Business Objectives and Strategic Decisions Flashcards
1
Q
Organisational aims
A
A business aim is the goal a business wants to achieve. A primary aim for all business organisations is to add value and in the private sector this involves making a profit.
2
Q
Corporate/business objectives
A
Corporate objectives are those that relate to the business as a whole. They are usually set by the top management of the business and they provide the focus for setting more detailed objectives for the main functional activities of the business.
3
Q
Strategic objectives
A
Strategic objectives are long-term organisational goals that help to convert a mission statement from a broad vision into more specific plans and projects. They set the major benchmarks for success and are designed to be SMART translations of the mission statement that can be used by management to guide decision making.
4
Q
Tactical objectives
A
A tactical objective is the immediate short term desired result of a given activity, task or mission, usually entrusted to the lower positioned management in a three-tier organisation structure or front desk, middle and executive management.
5
Q
Operational objectives
A
Operational objectives are short-term goals who achievement brings an organisation closer to its long-term goals.
6
Q
What’s the difference between tactical objectives and operational objectives?
A
Operational objectives are short term goals whereas strategic objectives are long term goals.
7
Q
What are SMART targets
A
Specific Measurable Attainable Realistic Time bound
8
Q
Importance of SMART targets to a business and its stakeholders
A
- employees know what the business needs to achieve precisely.
- customers are more likely to have a reliable project as staff know what they are meant to achieve
- employees know the time constraint’s on what they are achieving
9
Q
Hierarchy of objectives
A
The hierarchy of objectives is a to that helps analyse and communicate the project objectives. It organised these into different levels of a hierarchy or tree.
The approach organises objectives into 3 broad levels
- policy
- strategic
- operational
10
Q
Impact and importance of setting aims and objectives.
A
Staff know what they need to do.
Sets clear aims
Everyone is trying to achieve the same thing
It allows for easier decision making
11
Q
How does the sector in which a business operates affects its aims and objectives.
A
A business in:
a public sector organisation sets objectives on what service they need to produce.
A private sector is more likely to set objectives such to maximise profit though customer satisfaction etc.
12
Q
How can objectives be communicated?
A
Company website
Word of mouth
Meetings with staff.
13
Q
Evaluate the consequences of mis-communicating objectives to a business and its stakeholders
A
Staff- won’t know what they are meant to be achieving/ are aiming for. This could cause staff demotivation
Customers- might lose confidence in the brand if a business isn’t being productive due to the miscommunication of objectives
Shareholders- may not invest into a brand if they don’t know what the clear aims and objectives businesses are trying to invest in.
14
Q
Ways in which aims of a business could be better communicated.
A
Written out and given to staff that they can refer back to when needed
Displayed clearly on the company website.
15
Q
Why might the objectives of a business need to be changed.
A
New legislation Release of a new product Have a new end goal Introduction of new management Completion of previous objectives
16
Q
Recommend and justify the aims and objectives for a business and how any changes may be implemented
A
:(
17
Q
What is a stakeholder?
A
A persons with an interest or concern in the business (and its success)
18
Q
What are the internal stakeholders of a business?
A
Employees Owners Board of directors Managers Investors
19
Q
What are the external stakeholders of a business
A
Suppliers Customers Creditors Clients Intermediaries Competitors Society Government
20
Q
What are the objectives of the stakeholders of a business
A
Staff:
Be productive
Keep jobs
Shareholders:
Get the maximum dividend
Government:
To get maximum tax from a business
Suppliers:
To maximise own income buy supplying a lot to the businesses
Competitors:
To be competitive with the other businesses
Managers:
To manage staff effectively to gain maximum profits
ETC
21
Q
Reasons for conflict for different business stakeholders
A
They all want to achieve different end goals and these sometimes conflict with each other.
22
Q
Why does a business need to manage the conflicting objectives of its stakeholders.
A
To ensure that the conflict in interests doesn’t make problems for the productivity and running of the business
23
Q
What is the impact on a businesses stakeholders having conflicting interests?
A
less productivity
Cause uncertainty in the business
Demotivated staff
Less profitability
24
Q
Recommend and justify how a business should deal with conflicting objectives of stakeholders
A
- Establish and make known your integrity in relation to your role in the project management team.
