Business objectives and strategies Flashcards
What is a mission statement?
A statement which declares the overall purpose of the business
What is meant by the aims of a business?
What the business is trying to achieve (long term)
What is meant by a business objective?
Short term, specific targets
Why is it important for a business to have a mission statement?
- Gives the company direction
- Communicates purpose to stakeholders
- Could motivate staff
- Help recruit and retain the best staff
What is a strategic objective?
Slightly longer term target
What is a tactical objective?
Very specific and short term
What are 5 examples of a business objective?
- Maximise profits
- Launch a new product (Growth)
- Increase market share
- Provide good customer service
- Provide an environmentally sustainable business
What might stakeholders be in conflict about?
- Prices
- Wages/costs
- Effect on environment
What is a social enterprise?
A business that is set up in order to help people. it may also be known as the 3rd sector
What does a social enterprise seek to do?
Provide a service that benefits society whilst running a successful and professional business
Why might a business choose to operate as a social enterprise?
Give back to the community and help those who aren’t as privileged
What are the 4 factors of production?
- Land (Natural resources)
- Labour
- Capital (Technology)
- Enterprise
What constraints might there be on objectives?
- Lack of staff
- Lack of finance
- Not being able to get permission
- Shortage of demand
What is a corporate social objective?
Being seen as a business that cares about the environment and the local community
Why might a business have CSO?
To appeal to a wider market, more customers will be attracted if it benefits the environment and more revenue and profits will be made
What are the problems with CSO?
- More staff required
- Expensive
- Need new materials/technology
- Costs time of business
- Short term inefficiency (slows production)
What changing circumstances could affect a business and its objectives?
- Economic change (revenue)
- Legal issues (contracts)
- Political issues (Brexit)
- Social attitudes (Starbucks in Australia)
What is a business plan?
A document drawn up to state how a business intends to achieve its objectives
What might a business plan include?
Business idea Market research Financial plan Objectives Target market
Why do businesses need a plan?
- Gives guidance and direction
- Helps control costs
- Easier for loan
- Helps achieve aims and objectives
What is risk?
When the business owner invests their own time and money into a business
What is reward?
Reward is a positive consequence from the risk. E.g, good profits, paying yourself a big salary and the lifestyle that comes with this
What is quantifiable risk?
It can be measured
What is non quantifiable risk? Give an example
It cannot be measured (e.g, risk leads to loss of tension or peace)
What is Porters 5 forces model?
A tool for analysing competition in a business. It examines 5 forces that determine the competitive intensity of an industry in terms of its profitability
What are the 5 forces in the Porters model?
- Threat of new entrants
- Threat of substitutes
- Bargaining power of buyers
- Bargaining power of suppliers
- Degree of rivalry
What are the limitations of Porters 5 forces model?
- Too simplistic
- Disregards collusion
- Only useful on an industry basis rather than individual companies
- Markets can change, it is frozen in time
What is meant by opportunity cost?
Giving up other potential options
What is meant by a contingency plan?
A plan devised as a backup incase something goes wrong
What are the 4 elements that make up the process of contingency planning?
- Identifying what and how things might go wrong
- Understanding the potential effects if things did go wrong
- Devising a plan to cope with these threats
- Putting strategies in place to deal with the risks before they happen
What is meant by forecasting?
Using existing data to predict future trends
What are some examples of qualitative forecasting?
- Delph technique (expert opinion)
- Brainstorming
- Consumer opinion
- Leading academic opinion (Uni professors)
- Frontline staff opinion (Sales staff)
What is an advantage of qualitative forecasting (opinions)?
Expert/advanced opinions are likely to be credible and reliable because they have lots of knowledge in the subject
What is a disadvantage of qualitative forecasting?
It is based on opinion rather than fact so there is a degree of uncertainty
What is an example of quantitative forecasting?
Time Series Analysis
What does a time series analysis do?
Calculate averages over a period of time
What can be gathered from a time series analysis?
Raw Data - looks at trends over time
Cyclical Variations - looks at economic patterns
Seasonal Variations - considers seasonal patterns
Random Fluctuations - looks at. unexpected changes in trends
What are 2 benefits of using forecasts in a business?
- It is only as reliable as the data put forward
- It enables you to see trends and patterns
What are 3 limitations of using forecasts in a business?
- Can’t assume trends will continue
- Only recent information is relevant
- Doesn’t consider internal changes for the business (discontinued product)
What is a decision tree?
A mathematical model used to help managers make decisions
What does a decision tree do?
Uses estimates and probabilities to calculate likely outcomes. It also helps decide whether the net gin from a decision is worthwhile for its risk
What are 3 benefits of using decision trees?
- Options can be compared
- Risk can be addressed
- Easy to produce and understand
What are 3 drawbacks of using decision trees?
- Only estimates
- Ignorant of qualitative data
- Doesn’t reduce amount of actual risk
What is meant by crisis management?
The response made by a business in the event of a major crisis
What is the SWOT decision making tool?
Strengths
Weaknesses
Opportunities
Threats
