Business objectives & strategy Flashcards
Topics 44-47
What are business aims?
Business aims are things a business intends to do in the long-term. It is what a business strives to achieve. They are less specific than an objective and could be expressed as a vision.
What is a mission statement?
Mission statements declare the business’ overriding purpose, but may also reflect its goals and values.
What are the benefits of creating a mission statement?
1= Commitment to customers
2= Improves motivation
What is a drawback of using a mission statement?
1= Time and resource consuming
2= Demotivating if false / unrealistic
Objectives should be _ _ _ _ _
S= Specific
M= Measurable
A= Agreed
R= Realistic
T= Time Specific
Ansoff’s Matrix:
1= Existing market, Existing product
2= Existing market, New product
3= New market, Existing product
4= New market, New Product
1= Market penetration
2= Product development
3= Market development
4= Diversification
What is market penetration?
Market Penetration is achieving growth in existing markets with existing products. It can be done through increasing brand loyalty or encouraging more frequent use of products.
What are the benefits of market penetration?
1= Increased customer loyalty
2= Good for successful products
3= Lowest level of risk
What are the drawbacks of market penetration?
1= May overlook other opportunities, leading to high opportunity cost.
What is product development?
Product Development is marketing new or modified products into an existing market.
When is product development the best strategy?
In a market where product life cycles are very short or where consumer trends change very quickly.
What are the benefits of product development?
1= Associated with Kaizen
2= Can be used to gain edge
3= Gains business reputation
What are the drawbacks of product development?
1= Significant investment into R&D
2= Risk taken
What is market development?
Market Development is the marketing of existing products into a new market. This could involve entering geographically new markets, or deciding to focus on a new target age group or ethnic group.
What are the benefits of market development?
1= Allows business to expand into new markets.
2= Can aid international growth
What are the drawbacks of market development?
1= Risky
2= You are inexperienced in the market and do not know their tastes.
What is diversification? (Ansoff)
Diversification occurs when new products are developed for new markets.
What are the benefits of diversification? (Ansoff)
1= Reduces overreliance
2= Spreads risk
3= Increases safety
What are the drawbacks of diversification? (Ansoff)
1= Takes a business outside their area of expertise.
What are the three components of Porter’s strategic matrix?
1= Cost leadership
2= Differentiation
3= Focus
Cost leadership involves being the lowest-____ provider in the _______. It is not always associated with having the lowest ______. Helps a firm to ________ and have high __________ but often offers a “__ _______” product.
cost
market
price
compete
revenues
no thrills
Differentiation involves taking a ________ ________ in the market. It can be adopted by ___ buisness and allows a firm to charge a __________ price. However it is difficult to ____________ that differentiation will _______ increased prices.
unique position
any
premium
guarantee
justify
Focus involves targeting a ________ range of __________ in one of two ways. It can be by understanding ___________ very well and delivering products that are very ________ to customer _______. Linked to a _______ market.
narrow
customers
customers
specific
needs
niche
Define distinctive capeability.
A distinctive capability is a form of competitive advantage that is difficult for competitors to understand or imitate.
What are the three types of distinctive capeability that John Kay suggests there are?
1= Architecture
2= Reputation
3= Innovation
Architecture is ___________ within and around an ___________. They can include relationships between the business and its __________, ___________ or _________. They allow a business to ___ _______ by being more ________ through easy and open transfer of ___________.
relationships
organisation
employees
suppliers
customers
add value
efficient
information
Reputation is positive ____________ a business builds around things such as q_______, reliability, s_______, prestige, and h________. They cannot be built __________, and _________ reputation can have _________ effects.
associations
quality
service
honesty
overnight / quickly
negative
lasting / long-term
A sustainable competitive advantage can arise when a business __________ by creating a ____ product or service. It can sometimes create a whole new _______ or ________.
innovates
new
market
industry
_____-term strategies are taken out to achieve a __________ _________ but _____-term strategies are used to respond to an __________ or ______ in the ________.
long-term
business objective
short-term
opportunity or threat
market
What is an internal audit?
An Internal Audit is an analysis of the business itself and how it operates, attempting to identify the pros and cons of its operations.
What may an internal audit assess?
1= Products
2= Finance
3= Production
4= Human Resources
What is an external audit?
An external audit is an analysis of the environment in which a business operates and over which it has little to no control.
What may an external audit assess?
1= Market
2= Competition
3= PESTLE
What does SWOT analysis analyse?
S= Strenghts
W= Weaknesses
O= Opportunities
T= Threats
What are some of the uses of SWOT analysis?
1= Aids decision making
2= Aids strategy building
3= Improves business performance
What is PESTLE analysis and what does it stand for?
PESTLE Analysis is used to help monitor and analyse the likely impact of external influences on a business.
Political
Economic
Social
Technological
Legal
Environmental
Why should a business be aware of political factors in the external environment?
Some parts of the world are particularly volatile and should be approached with caution, e.g. Gaza.
Why should a business be aware of economic factors in the external environment?
Trading conditions can become very difficult for certain businesses during a recession, depending on the business type.
Why should a business be aware of social factors in the external environment?
Social and cultural changes can influence changes to consumer needs and wants, but they are usually slow changes that take place over time.
Why should a business be aware of technological factors in the external environment?
Businesses welcome technological advances as they help to improve efficiency, however it can shorten product life cycles.
Why should a business be aware of legal factors in the external environment?
Legislation may be directed at businesses to protect vulnerable groups that might otherwise be exploited.
Why should a business be aware of environmental factors in the external environment?
Global warming and climate change has led to people becoming more protective of the environment. People are more inclined to buy ‘green goods’ or buying products that come from businesses who are environmentally friendly.
What is it called when a market only has one sole producer? What about if there is a few dominating firms?
A) A monopoly
B) An oligopoly
What are Porter’s 5 forces?
1= Bargaining power of suppliers
2= Bargaining power of customers
3= Threat of new entrants
4= Threat of substitutes
5= Rivalry among existing businesses
The more power that a supplier has, the higher ______ it can charge, reallocating _____. You can reduce their power by ________ _________ or encouraing _________.
prices
profit
growing vertically
competition
The more power customers have, the lower they can force ______ down. Firms can increase their power via __________ _________ ___________ or making it hard for a customer to _______ suppliers.
prices
forward vertical integration
switch
If it is easy for a new business to start up, it becomes hard for existing firms to ______ _____ ______. Erecting ________ __ ______ can counteract this.
charge high prices
barriers to entry
Substitutes hard a businesses ______ _______, so they can _______ ideas to prevent others from copying them.
profit potential
patent
