Business Strategy Flashcards
Define Objective
An objective is a specific, measurable, and time-bound goal that an organization aims to achieve
Define Strategy
A strategy is a broad plan or approach designed to achieve one or more objectives.
Define Corporate Strategy
Corporate Strategy is the strategy made at the very top of the business hierarchy (owners, managers etc.) which can affect the whole business
Define Strategic Direction
Strategic Direction is the course of action that ultimately leads to the achievement of the stated goals of the corporate strategy.
Define Division Strategy
Division Strategy, the overall corporate strategy will be communicated to the divisional managers
Define functional strategy
Functional Strategy relates to a single functional operation such as: production, marketing or HRM and the activities involved within each of these functions.
Define Strategic Decision
Strategic decisions concern the general direction and overall policy of a business.
Long-term, Difficult to reverse, Usually taken by senior management, made infrequently
Define Tactical Decisions
Tactical decisions tend to be medium-term decisions which are less far-reaching than strategic decisions.
- Less resources involved
- Can be changed in a short time scale
- Taken by middle management
- Made occasionally
Define Operational decisions
Operational decisions are administrative decisions that will be short-term and carry little risk
Few resources involved, fairly easy to reverse, Taken by junior management, made regularly
Define Corporate Plan
A corporate plan is a statement of organisational goals to be achieved in the medium- to long-term, it will make clear measurable objectives and formulate strategies for achieving these objectives. The corporate plan will include methods for monitoring the achievement of objectives.
Define SWOT analysis
SWOT analysis is a strategic planning tool that helps organisations identify and understand their internal strengths & weaknesses as well as external opportunities and threats to the organisation
What do firms look for in Strengths & Weaknesses
Strengths: Firms look how they can increase and improve their strengths
Weakness: Firms look to identify weaknesses so that they can improve on reducing these weaknesses
What do firms look for in Opportunities & Threats
Opportunities: Firms look to identify these opportunities and use them to their advantage as much as possible.
Threats: Firms look to identify threats to try avoid them or reduce it to maximum benefit.
What is porters 5 force theory used for
Porters 5 Forces, help businesses determine the market or industry is profitable or not
What are porters 5 forces
Threat of new entry
Competitive Rivalry
Supplier Power
Buyer Power
Threat Of Substitution
What is part of Threat of new entry
- Specialist knowledge
- Economies of scale
- Cost advantages
- Technology protection
- Barriers to entry
What factors are there of Competitive Rivalry
- Number of competitors
- Differences
- Switching costs
- Customer loyalty
- Costs of leaving market
What factors are there of Supplier Power
- Number of suppliers
- Size of suppliers
- Uniqueness of service
- Your ability to substitute
- Cost of changing
What factors are there of buyer power
- Number of customers
- Size of each order
- Differences between competitors
- Ability to substitute
- Cost of changing
What 2 factors are there of threat of substitution
- Substitute performance
- Cost of change
Define the Ansoff matrix
Ansoff’s Matrix is a marketing planning model that helps a business determine its product and market growth strategy.
Define Market penetration
Market penetration - Concentrating on sales of existing products to existing markets.
Taking customers from competitors
Define Product development
Product Development - Involves the development of new products for existing markets. (or improvcing/changing current product)
Define market development
Market Development - Finding and developing new markets for existing products. (Identifying a new market (new country) or identifying a new customer e.g age)
Define diversification
Diversification - Developing new products and new markets, Involves introducing a new product to a different market, highest level of risk but if successful spreads risk for the business.
What are the advantages of the Ansoff matrix
Helps businesses make decisions on what products and markets they should focus on
Helps assess the level of risk associated with a strategy
What are the disadvantages of the Ansoff Matrix
Ansoff matrix assumes the market and how it operates so rapid changes can effect the effectiveness of the Ansoff matrix
It doesn’t tell the business how to execute the chosen strategy.