- Establish and make known the significance of your role in a project undertaking.
- Make a written report of any known conflicting proposal that can affect the potential outcome of a project, through proper channels, beginning with your immediate superior
- Examine the company policies and procedures on how the issue should be reported.
25
what influence do different stakeholders have on a business
they influence:
aims and objectives
decision making,
behaviour and performance.
26
What are the impacts of a business's decision on different stakeholders groups
Employees: change in how and why something needs to be from. employees will have to make changes.
Customers: change in the good and services they receive
Government: may increase or decrease the money they receive through taxation
Suppliers: may cause a change in the products the business orders.
27
what is meant by a joint venture?
A commercial enterprise undertaken jointly by two or more parties which otherwise retain their distinct identities.
28
What is meant by a strategic alliance?
A strategic alliance is an agreement between two or more parties to peruse a set of agreed upon objectives needed while remaining independent organisations... Strategic alliances occurs when two or more organisations join together to pursue mutual benefits.
29
what is the impact and importance of a strategic alliance to a business and its stakeholders
?
30
what is a mission statement
A mission statement gives a general idea of what the business exists to do and its purpose is to set this down for the benefit of all stakeholders
31
Recommend and justify a suitable mission statement for a business
E.G:-
| -Cadbury's UK limited: 'our core purpose us working together to create brands people love.'
32
Advantages to a business of having a mission statement.
- provide directions
- helps to resolve conflicts
- removes any Ambiguity surrounding the existence of a company
- acts as a communication tool
- a framework for decision making
33
Disadvantages to a business of having a mission statement.
- on its own it can be ambiguous and worthless
- focused more on short term issues and internal in nature
- can sometimes lead to conflicts and inconsistencies
- wastes management's time and resources
- can be unrealistic in reality
34
What is the impact of changing a mission statement on a business and its stakeholders.
- can cause confusion if this isn't correctly communicated
- customers may be uncertain what to expect
- whilst it changes conflicts may arise.
35
What is meant by corporate social responsibility (CSR)
Corporate social responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders. CSR is a concept with many definitions and practices.
36
Explain the potential conflict between CSR and profit and other objectives.
?
37
what is the impact and importance of a CSR policy to a business and its stakeholders
- can change the way customers view a industry
| - bad publicity is less likely to occur
38
Advantages of a business's CSR profile to the business and its stakeholders.
- A good reputation makes it easier to recruit employees.
- CSR will help you retain staff. Employees may be motivated stay longer, reducing the costs and disruption of recruitment and retraining.
- Employees are better motivated and staff productivity will increase.
- CSR helps ensure you comply with regulatory requirements.
- Activities such as involvement with the local community are ideal opportunities to generate positive press coverage.
- Good relationships with local authorities make doing business easier. See work with the local community.
- Understanding the wider impact of your business can present opportunities to develop new products and services.
- CSR can make you more competitive and reduces the risk of sudden damage to your reputation (and sales). You may find it easier to access finance as investors are more willing to back a reputable business.
39
Disadvantages of a business's CSR profile to the business and its stakeholders.
- Shift from the Profit-Making Objective
- Company Reputation takes a hit
- Customer Conviction
- Increase in Cost of Production
40
Recommend and justify how a business could improve its CSR profile.
?
41
Evaluate the impact and importance of CSR to a business and its stakeholders.
?
42
What is meant by a strategic alliance?
A strategic alliance is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. Typically, two companies form a strategic alliance when each possesses one or more business assets or have expertise that will help the other by enhancing their businesses. Strategic alliances can develop in outsourcing relationships where the parties desire to achieve long-term win-win benefits and innovation based on mutually desired outcomes.
43
What is the impact and importance of joint ventures to a business and its stakeholders.
?
44
What is the impact and importance of a strategic alliance to a business and its stakeholders
?
45
What is a mission statement? What is its purpose?
A mission statement is a statement that defines the essence or purpose of a company – what it stands for i.e. what broad products or services it intends to offer customers.
46
What are the advantages of a mission statement?
