Flashcards
Business Model Canvas
8 key aspects
- Key activities (production, research and development, marketing, sales and customer service)
- Value proposition (identifies the benefits of a company’s products and services it will deliver to customers)
- Customers (Customer targets)
- Revenue Channels (wholesalers, retailers, distributors)
- Customer Relationships (self-service, automated, communities)
- Key Resources (technology, capital, assets, infrastructure)
- Costs (all costs needed to operate, B2C and B2B)
- Key Partners (suppliers and distribution partners)
What is the nature of business activity?
- Goal-directed behaviour aimed at
obtaining and utilising scarce
resources to buy, make, trade,
and sell goods and services for a
profit (revenue – cost) - To sell products and services for a profit they
must satisfy customers’ wants and needs - Coordinating, organizing and motivating
people so that they work toward a common
goal
Business Environment Sectors
4 sectors (outer sectors and inner sectors!)
Organisation < Competitors (strategic groups) < Industry/sector (Porter’s Five Forces) < Macro-environment (PESTEL)
PESTEL
What does it stand for?
Political
Economical
Social Cultural
Technological
Environmental/legal
Political Factors
refer to taxes and government
government policies (corporation tax on profits)
taxation
trade regulations
political risks
trade blocks
Economic factors
Rates and employment
business cycles
unemployment
disposable incomes (incomes after tax and bills)
Interest rates
Exchange rates
Social-cultural factors
Lifestyle and incomes
demographics
income distribution
lifestyle changes (sleeping, eating etc)
social mobility (movement of individuals/families in social stata)
consumerism
culture and fashion
Attitudes towards work and leisure
Technological factors
Research and technology
research and development
government spending
technology transfer (movement of technical knowledge from organisation to another e.g internet , smartphones)
rates of obsolescence (new technology replaces old ones can be use in other cases other than technology)
Environmental/legal factors
Environmental impacts, health and licensing
environmental protection (from government and people)
energy consumption
global warming
waste disposal
re-cycling
competition laws (promoting healthy competition between businesses)
health and safety
employment laws
licensing laws
IPR laws (innovations/inventions are treated as an asset)
4 Industry Types
- perfect competition - small firms
large number of competing firms
homogenous products
low cost entry and exit.
Going prices set by supply and demand.
e.g agricultural, foreign exchange market
Monopolistic competition - Numerous sellers
large number of competing firms
heterogenous products/different products
low cost entry and exit
coffee shops, taxis, hair salon (zara and uber are examples)
oligopoly - large sellers
small number of competing firms
homogenous and heterogenous
costly entry and exit - capital investment required
e.g airlines, pharmaceuticals, microsoft, film and television.
Monopoly - only one producer/supplier
complete control over prices of products
one dominant film
No close substitutes
Costly entry and exit
Porters Five Forces
Barriers to entry/threat of new entrants (easy it possible for new companies to start up and create competition)
power of suppliers (Good supply source? , negotiation of prices)
competitor rivalry (market shares and competitors)
power of buyers (switching costs, loyalty) Higher market growth rate - rivalry less - not as many customers to attract
threat of substitutes (other substitute products that have the same features)
Factors that affect industry rivalry:
equally balanced competitors
slow industry growth
high fixed costs
lack of differentiation/switching costs
high exit barriers
stategic management
set of decisions and actions that result in the formulation and implementation of plans designed to achieve a company’s objectives.
competitive advantage
distinctiveness of an organisation’s resources and capabilities/competencies.
resources
assets that an organisation have or can call upon.
competencies
ways assets are used/deployed
core competency
well performed internal activity central to a company’s competitiveness and profitability
e.g brand recognition
Threshold resource
needed to meet customer minimum requirements - need in order to participate in the industry and compete in the market
Without threshold resources, an entity cannot survive in its industry and markets.
e.g management, money, materials for production
Threshold competence
Minimal requirements
basic knowledge and skills/essential characteristics
To move beyond minimal performance, additional competencies are required.
