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Class Notes Flashcards

1
Q

Define Strategy

A

‘Strategy is the direction and scope of an organisation over the long term, which achieves advantage for the organisation through its configuration of resources within a changing environment, to meet the needs of markets and to fulfil stakeholder expectations.’

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2
Q

Define corporate strategy

A

‘Corporate strategy is concerned with an organisation’s basic direction for the future, its purpose, its ambitions, its resources and how it interacts with the world in which it operates.’

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3
Q

What two things may an organisation orientate their corporate strategy around?

A

1) External - The market and what customers want - positioning view
2) Internal - Resources and competences it has or would like to have - Resources view

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4
Q

What are the characteristics of the positioning view?

A

1) Focus on customers
2) Building market share
3) Reduction of costs
4) Strong relationships

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5
Q

What must an organisation be aware of when using the positioning approach?

A

Fashions, brand loyalty and technology change over time. Company and products must stay relevant to avoid becoming obsolete

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6
Q

What are the characteristics of the resource based view?

A

1) Using superior competences
2) Creation of new markets
3) Continual development and acquisition of new resources and competences to maintain the competitive advantage

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7
Q

What are the theories for positioning view?

A

Porter’s Five Forces
Porter’s Generic Strategies
Life Cycle Analysis
BCG Matrix

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8
Q

What are the theories for resource view?

A

9M’s
Benchmarking
Porter’s Value Chain

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9
Q

What is a Strategic Business Unit? (SBU)

A

A relatively autonomous division of a large company that operates as an independent enterprise with responsibility for a particular range of products or activities.

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10
Q

What is a strategic mission?

A

A formal summary of the aims and values of the organisation.

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11
Q

What is the difference between a strategic mission and vision?

A

Vision is idealistic

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12
Q

What is a corporate goal?

A

Targets that are set for the organisation according to the mission and its primary objective. Do not meet SMART criteria

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13
Q

What are corporate objectives for?

A

Informs the Corporate Strategy:
essentially, how to meet the objectives determined by the board

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14
Q

What are the SBU Objectives for?

A

Informs the Business Strategy: each SBU determines how it will meet the objectives handed to it by the board

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15
Q

What are functional objectives for?

A

Informs the Functional Strategy: how the day-to-day operations will fulfil the business objectives and business strategy

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16
Q

According to the Ashridge College model of mission, what 4 elements should as successful mission statement contain?

A

Reason
Strategy
Values
Policies

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17
Q

In Ashridge College model, what is ‘reason’?

A

Why the organisation exists and/or for whom

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18
Q

In Ashridge College model, what is ‘strategy’?

A

The way the organisation will achieve its mission. This could be through a competitive position or distinctive competence.

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19
Q

What is the acronym for the Ashridge College model?

A

RSVP

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20
Q

In Ashridge College model, what is ‘values’?

A

What the organisation believes in, which should be replicated in the employees’ own values

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21
Q

In Ashridge College model, what is ‘policies’?

A

The policies and behavioural patterns underpinnings its work

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22
Q

What can a mission statement do?

A

Can help to communicate the nature of the organisation to its stakeholders and help instil core values in its employees.

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23
Q

The board must ensure the mission remains …. to the organisation

A

Relevant

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24
Q

What is the primary goal of a profit seeking organisation?

A

Maximise shareholder wealth

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25
Q

What is the secondary goal of a profit seeking organisation?

A

Anything else that the organisation chooses to do in support of the primary goal

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26
Q

What is the primary goal of a not for profit organisation?

A

To do whatever the organisation is there to do

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27
Q

What is the secondary goal of a not for profit organisation?

A

Secondary goals support the primary so raising funds and surviving

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28
Q

What does maximise the shareholders wealth mean?

A

The concept that corporations exist to maximise the wealth of their owners causes the following behaviours to apply:
- As a means to make decisions
- As a basis upon which divisions and their managers may be evaluated

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29
Q

What else other than money can be considered with maximising shareholder wealth?

A

Non-financial goals e.g. ethical fund shareholders
Long term viability
Corporate responsibility - the good of society and the natural environment

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30
Q

What will corporate objectives be underpinned by?

A

The primary goal of the organisation

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31
Q

What level are corporate objectives and strategy made?

A

Board level

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32
Q

What sort of decisions will be made at board level?

A

Which products and markets to pursue
Major investment decisions
Allocation of resources to its business units
How it will raise finance

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33
Q

Who is responsible for periodically reviewing, updating and replacing its mission statement, which in turn will redefine its corporate objectives and resultant strategy.

A

The board

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34
Q

Who manages relationships with external stakeholders?

A

The board

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35
Q

Who sets the objectives for the SBUs?

A

The board

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36
Q

Who devises strategies to achieve the SBU objectives?

A

The managers at this level

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37
Q

What decisions will be made on how to spend resources allocated to an SBU?

A

What products it should make
How will it achieve competitive advantage
How it will conduct its marketing

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38
Q

What are functional objectives and strategy?

A

Strategies for day to day operations that will lead to goal congruence

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39
Q

What are the 4 main steps of rational approach to strategy formulation?

A

Strategic analysis
Strategic Choice
Implementation
Review and control

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40
Q

How is strategic analysis in the rational approach split up?

A

SWOT (External and internal) analysis
Corporate appraisal
Mission and objectives
Gap analysis

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41
Q

What is gap analysis?

A

Analysis of what is missing between what we have now and what we aim to have

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42
Q

What is strategic choice?

A

Picking the method

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43
Q

What is strategic implementation?

A

Doing the chosen method

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44
Q

What are the benefits of the rational approach?

A

Gives a time frame to work to
Time to ensure resources will be available
Well structured so allows inputs from all leaders
Promotes goal congruence
Considers internal and external

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45
Q

What are the drawbacks of rational approach?

A

Takes time
In a dynamic market, market could have changed before implementation
Less opportunity for quick innovation if resources are tied up
Top down so lower level staff may be demotivated

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46
Q

What is an emergent strategy?

A

Strategy born out of a combination of intention and opportunity

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47
Q

When do emergent strategies occour?

A

When the conditions in the organisation are right to spot and harness them

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48
Q

What are the 5 types of emergent strategy considered in the emergent strategic model?

A

Intended
Deliberate
Unrealised
Emergent
Realised

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49
Q

What does intended mean in the emergent strategic model?

A

The result of formal planning process

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50
Q

What does deliberate mean in the emergent strategic model?

A

The intended plans have been put into action

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51
Q

What does unrealised mean in the emergent strategic model?

A

The intended plans that didn’t happen

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52
Q

What does emergent mean in the emergent strategic model?

A

Strategies created by force of circumstance

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53
Q

What does realised mean in the emergent strategic model?

A

The final realised strategy whether emergent or deliberate (the ones that actually happened)

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54
Q

Emergent strategies could still have the same evaluation process as the rational model

True or false

A

True

The process of choice and implementation will take place together

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55
Q

What is goal congruence?

A

The whole organisation is working towards the same goal

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56
Q

What does SMART stand for?

A

Specific
Measurable
Attainable
Relevant
Timebound

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57
Q

Other than SMART what other things are considered with objectives?

A

If they are open or closed

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58
Q

What is an open objective?

A

An open objective is a principle to be followed akin to a goal.

Examples would include the achievement of excellent customer satisfaction or to demonstrate a competitive return on capital employed.

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59
Q

What is a closed objective?

A

A closed objective is a specific measurable target.

Examples are customer satisfaction could be set at an average of 4.5 out of 5 by the end of the year and projects must deliver a minimum return of 20% over its lifetime.

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60
Q

What are objectives for a not-for-profit based on?

A

Achieving a particular response from a various target stakeholder

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61
Q

List 7 possible objectives for Not for profit organisations

A

Surplus maximisation (equivalent to profit maximisation)

Revenue maximisation

Utilisation maximisation (as in leisure centre swimming pool usage)

Management of capacity available (such as hospital beds)

Full or partial cost recovery (to minimise subsidy needed)

Budget maximisation (making full use of what is offered)

Maximising the satisfaction of various stakeholder groups

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62
Q

How many years is a short term plan?

A

1 to 3 years

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63
Q

How many years is a medium term plan?

A

3 to 10 years

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64
Q

How many years is a long term plan?

A

More than 10 years

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65
Q

How does ethics impact strategy?

A

1) Formation of objective - Not considering lines of business for ethical reasons
2) Ethical climate in which it operates - raises expectations
3) Internal appraisal - should be sustainable
4) Strategy selection - ethical implications of proposed strategies

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66
Q

What is a stakeholder?

A

Groups or persons with an interest in what the organisation does

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67
Q

What are the three categories of stakeholders?

A

Internal
Connected
External

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68
Q

What is Mendelow’s theory on stakeholders?