1) Provide Directions (for staff)
2) helps to resolve conflicts both within the business and with customers and suppliers
3) removes any ambiguity surrounding the existence of a company: managers and other stakeholders will know the primary aim of the company
4) acts a communication tool
5) can help with the decision making process.
47
What are the disadvantages of a mission statement?
1) on its own it can be ambiguous and worthless
2) focused more on the Short Term issues and internal in nature
3) can sometimes lead to conflicts and inconsistencies
4) wastes managers time and resources.
5) can be unrealistic
6) customer/ stakeholders expect a mission statement.
48
Impact of changing a mission statement on a business and its stakeholders
?
49
What is meant by corporate social responsibility?
Corporate social responsibility (CSR) is a business approach that contributes to sustainable development by delivering economic, social and environmental benefits for all stakeholders.
50
what is the purpose of a business plan?
A business plan conveys the organizational structure of your business, including titles of directors or officers and their individual duties. It also acts as a management tool that can be referred to regularly to ensure the business is on course with meeting goals, sales targets or operational milestones.
51
what is the purpose of a business plan?
A business plan conveys the organizational structure of your business, including titles of directors or officers and their individual duties. It also acts as a management tool that can be referred to regularly to ensure the business is on course with meeting goals, sales targets or operational milestones.
52
what is included in a business plan?
A business plan is a written description of the future of your business. It's a document that tells the story of what you plan to do and how you plan to do it.
53
advantages of having a business plan?
It makes an entrepreneur consider every aspect of the start up so they can try to eliminate failures.
•It makes the entrepreneur aware of what skills they are missing so that they are missing so that they can hire experts in that particular field.
•Venture capital may be available to the business if investors like the business plans.
54
disadvantages of having a business plan?
The business plan is only a plan and does not guarantee success. For example, sales may be lower than predicted as they can be affected by a range of issues.
•If the plan is too rigid some problems may arise, it must be flexible to adapt to market changed.
•High sales expectations may cause overspending in other areas such as stock and staffing.
55
What is meant by the 'Plan-Do- Review' cycle?
Planning is about…
•Planning what the organisation wants to achieve for the year
•Planning objectives for employees
•Making sure employees are focused
•Making sure employees have the skills to deliver
•Making sure employees feel motivated to deliver
Doing is about….
•Creating Action Plans
•Ensuring the right things are done day to day
•Empowering employees but keeping in touch as a manager via 121s
•Coaching for performance
•Nipping underperformance in the bud
Reviewing is about….
•An annual review at minimum
•Encouraging managers and leaders to have regular 121s
•A formal opportunity to recognise results
•Ensuring employees have quality 121 time with their manager
•Re-establishing objectives for the year ahead
56
What is meant by risk and reward?
This ratio is calculated mathematically by dividing the amount the trader stands to lose if the price moves in the unexpected direction (the risk) by the amount of profit the trader expects to have made when the position is closed (the reward).
57
what is quantifiable risk?
Quantifiable risk is defined as "value creating risk," which we proactively take to generate a return. Our policy is to maximize the Risk-adjusted Return while maintaining Risk-adjusted Assets within our buffer.
58
What is unquantifiable risk?
Non-quantifiable risk is defined as "value breaking risk," which only generates losses when it surfaces.
59
how can a business reduce its level of risk?
- review the existing system if internal controls, which provide checks and balances for every aspect of a company.
- Develop a risk management plan. having sufficient insurance to protect against losses is only one
- Employ the services of a internal control consultant.
60
what are the non-financial measures of business performance?
-market share
- resource utilisation
-environmental impact
-quality
-customer satisfaction
etc
61
what are the consequences to a business and its stakeholders of poor risk management?
- loss in profits
- job uncertainty
- loss in trust and brand loyalty
- impact the ability to reach aims and objectives
62
what are the risks a entrepreneur face
- risk their physical and mental well-being
| - risks of loosing their house and personal belongings
63
what is meant by uncertainty?
the inability to calculate the costs and benefits of a decision precisely
64
what are internal causes of uncertainty
- Organisational and human resource uncertainty
- stakeholder uncertainty
- technological uncertainty
65
what are external causes of uncertainty
- economic uncertainty
- political uncertainty
- competitive uncertainty
66
how can uncertainty affect aims and objectives
- business's are unaware of what they want to achieve
| - staff may not be motivated to achieve aims and objectives as they don't know what to achieve
67
how can uncertainty affect planning?
