Business Objectives And Strategy (Chapters 5 - 9) Flashcards
Chapter 5
Who is a stakeholder?
A person or party with an interest in the success of a business.
Chapter 5
What are some stakeholders within a business?
Owners, employees, customers, suppliers, lenders, the community, the government.
Chapter 5
What are the objectives of some of these stakeholders?
•Owners want a satisfactory return on their investment.
•Customers want good quality, low prices, innovation, and safe products.
•Suppliers want regular orders and prompt payment.
•Employees want job security, job satisfaction, good wages and conditions.
•Local community wants jobs, community involvement, and a responsible attitude.
Chapter 5
What is the difference between private and social costs and benefits?
Private costs that a business pays (e.g. labour costs) and the benefits it gets from its activities (e.g. profit).
Social costs and benefits or overall/’true costs’ of a business’s activities, taking into account external costs and benefits (e.g. pollution as a cost), as well as private ones.
Chapter 6
What are the aims/goals of a business? Give a brief explanation for each of them.
•Survival. The most important aim for a new business.
•Breaking even. It is more realistic for a business to break-even before setting a goal to make profit.
•Share of the market/growth. Capturing a larger share of the market increases sales and gives the business the opportunity to dominate the market
•Profit. A longer-term goal for most businesses.
Chapter 6
What are the benefits for a business in setting objectives?
•A greater sense of direction for the business.
•A possible motivational force for all employees.
•An aid to controlling existing and future operations in a business.
Chapter 6
What are some factors a business needs to take into account when creating a hierarchy of objectives?
•The mission/overall purpose of the business.
•Its vision and where it wants to be in the future.
•The aims it has for achieving the mission and vision.
•The objectives to be put in place to achieve all this.
Chapter 6
What is the difference between strategic and tactical objectives?
Strategic objectives are about how a business plans to achieve its aims or goals. Often a long-term approach.
Tactical objectives are the day-to-day (short-term) objectives needed to ensure the strategic objectives are achieved.
Chapter 6
What are SMART objectives and what does each part of SMART do?
S (Specific) makes sure that everyone understands what the target is.
M (Measurable) the objective statement needs measurements to ensure that success or failure can be achieved.
A (Agreed) agreement between different departments makes the objectives more likely to be achieved.
R (Realistic) being realistic when setting objectives is important to avoid employee demotivation.
T (Time-bound) a time constraint aids measurement and helps focus people’s minds.
Chapter 6
What are some internal constraints on a business?
•A lack of finance to meet the chosen objectives.
•Poor communication within the business.
•An industrial dispute with the workforce.
Chapter 6
What are some external constraints on a business?
•The state of the economy.
•Behaviour of competitors.
•Changes in the law that affects the way a business operates.
Chapter 6
What is the purpose of corporate objectives?
To give a sense of direction for the business and help to define the culture in which the business is organised and operates.
Chapter 6
What is the purpose of social objectives?
To address the social issues and increase the business’s social reputation through action such as being environmentally friendly, offering sponsorship in the local community.
Chapter 7
What does a PEST analysis cover?
A PEST analysis covers both the opportunities and threats for the business by looking at certain factors:
•Political.
•Economic.
•Social (characteristics of the population (e.g. changes in distribution, spending habits)).
•Technological.
•Competition.
•Culture (characteristics of the local population).
•Ethics - demand for ethical trading and its effect on customer demand.
•Pressure groups.
•Environment.
Chapter 7
What are stakeholders conflicts?
A business must take into account stakeholder objectives when making strategic decisions, which can lead to stakeholder conflicts, meaning there would have to be trade-offs between them, at least in the short-term.
Chapter 8
What is a business plan?
A formal written document that explains in detail how a business is going to achieve its objectives.
Chapter 8
What is the purpose of a business plan for start-ups?
A proper plan:
•Proves that those who run the business ‘know what they’re doing’.
•Know what the potential for the business is.
•Allows for the business to receive financial backing.
Chapter 8
What is the purpose of a plan for established businesses?
For established companies, a plan involves a strategic review of the firm and aims to improve and sustain business performance by addressing such questions as:
•Where are we now?
•Where do we want to go?
•Can we get there?
•How?