A

It places them in a matrix based on power and influence

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69
Q

According to Mendelow’s theory, what is required when a stakeholder has low interest and low power?

A

Minimal effort

Eg. Community

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70
Q

According to Mendelow’s theory, what is required when a stakeholder has high interest and low power?

A

Keep them informed

Eg. Individual employee

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71
Q

According to Mendelow’s theory, what is required when a stakeholder has low interest and high power?

A

Keep satisfied

Eg. HMRC

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72
Q

According to Mendelow’s theory, what is required when a stakeholder has high interest and high power?

A

Key players - keep happy and informed

E.g. Investors

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73
Q

What must be considered when stakeholder mapping?

A

1) The influence stakeholders have over other stakeholders
2) Would strategies cause stakeholders to move from one quadrant to another
3) What is the disruptive power of a stakeholder
4)Do stakeholders interest conflict with each other

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74
Q

What are the two types of business enviroments?

A

Macro
Micro

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75
Q

Why does an organisation need to have a good understanding of its environments?

A

So it can:
-Take advantage of new opportunities as they arise
- Minimise current and identified future risks

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76
Q

What are macro environments?

A

Big environments e.g countries

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77
Q

What are micro environments?

A

Smaller environments e.g. industries

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78
Q

What type of environment does PESTEL relate to?

A

Macro

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79
Q

What does PESTEL stand for?

A

Political
Economic
Social
Technological
Environmental
Legal

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80
Q

Do macro environments have a big or little influence over strategies?

A

Little influence

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81
Q

Do micro environments have a big or little influence over strategies?

A

Big influence

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82
Q

What are the 5 things to consider when validating information?

A

Integrity of the source
Corroboration and substantiation
Former historic accuracy
Age of the information
Motivation of the source provider

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83
Q

Once information is gathered it is important that it is shared with those in the management team who will be able to use it. What is this called?

A

Dissemination

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84
Q

What is the most informal method of dissemination?

A

Placing documents on the intranet

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85
Q

What is the most formal method of dissemination?

A

Holding annual management development sessions

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86
Q

What is a static environment?

A

Static environments where the participants enjoy relative certainty over the future and little changes over a long period of time. These organisations might be severely disrupted by a short-term shock to the environment and may fail as a result.

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87
Q

What is a dynamic environment?

A

Dynamic environments, which is characterised by constant and potentially rapid change. These firms must remain flexible to be able to adapt.

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88
Q

Define scenario planning

A

Scenario planning: The development of pictures of potential futures for the purposes of managerial learning and the development of strategic responses.

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89
Q

Scenario planning is useful where…

A

A long-term view of strategy is needed and where there are a few key factors influencing he success of the strategy

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90
Q

Does scenario planning go beyond the normal planning process?

A

Yes
It looks much longer term
Considers plausible directions an industry may head
Seeks to consider a range of potential outcomes not just one

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91
Q

What is the approach of scenario planning?

A

To build scenarios, an organisation takes the following steps:

(1) Identify key forces, using techniques such as PESTEL analysis.

(2) Understand the historic trend in respect of the key forces.

(3) Build future scenarios, for example, optimistic, pessimistic and most likely.

The scenarios generated are then ‘plots’ to be played out making managers consider future possibilities and encouraging them to think about strategy more flexibly.

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92
Q

Examples of political factors in PESTEL

A

Policies and attitudes
Government stability
Spending
Taxation
Foreign policy

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93
Q

Examples of economic factors in PESTEL

A

Globalisation
Interest rates
Exchange rates
Business cycle
Financial infrastructure

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94
Q

Examples of social factors in PESTEL

A

Income levels
Demographic changes
Attitudes and behaviours
Fashions
Education

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95
Q

Examples of technological factors in PESTEL

A

New ideas
Use of R&D
Speed of change
Uncertainty
Cyber crime

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96
Q

Examples of ecological/environmental factors in PESTEL

A

Sustainability
Pollution
Disasters
Pressure groups
Natural capital

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97
Q

Examples of legal factors in PESTEL

A

Regulation
Taxation law
Competition law
Employment law
Enforceability

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98
Q

Define globalisation

A

Globalisation: The production and distribution of products and services of a homogenous (same) type and quality on a worldwide basis.

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99
Q

4 ways in which global competition affects firms

A

 It provides the opportunities of new markets to exploit.

 It introduces competition in the home economy from foreign firms.

 It offers an opportunity of relocating parts of business activity (or supply chain) to countries able to perform them better or more cheaply.

 May drive cross-border acquisitions and alliances.

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100
Q

What is Ohmae’s five C’s used for?

A

Factors encouraging development of global business

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101
Q

What are Ohmae’s five C’s?

A

Customer - does it satisfy common customer tastes in a different country

Company itself - fixed costs will spread over increasing sales volume

Competition - Could intensify innovation and competition if other local competitors follow suit

Currency volatility - Reduces exchange rate risks inherent in exporting and may also help to get around government imposed trade barriers

Country - cheaper labour, materials and finance, plus goodwill of host governments

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102
Q

What are the two possible acronyms for Porter’s diamond?

A

Fuck Sakes Don’t Remember

Sugar Donuts Reliable Favourite

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103
Q

What are the 4 connected points in Porter’s diamond?

A

Strategy, structure and rivalry
Demand conditions
Related and supporting industries
Factor conditions

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104
Q

Other than the 4 connected points in Porter’s diamond, what are the other two factors?

A

Government
Chance events

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105
Q

In Porter’s diamond what can factor conditions be split into?

A

Advanced factors
Basic factors

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106
Q

Examples of basic factors in Porter’s diamonds

A

Natural resources
Climate
Unskilled and semi skilled labour

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107
Q

Examples of advances factors in Porter’s diamonds

A

Digital communications
Highly educated personnel

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108
Q

What does demand conditions refer to?

A

What people want

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109
Q

What does related and supporting industries refer to?

A

Success often relates to success in related industries

Sometimes from local proximity or from expertise in he related industry

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110
Q

In Porter’s diamond, what does Strategy, structure and rivalry mean?

A

Structure - Refers to certain national cultural factors that orientate business people towards certain industries.

Strategy concerns how companies have managed their financing and whether they chose to innovate within an industry to obtain competitive advantage or diversify into multiple industries (conglomerates).

Domestic rivalry, or the absence of it, affects how businesses have developed. Where it is intense, tough domestic rivalry can teach businesses about innovation and competitive success on a global scale.

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111
Q

What are the limits to globalisation of business?

A

Political risks in international business
Protectionism in international trade

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112
Q

What are the four factors of political risk in international business?

A

The stability of the government
International relations
Ideology of government and role in the economy
Informal relations

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113
Q

What is protectionism in international trade?

A

Discouragement of imports by for instance intro of tarrifs or imposition of quotas in order to favour local producers

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114
Q

When do you use Porter’s Five Forces model?

A

When:
- Appraising an industry that a business may consider entering
- Looking for opportunities or threats to a business within an industry
- Determining whether any forces have shifted following a change of strategy by any of the participants in the industry

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115
Q

What are the two extensions of Porter’s Five Forces?

A

The government
Complementors

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116
Q

What are the 5 forces in Porter’s Five Forces?

A

Competitive Rivalry
Bargaining Power of Customers
Threat of Substitutes
Bargaining Power of Suppliers

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117
Q

What is the shakeout stage of the product life cycle?

A

Many businesses will not be successful and will exit the market

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118
Q

What are the criticisms of Porter’s Five Forces?

A

Not helpful for Not-for-profits
Uses positioning view not resource based view
Less useful in dynamic industries
Ignores potential for collaboration

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119
Q

What are the 5 stages of the life cycle?

A

Introduction
Growth
Shakeout
Maturity
Decline

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120
Q

What are the 4 uses of the product life cycle?

A

Considering:
The suitability of a proposed strategy
R&D expenditure
Developing a balanced portfolio
Decision on marketing costs

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121
Q

What are the four stages of International Trade Life Cycle?

A

Initial high-income country
Originator’s initial export market
Third party export markets
Secondary third party export markets

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122
Q

What are the four additional considerations for businesses that wish to trade with governments?

A

Public accountability
Intrinsic variability
Political consideration
Purchase by tender

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123
Q

What five factors should be considered when choosing a target of export markets?

A

Level of economic development
Cultural similarities
Members of economic groups
Market similarities
Market timing differences

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124
Q

What may prevent an exporter to compete in a foreign market?

A

Brand travel
Local know-how
Legal barriers

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125
Q

When a business wishes to trade with local and/or international governments, what are the additions considerations?

A

Public accountability
Intrinsic variability
Political consideration
Purchase by tender

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126
Q

What is public accountability?

A

The government must be seen to be spending taxpayer funds wisely

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127
Q

What is intrinsic variability?

