Business Objectives And Strategy Flashcards
Explain the nature and purpose of a mission statement
The over riding goal of a business and is written for stakeholders to help the organisation focus and stay on track to make the decisions in the future
Evaluate the advantages of a mission statement
Businesses are less likely to make incorrect decisions and go off track
Can motivate employees as they have a goal to work towards can send a powerful message to the public
Evaluate the disadvantages of a mission statement
Might be ignored by senior management
Employees could become cynical if ignored
Ineffective if not followed by everyone
Can be too vague and the information isn’t measurable
Evaluate the impact of changing a mission statement to the business and stakeholders
Employees may become more motivated because they have new goals to achieve
Explain the relationship between objectives, strategy and tactics
Strategy - the approach you take to achieve a goal
Objective - a measurable step you take to achieve a strategy
Tactic - a tool you use in pursuing an objective
Explain the purpose of a business plan
A written document that describes a business, its objectives, its strategies, the market its in and its financial forecast
Describe the main contents of a business plan
Business idea/opportunity
Target market
What the product is
Who the customers are
What it costs to produce and sell the product
Evaluate the advantages of a business plan
Gives a sense of direction
Evaluation of objectives
Considers constraints
Establishes departments and individuals roles
Encourage communication
Evaluate the disadvantages of a business plan
Time spent formulating it could be spent elsewhere
Often to rigid and may limit an individuals creativity
It’s useless unless its followed
Needs flexibility to adapt to a change in circumstances
Explain whats meant by the plan-do-review cycle
Plan - establish objectives, course of action and resources
Do - implement the plan ensuring that all parts of the business understands responsibilities and deadlines
Review - formal ongoing evaluation of progress towards objectives and final review
Analyse how the plan do review cycle can improve business performance
Encourages kaizen so you wont be producing as much waste which is more profitable for the business
Allows evaluation and adaptation
Explain what is meant by risk and reward
Risk - a threat that may prevent or hinder the ability to achieve a goal
Reward - a thing given in recognition of service, effort or achievement
Explain the relationship between uncertainty and risk
The possibility of something going wrong
Evaluate the relationship between risk and reward in a business
High risk investments increases the likelihood of risk and the opposite if its a low risk investment
Distinguish between quantifiable and unquantifiable risk
Quantifiable - likelihood of predictable risk occurring
Unquantifiable - risks that are unexpected
Evluate ways in which a business can reduce its level of risk
Economic - indicators and use of data
Political - understand different parties intentions
Competitive - research, SWOT analysis
Organisational - working towards the same goal, a change in culture
Explain what’s meant by opportunity cost
The cost of the best alternative forgone
Explain the nature and purpose of forecasting
A technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future trends
Evaluate the advantages of forecasting to a business and stakeholders
Enables the manager to plan for the future of the organisation
The most recent information is usually the most useful and relevant
Evaluate the disadvantages of forecasting on the business and stakeholders
Will only be as reliable as the data that’s used to formulate it
Businesses need to be careful about making assumptions about the future based on past experience
The forecast doesn’t take into account and changes in objectives
Explain the nature and purpose of decision trees
A mathematical model used to help managers make decisions when faced with choices
Evaluate the advantages of decision trees
Allows managers to analyse possible options and identify oppportunity costs
Forces managers to inject quantifiable analysis into the decision making process
Useful to managers when the business has encountered similar situations that have been faced
Evaluate the disadvantages of decision trees
The accuracy of estimation because it doesn’t include the outside environment
Managerial bias
Less useful when the business is facing a new situation
May lead to qualitative factors being ignored
Explain the nature and purpose of Ansoff’s matrix
A marketing planning model that helps a business determine its product and market growth strategy and looks at the risks involved
Distinguish between the quadrants of Ansoff’s matrix
Products + markets:
Existing + existing = market penetration
Existing + new = product development
New + existing = market development
New + new = diversification
Explain market penetration
A growth strategy where a business aims to sell existing products into existing markets, aim is to increase market share
Explain product development
As growth strategy where you introduce new products into existing markets
Explain market development
A growth strategy where you sell existing products into new markets (another country)
Explain diversification
A growth strategy where you sell new products in new markets
Evaluate market penetration
Business focuses on markets and products it knows well
The business can exploit insights on what customers want
Unlikely to need market share
Evaluate product development
Often plays to the strengths of an established business
Strong emphasis on effective market research
A great way of exploiting the existing customers
Being first to the market is usually important
Evaluate market development
A local strategy where existing markets are saturated or in decline
Often more risky than product development
Existing products may not suit new markets
Evaluate diversification
It’s a risky strategy because you don’t know anything about the market
Few economies of scale
Explain Porters 5 forces model
A system for analysing the level of competition in an industry
Explain each of porters 5 forces in the model
1) threat of new entrants - when they enter, they’ll take a share of the market and increase competition
2) bargaining power of suppliers - suppliers can force up prices of their products which cuts profits in the industry
3) bargaining power of customers - strong bargaining powers will force prices down and reduce likely profitability
4) threat of substitutes - threat of substitute products entering the market, such technology market with phones, iPads, and laptops
5) degree of competitive intensity - likely that if it’s high it will result in innovation, price wars and higher spending on promotion