- you have to have contingency plans in place to overcome any potential problems caused by the uncertainty
68
how can uncertainty affect decision making/
- businesses may not make decisions when the position of the decision's can be correctly calculated
69
how can uncertainty affect business analysis?
?
70
how can uncertainty affect forecasting?
?
71
what is meant by opportunity cost?
the next best alternative that has to be forfeited when a decision is made
72
what is contingency planning?
planning for 'what will happen if things go wrong?' This means that an agreed course of action is in place and is ready to be used if necessary.
73
what are the advantages of contingency planning to stakeholders?
- minimise problems if something does go wrong
- prove to potential investors that you have thought of all possible scenario's
-
74
what are the disadvantages of contingency planning to stakeholders?
- long process
| - if problems don't occur you have wasted time and money
75
what is the impact and importance of contingency planning to a business and its stakeholders
?
76
what is crisis management?
Crisis management is the process by which an organisation deals with an event that threatens to harm the business and its stakeholders
77
what is Porter's Five Forces Model? What are the 5 forces?
-its a system for analysing the level of competition in an industry
the 5 forces are:
1) threat of new entrants to the market
2)bargaining power of suppliers
3)bargaining power of customers
4) threat of substitute products entering the market including changes in technology
5)degree of existing competitive revelry
78
what is the usefulness of Porter's Five Forces model to a business?
when a business is thinking of moving into a new sector, it is possible to use the model to see the situation clearly. For Example, the threat of substitution in some sectors may come from induviduals choosing to do the work themselves rather than employ a professional.
During a recession, many people will choose to do jobs lke decorating or home improvements themselves. if an individual or business is thinking of moving into this market they need to assess the likelihood of this situation arising .
The decision to proceed into the industry may depend on the quality of the service offered , as well as the ability to offer good customer service and rapid delivery.
The problem with using Porter's Five Forces model is that it is not always easy to obtain all the required information about the threats that exist and the market situation
79
what is Porter's generic strategies?
porters generic strategies show how a company can achieve a competitive advantage in its industry. He suggested 3 strategies , together with a 4th , 'stuck in the middle' which is unlikely to result in any competitive advantage
1) Cost Leader
2) Differentiation
3) Focus or Niche
80
what is the usefulness of Porter's generic strategies to a business?
If a firm wants to achieve a competitive advantage, it should look at each of the 3 forced to see if it can be applied to the business specific situation. Although they are called generic , some firms will find that they cannot gain competitive advantage through any of the situations. They may be too small to achieve economies of scale; they may not have the possibility of creating a differentiated product or appeal to a niche market.
81
what is meant by competitive advantage?
a condition or circumstance that puts a company in a favourable or superior business position.
82
what are financial measures of business performance
- Gross Profit Margin
- Net Profit Margin
- ROCE
- Return On Equity
- Dividend Per Share
- Dividend yield
- Earnings Per Share
- Price Earning's Ratio
- Asset Turnover
- Stock (inventory) Turnover
- Debtor Days
- Creditors days/ Turnover
- Gearing
- Debt to equity ratio
- Interest Cover
- Ratio Analysis
- Current Ratio
- Acid Test Ratio
83
what are non-financial measures of business performance
- company reputation
- customer influence and value
- competitiveness
- innovation
- Market share
84
what are final accounts?
The financial statements of an organization made up at the end of an accounting period, usually the fiscal year.
For a manufacturer, the final accounts consist of (1) manufacturing account, (2) trading account, (3) profit and loss account, and (4) profit and loss appropriation account. A commercial company's final accounts will include all of the above except the manufacturing account. Together, these accounts show the gross profit, net income, and distribution of net income figures of the company.