A

Different government departments may exhibit different cultures, agendas and resources. Variability may also exist on a regional basis.

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128
Q

What is political consideration?

A

Public procurement will look at the whole social benefit, not just the cost. Additional matters include employment and sustainability.

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129
Q

What is purchase by tender?

A

Governments often acquire products and services through tendering:
– Open tender offers the opportunity to any business.
– Selective tender requires a provider to be prior approved before it may tender. It may take considerable persistence to get to this stage.

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130
Q

Define critical success factors (CSFs)?

A

Those things in an organisation that must ‘go right’ or ‘be
done well’ for it to succeed. There will be numerous CSFs

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131
Q

Define key performance indicators (KPIs)?

A

A numerical expression of something that can be measured, which demonstrates the achievement of a CSF. To be effective, a KPI needs a target or benchmark to be compared against.

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132
Q

What is meant by resources and competencies?

A

What we have and what we can do

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133
Q

What is a threshold resource?

A

The basic resources needed by all firms in the market

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134
Q

What are unique resources?

A

Resources that give the firm a sustainable competitive advantage over its competitors

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135
Q

What are threshold competences?

A

Activities and processes required to be able to stay in business

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136
Q

What are core competences?

A

The critical activities and processes that enable the firm to meet its CSFs and therefore achieve a sustainable competitive advantage

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137
Q

What are the three categories that core competences can be broken into according to Kay’s three sources?

A

Competitive architecture
Reputation
Innovative ability

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138
Q

In Kay’s three sources what is competitive architecture and how can it is split?

A

The network of relationships within and around a business that help create core competences.

Can be split into:
Internal - relationships with employees
External - relationships with suppliers, customers
Network - relationships between collaborating businesses

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139
Q

What is innovative ability?

A

The ability to develop new products and services and maintain a competitive advantage.

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140
Q

What is a resource audit?

A

A company reviews its strategic capability based on its resources and which resources underpin its competitive advantage.

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141
Q

What is the 9Ms model used for?

A

Resource audits

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142
Q

What are the 9 categories in the 9Ms resource checklist?

A

1) Men and women
2) Money
3) Machinery
4) Materials (suppliers)
5) Markets
6) Management
7) Methods
8) Make-up
9) Management information systems

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143
Q

In terms of the 9Ms what does make-up refer to?

A

Organisation structure and culture

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144
Q

Define limiting factor

A

A factor which at any time, or over a period, may limit the activity of an entity, often occurring where there is shortage or difficulty of availability.

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145
Q

In the short term what should a business do regarding limiting factors?

A

Make the best use of the resources available

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146
Q

In the long term what should a business do regarding limiting factor?

A

Reduce the shortfall - obtain more or outsource
Economise on use - reconsider the activities that consume that resource

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147
Q

What does the value chain consist of?

A

Primary and support activities

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148
Q

What are the 5 primary activities included in the value chain?

A

Inbound logistics
Operations
Outbound logistics
Marketing and sales
Service

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149
Q

What are the 4 support activities included in the value chain?

A

Firm infrastructure
Technology Development
Human Resource Management
Procurement

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150
Q

How can the value chain be analysed?

A

By looking into each category and establishing the cost drivers and/or value drivers.

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151
Q

What is a cost driver?

A

Does something reduce the cost or increase the cost?

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152
Q

What is a value driver?

A

Something that customers may value and thus influence them to buy.

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153
Q

An organisation will have a mix of cost and value drivers. But what are the three generic strategies?

A

Cost leadership
Differentiation
Focus/niche

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154
Q

Define cost leadership strategy and what it seeks

A

A firm is a cost leader if the components of the value chain deliver value through cost savings.

Seeks to position as lower cost producer in the industry. Either sell cheaper or have large profit

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155
Q

Define differentiation strategy and what it seeks

A

Differentiation strategy: a firm is a differentiator if it delivers value to its customers by positively setting itself apart from its competitors

Seeks to stand out and therefore enjoy a higher price

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156
Q

What are the advantages of focus/niche strategy?

A

Potential to occupy a position ignored by competitors - makes it easier
Avoids spreading the business to thinly and sticks to what it is good at

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157
Q

What are the disadvantages of a focus/niche strategy?

A

Focusing on a smaller target segment of the market may sacrifice economies of scale
Risk of disruption if the market changes

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158
Q

If you are not a cost leader or a differentiator, what are you? And what does it mean?

A

Stuck in the middle

Could struggle unless you strike the perfect compromise

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159
Q

What is the value system?

A

Considers value chains beyond the companies boundaries

E.g suppliers to organisation, to distribution to customer

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160
Q

Can competitors copy your value chain?

A

They may be able to replicate parts but it is difficult to copy linkage

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161
Q

What can the value chain be used to do?

A

Help understand strengths and weaknesses
Identify value activities to id targeting capital investment
Compare with competitors to identify sources of differentiation
Identify opportunities for synergy between the firm and a potential acquisition

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162
Q

Define supply chain management

A

Supply chain management (SCM): the management of all supply activities from the suppliers to a business through to delivery to customers.

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163
Q

What are the man three themes in Supply Chain Management (SCM)?

A

Responsiveness - The ability to supply customers quickly ( Just-in-Time (JIT) throughout the chain)
Reliability - The ability to supply customers reliably (Total Quality Management (TQM))
Relationships - The use of single sourcing and long term contracts to integrate the buyer and supplier

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164
Q

Examples of technology that have supported SCM

A

Extranets
Electronic Data interchange (EDI)
GPS satellite tracking
Radio frequency indentification (RFID)

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165
Q

If a question mentions portfolios what theories should you use?

A

Lifecycle and BCG matrix

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166
Q

What is the BCG matrix?

A

Compare relative market share and rate of market growth

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167
Q

How do you calculate relative market share?

A

Largest competitor sales

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168
Q

Only —– competitor(s) can have a relative market share bigger than one in BCG

A

1

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169
Q

What rate of market growth is generally considered high?

A

Anything 10% or above

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170
Q

The BCG matrix looks like what and with what headings?

A

Relative Market Share
High Low
High Star Question mark

Market
Growth

Low Cash Cow Dog

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171
Q

Should a dog always be ceased in BCG matrix?

A

No not if it is profitable

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172
Q

How do you turn a question mark in BCG matrix into a star?

A

Invest money to build market share

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173
Q

What to consider with question mark products?

A

Is the market attractive?
Will it require significant funding?
Is it better to remain small, offload product and shut down?

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174
Q

What to consider with a star product?

A

Demonstrable success will attract newcomers
Cash must be heavily reinvested
Expectation of moderate net cash flows

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175
Q

What to consider with cash cows?

A

Need very little capital expenditure
Generate high levels of cash income
It is unlikely new entrants will join
Little investment is required
Large market share can be used to exploit available opportunities
Large net cash flow
Returns should be used to finance stars and question marks

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176
Q

What are the criticisms of BCG?

A

It provides no real insight into how to compare one opportunity with another. Nor does it consider any inherent riskiness of a particular product line or service.
 Only one star or cash cow may exist in a market. Perfectly competitive products end up unfairly being labelled as question marks or dogs!
 The rate of profit for some product lines and business units can actually be very high. In the right conditions, a company can profit from a low share of a market.
 Factors besides market share and sales growth affect cash flow e.g. amount of R&D and investment in new technologies.

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177
Q

What makes up a SWOT analysis?

A

Strengths
Weaknesses
Opportunities
Threat

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178
Q

Out of SWOT what is internal and external?

A

S & W are internal
O & T are external

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179
Q

What is the idea of conversion and matching in SWOT?

A

Conversion is turning bad into good
So weaknesses into strengths and threats into opportunities

Matching is the idea of matching strengths to opportunities

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180
Q

Define gap analysis

A

Gap analysis: the comparison between an entity’s ultimate objective and the expected performance from projects both planned and underway, identifying means by which any difference (gap) might be filled.

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181
Q

What are the three strategies to close the gap?

A

Efficiency
Expansion
Diversification

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182
Q

What 4 categories are covered by Ansoff’s growth vector matrix?

A

Market penetration
Product Development
Market Development
Diversify

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183
Q

What are the subcategories of diversify in Ansoff’s growth matrix?

A

Related
-Vertical
-Horizontal

Unrelated

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184
Q

What is vertical diversification?

A

It integrates supplier (backward or upstream processes) or customer (forward or downstream) chain activities.

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185
Q

What is horizontal diversification?

A

can be broken down still further:
– Competitive products is the takeover of a competitor, broadening the product portfolio and increasing market share.
– Complementary products uses commonality of competence and resource to enter a new market with new products on familiar terms.
– By-products commercialises by-products from production processes. This revenue stream should be seen as non-core and something of a windfall.

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186
Q

What is unrelated (conglomerate) diversification?

