Business Objectives and Strategy Flashcards
give some examples of stakeholder objectives
shareholders-dividends
customer-quality of product/service
give an example of stakeholder objectives
customer wants to buy from business with ethical behavior
business wants low costs
mission statement
idea of what did business exists to do
aims
overall long term thing business wants to achieve
objective
short term, measurable achievement
tactical objective
short term objectives, likely to do with day to day activities
strategic objective
how a business plans to achieve its aims or goals
longer term approach
what is the criteria for setting objectives
SMART
what does SMART stand for
specific measurable achievable realistic time-bound
corporate objective
help to define the culture of the business
change over time
hierarchy objectives
overall purpose
vision for future
aims for achieving mission+vision
objectives in place
constraints of objectives
lack of finance
poor communication
state of the economy
laws which change operation of the business
what is the difference between objective,strategy and tactics
objective-to reach a goal
strategy-action plan to reach objective
tactic-step taken to achieve strategy
how can a business formulate a strategic plan
internal/external audit
what do internal and external audits look at
internal-strengths+weaknesses
external- opportunities+threats
what four areas does an internal audit look at
people
marketing
operations management
financial
what are some of the areas an external audit looks at
competition
economy
political issues
ethics
what is a PEST analysis
external factors in an audit
political,economic,social,technological
how can a business formulate a strategy
using SWOT analysis
strengths,weaknesses,opportunities,threats
apart from a SWOT what else can a business use to formulate strategy
market research
ratio analysis
government stats
how can employees influence business objectives
could be part of trade union
lots of them collective power
experts/specialists hard to replace, power position
how can suppliers influence business objective
could be in a monopoly position
what does porters 5 forces model do?
analyse level of competition in an industry
what are porters 5 forces
threat of new entrants bargaining power of suppliers bargaining power of consumers threat of substitutes (includes changes in technology) degree of existing competitive rivalry
how would porters 5 forces model be displayed
intensity of rivalry in the middle with arrows to other four forces
what are the criticisms of porters 5 forces
assumes a classic perfect market
people apply it to an individual businesses not industry
markets can change (e-commerce)
what do porters generic strategies show
how company can achieve competitive advantage in its industry
what are porters three generic strategies
cost of leadership
differentation
focus/niche
explain porters generic strategy of cost of leadership
aim of being lowest cost producer in field
explain porters generic strategy of differentiation
produce a range of goods perceived as different to competition
explain porters generic strategy of focus/niche
produce for particular sector of market-usually consumers in sectors prepared to pay premium
if no patent, product can be copied+no advantage
what is the fourth strategy of porters generic strategies
‘stuck in the middle’
business that tries to adopt all 3 generic strategies likely to be unsuccessful
what are the functions of a business
marketing production and operations accounting and finance human resources customers service
why would a business change its objectives
economic change
legal issues
political issues
social attitudes
accounting and finance (business functions)
monitors+controls monetary resources
production and operations (business functions)
transforming resources into goods
operations-controlling+designing process of production e.g stock control
marketing (business functions)
creates the desire to buy a product
conducts market research
human resources (business function)
responsible for well being of employees
customer service (business functions)
ensuring satisfaction with a product or service
operational objective
specific production targets set by organisation to ensure goals are achieved
give examples of some operational objectives
maintain quality
maximise utilisation of materials
social enterprise
set up with main objective is to help people
Privatisation
public sector enterprise sold by the gov
nationalisation
private sector enterprise taken over by the gov
corporate social responsibility
businesses address social and environmental considerations as part of their normal business activities.