85
what are ratio analysis
- LIQUIDITY- current ratio/ acid test ratio
- PROFITABILITY- gross profit margin/ net profit margin/ return on net assets/ return on capital employed
- FINANCIAL EFFICIENCY- asset turnover/ stock turnover/ debtor days/ creditor days
- SHAREHOLDER- dividend per share/ dividend yield Price earnings ratio
- GEARING - gearing/ interest cover.
86
what is gearing
A calculation which focuses on the long-term liabilities of the business and its ability to borrow money and its ability to cover the cost of borrowing.
87
what is cash flow
A business needs sufficient inflows of cash to finance its day-to-day outgoings; if cash receipts are insufficient, the business is said to have cash flow problems
88
what is budgeting
A budget is a financial plan for the future concerning the revenues and costs of a business. However, a budget is about much more than just financial numbers. Budgetary control is the process by which financial control is exercised within an organisation
89
What is variance analysis
Variance is the amount by which the actual financial results for an item differ from the amounts in the budget. Variance can be adverse or favourable. For revenue, if actual sales exceed the budgeted figures the variance will be favourable, whereas for cost if actual costs exceed the budgeted figure the variance will be negative. A positive variance improves profit and a negative variance reduces actual profit
90
what is the importance to a business of using financial measures of business performance?
?
91
importance to a business of using non-financial measures of business performance?
?
92
what are financial measures of business performance
?
93
what is profit
total contribution- fixed costs
Profit is a financial benefit that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs and taxes needed to sustain the activity. Any profit that is gained goes to the business's owners, who may or may not decide to spend it on the business.
94
what are measures of liquidity?
CURRENT RATIO- current assets/ current liabilities
ACID TEST RATIO- current assets- stock/ current liabilities
GEARING RATIO- fixed cost capital/ long term capital
INTEREST COVER- profit before tax and interest/ interest
95
what are measures of profitability?
RETURN ON CAPITAL EMPLOYED (ROCE) - profit on tax and interest/ long term capita employed X100
GROSS PROFIT MARGIN- gross profit/ turnover X100
NET PROFIT MARGIN- net profit/ turnover X100
96
what are measures of efficiency?
ASSET TURNOVER- turnover/ current assets
STOCK TURNOVER- cost of stock/ average stock
DEBTORS DAYS- trade receivables/ revenue X365
CREDITOR DAYS- trade payables/ purchases X365
97
why do a business's published accounts not provide a complete picture of performance
?
98
what is market share
The proportion or % of total sales within the market in question that is controlled by the business
sales revenue/ total market revenue
sales/ total market sales
99
what is resource utilisation
A supply chain network uses resources of various kinds: manufacturing resources (machines, material handlers, tools, etc.); storage resources (warehouses, automated storage and retrieval systems); logistics resources (trucks, rail transport, air-cargo carriers, etc.); human resources (labour, scientific and technical personnel); and financial (working capital, stocks, etc.). The objective is to utilize these assets or resources efficiently so as to maximize customer service levels, minimize lead times, and optimize inventory levels.
100
what is environmental impact?
?
101
what is quality? how is it measured?
Quality is concerned with: the design of the product/ the reliability of the product/ ensuring that the product is properly checked while in production and not only when completed
102
what is customer satisfaction
Customer satisfaction (often abbreviated as CSAT, more correctly CSat) is a term frequently used in marketing. It is a measure of how products and services supplied by a company meet or surpass customer expectation. ... They focus employees on the importance of fulfilling customers' expectations.
103
why does a business measure performance
to check whether they reach there targets.
104
what are the advantages to a business of measuring performance
- performance based conversations
- targeted staff development
- encouragement to staff
- rewards staff for doing well
- underperforming staff are identifies and eliminated
- history o employee performance can be documented
- allows for employee growth
105
what are the disadvantages to a business of measuring performance
- time consuming
- discouragement
- inconsistent message
- bias
106
performance of a business for different stakeholders
?