A

Creates a portfolio of businesses with no common theme. Success depends upon the ability of management to extract value from the various companies that make up the group.

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187
Q

What are the advantages of unrelated (conglomerate) diversification?

A

A portfolio of companies balances out financial profits and losses.
A company may grow quickly through the utilisation of surplus funds. Conglomerates, due to their size, may find it easier to access capital markets that fund mergers and acquisitions.
 Gain access to cash or other financial assets such as property.
 The conglomerate may have a strong brand and identity, which it can use to develop an acquired business.

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188
Q

What are the disadvantages of unrelated (conglomerate) diversification?

A

Unrelated businesses may lack a common identity and offer little potential for operating synergies. It may be harder to justify acquisitions to shareholders, who may be better offer choosing which companies they wish to hold in their portfolios.
Business failure can be damaging as it has the potential to drag down the rest as it consumes resources.
Lack of management experience in target markets. Just because a company was successful in one market does not guarantee success in others.

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189
Q

What are exit barriers?

A

Costs or things that make it difficult to withdraw a product

190
Q

Examples of exit barriers

A

Cost barriers
If the product is acting a loss leader - companies rep for breadth of coverage
Enabler or gateway product to sell other profitable
Appearance of failure in the market

191
Q

Why may a company divestment or demerger?

A

Rationalising the businesses in a portfolio enables management to focus on the core.
Raising funds for whatever purpose the conglomerate wishes.
Protecting the conglomerate from being taken over and being split anyway by new owners.
Satisfy investors by enabling them to manage their own portfolio. Outside of Asia, conglomerates are less fashionable to investors than they once were.

192
Q

What are the three categories in SFA for proposed strategies?

A

Suitability
Feasibility
Acceptability

193
Q

What is the entrepreneurial structure?

A

Simple structure
Single owner/manager
Flexibility and swift decision making
Limited ability to expand due to reliance on one person

194
Q

What is functional structure?

A

Bureaucracy
Board of directors then set functions/specialisms
Less cross functional innovation
Unsuitable for highly dynamic environments

195
Q

What is a matrix structure?

A

Multiple functions and products with cross communication

196
Q

Advantages of matrix structure

A

Product managers gain big picture views
Can rotate product members to gain experience
Greater understanding of departmental challenges and co-operation
Functional managers act as a source of knowledge

197
Q

Disadvantages of matrix structure

A

Functional manager may feel demoted and become demotivated
Stress from having two bosses
More costly to implement
Goes against classical management theory
Slow decision making

198
Q

What examples can the matrix system be used for?

A

Short-term products within a single company
Large projects
Geographical arrangements

199
Q

What is divisionalisation?

A

When a business can be divided into autonomous units based purely on: geography, product or market, and type of operation. All grouped under a head office

200
Q

Mintzberg’s theory of organisational configuration is characterised by five distinct components that operate within the sixth. What are they?

A

Operating core
Middle Line
Strategic Apex
Support Staff
Technostructure
6th = Ideology

201
Q

What are the 5 configurations that Mintzberg identified?

A

Simple structure (entrepreneurial)
Machine bureaucracy (functional)
Professional bureaucracy
Divisionalised
Adhocracy (matrix)

202
Q

What is the span of control?

A

The number of people reporting to one person

203
Q

What is centralisation?

A

Upper levels retain authority to make decisions

204
Q

What is decentralisation?

A

Ability to make decisions is passed down to lower levels of the hierarchy

205
Q

Define shared service centre

A

A single site within an organisation that carries out processing activities that were previously conducted by a number of different departments or the same kind of department found in a number of business units.

206
Q

What are the advantages of shared service centre?

A

Cost savings of reducing headcount
Realisation of economies of scale from a single location
Knowledge sharing and development of best practice
Standardised processes ensure all departments are treated consistently

207
Q

Disadvantages of shared service centre?

A

Loss of knowledge
Removed from day-to-day realities
Weak relationships between the shared service centre and local business

208
Q

Define outsourcing

A

The use of external suppliers as a source of finished products, components or services once previously provided in-house. Outsourcing can enhance quality and reduce cost by using an expert to carry out the activity.

209
Q

What do consider with whether to outsource?

A

Firms competence in doing it themselves
If risks are better managed by outsourcing
Can it be assured and controlled
The transfer and security of intellectual property
The financial cost

210
Q

What to consider in deciding to whom to outsource to?

A

Track record
Quality of the relationship
Strategic goals
Financial stability

211
Q

What are the two types of extreme structure identified by Burns and Stalker?

A

Mechanistic - rigid, bureaucratic and applicable to stable environments

Organic - Fluid and applicable to changing environments

212
Q

What is a boundary-less organisation?

A

No traditional horizontal, vertical or external boundaries.
Enables people to form relationships
Always some hierarchy to avoid chaos

213
Q

What is a network organisation?

A

Both organisational structure and organic
Through encouraged relationships between functions and extensive use of outsourcing, partnerships, joint ventures etc
Lock in competitive advantage through relationships
Task orientation and emphasises working together

214
Q

What are the two types of virtual organisations?

A

Virtual teams - comprised of colleagues in disparate offices, collaborative function on a team via technology

Virtual firm - no overly physical presences - can be online stores e.g. Amazon

215
Q

What are the two types of organisations that use extensive outsourcing?

A

Hollow organisation - all non-core activities are outsourced allowing focus on activities that add the most value

Modular organisation - extends outsourcing to production of components for assembly by retained staff or employees just to coordinate fully contracted out services

216
Q

Handy defines the shamrock organisation as…

A

core of essential executives and workers supported by outside contractors and part-time help.

It is also known as a flexile firm

217
Q

What are the four categories of a shamrock organisation?

A

Professional core - perm staff
Contractual fringe - external provider
Flexible labour force - temp or part time workers
Customers - enabled to execute some tasks on their own

218
Q

Define transfer price

A

The price at which one division in a group sells its products or services to another division in the same group.

219
Q

What are the four types of responsibility centre?

A

Revenue centre
Costs centre
Profit centre
Investment centre

220
Q

7 ways to set a transfer price

A

Full cost (absorbed)
Variable (marginal) cost
Oppurtunity cost
Full cost plus
Negotiated prices
Two-part transfer process
Dual pricing

221
Q

What are the implications of transfer pricing?

A

Can determine the profits of a division
Which affects performance evaluation
Determines taxes paid
Adding incremental margins could influence the final sales price
Dysfunctional decisions can be made - better from a market

222
Q

Considerations of transfer pricing

A

How much the system costs to run
Whether dysfunctional behaviour is introduced as managers seek to obtain bonuses
Positioning of product based on price

223
Q

Define corporate governance

A

The set of principles which govern the structure and determines objectives of an organisation and regulates the relationship between the organisation’s management, its board of directors and its shareholders.

224
Q

What is UK Corporate Governance Code?

A

Is a code of practice embodying a shareholder-led approach to
corporate governance.

225
Q

What are the 5 main sections of the UK Corporate Governance code?

A

Leadership
Division of responsibility
Composition, succession and evaluation
Audit, risk and control - need audit committee of 3 NEDs
Remuneration

226
Q

What is in public companies to demonstrate to shareholders that there is an objective process to determining the financial rewards of Directors?

A

Remuneration committee

227
Q

What are the 5 principal roles of a board of Directors in the UK?

A

Accountability
Supervision
Direction
Executive action
Risk assessment and management

228
Q

What additional responsibilities do the boar have in terms of cyber security?

A

Promote awareness of cyber risks
Security focus culture
Transparency and accountability
Improving IT environment
Attract and retain skilled individuals

229
Q

Governance of government, public and not-for-profit has what specific matters to be aware of?

A

Accountability
Stakeholders
Openness and transparency
Governance/broad structure
Monitoring performance

230
Q

What was the Nolan Seven Principles for and what are they?

A

For corporate governance in the UK public sector

1) Selflessness
2) Integrity
3) Objectivity
4) Accountability
5) Openness
6) Honesty
7) Leadership

231
Q

What is the 4 ways growth can be expressed?

A

Sales
Profit
Numbers and volumes
Employee headcount

232
Q

What did Lynch summarise?