What are the different types of growth
Vertical Forwards & Backward integration
Horizontal integration
Franchise
Internal/organic
External
Diversification
Merge
Takeover
What is horizontal integration
When a business takes over a firm in the same sector and in the same industry.
What are the benefits of horizontal integration
Removes some of the competition – possibly for defensive reasons.
May benefit from increased economies of scale.
Increases market power to compete with market leaders by spreading the brand.
What are the drawbacks of horizontal integration
management of the firm don’t match (culture)
risky
reduced flexibility
Define Vertical Backwards
when a business takes over another business back down the chain of production.
Define Vertical Forwards
when a business takes over another business further up the chain of production.
What are the advantages of vertical integration
Security of supplies and control of suppliers’ prices.
Improves supply chain co-ordination.
Can guarantee the quality of its raw materials.
Use of outlets to determine brand image.
What are the drawbacks of vertical integration
Your firm is not an expert in that part of the market
Can create communication problems
Vertical mergers will have fewer economies of scale because production is at different stages of supply.
Define Organic Growth
When a business expands by using its internal resources and selling more of its existing products/expansion.
How can organic growth be achieved
Expanding the product range
Targeting new markets
Expanding the distribution network, such as opening more stores or selling in new places
what are the advantages of growth
Increase profits, increase market share, exploit new markets, benefit from economies of scale.
What are the disadvantages of growth
Costs involved
diseconomies of scale
bad publicity
Define External growth
is growth by acquisition, takeover or merger. Uses external resources to grow
What are the advantages of external growth
Rapid Expansion
Increase In market Share
Spreads Risk
Increase in distribution channels
What are the disadvantages of external growth
High Costs, Resistance to change, Brand and Reputation risks
Define franchising
A growth method which includes an entrepreneur who has the legal right to use the brand name, products and business style of an existing business. McDonald’s outlets
Define Franchisor
The franchisor is the individual who owns the business which is being franchised out
What are the benefits of being a franchisor
Extra commitment from franchisees.
- Able to expand the market and sales quickly.
- Less costs of developing the business themselves
- Risks and uncertainty are shared.
What are the drawbacks of being a franchisor
Franchisees may not operate in a satisfactory manner
Loss in full profits (shared)
Does not have complete control
Reputation risk
What are the benefits of being a Franchisee
- May be supported by national advertising/promotion.
- Reduced risk of failure
- Support offered by franchisor
Define Franchisee
The franchisee is the individual who is buying into the franchise
What are the drawbacks of being a franchisee
- Cannot sell the business without permission
- Cannot operate with the same level of freedom
- Risk of Franchisor cancelling their franchise
- Make regular payments to the franchisor
Define rationalisation
Rationalisation is the reorganisation of a business in order to increase its efficiency. This reorganisation normally leads to a reduction in business size.
What are the factors deciding for rationalisation
Operational Efficiency
Market conditions
Financial Position
Risk assessment
Define Outsourcing
Outsourcing occurs when outside suppliers are involved in activities that could be undertaken internally by a business. These suppliers are not directly employed by the business.
Advantages of outsourcing
- Significantly reduced staffing costs.
- Existing workload and stress levels are reduced
- Lower costs = more profit
Disadvantages of outsourcing
- Quality of production / product cannot be guaranteed.
- Existing Staff May feel demotivated if they believe there jobs are at risk
- More difficult to implement JIT systems
What is the impact of rationalisation on the business
Increase efficiency
Cost Reduction
Employees redundant
What is the impact of rationalisation on stakeholders
Employee, may lose there jobs
Customer, improved product and services
Local community, job losses
Shareholder/owner, more confidence as more profitable
What requirements should be expected from a franchisor to the franchisee
Training, so the same quality is offered throughout the firms
Potentially provide materials
What is a positive synergy
Successful financial synergy is when the merger of two companies results in increased revenue, tax benefits, and better debt capacity.
What is a negative synergy
Negative synergy occurs when the combined firm’s revenue is lower than the value of each company operated separately.
