Examining 5 forces of competition within an industry
-threat of substitute products
-threat of new entrants
-bargaining power of consumers
-bargaining power of suppliers
-competitive of rivalry within the industry
What is competitive rivalry within an industry?
Encourages:
-Price wars
-Investment and innovations
-Promotions
All are likely to increase costs and lower profits
What is bargaining power of customers?
Exerting pressure to drive down prices or increase the quality for the same price
-reduces profits within an industry
What is the threat of new entrants?
-Must ensure products are differentiated to distinguish themselves from new entrants
-Depends on barriers to entry
What is the threat of substitute products?
A product that meets the same need
-Depends of the price and performance of the substitute product and the willingness of customers to switch
What is the bargaining power of suppliers?
Where suppliers are selling products at a higher price to squeeze industry profits, businesses must choose whether to help suppliers or choose a new one and risk lower quality
What are the limitations of Porters 5 Forces?
-Can’t measure it, its more of a theory
-Dependant on industry
-Must take into account external factors as markets are ever changing