Distinctive resource
unique resources - create competitive advantage
Distinctive competency
Superior characteristic /quality that distinguishes a company from its competitors
e.g powerful brands - strong brand images
Disadvantaged competitive advantage
Not Valuable
Parity competitive advantage
Valuable
Not rare
Temporary competitive advantage
Valuable
rare
But can be imitated/copied
Sustained competitive advantage
Valuable
Rare
Cannot easily be imitated/copied
What are the 4 elements of SWOT analysis?
Internal and external
environmental opportunities(external) - look for ways to promote business growth
environmental threats (external) - negatively impact performance - e.g increased competition
organisational strengths (internal) - e.g unique selling points (competitive advantages)
organisational weaknesses (internal)- e.g lack of resources/ insufficent training - lack in business performance
what is an SBU?
Strategic Business Unit
an independently managed division/unit of a large organisation with its own vision, mission, and objectives.
4 elements of the boston consulting group matrix?
Star (high market growth rate and high relative market share)
Question mark (high market growth rate and low relative market share)
Cash Cow (low market growth rate and high relative market share)
Dog (low market growth rate and low relative market share)
marketing
Management process - responsible for identifying, anticipating and satisfying customer requirements profitably.
Market share
The market share of a company is the percentage of total sales it generates in an industry
if a company sold $100 million in tractors last year domestically, and the total amount of tractors sold in the U.S. was $200 million, the company’s U.S. market share for tractors would be 50%.
Industry
An industry is a group of businesses that are related in terms of their main activity
e.g entertainment industry, technology industry
5 elements of strategy clock
model to help you understand how companies compete in the marketplace
No frills (lacks differentiation-lowest prices)
Low price (lowest costs and low prices) e.g walmart
Hybrid (unique products higher value but at low prices) e.g spotify, microsoft
Differentiation (high quality/high value but lower premium)
e.g Tesla , Apple, Reebok
Focused Differentiation (designer products - perceived value only)
e.g Gucci, Rolls Royce
Ansoff Matrix
Market penetration (existing market and existing product) - expand customer base in the existing market e.g through advertising and product launches.
Market development (New market and existing product) brands such as Adidas and Nike, who continue to expand their global reach and attract new demographics of customers with their existing footwear products
Product development (Existing market and a new product) e.g Taco Bell: adding new items to their value menu
Diversification (New market and new product) e.g Tesco has diversified into areas such as clothing, electronics, financial services, and telecoms
Porter’s generic strategies
cost leadership - competitive advantage by having the lowest cost of operation in the industry. e.g mcdonalds provides continue valued food at low prices - has a good supply chain.
cost focus - A company with a cost focus strategy is one that does not necessarily offer the lowest prices within the industry, but offers the lowest prices compared to competitors within its target market. e.g Netflix
differentiation leadership- providing customers with something unique, different and distinct from items their competitors (provide high prices to make up for this) e.g BMW and apple
differentiation focus- This approach offers a specialized product to a specific market segment rather than the entire field e.g luxury vehicles
Marketing mix 4P’s
4 P’s
the combination of products, pricing, places and promotions it uses to differentiate itself from the competition
product- variety, quality, design, features, brand name, packaging and services.
price - list price, discounts, allowances, payment period, credit terms.
promotion - advertising, personal selling, sales promotion, public relations.
place - channels, coverage, assortments, locations, inventory, transport and logistics.
Structures of organisations
Who manages and what is required to be done?
roles
task relationships - descriptive model of leadership which maintains that most leadership behaviors can be classified as performance maintenance or relationship maintenances
authority- It is the power given to a manager or leader to act and make decisions within designated boundaries and achieve organisational objectives.