A

What a business can do to expand both internally or externally in the home country and abroad

233
Q

Define organic growth

A

Expansion of a firm’s size, profits, activities achieved without taking over other firms

234
Q

Benefits of organic growth

A

Might be only sensible way to pursue genuine technological innovations
If there is no suitable target for acquisition
Planned and financed easily
Maintain style of management and corporate culture
Cheaper
Less likely to have unforeseen losses

235
Q

Drawbacks of organic growth

A

May intensify competition in market
Too slow is market develops quickly
Doesn’t gain access to established knowledge and systems
Lack economies of scale initially
May be prohibitive barries

236
Q

5 reasons for expanding overseas

A

Chance
Life cycle
Competition
Reduce dependence
Variable quality

237
Q

Define merger

A

The mutual joining of two seperate companies to form a single company

238
Q

Define acquisition

A

The purchase of a controlling interest in another company

239
Q

Benefits of acquiring a company

A

Speed of growth
Economies of scale
Synergies - relationship
Risk-spreading (diversification)
Overcome barriers to entry
Outplay rivals

240
Q

Drawbacks of acquiring a company

A

 Finding a suitable target
 Cost
 Strategic fit
 Integration of processes
 Integration of culture
 Integration of systems
 Risk of government intervention
 Problems retaining key staff
 Inadequate due diligence

241
Q

Define joint venture

A

Two or more organisations set up a third organisation or co-operate in some other structured manner to share control. This is very common in entering normally closed markets.

242
Q

Benefits of joint venture

A

 They permit coverage of a larger number of countries since each one requires less investment
 They can reduce the risk of government intervention
 A joint venture with an indigenous firm provides local knowledge
 They provide funds for expensive technology and research projects
 Core competences, which are not available in one entity can be accessed from the other

243
Q

Drawbacks of joint venture

A

 Major conflicts of interest over profit shares, amounts invested, the management of the
joint venture, and the marketing strategy etc.
 Problems in each party protecting intellectual property (not sharing)
 Danger that a partner may seek to leave joint venture if its priorities change (e.g. shortage of funds) or it is acquired by another firm
 Lack of management interest: The JV will be seen as a secondment outside of the main career hierarchy of the parent firms

244
Q

Define alliance

A

A loose contractual relationship between two or more independent parties that seeks to achieve a common goal

245
Q

Define franchising

A

A method of expanding the business on less capital than would otherwise be possible. It is essentially a ready-made ‘business in a box’.

246
Q

Process of franchising

A

Franchisor grants a licence
Franchisee pays franchisor for subsequent goods as well as performance fee
Franchisee runs and franchisor imposes quality control
Franchisor provides support services

247
Q

Benefits of franchising to franchisor (top guy)

A

Rapid expansion and increasing market share
Low financial risk
Economies of scale are quickly available
Income stream as well as initial capital

248
Q

Benefits of franchising to franchisee

A

Can adopt brand name etc
Additional help and training provided

249
Q

Drawbacks of franchising for the franchisor

A

Clash between local needs/market and strategy of franchisor
Most successful may break away and set up independently

250
Q

Drawbacks of franchising for the franchisee

A

Franchisor will seek to maintain control
Payment of royalties

251
Q

Why do a business plan?

A

Co-ordinate activities of different divisions and functions
Help to secure finance
Gain board approval
Develop annual budget

252
Q

What is included in a business plan?

A

Cover sheet
Statement of purpose
The business
Financial data
Supporting document

253
Q

Examples of what is included in ‘the business’ part of business plan

A

Description of the business
Marketing
Competition
Operating procedures
Personnel
Business insurance
Summary of financial data

254
Q

Examples of what is included in ‘financial data’ part of business plan

A

Loan applications
Capital equipment and supply list
Break-even analysis
Pro-forma projections:
- detail by month, first year
- detail by quarter, second and third years
- basis of assumptions made
Statement of financial position
Pro-forma cash flow

255
Q

Examples of what is included in ‘supporting document’ part of business plan

A

Tax returns of the business and its owners
Personal financial statement (if security has to be given on finance borrowed)
Resumes of owners and senior managers
Copies of any (where applicable):
- franchise contracts
- leases
- licences
- other legal documents
- letters of intent from customers or suppliers

256
Q

What is the role of the finance function in planning?

A

 Ensures financial resources are available or are raised in sufficient time, such as equity and loan capital.
 Turns the strategy, and the functional strategies, into an overall financial budget.
 Can assist with the setting and monitoring of financial and non-financial performance measures.
 Can help with the establishment of priorities.
 Assist in business modelling and scenario planning

257
Q

What is the role of the finance function as a business partner?

A

To facilitate this, finance professionals become embedded in operations at lower and/or local levels, which provides a better level of overall support. Finance professionals can:
 Provide other business units, departments and projects with real-time support.
 Assist in the analysis of financial and non-financial performance data.
 Help devise strategies to improve performance.
 Review and challenge proposals before being read by senior management.
 Collaborate in the preparation of departmental budgets and forecasts.
 Assist in the development of information systems so necessary information is captured into the final design.

258
Q

What is human resource management (HRM)?

A

A strategic and coherent approach to the management of an organisation’s most valued assets: the people working there who individually and collectively contribute to the achievement of its objectives for sustainable competitive advantage

259
Q

What is the role of HR?

A

 Serve the interests of management rather than employees.
 Provide a strategic approach to meeting staffing issues.
 Link the business, its mission and its goals to HR strategies.
 Enable human resource development to add value to products and services.
 Gain employee’s commitment to the organisation’s values and goals.

260
Q

What methods do the HR have to close the gap?

A
  • Recruitment
  • Training and retraining
  • Transfer and relocation
  • Redeployment
  • Redundancy
  • Productivity improvements
  • Morale management
  • Avoidable wastage reduction
261
Q

What is succession planning?

A

Often associated with continuity of leadership
Ensuring someone is ready and able to take place

262
Q

4 features of succession planning

A

 Increased development of existing managers, groomed for promotion and succession.
 Shared responsibility with senior and line managers. It is not just HR’s sole responsibility to spot vulnerabilities in succession.
 Objective assessment of current managerial talent is useful in resource audits and to identify training needed to close skills gaps.
 Development of leadership teams, rather than a queue for top positions. This should ensure flexibility in skills to cover temporary gaps.

263
Q

5 parts of human resource cycle

A

Selection
Performance
Appraisal
Reward
Training and development

264
Q

How can research be used to improve products?

A

Find improvements
Find new products

265
Q

How can research help processes?

A

Productivity improvements
Quality management
Planning and efficiency
Operational processes

266
Q

What 5 factors should be considered with innovation?

A

Leadership
Culture
People
Structure
Communication

267
Q

Operations management is concerned with what 4 Vs?

A

Volume
Variety
Variation in demand
Visibility

268
Q

What are the 4 types of capacity planning?

A

Level capacity - constant
Chase demand - matched to forecast
Demand management - Use price discrimination methods to manage
Mixed - combo

269
Q

Define just in time

A

An approach to planning and control based on the idea that goods or services should be produced only when they are ordered or needed. Also known as lean manufacturing.

270
Q

What are the three key elements of just in time system?

A

Elimination of activities that do not add value
Involvement of all staff
Continuous improvement to processes (kaizen)

271
Q

Define quality assurance

A

Focuses on the way a product or service in produced or delivered. Procedures and standards are devised with the aim of ensuring defects are eliminated

272
Q

Define quality control

A

Is concerned with checking and reviewing work that has been done

273
Q

Total Quality Management (TQM) is a popular technique of quality assurance. What are the 4 main elements?

A

Internal customers and suppliers
Service level agreements
Quality culture within the firm
Empowerment

274
Q

What 4 factors does the purchasing manager need to consider?

A

Price
Quality
Quantity
Delivery

275
Q

Advantages of single supplier

A

 Stronger relationship with the supplier
 Possible source of superior quality due to increased opportunity for a supplier quality assurance programme
 Facilitates better communication
 Economies of scale
 Facilitates confidentiality
 Possible source of competitive advantage

276
Q

Disadvantages of single supplier

A

 Vulnerable to any disruption in supply
 Supplier power may increase if no alternative supplier
 The supplier is vulnerable to shifts in order levels

277
Q

Advantages of multiple supplier

A

 Access to a wide range of
knowledge and expertise
 Competition among suppliers
may drive the price down
 Supply failure by one supplier
will cause minimal disruption

278
Q

Disadvantages of multiple supplier

A

 Not easy to develop an effective quality assurance programme
 Suppliers may display less commitment
 Neglecting economies of scale

279
Q

Advantages of delegated suppliers

A

 Allows the utilisation of specialist external expertise
 Frees-up internal staff for other tasks
 The purchasing entity may be able to negotiate economies of scale

280
Q

Disadvantages of delegated suppliers

A

[] First tier supplier is in a powerful position
 Competitors may utilise the same external organisation so unlikely to be a source of competitive advantage

281
Q

What is strategic procurement?

A

Is the development of a true partnership between a company and a supplier of strategic value. The arrangement is usually long-term, single-source in nature and addresses not only the buying of parts, products, or services, but product design, quality and supplier capacity.

Intergrated supply chain

282
Q

Define marketing

A

The management process that identifies, anticipates and supplies customer requirements efficiently and profitably.

283
Q

Three ways to compete in the market

A

Generic strategy
Product/Market (Ansoff)
Orientation

284
Q

What are the stages of marketing appraoch?