107
what is the nature and purpose of forecasting
forecasting is the use of existing data to predict future trends
108
what are the advantages of using forecasts to a business and its stakeholders
- they have the ability to plan ahead
- employees know what they are aiming to sell
- stakeholders know how much dividend to expect
109
what are the disadvantages of using forecasts to a business and it's stakeholders
- can be un-realistic
- only forecasts
- means that budgets may become inaccurate if forecasted sales may not be correct
110
what are qualitative forecasting measures
Executive opinions
Delphi technique
Sales force polling
Consumer surveys
111
what are quantitative forecasting measures
```
Naive methods
Moving average
Exponential smoothing
Trend analysis
Decomposition of time series
```
112
what are the advantages to a business of using structured methods of qualitative forecasting
?
113
what are the disadvantages to a business of using structured methods of qualitative forecasting
?
114
what is meant by seasonal variations
These are changes that occur over the year; they will affect some businesses more than others. For example, a toy manufacturer would expect sales to increase in the run-up to the Christmas period and holidays.
115
what is meant by cyclical variations
These are the variations that occur as a result of the business cycle, and recessions and booms in the economy. For example, a house-builder may find that demand for properties change with the rate of interest and the availability of credit
116
how do seasonal variations impact on forecasting
- they will have to take into accounts booms and recessions in there expected sales
- they may have to average out sales making different areas inaccurate
117
how do cyclical variations impact forecasting?
?
118
what is time series analysis
Time series analysis comprises methods for analysing time series data in order to extract meaningful statistics and other characteristics of the data. Time series forecasting is the use of a model to predict future values based on previously observed values.
119
what is the usefulness of time series analysis
- helpful for study of past behaviour
- helpful in forecasting
- helpful in evaluating the achievements
- helpful in comparison
120
how can a business respond to forecasts
?
121
what is the nature and purpose of decision making
it is the action or process of making important decisions that affects the whole business
122
what is the impact and importance of effective decision making to a business and its stakeholders
?
123
why does level of risk need to be taken into account when making business decisions
?
124
why does accuracy of forecasts need to be taken into account when making business decisions
If you rely fully on the forecasts to make decisions then the decision they make may be inaccurate and not produce the response and outcome they want and expect
125
why does volatility need to be taken into account when making business decisions
?
126
why does potential for bias need to be taken into account when making business decisions
?
127
what is the 'relationship' between the aims and objectives of a business and its decision making
?
128
What are short term decisions
known as operational decisions: are those taken on day-to-day basis; these decisions are taken by managers of departments.
129
What are long term decisions
also known as strategic decisions: affecting the whole of the business : they are long-term decisions that are taken at board or senior management level.
130
What are medium term decisions
also known as tactical decisions: these are taken by middle management affecting a particular part of the business; they are medium- term decisions affecting a particular decision
131
what is the nature and purpose of decision trees?
A decision tree is a technique that is used to aid the decision making process. Whenever a business is considering 2 or more options, decision trees can be used to show the likely financial return for undertaking each of the options
132
benefits of decision trees
Choices are set out in a logical way
Potential options & choices are considered at the same time
Use of probabilities enables the “risk” of the options to be addressed
Likely costs are considered as well as potential benefits
Easy to understand & tangible results
133
what is the nature and purpose of Ansoff matrix
The Ansoff Matrix is a strategic planning tool that provides a framework to help executives, senior managers, and marketers devise strategies for future growth.
134
what are the quadrants of Ansoff matrix
MARKET PENETRATION- existing markets/existing products
PRODUCT DEVELOPMENT- existing markets/ new products
MARKET DEVELOPMENT- existing products/ new market
DIVERSIFICATION- new products/ new market
135
what is the usefulness of Ansoff's matrix when making a business decision
?
136
why might decision making tools may conflict with another?
?
137
What is the impact and importance of a joint venture to a business and its stakeholders
- the capital cost of a particular project might be very high and above the resources if a single business.
- a joint venture allows both parties to share cost burden
- a single business may consider the venture too much of a risk.
- it enables business's to share strengths, and increase their competitive advantage against others
- affective way of gaining access to markets and resourced in another country
138
drawbacks of decision trees
Probabilities are just estimates – always prone to error
Uses quantitative data only – ignores qualitative aspects of decisions
Assignment of probabilities and expected values prone to bias
Decision-making technique doesn’t necessarily reduce the amount of risk