Chapter 8
What are the benefits of a strategic review?
It enables:
•Analysis of the key performance indicators from all the four functional areas in the firm.
•Analysis of the current situation in the external environment using SWOT and PEST.
•Identification of ‘good practice’ and ‘bad practice’ in the firm.
Chapter 8
Why might the stakeholders want to view a business’s plan? Give a few examples.
Each stakeholder group has their own reason for wanting to view the business’s plan, and that depends on their main objectives, for example:
•Customers - want good customer service, so want to know if it’ll improve.
•Suppliers - want regular orders, so want to know if more or less of them will occur.
Chapter 8
What are the advantages and disadvantages of a business plan?
+Gives a business a sense of direction.
+Encourages communication, co-operation and co-ordination between different departments.
+Forces an evaluation of current strategic and tactical objectives.
-Opportunity cost on time spent gathering information.
-A plan may be too rigid and leave little room for individual employee creativity.
-A plan may be disregarded/altered by someone who doesn’t like it.
Chapter 8
What are some of the questions that need to be answered when making a business plan?
•What are we aiming to achieve?
•Why?
•What will need to be done to achieve this?
•By whom?
•When?
•Using what resources?
Chapter 8
What are some key issues and reasons for planning for the Accounting and Finance department in a business?
Key issues:
•How to raise any additional funds needed, or simply maintain existing levels.
•The budget to be allocated to each department.
Reasons for planning:
•Ensure adequate cash flow.
•Try and ensure shareholder objectives in terms of expected returns are met.
Chapter 8
What are some key issues and reasons for planning for the HR Management department in a business?
Key issues:
•Whether the existing workforce is capable of carrying out the plan.
•The project level of labour turnover.
Reasons for planning:
•Correct planning can avoid hiring or training employees at the wrong time.
•A need for labour turnover to be calculated and planned for in order to avoid future staff shortages.
Chapter 8
What are some key issues and reasons for planning for the Operations Management department in a business?
Key issues:
•If the existing production process can cope with any planned changes.
•If there are any new stock and quality control issues.
Reasons for planning:
•Identify what will happen to costs as a result of the plan.
•To consider whether the products can actually be made to the desired standard.
Chapter 8
What are some key issues and reasons for planning for the Marketing department in a business?
Key issues:
•The advertising and promotional plan
•The pricing strategies for different products.
Reasons for planning:
•To avoid any mistakes from previous promotions and/or pricing strategies.
•To ensure that sales levels are carefully co-ordinated with the amount being produced.
Chapter 9
What is meant by ‘uncertainty’ in relation to the business?
The inability to calculate the costs and benefits of a decision precisely.
Chapter 9
What are some external uncertainty factors?
•Economic uncertainty.
•Political uncertainty.
•Competitive uncertainty.
Chapter 9
What are some internal uncertainty factors?
•Organisational and HR uncertainty.
•Stakeholder uncertainty.
•Technological uncertainty.
Chapter 9
What are some ways to manage different external risks?
Economic risk:
•Analysis of a wide variety of economic indicators.
•Recognising that some data may be national, so it’s better to use regional data.
Political risk:
•Managers being aware of the policy intentions of the main political parties.
Competitive risk:
•Ongoing market research.
•Use of tools such as the Boston Matrix.
Chapter 9
What are some ways to manage different internal risks?
Organisational risk:
•A clear understanding of how each department’s actions impact one another.
•Offering appropriate incentives for those adopting new roles where restricting is necessary.
Stakeholder risk:
•Consultations with any stakeholders likely to be affected by the decision well in advance.
Technological risk:
•Making sure that existing technology can cope with the business’s decision.
Chapter 9
What is meant by ‘quantifiable risk’?
The likelihood of a predictable risk occurring. It’s possible to put a value on this sort of risk.
Chapter 9
What is meant by ‘unquantifiable risk’?
The risk of an event that is unexpected. Sometimes referred to as ‘the unknown unknowns’. It’s not possible to put a value on this sort of risk.
Chapter 9
What is meant by ‘personal risk’?
The risk that an entrepreneur takes on its own physical and mental well-being in the early stages of the firm’s existence. There’s also an additional risk that a person uses his or her house as collateral for a loan.