A

Corporate, business and market strategy
How do we compete in the market?
What is it that we should do?
What is our marketing plan?

285
Q

What is the difference between customer and consumer?

A

Customer purchases
Consumer uses it

Can be the same person

286
Q

What are the four approaches to marketing?

A

Product orientation
Production orientation
Market orientation
Sales orientation

287
Q

Define market segmentation

A

The division of the market into separately identifiable sub-units to help target the marketing effort

288
Q

What are the three approaches to targeting individual customer group?

A

Mass/undifferentiated - no seperate customer segments
Niche/concentrated - one or two segments only
Micro - tailored to individual needs

289
Q

Organisations gaining a better understanding of customers in each segment will result in…

A

Identify new marketing opportunities
Specialists can be used for major segments
Marketing allocated proportionately and therefore maximise return on investment
Make adjustments to the product
Can try to dominate particular segments

290
Q

Methods used for segmentation bases (splitting up of the market)

A

Types of customer
Location of customer
Demographic factors
Lifestyle
Behavioural
Contextual

291
Q

What 5 things does the attractiveness of a market segment depend on?

A

if it is:
Measurable
Accessible
Stable
Substantial
Defensible

292
Q

Define positioning

A

The overall location of a product in a buyer’s mind in relation to other
competing products, services or brands.

293
Q

Define market research

A

The systematic gathering, recording and analysing of information about problems relating to the marketing of goods and services. It is used to formulate the marketing mix.

294
Q

Market research focuses on what 5 things?

A

The market
Products
Pricing
Promotion
Distribution

295
Q

What are the 6 stages of market research?

A

Defining problems
Developing hypotheses
Research
Data collection
Analysis and interpretation
Conclusions and recommendations

296
Q

Define desk research

A

The gathering and analysis of existing or secondary data. This may use existing company reports and other information from both internal and external sources, such as information gathered from customers via a store card.

297
Q

Define field research

A

The collection of new (primary) information direct from respondents. As such it is usually more expensive than desk research and so is only performed if desk research fails to answer all questions asked.

298
Q

Types of field research

A

 Individual and group interviews.
 Trial testing and focus groups.
 Word association.
 Observation of processes.
 Questionnaires, which may include opinion scoring using net promoter methods

299
Q

What 3 essential features does a brand have?

A

Name - legally protected
Livery - designs, trademarks etc
Association of personality - brand distinguish a product

300
Q

What are the three branding policies an organisation can adopt?

A

Single company name
Different brand names for each product
Own branding

301
Q

What are the four names for brand positioning given to products based on price and quality?

A

Cowboy - High price Low quality
Premium - High Price High Quality
Economy - Low price low quality
Bargain - Low price high quality

302
Q

Define marketing mix

A

The set of controllable marketing variables that a firm blend to produce the response it wants in the target market.

303
Q

What are the 7 marketing P’s?

A

Both product and service:
Product
Place
Promotion
Price

Service only:
People
Processes
Physical evidence

304
Q

What are the three main elements of a product offering?

A

Basic/core
Actual
Augmented - the whole package e.g. added extras

305
Q

What are the four categories for the degree of potential in a global market?

A

Local products
International products
Multinational products
Global products

306
Q

Two categories of distribution channels and what are they?

A

Direct - goes from producer to consumer
Indirect - makes use of intermediary

307
Q

What are the 5 types of intermediary in distribution?

A

Retailers
Wholesalers
Distributors and dealers
Agents
Franchisees

308
Q

If looking to see overseas what 4 things could a company do?

A

Distributor
Sales agent
Joint venture
Own a local office

309
Q

What is the pull effect?

A

When consumers ask for the brand by name, inducing retailers or distributors to stock up with the company’s goods.

310
Q

What is the push effect?

A

Is targeted on getting the company’s goods into the distribution network. This could be by giving a special discount on volume to ensure that wholesalers and retail customers stock up.

311
Q

What is the difference between above the line and below the line advertising?

A

Above the line - customer sees
Below the line - non-media e.g incentives

312
Q

4 objectives of advertising

A

Communicating information
Awareness of new products
Highlighting USP
Increasing sales and profits

313
Q

What three headings is advertising categorised under?

A

Informative
Persuasive
Reminding

314
Q

What is personal selling?

A

One-to-one basis

315
Q

What is public relations?

A

creation of positive attitudes regarding products, services, or companies

316
Q

Kotler presents the pricing decision as a balance of what 3 C’s?

A

Costs
Customers
Competitors

317
Q

What is arguably a fourth C of Kotler’s pricing decisions?

A

Corporate objective

318
Q

What are the 3 levels of pricing?

A

Discount pricing - Low price higher sales
Parity pricing - Market benchmark
Premium - High price lower sales

319
Q

Define price elasticity of demand

A

The measure of how far demand for a good will change in response to a change in its price.

320
Q

What is the price elasticity of demand formula? (PED)

A

% change in demand

% change in price

321
Q

If PED is less than one it is

A

Inelastic

322
Q

If PED is more than one it is

A

Elastic

323
Q

What are the two cases where it is a truly positive PED?

A

Giffen goods - One that is consumed even with price increase because people have to pay it - petrol

Veblen goods - Demand for goods rises as consumers perceive a higher price to make it more luxury

324
Q

Define price disrimination

A

The setting of different prices for a similar product in different parts of the market. Also sometimes referred to as differential pricing.

325
Q

Different methods of differential pricing…

A

Market segment
Product version
Place
Time
Dynamic

326
Q

9 things to consider with pricing decisions

A

Market skimming - High price initially
Penetration pricing - Low price to increase market share
Promotional prices - Deals
Everyday low prices - Aldi
Product line pricing - Basic/deluxe version
Captive product pricing - Inital loss for add ons
Predatory pricing/dumpling -Drop price to push out competition
Psychological pricing - appeals to desire
Value pricing - pay what you think it is worth

327
Q

Define marginal cost based costing

A

Based on variable costs of production only. The contribution earned should cover the fixed costs (break-even) and beyond that, earn profit.

328
Q

Define full cost based costing

A

Fixed costs are absorbed into the cost of the product and a mark-up represents
profit.

329
Q

Define target return based costing

A

Increases the full cost as above with an amount of profit that represents the return on the assets used to make it.

330
Q

Advantages of cost-plus approach to pricing

A

 Simplicity of price setting
 Control of sales discounting
 Ease of budgeting
 Easy to state rates of mark-ups in contracts with the government so profits are deemed fair and not excessive

331
Q

Disadvantages of cost-plus approach to pricing

A

 Ignores the effect of volumes on costs (under/over recovery on fixed costs)
 Useless for very high fixed cost industries
 May not suit positioning of the product – product could be undersold or overpriced
 Ignores competitive conditions
 Does not consider the implications for sales of other products made by the firm (a so-called loss leader approach)
 Inherent problems in assessing costs
 Invites poor cost control

332
Q

Service businesses will be dependent upon

A

People they employ
Processes they follow
Physical evidence the customer receives

332
Q

What is transactions marketing?

A

A marketing mix that gets customers to buy a product or service and satisfies their needs, perhaps in a single sale, without building any sort of long-term relationship with them.

333
Q

What is relationship marketing?

A

Management processes that seek to attract, maintain and enhance customer relationships by focusing on the whole satisfaction experiences by the customer when dealing with the firm.

334
Q

3 ways to build loyalty and retention

A

Loyalty schemes
Personalisation programmes
Structural ties

335
Q

What ethical concerns can be raised by marketing?

A

People do not need the products, their production wastes resources
Cause envy if not affordable
Use pricing to be selective
Benefits may be unrealistic

336
Q

Reasons for change or development

A

Changes in the environment
Changes in the products the organisations in the working methods
Changes in management and working relationships
Post-acquisition

337
Q

The change in management strategy covers

A

Scope
Pace
Manner

338
Q

What are the two types of change?

A

Incremental
Transformational

339
Q

Types of management approach to change

A

Reactive or pro-active

340
Q

What are the three levels which change efforts are focused?

A

Individual level - improving skill levels etc of individuals
Organisation structure and systems level - situation in which people work
Organisational climate and interpersonal style levels - develops trust, reduces negative effect of excessive social conflict

341
Q

What are the three types of pace of change?

A

Forced change
Transformational changes
Step change

342
Q

What are the three steps of change in the iceberg model?

A

Unfreeze
Move
Refreeze

343
Q

Coercive change is when…

A

it is enforced without participation

344
Q

What is a change agent?

A

Sometimes called a champion of change, or a group or external consultancy with the responsibility for driving and ‘selling’ the change.

345
Q

What is the role of the change agent?