which areas do businesses have to consider their corporate responsibility
environment+ethics
charity+fundraising
diversity
financial
advantages of being a socially responsible corporation
reputation
attract more staff
disadvantages of being a socially responsible coporation
large amount of time
short term costs
how could a business become more socially responsible
less plastic packaging (environment)
charity/community schemes, (EDF gives workers day off per/y to work on community projects)
business plan
sets out how a business intends to achieve its objectives
what is the content of a business plan
the idea finance objectives target market competitors
advantages of a business plan
requires strategic review, see how well each functional area is performing
sense of direction
sets out role of each department
encourages communication+coordination
disadvantages of a business plan
opportunity cost of time
demotivates those responsible for carrying it out if have no input
useless unless implemented
opportunity cost
cost of the next best alternative foregone
benefits of a strategic review
analysis of SWOT/PEST undertaken
lead to improvement in long term profitability
consensus established among senior managers
strategic review
review which is about improving+sustaining business performance
what kind of business uses a strategic review
already established
why would employees have an interest in a businesses plan
objective-pay rise
is likely to happen looking at the plan?
why would suppliers have an interest in a business plan
objective-regular orders+increasing size
plan might include business growth which could increase their order
what is the purpose of a plan-do-review process
make sure that the business is ‘on track’
stages of plan do review cycle
plan-establish objectives
do-implement plan
review-formal on going evaluation
advantages of a plan do review
methodical, forces strategic approach
deparments get clarity on what they have to ‘do’
regular reviews of departments-deviations from plan can be corrected
disadvantages of a plan do review
lengthy-opportunity cost
not flexible once objectives have been set
some employees regard on going review of work ‘spying’ don’t feel trusted
contingency plan
plan devised for an outcome other than what is the expected outcome
disadvantages of a contingency plan
opportunity cost
people who construct plan,not honest with their assessment of risk
advantages of a contingency plan
co-ordination amongst employees
operations can continue to run as best as possible
if plan for worst can prevent some outcomes
what would happen to stakeholders if a contingency plan wasn’t in place
supplier could receive fewer orders
bad reputation, let customers down
gov lose tax revenue
crisis management
organization deals with an event that threatens to harm the business
deal wi potentially damaging even quickly after it occurs
how is risk management different to crisis management
risk management but looks more at minimizing risk
what are some solutions to possibility of a crisis
make sure insurance policies up to date
‘trial runs’
what is the relationship between risk and reward
big risk expected big reward
uncertainty
inability to calculate the costs and benefits of a decision
risk
chance of an adverse occurrence
reward
possible return particular activity may make
what are the external causes of uncertainty
economy
politics
competition
what are the internal causes of uncertainty
organization+HR
stakeholders (shareholders+employees)
technology
how could human resources be an internal cause of uncertainty
does culture of business support decision?
can employees implement new decision?
how is stakeholders an internal cause of uncertainty
shareholder revolt?
industrial action from employees
how does uncertainty affect aims and objectives
the decision to adopt objective may still be make but is done with cautious, not ambitious
how does uncertainty affect decision making
making decision in groups harder
severity of risk is subjective
how can economic risk be managed
analysis of economic indicators (GDP,interest rates, unemployment rate)
time series analysis
how can political risk be managed
up to date with current policy intentions
how can competitive risk be managed
strategy based on SWOT
market research
unquantifiable risk
unexpected, can’t put a value on it
quantifiable risk
can be predicted, value can be placed on
give an example of a quantifiable and unquantifiable risk
if factory burnt down
cost to rebuild known
amount of revenue from future customers not known
how can organizational risks be managed
foster a ‘change culture’ less risk of resistance if wanted to
appropriate incentive during restructuring
how can stakeholder risk be managed
consultation
risks faced by an entrepreneur
not securing finance
unsuccessful product/service
local market
where customers are short distance from suppliers
national market
where customers are spread throughout the country or over large area
international market
where customers are spread throughout the world
what is forecasting
use of existing data to predict future trends
what are the two types of forecasting
qualitive (experience) and quantitative (numbers)
what are the structured methods of qualitative forecasting
Delphi technique
forecasting
what are the unstructured methods of qualitative forecasting
brainstorming
intuition
describe the Delphi technique as a form of structure qualitative forecasting
relies on expert info
takes form of questionnaire
ask experts opinions on outcome of business situation
all info is summarised
describe intuition as a form of unstructured qualitative forecasting
rely on knowledge of business,markets,economy and past experience