What do these organisation culture/strcuture have an impact on in business?
cost base (amount of money you put into a business initially)
coordination - the function of management which ensures that different departments and. groups work in sync
levels of motivation
speed of decision making
flexibility (ability to change) e.g short term changes/unexpected changes
Legal structure of firms
sole traders
private limited companies
partnerships
public limited companies
sole trader
one person business
small funds to set up
send a self assessment tax return every year
pay income tax on profits
pay national insurance
register for VAT if takings more than £82,000
partnership
association of individuals
2 to 20 partners
each partner responsible for debt of company
Liability is very important
Private limited company
business separate legal identity from owners
each shareholder part of business
shares cannot be traded to general public
company is run by board of directors with a chairman
register on companies house
let HM revenue know when business activities start
for directors:
send self assessment tax return every year
pay tax and national insurance through PAYE if paid a salary by company
Public limited company
similar to ltd
can sell shares on stock exchange to public
fluctuating share prices
separation of ownership and control
public access to annual accounts
every financial year: put together statuary accounts, send companies house an annual return, send HMRC a company tax return. Must register for VAT if takings expected to be more than £82, 000 a year.
What are the 5 key design questions for a company/business?
work specialisation - to what degree should tasks be subdivided into separate jobs?
formalisation - to what degree will there be rules and regulations to direct employees and managers?
chain of command- to whom do individuals and groups report?
span of control -how many employees does a manager direct?
degree of centralisation - to what extent decisions are made centrally?
How many employees and managers are at narrow span of control?
4096 employees
managers (levels 1-6) = 1,365
How many employees and managers are at wider span of control?
4096 employees
managers (levels 1-4) = 585
Describe the scientific management mode of organisation?
- Aim to organise production efficiently
- Efficiency, standardisation and discipline
- Division between management and workers
- Scientific methods (time and motion studies) to determine ‘one best way of doing a job’
What is the ‘fordism’ mode of organisation? (manufacturing industry)
- application of scientific management principles
- divide production into simple repetitive steps
- installed single purpose machine tools
- introduced assembly line
- used monetary rewards to motivate people
This was a quicker method for production as assembly lines allowed more production faster
What are the positives of the rational goal models?
- provides managerial control
- supports mass production/service
- increased efficiency and productivity
- greater standardisation, less error
- employees require less straining
standardisation - that its products and the way they are marketed are largely the same everywhere
What are the criticisms of the rational goal models?
can be rigid and inflexible
dehumanises the worker
jobs become monotonous
restricts individual initiative and enterprise - cogs in a machine
What is the organic design structure?
Relates to innovation strategies and turbulent/uncertain environments.
flexible and responsive to change
cross functional teams (people with different expertise working together)
Decentralised decision making (distributed through large groups)
Law of specialisation - products which meet needs of customers
Extensive communication
Knowledge sharing
What is the mechanistic design structure?
Tight control and high formalisation
Good for low cost strategy and stable and predictable environment
(rigid and formal)
standardisation with tight control
centralised decision making
narrow spans of control
Extensive work specialisation - separating activities into individual tasks
High formalisation (job descriptions, work processes and organisational rules)
Minimal discretion (freedom)
What is the combined design structure?
Good for hybrid strategy and mixed environments
(organic and mechanistic)
Mix of loose and tight properties
tight control over current activities
looser controls for new undertakings
Culture
The way you think act and interact
Organisational Culture
is the set of values, beliefs, attitudes, systems, and rules that outline and influence employee behavior within an organization
What are the formal organisations of a company?
Structure
Hierarchy
Tasks and role definitions
Performance measures
Coordination and control
Formal rules and procedures
What are the informal organisations of a company?
Routines
Norms and values - something that is usual, typical, standard, or expected
Group/inter group behaviour
Coalitions, alliances and power
Organisational culture
What are the 5 steps in the process of developing organisational culture?
- Shared values (share common attitudes of employees and managers - link an organisation together)
- Shared beliefs (beliefs that are shared by people across all business)
- Norms (shared expectations - dress code and etiquettes)
- Individual and group behaviour
- Reinforcing outcomes (communicate core values and expected behaviour)
Examples of responsibility actions to take for business
- Inputs and resource supplies (fair to producers and suppliers - purchasing raw materials from sustainable suppliers and comply with minimum employee standards before signing contracts)
- workforce (Diversity, equality, health and safety, work life balance, fairly pay, holidays , bonuses and pension schemes)
- operations - reducing waste of materials and energy used in production and transportation. Waste reducing programmes.
- product and service - responsible adverts, child protection, harmful ingredients listed, clean and easy to recycle packages.