A

 Defining the problem
 Suggesting possible solutions
 Selecting and implementing a solution
 Gaining support from all involved

346
Q

What are the required skills and attributes for a change agent to be effective?

A

 Communication skills
 Negotiation and ‘selling’ skills
 An awareness of organisational ‘politics’
 An understanding of the relevant processes

347
Q

What are Gemini 4Rs framework for planned strategic change

A

Reframe
Restructure
Revitalise
Renewal

348
Q

3 areas changes may affect individuals

A

Physiological changes
Circumstantial changes
Psychological changes

349
Q

What are two cultures barriers?

A

Structural inertia - cumulative effect of all systems and procedures the organisation to ensure consistency

Group inertia - block change that are inconsistent with team norms

350
Q

What are personal barriers?

A

Habit
Security
Effect on earnings
Fear of the unknown
Selective information processing

351
Q

Management wants to do what to restraining forces?

A

Weaken them

352
Q

Management wants to do what to driving forces?

A

Strengthen

353
Q

Change must be communicated to who that may normally be forgotten

A

Stakeholders

354
Q

How does an organisation monitor change?

A

A strategic control system

355
Q

5 stages of strategic control system

A

Perform strategic review
Set strategic objectives - set milestones
Set target achievement levels
Monitor
Reward

356
Q

What is a budget?

A

A plan expressed in financial terms
Usually short term
Sets milestones

357
Q

Benefits of budgets

A

 Promotes forward thinking in terms that potential problems and solutions are identified early.
 Helps identify linked parts of the business and ensure that managers work together to achieve the desired joint outcomes.
 Sets targets and motivates performance to achieve those targets.
 Provides a basis of control by comparing actual results to the budget and determining the cause for any variance.
 Provides a system of authorisation by allocating managers fixed funds and thereby the authority to spend.

358
Q

What 6 features does a successful budgetary control systems have?

A

 Buy in and adherence in respect of senior management
 Accountability with clear responsibilities
 Motivating targets that are challenging but achievable
 An established system of regular data collection and reporting
 Targeted reporting and short reporting periods that are timely
 Creation of action – reporting variances and the causes of variances is not enough.

359
Q

What is the relationship between critical success factors and key performance indicators?

A

KPI’s measure how well CSF are going

360
Q

What are the limitations of focusing on financial factors only when measuring performance?

A

Encouragement of short-termist behaviour
Ignores strategic goals
Cant control people without budget responsibility
Historic measures
Distortability - manipulation

361
Q

What are the 4 parts to the balanced scorecard?

A

Financial perspective
Customer perspective
Internal Business perspective
Innovation and learning

362
Q

What are the problems with a balanced scorecard?

A

Conflicting measures
Selecting measures
Interpretation and expertise

363
Q

What 3 Es focus on conversion of inputs to outputs?

A

Economy x Efficiency = Effectiveness

364
Q

What are measures of growth?

A

 Sales revenue
 Market share
 Profitability
 Number of units
 Number of employees
 Number of customers
 Number of countries in which the business operates

365
Q

What are measures of profitability?

A

 Year on year increase
 Gross profit margin
 Net profit margin
 Mark up applied
 ROCE/RI

366
Q

What are measures of liquidity and gearing?

A

 Working capital cycle:
– Inventory days
– Receivable days
– Payable days
 Current ratio
 Gearing ratio
 Interest cover

367
Q

What is the return on capital employed formula?

A

Profit for the period
—————————– x 100
Average capital employed during the period

368
Q

Why is return on capital employed popular?

A

 It enables comparisons to be made between projects and divisions of different sizes.
 It is readily understood by management as it’s a simple formula.
 It is cheap and easy to calculate given that information is readily available.
 If all divisions are hitting the same ROCE, the group will also as a whole.

369
Q

What is the formula for residual income?

A

Divisional profit - (net assets of division x required rate of return)

370
Q

Why is ROCE more widely used than RI?

A

It is conceptually more complicated
You cannot easily compare differently sizes divisions

371
Q

Problems with using ROCE/RI

A

Short-termist
Discourage of investment in assets meaning
Continues with shabby assets
Assets are patched not replaced
Managers choose inappropriately outsource asset-intensive operations

372
Q

Define uncertainty in risk

A

the inability to predict the outcome from an activity due to a lack of information.

373
Q

Define risk

A

the ability to quantify the chance of something happening, perhaps by using past data as a guide.

374
Q

How can risk be further categorised?

A

Downside risk - possibility the outcome is worse than expected
Upside risk - possibility it could be better than expected

375
Q

Define risk management

A

the process of identifying and assessing (analysing and evaluating) risks and the development, implementation and monitoring of a strategy to respond to those risks.

376
Q

Define risk management strategy

A

Involves the selection, implementation, monitoring and review of suitable risk treatments for each risk identified.

377
Q

Process of risk management

A

1) Establish risk management group and set goals
2) Identify risk areas
3) Understand and assess scale of risk
4) Develop risk response strategy
5) Implement strategy and allocate resources
6) Implementation and monitoring of controls
7) Review and refine process and do it again

378
Q

What to include in a risk register?

A

 A description of the risk and how it arises (its scope).
 A categorisation of the nature of the risk.
 The parties affected by the risk.
 Quantification of the risk (likelihood and impact).
 Tolerance or appetite for the risk.
 Risk treatment and control (how it is managed at present and what will be done if it manifests).
 Potential action to further reduce the risk.

379
Q

Each organisation will chose their own way to defend risk. What are the four types?

A

Defenders - Prefer low risk, secure markets, and tried and tested solutions. Decision making formulised.

Prospectors - Prefer results, being entrepreneurial and pro active. Happy to take risks

Analysers - Core of stable products and markets. Will consider moves into new markets carefully. Likely to follow change not initiate.

Reactors - No consistently defined strategy but muddle through. Oblivious to risk.

380
Q

What factors affect the company’s appetite to risk?

A

 Expectations of shareholders
 Organisational attitudes
 National origin of the organisation
 Regulatory framework
 Nature of ownership
 Personal views of managers

381
Q

When looking for risks to an organisation, consider…

A

External and internal factors (PESTEL + Porter’s Five Forces)
Activities and processes, relevant policies and procedures
Culture within the organisation
Potential for unexpected outside events

382
Q

What are the 7 categories of risk?

A

Strategic risk
Operational risk
Hazard risk
Financial risk
Compliance risks
Business risks
Cyber risks

383
Q

What is a strategic risk?

A

Associated with the longer-term strategic objectives and the potential variability of returns as a result of corporate strategy and its strategic positioning. External environmental analysis should be a good way of determining these.

384
Q

What is an operational risk?

A

One that arises from day-to-day activities

385
Q

What is a hazard risk?

A

The exposure to natural events, the actions of employees and disastrous events affecting key stakeholders such as customers and suppliers.

386
Q

What is a financial risk?

A

Gearing,
Exposure to credit,
Liquidity,
Interest rates,
Exchange rates
and so on.

387
Q

What is a business risk?

A

Caused by general fluctuations in financial results

387
Q

What is a compliance risk?

A

Potential to fail to comply with las or regs

387
Q

What is a cyber risk?

A

Can be split into 3
Reliance
Misuse
Unauthorised access

388
Q

If a risk is highly likely but low impact, you?

A

Control or reduce

389
Q

If a risk is highly likely and have a high impact, you?

A

Avoid or abandon

390
Q

If a risk is low likelihood but high impact, you?

A

Transfer - e.g. get insurance

391
Q

If a risk is low impact and low likelihood, you?

A

Retain or accept

392
Q

What are the 7 typical methods used to manage risk?

A

 Corporate codes of conduct
 Environmental policies
 Health and Safety policies
 Financial controls
 Information systems controls and cyber security measures
 Personnel controls
 Internal audit processes

393
Q

UK’s Turnbull report states that as a minimum you have to…

A

Disclose in the accounts
- The existence of a process for managing risks
- How the board has reviewed the effectiveness of the process
- The process accords with Turnbull guidance

394
Q

UK’s Turnbull report states that the should also include (more than minimum)…

A

Acknowledgement that the board is responsible for the company’s system
System is designed to manage rather than eliminate
Summary of the process used by Directors to review
Information about weaknesses

395
Q

Failure to manage risks could lead to…

A

 Litigation from persons affected by an activity of the organisation and/or its staff
 Fines from regulatory bodies
 Loss of assets due to theft or damage
 Costs of rectification of errors
 Revenues lost due to breakdowns
 Loss of reputation
 Loss of faith in management

396
Q

Define business continuity planning

A

The process through which a business details how and when it will recover and restore operations interrupted by the occurrence of a rare, but massive, risk event.

397
Q

Crisis management and disaster recovery plans are likely to include…

A

 Securing interim management and staff.
 Replacement of lost inventory.
 Restoration of IT systems and data.
 Obtaining premises used during recovery.
 Management of PR issues.

