CHAPTER 1 ALL Flashcards
Define PEST
an acronym for political, economic, social, and technological that looks at opportunities and threats of the external environment within which businesses operate
what is the purpose of PEST?
to use at the start of a strategy review process, such as assessing the feasibility of an overseas investment project
what are the elements of Political?
- government legislation
- government intervention
- applying government policies to control business behavior
what are the elements of Economic?
- government policies
- attitudes/actions of foreign countries
- levels of business
- consumer confidence in the economy
what are the elements of Social?
-attitude of society towards a wide range of different issues (such as business ethics, social welfare, women, religion, animals)
what are the elements of Technological?
expected gains in efficiency (as measured by productivity, flexibility, communications)
-profits
Define SWOT.
useful decision-making tool
What is the purpose of SWOT?
to assess the current and future situation of a brand, product, company, proposal or decision
What’s the internal and external factors for SWOT?
internal: strengths, weaknesses
external: opportunities, threats
What are the factors of Strengths?
- unique selling point
- brand recognition/loyalty
- experience
- market share
- corporate image/reputation
- product qualities
- geographical location
- value for money
What are the factors of Weaknesses?
- limited source of revenues
- escalating costs of production
- higher prices than competitors
- unproductive workforce
- limited source of finance
- lack of spare capacity
- restricted product range
What are the factors of Opportunities?
- economic development
- trade liberalization
- weakening exchange rate
- upswing in the business cycle
- technological developments
- new markets/locations
- mergers/acquisitions of rival firms
What are the factors of Threats?
- new entrants in the marketplace
- outbreak of infectious diseases
- pressure group actions
- social/environmental/legal constraints
- media coverage/publicity
- unfavorable changes in seasons/weather
- changes in fashion/tastes
- price/non-price competition from rivals
Define Mission statement.
the declaration of an organization’s overall purpose
Define Vision statements.
an organization’s long-term aspirations, i.e. where it ultimately wants to be
What are advantages of sole traders?
- Few legal formalities
- Receives all profits, being your own boss, personalized service
- Enjoy privacy
What are disadvantages of sole traders?
- Unlimited liability
- Limited source of finance
- High risks
- Workload and stress
- Lack of continuity
- Higher costs of production
What are advantages of partnerships?
- Financial strength
- Division of labour and specialization
What are disadvantages of partnerships?
- Unlimited liability
- Decisions making taking longer
- Lack of continuity
- Must having a huge amount of mutual trust
- Faces difficulties in raising capital
What are advantages of private limited companies?
-Owners have greater control of the business and being cheaper to set up a private limited company than a public limited company
What are disadvantages of private limited companies?
-They do not tend to be able to raise as much finance as public limited companies
What are advantages of public limited companies?
-They’re able to advertise and sell its share to the general public via the stock exchange
What are disadvantages of public limited companies?
-It allows the general public to buy shares in the public company when there’s dilution of control (more shares = company has more owners, thereby wakening its ability to control the business), public companies are expose to takeover bids from other investors that seek to purchase a majority stake in the company
What’s the order of the business cycle?
- Boom
- Recession
- Slump
- Recovery
What’s boom?
- Consumer
- Expenditure
- Investment and export earnings are high
- Unemployment is low
What’s recession?
- Declining aggregate demand
- Lower investment expenditure
- Falling export sales
- Rising unemployment
What’s slump?
-High level of unemployment along with low levels of consumer spending, investment and export earnings
What’s recovery?
-National income begins to increase again, consumption, investment, exports and employment will all gradually rise
What’s ANSOFF matrix?
- Market penetration
- Product development
- Market development
- Diversification
What’s market penetration?
- A low-risk strategy; focuses on selling exiting products in existing markets
i. e. to increase their market share of current products. - This might be achieved by improving a firm’s marketing mix, such as using better advertising to enhance the desirability of the product or by offering more competitive prices.
What’s product development?
- A medium-risk growth strategy ; businesses aiming to sell new products in a existing market
- It is suitable for products that reached the saturation or decline stage of their product life cycle
What’s market development?
- A medium-risk growth strategy
- Businesses selling existing products in new markets
- i.e. an established product that is marketed to a new market segment. This might be done by using new distribution channels to sell the product in a different location or overseas, although this could be quite risky if the business is unfamiliar with local market conditions and cultures.
What’s diversification?
- A high risk growth strategy
- Business marketing new products in new markets
- It is suitable for firms that have reached saturation in their markets and are seeking new opportunities for growth
What is tactical (operational)?
-Short-term objectives that affect a segment of the organization
What is strategic?
-Longer term aims of a business organizations
What is ethical?
-The more principles that guide decision-making and strategy
What are objectives of tactical?
- Strive toward survival
- Sales revenue maximization
What are objectives of strategic?
- Profit maximization
- Growth
- Image/reputation
- Market standing
What are objectives of ethical?
- Improving corporate image
- Staff motivation
- Staff morale
- Increasing customer loyalty
- Cost cutting
What are factors of private limited companies?
- Share are sold to private family members/friends
- Shares in a private company cannot be traded without the prior agreement from the Board of Directors
- Shares cannot be traded via the stock exchange
- More cheaper to set up than a public limited company
What are factors of public limited companies?
- Able to advertise and sell its shares to the general public via the stock exchanges
- The general public are allowed to buy shares in the public company (dilution of control_
- Raise more finance
What are factors of mission?
- Medium/long term objectives
- Updated more frequently than vision
- Have actual targets
- Outline/highlight the values of the business
- Sets the tone for how mangers/employees behave on a day-to-day basis
What are factors of vision?
- Long term objectives
- Do not have actual targets that must be realized
- Allows people to see what could be the actual target