describe expert opinion as a form of structured qualitative forecasting
people who have extensive knowledge about the market
describe brainstorming as a form of unstructured qualitative forecasting
using a group to solve problems
discuss ideas for solutions
advantages of structured forecasting
people have experience likely to know more than you
predictions could be more accurate
disadvantages of structured forecasting
not part of your business don’t know how it operates
advantages of unstructured forecasting
you know your business and likely outcomes
disadvantages of unstructured forecasting
isn’t based on experts
advantages of forecasting
show trend in figures, helps business plan ahead
see how well business is likely to perform in future
disadvantages of forecasting
only as reliable as the data put forward, if not accurate
external influences aren’t taken into account
what is cyclical variation
amount by which actual sales in a period vary from moving average figures
what is time series analysis
calculates a moving average
how do you calculate cyclical variation
actual sales-moving average sales
how do you use time series analysis to predict future values
moving averages-odd number of years
how do you calculate the moving average and use it to forecast
find trend period calculate moving total calculate moving average calculate cyclical variation plot trend, line of best fit add/subtract av cyclical varitation to forecast figures on graph
financial measures of business performance
final accounts ratio analysis gearing cash flow budgets variance analysis
non-financial measures of business performance
markets share resource utilization environmental impact quality customer satisfaction
cashflow forecast
estimates of likely inflows and outflows into and out of business
variance analysis
difference between actual and budgeted figures
why is cash flow important for a business
monitor,compare forecast with statement
potential lenders want to see it
why does a businesses published accounts not provide a complete picture of performance
only looking at financial performance
what do liquidity ratios asses
level of cash in business
how to improve cash flow
more sales
factoring
what is factoring
‘selling’ debt of business revenue from debtors can be received earlier
factoring company with take proportion of value of debt as pay
advantages of measuring business performance
identifies weak points
helps set objectives
compare as your business grows
disadvantages of measuring business performance
time consuming
importance of non financial performance measures
assess the impact business is having on stakeholders
help indicates future finance performance
why do businesses measure performance
see where weaknesses are
see how its progressing
what are the decision making tools for a business
decision trees
Ansoff matrix
decision trees
when business is considering two or more options
show likely financial return for each decision
combine risk and return
what two aspects are decision trees based on
probability of outcome
estimated monetary reward
whats the difference between ethical business and socially responsible corporation
CSR-responsibility to all stakeholders
morally correct behavior
which characteristics did porter identify with high profit industries
weak supplier
weak buyer
high barriers to entry
what do the symbols in decision trees show
square-a decision, no. of lines drawn from shows amount of options
circle-possible outcomes
how do you calculate expected values on decisions trees
estimated monetary valueXprofitability
benefits of decision trees
Choices are set out in a logical way
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
drawback of decision trees
just estimates – always prone to error
Uses quantitative data only – ignores qualitative aspects of decisions
Assignment of probabilities and expected values prone to bias
ansoff matrix
is a marketing planning model that helps a business determine its product and market growth strategy.
what does an ansoff matrix suggest
that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets
advantages of an Ansoff matrix
forces think about the expected risks of moving in a certain direction
It lays out possible strategies for growth
it focuses the business
Presentable to stakeholders
Creates a risk aware culture
disadvantages of an Ansoff matrix
Only a theoretical model
Does not take into account the activities of external competitors
Accurate predictions are difficult- unforeseen events
what are the quadrants of the Ansoff matrix (top two left to right then bottom two left to right)
market penetration + product development
market development +diversification
what are the arrows going on the x and y axis of an ansoff matrix
x-left at top existing product then new product
y- side top existing markets then new markets
which factors need to be taken into account when making a decision
level+nature of risk
accuracy of forecatss
potential for bias
volatility
types of decision making based on length
short-term-Day to day, up to a year
medium-term –Monthly up to 3-5 years
long-term decisions-Longer than 5 years
describe tactical, operational and strategic decisions
strategic- Long term affecting whole business
tactical –Middle management impact part of business
operational decisions-day to day taken by department managers
when would you use qualitative forecasting
fluctuating demand
little historical data available
qualitative decision making tool
ansoff
quantitative decision making tool
decision tree
what three responses should a business have in a crisis
communications response
management response
operational response