398
Q

What three things does a cost need to be to be relevant?

A

Incremental and avoidable cashflows

Cashflow has not already been incurred (sunk costs)

Revenue or cost must be a cash flow

399
Q

What is an opportunity cost?

A

A type of relevant cash flow
Includes lost revenue and associated variable costs that will not be earned/incurred as a result of pursuing the proposal

400
Q

Break even output formula

A

Total fixed costs

Contribution per unit

401
Q

Margin of safety

A

Planned sales - breakeven sales

Planned sales

402
Q

Output to hit a target profit

A

Total fixed costs + Target profit

Contribution per unit

403
Q

What are the issues with break even analysis?

A

Break-even assumes that revenue and variable costs change proportionally with volume

Some fixed costs are stepped fixed costs

May be hard to attribute which costs are attributable to products being manufactured

404
Q

What does sensitivity analysis involve?

A

Changing the value of one variable in order to test its impact

404
Q

How can sensitivity analysis be useful?

A

Can test a range of possible analysis

405
Q

Profitability of achieving the desired result formula

A

Number of ways of achieving desired result/

Total number of possible outcomes

406
Q

What is mutually exclusive outcomes?

A

Occurrence of one excludes the other

407
Q

What are independent events?

A

One outcome doesn’t effect the other

408
Q

What is expected value?

A

Long run average

(Outcome * probability) Average of all

409
Q

What are the limitations of expected values?

A

Can be inaccurate as all dependent on the probability workings

Long-term averages so not useful in one-off decisions

Can only be a guide

Does not consider risk

Time value of money is not taken into consideration

410
Q

What does a square on a decision tree mean?

A

All possible choices

411
Q

What does a circle on a decision tree mean?

A

All possible outcomes

412
Q

What are the limitations of decisions trees?

A

(a) As with expected values, everything to do with probability and outcome will be an estimate and therefore potentially subjective and unreliable.
(b) Decisions trees only consider the financial outcomes being assessed. There may be other financial or non-financial benefits of choices such as reduction of carbon miles, avoidance of relocating or firing/hiring staff, reputational enhancements or completion of product portfolios.

413
Q

What are the uses of trend analysis?

A

Plotting monthly revenue and cost information

Forecasting

414
Q

What is correlation coefficient formula?

A

Coefficient of variation

= standard deviation
—————————– x 100
mean

415
Q

What does standard deviation mean?

A

Shows the amount of variability in a data set

416
Q

What is the normal distribution?

A

It shows the % of data that falls within a standard deviation of the mean

417
Q

Define regression analysis

A

An assessment of the relationship between two or more variables. One of these variables is the dependent variable, whose value depends on the independent variable(s).

418
Q

Define correlation

A

A measurement of the extent to which changes in the dependent variable are explained by changes in the independent variable.

419
Q

Define correlation coefficient

A

A statistical measure of the strength of the relationship between the relative movements of two variables. It takes a value between -1 and +1 and the closer the value is to -1 or +1, the stronger the relationship. The closer the value is to 0, the less of a relationship there is between the two values.

420
Q

What are the 7 types of bias?

A

Selection bias
Self-selection bias
Observer bias
Omitted variable bias
Cognitive bias
Confirmation bias
Survivorship bias

421
Q

Define information management strategy

A

The strategy specifying who in the organisation controls and uses the technology provided.

422
Q

Define information technology

A

The hardware systems that enables the use of information to support the business strategy.

423
Q

Define information systems

A

The combination of hardware, software and telecommunications that
delivers on the information management strategy.

424
Q

4 reasons to invest in information systems

A

Revenue opportunities
Cost reduction
Enhanced services
Improved decision making

425
Q

3 risks associated with information technology and information systems

A

Risk of inadequacy
Risk of breakdown
Risk of excess expense

426
Q

What are the 6 stages of implementing an information system?

A

Analysis
Design
Programming
Testing
Conversion
Implementation

427
Q

What are the cyber risks to IT?

A

Human threats e.g. hackers
Fraud
Deliberate sabotage
Denial of service attacks

428
Q

What are the general risks to information systems?

A

Natural threats e.g. floods
Integrity - incorrect entry
Non-compliance - data protection
Accidents - human caused damage

429
Q

Ultimate responsibility for the security of system rests with who?

A

The board

430
Q

Security controls can be subdivided into what 6 categories?

A

Prevention
Detection
Deterrence
Recovery
Correction
Avoidance

431
Q

What is big data?

A

Multiple sets of large volumes of data

432
Q

What are Doug Laney’s 4Vs related to big data?

A

Volume
Velocity - speed it is collected
Variety
Veracity - Truthfulness of data

433
Q

Structured data is what?

A

Anything that can be recorded in a table

434
Q

Unstructured data is what?

A

Comprises of visual and audio data and unstructured text such as emails, texts

435
Q

Define data analytics

A

The process of collecting, organising and analysing large sets of data to discover patterns and other information for use in business decisions.

436
Q

Define data warehouse

A

Essentially, a single database into which data is loaded in a standardised format for the purpose of data mining.

437
Q

Define data mining

A

The process of identifying patterns and relationships within and between different sets of data. In essence, it turns raw data into useful information.

438
Q

Things to consider before using big data

A

Access to skills to use the data
Robust security measures
Financial resources
Who owns the data

439
Q

5 criticisms of big data

A

Latest buzzword - does it really tell you anything you didn’t already know

Correlation and causation - tells you what has happened by not why

Data overload

Sustainable competitive advantage

Representative data

440
Q

Technologies for processes are used to …

A

Reduce costs by increasing efficiencies

Through automation or intelligent systems

441
Q

When using technology to streamline and increase efficiency what must organisations remember?

A

Associated redundancy costs
Ethical considerations

442
Q

What is a cloud system?

A

One that uses the internet for part of its function

443
Q

What is the internet of things?

A

System of interrelated computing devices

444
Q

What is a digital asset?

A

One not held in a physical form eg audio and images

445
Q

What is a digital asset management system used for?

A

 Secure access through the cloud.
 Search facilities.
 Version control.

446
Q

What is explicit knowledge?

A

The company knows it has, recorded and stored on a server

447
Q

What is tacit knowledge?

A

Info held in someones head or not formally documented

448
Q

What should you consider with block chain?

A

If it is suitable to increased security

449
Q

5 ethic principles

A

Objectivity
Integrity
Confidentiality
Professional behaviour
Professional competence and due care

450
Q

5 ethical threats

A

Self interest
Intimidation
Familiarity
Advocacy
Self review

451
Q

What is business trust?

A

Trust that stakeholders place in a business which allows to exceed in the market

452
Q

Define sustainability

A

the ability to ‘meet the needs of the present without compromising the ability of future generations to meet their own needs’ (the Brundtland Report).

453
Q

Define sustainable development

A

the process by which we achieve sustainability.

454
Q

Define sustainable enterprise

A

A company, institution or entity that generates continuously
increasing stakeholder value through the application of sustainable practices

455
Q

What does ESG stand for?

A

Environmental
Social
Governance

456
Q

What could ESG affect in terms of decisions?

A

If a revenue stream is ethical/sustainable

Pressure groups causing movements towards sustainable materials

Fairness of labour contracts

Privacy of customers and employees

Terms of trade with suppliers

Prices to customers

Managing cross cultural businesses

457
Q

4 steps in monitoring sustainability

A

Identify issue
Set targets
Monitor progress
Report to stakeholders

458
Q

The Global Reporting Initiative (GRI) is what?

A

World setter in sustainability reporting and issued standards to report on economic, environmental and social matters.

459
Q

What is corporate social responsibility?

A

The strategic actions, activities and obligations of business in achieving sustainability.

460
Q

What are the four strategies to corporate responsibility?

A

Proactive
Reactive
Defence
Accommodating - need encouragement and avoid government intervention

461
Q

What is the big ethical issue with marketing?

A

Wastes resources by making things people don’t need and using marketing to convince them they do

462
Q

What 6 things defend marketing?

A

Value judgements are opinions -one say they don’t need another says they do

Increased employment opportunity

Proper target marketing may reduce waste

Ethical marketing - promotes alternative more responsible choices

463
Q

4 categories of ethical issues and the marketing mix

A

Product issues - dangerous but still sold - alcohol

Price issues - products priced to maximise returns

Promotion issues - Conditioned to accept or become offended by campaigns

Place issues- encouraging or denying access

464
Q

What does ethical issues in manufacturing cover?

A

Ensuring they do not cause hard

E.g animal testing

465
Q

What is ethical procurement?

A

Looking for ethical suppliers

466
Q

Ethical issues surrounding collection of data

A

Using to target customers to increase sales
Some companies sell on the data to other entities
Hard to show who owns the data

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