Business Objectives And Strategy Flashcards
What is a corporate objective?
Corporate objectives are targets set for the whole firm to reach in a given time period.
What are the effects of setting corporate objectives?
sense of direction
clear target provides focus for any activity.
Productivity and co-ordination can be enhanced
help the firm achieve its goals.
What are corporate aims and how do they benefit a firm?
An aim provides a general sense of what’s to be achieved.
Sense of purpose and drive that the aim can bring to day to day tasks.
If everyone in a business is aware of what the firm is trying to achieve they will be more driven to achieve their part of that whole.
What are examples of typical corporate aims?
Growth
Maximising profit
Entering new markets
Surviving the first two years of being in business
Improving the communities in which they operate
What effect do corporate aims have on employees?
Focusing on a corporate aim would help employees to understand what factors should be prioritised when making decisions.
This should allow decisions to be made quickly without the need for lengthy consultation with senior management.
Increased motivation from the sense of purpose and drive.
What is a mission and mission statement?
A mission is the underpinning purpose behind the existence of a business.
A mission statement is a catchy summary of the reason why a business exists
What major factors affect the actual sense of mission created within the business
Purpose
Values
Standards and behaviours
What is a corporate strategy?
The corporate strategy is a medium to long-term plan for achieving the corporate objectives.
What should a successful strategy consider.
The best strategic recommendations will always make clear how the strategy plays to a firm’s strengths and addresses the external environmental conditions faced by the business.
What is Michael Porters generic strategy matrix?
It provides advice to any business on the potential route to choosing the successful corporate strategy.
Porter sees this as a crucial element in achieving a long-term competitive advantage.
What does Porters generic strategy matrix show?
four major strategic choices that Porter suggests can lead to long-term success.
The key issues to consider when analysing a company’s strategy or whether it is selling to a mass or niche market and how it makes itself stand out from its rivals. Either through being the lowest cost operator or having a significant point of differentiation.
What is product differentiation?
Product differentiation describes a business’s attempts to make its product stand out from those of rivals, perhaps through marketing, design or quality.
What is porters low cost strategy and how can it be effective in the long term?
Being sufficiently efficient in its operations allows a business to be able to undercut rivals on price and still make a profit.
To be effective in the long term, the local strategy must be based on an advantage that rivals cannot easily copy so outsourcing to China may not prove the heart of a successful low-cost strategy as that is a relatively easily copied.
What is are some examples of how businesses can use Porters differentiation strategy?
Great design or amazing customer service can differentiate a business just as effectively through the work of the operations management function.
What is focused low-cost in Porters generic strategy matrix?
A strategy that focuses on a niche market and succeed in being the lowest cost provider within that niche can bring success.
This is less likely to be cost reduction through economies of scale and more likely to be based on operational efficiencies and high productivity levels.
What is focus differentiation in Porters generic strategy matrix?
Successful differentiation within the niche market can also lead to long-term success generally with a very high margin, relatively low volume business model.
What is Ansoffs matrix?
Strategic matrix shows the major choices open to a business considering its strategic direction, and highlight the level of risk involved in the choice.
(Across the horizontal axis are the products going from existing to new - increasing risk and on the vertical axis is the markets going from existing to new - increasing risk)
The four sections are market penetration, product development, market development, and diversification.
Level of risk is lowest in the top left-hand corner of the matrix, with market penetration and the highest in the bottom right with diversification.
What is market penetration and how significant are the risks associated with it?
The commonest and lowest risk strategy involves boosting market share to selling more of the same product to the same target market.
Risks are low as the company is still operating on familiar ground with tried and tested products.
What methods of market penetration are there?
Increase promotional activities.
Build brand image.
Finding new customers within the target market.
Taking new customers from competitors.
Increasing usage of the product among existing customers.
What is market development?
This is when a business aims the products at new markets while still selling existing products. This can be done by looking for a new geographical market often breaking into foreign markets or by repositioning the product to aim at a different type of customer.
What is the major risk factor of market development?
Requires heavy promotion.
The major risk factor here is that the company may not understand consumer behaviours in the new market they are entering.
Although market research can help to reduce this risk, this research is unlikely to equip a firm with the depth of understanding of consumer behaviour possessed by established rivals in these new markets.
What is product development and why can this be tough?
Huge investment in R&D
Developing new products is tough because there are many reasons why new product launches failed; from design problems to manufacturing issues and most commonly a failure to actually meet customer needs.
In product development what can the new products be and what are the risks associated with them?
It could be changes made to an existing product.
It could be developing and launching brand-new products.
First option may be slightly lower risk, although adding new features or ingredients can still backfire. Developing and launching brand new products present more hurdles and this involves greater risks.
What is diversification as defined by Ansoff?
Diversification means selling new products to new markets.
What are the risks and rewards of diversification?
Risks:
No reputation or expertise.
Extremely high risk and vital to plan for the operational risk by making sure the financial position is secure.
Rewards:
Spreads overall risk, as the business isn’t reliant on one market or customer base.
Utilise core competencies in a different context.
It can transform the size and opportunities for a business.
Radical diversification can be hugely exciting for the workforce, helping you recruit the best.
What is the definition for SWOT analysis?
SWOT analysis identifies the businesses strengths and weaknesses along with the opportunities and threats it faces.
What does a SWOT analysis set out to gain?
It sets out to gain a full understanding of what a firm does well and badly and what major issues it must address in the future. It’s therefore a framework used to help begin the process of strategic planning.
What are key performance indicators?
Key performance indicators are quantifiable measures of aspects of the businesses performance that the business considers to be the main determinants of its commercial success.
What are some examples of key performance indicators?
Like for like sales, Market share, Capacity utilisation, Unit cost, Brand recognition, Staff turnover.
If compared with industry rivals or figures from previous years these KPIs can offer clear statements of strengths and weaknesses.
What external considerations does a business have for opportunities and threats.
Demographics
Technological factors
Economic factors
New laws and regulations - these can make existing products obsolete overnight e.g. the introduction of sugar tax on soft drinks.
What is the PESTLE analysis?
It sets out the six main areas of external influences: political economic social technological or legal and environmental.
How can political factors benefit a business?
Government policies encouraging investment in infrastructure or exports can represent significant opportunities to some firms.
How can political factors such as the decision to leave the European Union affect businesses?
Harder to access EU markets,
More expensive imported materials due to the reduction in the value of the pound,
Harder to fill lower paid job vacancies without free movement of labour,
Less foreign direct investment to the UK from foreign multinationals,
UK businesses will find it easier to compete on price with more expensive foreign imports due to exchange rate shift.
Why do economic factors affect businesses?
The link between economic growth and average income tends to have an impact on sales of most products depending on their income elasticity.
Economic gloom may be a threat for many businesses, for others it can represent significant opportunity to grow for example discount stores like Aldi and Lidl have seen significant growth as average incomes in the UK stagnate (cease to flow) and consumers become more price sensitive.
How does the economic factor of the rate of inflation impact businesses?
As it rises it tends to cause uncertainty and lead to a reduction in investment and decisions to expand.
What is the impact of the rate of unemployment?
An increase will reduce average incomes but make it easier to recruit staff without needing to offer higher wages.
