Business Objectives And Strategy

Question 1

Explain the nature and purpose of a mission statement

Answer 1

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

Question 2

Evaluate the advantages of a mission statement

Answer 2

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

Question 3

Evaluate the disadvantages of a mission statement

Answer 3

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

Question 4

Evaluate the impact of changing a mission statement to the business and stakeholders

Answer 4

Employees may become more motivated because they have new goals to achieve

Question 5

Explain the relationship between objectives, strategy and tactics

Answer 5

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

Question 6

Explain the purpose of a business plan

Answer 6

A written document that describes a business, its objectives, its strategies, the market its in and its financial forecast

Question 7

Describe the main contents of a business plan

Answer 7

Business idea/opportunity
Target market
What the product is
Who the customers are
What it costs to produce and sell the product

Question 8

Evaluate the advantages of a business plan

Answer 8

Gives a sense of direction
Evaluation of objectives
Considers constraints
Establishes departments and individuals roles
Encourage communication

Question 9

Evaluate the disadvantages of a business plan

Answer 9

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

Question 10

Explain whats meant by the plan-do-review cycle

Answer 10

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

Question 11

Analyse how the plan do review cycle can improve business performance

Answer 11

Encourages kaizen so you wont be producing as much waste which is more profitable for the business
Allows evaluation and adaptation

Question 12

Explain what is meant by risk and reward

Answer 12

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

Question 13

Explain the relationship between uncertainty and risk

Answer 13

The possibility of something going wrong

Question 14

Evaluate the relationship between risk and reward in a business

Answer 14

High risk investments increases the likelihood of risk and the opposite if its a low risk investment

Question 15

Distinguish between quantifiable and unquantifiable risk

Answer 15

Quantifiable - likelihood of predictable risk occurring
Unquantifiable - risks that are unexpected

Question 16

Evluate ways in which a business can reduce its level of risk

Answer 16

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

Question 17

Explain what’s meant by opportunity cost

Answer 17

The cost of the best alternative forgone

Question 18

Explain the nature and purpose of forecasting

Answer 18

A technique that uses historical data as inputs to make informed estimates that are predictive in determining the direction of future trends

Question 19

Evaluate the advantages of forecasting to a business and stakeholders

Answer 19

Enables the manager to plan for the future of the organisation
The most recent information is usually the most useful and relevant

Question 20

Evaluate the disadvantages of forecasting on the business and stakeholders

Answer 20

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

Question 21

Explain the nature and purpose of decision trees

Answer 21

A mathematical model used to help managers make decisions when faced with choices

Question 22

Evaluate the advantages of decision trees

Answer 22

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

Question 23

Evaluate the disadvantages of decision trees

Answer 23

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

Question 24

Explain the nature and purpose of Ansoff’s matrix

Answer 24

A marketing planning model that helps a business determine its product and market growth strategy and looks at the risks involved

Question 25

Distinguish between the quadrants of Ansoff’s matrix

Answer 25

Products + markets:
Existing + existing = market penetration
Existing + new = product development
New + existing = market development
New + new = diversification

Question 26

Explain market penetration

Answer 26

A growth strategy where a business aims to sell existing products into existing markets, aim is to increase market share

Question 27

Explain product development

Answer 27

As growth strategy where you introduce new products into existing markets

Question 28

Explain market development

Answer 28

A growth strategy where you sell existing products into new markets (another country)

Question 29

Explain diversification

Answer 29

A growth strategy where you sell new products in new markets

Question 30

Evaluate market penetration

Answer 30

Business focuses on markets and products it knows well
The business can exploit insights on what customers want
Unlikely to need market share

Question 31

Evaluate product development

Answer 31

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

Question 32

Evaluate market development

Answer 32

A local strategy where existing markets are saturated or in decline
Often more risky than product development
Existing products may not suit new markets

Question 33

Evaluate diversification

Answer 33

It’s a risky strategy because you don’t know anything about the market
Few economies of scale

Question 34

Explain Porters 5 forces model

Answer 34

A system for analysing the level of competition in an industry

Question 35

Explain each of porters 5 forces in the model

Answer 35

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