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Business Theme 3 > Key Terms > Flashcards

Key Terms Flashcards

1
Q

Objectives

A

Statements of specific outcomes that are to be achieved

  • the specific outcomes of business strategy
  • targets which the business adopted in order to achieve its aims
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2
Q

Corporate objectives

A

Objectives that relate to the business as a whole

Driven and influenced by vision, mission and aims of business

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3
Q

Short termism

A

Where a business prioritises short term rather than long term performance

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4
Q

Strategy

A

How the business intends to achieve its objectives

  • long term
  • made by senior management
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5
Q

Tactics

A

Support achievement of specific targets

  • short term
  • delegates to junior management
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6
Q

Mission statement

A

Overriding purpose of the business and the reason for its existence

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7
Q

Ansoff Matrix

A

Famous marketing planning model that helps business determine its product and market strategy

  • market penetration
  • product development
  • market development
  • diversification
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8
Q

Product development

A

Growth strategy where a business aims to introduce new products into existing markets

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9
Q

Market development

A

Growth strategy involves a business seeking to sell its existing products into new markets

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10
Q

Diversification

A

A growth strategy where a business markets new products in new markets

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11
Q

Market penetration

A

Growth strategy where a business aims to sell existing products into existing markets

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12
Q

Competitive advantage

A

An advantage over competitors gained by offering consumers greater value, either by means of lower prices of by providing greater benefits and service that justifies higher prices

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13
Q

Distinctive capabilities

A

The capabilities a business has which other firms cannot replicate even after they realise what the benefits are that owning the capability confers

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14
Q

Core competencies

A

Something unique that a business has, or can do, strategically well, which provide a source of competitive advantage

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15
Q

Porters generic strategies

A

Porter argued that differentiation and low cost are effective strategies for firms to gain competitive advantage

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16
Q

Porter: low cost strategy

A

The objective is to become the lowest cost operator in a market or industry

Typically involves production or operations on a large scale which enables business to exploit EOS

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17
Q

Porter: differentiation

A

Where a business is able to distinguish its product or service in the minds of consumers as offering better value- perhaps through quality, branding or other attributes that consumers value

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18
Q

Product portfolio analysis

A

Assesses the posterior of each product of brand in a firm’s portfolio to help determine the right marketing strategy

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19
Q

Boston matrix

A

A model which helps businesses analyse their portfolio of businesses and brands. Categorises the products into four different areas based on market share and market growth

  • stars
  • cash cows
  • question marks
  • dogs
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20
Q

Boston matrix: starts

A

High growth products competing in markets where they are strong compared with the competition

  • need heavy investment to sustain growth
  • growth will slow and become cash cows ;assuming they keep their market share)
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21
Q

Boston matrix: cash cows

A

Low growth products with a high market share

  • mature, successful products with relatively little need for investment
  • need to be managed for continued profit- so they continue to generate the strong cash flows the company needs for its stars
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22
Q

Boston matrix: question marks

A

Products with low market share operating in high growth markets

  • suggest they have potential, but may need substantial investment to grow market share at the expense of larger competitors
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23
Q

Boston matrix: dogs

A

Products that have a low market share in unattractive, low growth markets

  • may generate enough cash to break even
  • rarely worth investing in
  • usually sold or closed
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24
Q

SWOT analysis

A

A method for analysing a business, it’s resources and it’s environment

  • strengths
  • weaknesses
  • opportunities
  • threats
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25
Strengths
Features within the control of a business that are a source of competitive advantage
26
Weaknesses
Features within the control of a business that are a source of competitive advantage
27
Opportunities
Features of the external environment that crate opportunities for a business to leverage its strengths to benefit the business
28
Threats
Features of the external environment that threaten the performance and position of a business if not addressed
29
PESTLE
``` Useful way to analyse the external environment Political Economic Social Technological Legal Ethical/ environmental ```
30
Economic growth
Measure of the value of output (activity) in the economy
31
Market demand
How much of a good or service a consumer wants
32
Real incomes
Measure the amount of disposable income available to consumers
33
Interest rates were
Reward for saving and the cost of borrowing expresses as a percentage of the money saved or borrowed
34
Demography
Concerned with the size and completion of a population
35
Environmental issues
Concern for the impact of business on the environment is now a significant issue that goes well beyond the potential reputational damage from issues such as pollution and noise
36
Porters five forces
A framework for analysing the nature of competition within an industry - bargaining power of customers - bargaining power of suppliers - threat of new entrants to a market - threat from substitute products - intensity of rivalry
37
EOS
When unit costs fall as output increases
38
Overtrading
When a business expands to quickly without having the financial resources to support such a quick expansion
39
Organic growth
Involves expansion from within a business E.g Expanding product range, number of business units and locations
40
Takeover
Involves one business acquiring control of another business
41
Merger
Combination of two previously separate firms which is achieved by forming a completely new firm into which the two original businesses are integrated
42
Forward vertical
Acquiring a business further up in the supply chain E.g Manufacturer guys a distributor
43
Backward vertical
Acquiring a business operating earlier in the supply chain | E.g retailer buys a wholesaler
44
Horizontal
Acquiring a business at the same stage of the supply chain | E.g manufacturer buys a competitor
45
Conglomerate
Where the acquisition has no clear connection to the business buying it
46
Joint venture
A separate business entity created by two or more parties involving shared ownership, returns and risks
47
Horizontal integration
Acquiring a business at the same stage of the supply chain
48
Vertical integration
Acquiring a business at right an earlier or later stage of the supply chain
49
External growth
Growth that comes from outside the business | E.g takeover or joint venture
50
Franchising
When a franchisor grants a licence (franchise) to another business (franchisee) to allow it trade using the brand/ business format to
51
Quantitative sales forecasting
``` Forms the basis for most other common parts of business planning: HR plan Production/ capacity plans Cash flow forecasts Profit forecast and budgets ```
52
Extrapolation
Involves the use of trends establish by historical data to make predictions about future values
53
Moving average
Helps point out the growth trend and it is this which extrapolation would use first to predict the path of future sales
54
Correlation
Method of sales forecasting that looks at the strength of a relationship between two variables
55
Payback period
The time it takes for a project to repay its initial investment
56
Average rate of return
Looks at the total accounting return for a project to see if it meets the target return
57
Discounted cash flow (NPV)
Calculated the monetary value now of the projects future cash flows
58
Expected value
This is the financial value of an outcome calculated by multiplying the estimated financial effect by its probability
59
Net gain
This is the value to be gained from taking a decision Calculation Expected value of each outcome + deducting costs associated with decision
60
Critical path analysis
Management planning tool to help manage complex and time critical projects
61
Subjective decision making
Based on intuition, gut feel and experience
62
Evidence based decision making
Based on data and analysis
63
Organisational culture
- shared values of a business - beliefs and norms that affect every aspect of work life - behaviours typical of day to day behaviour
64
Power culture
Held by just a few individuals whose influence spreads throughout the organisation
65
Role culture
Based on rules Highly controlled with everyone in the organisation knowing what their roles and responsibilities are Power is determined by a persons posterior
66
Task culture
Forms when teams in an organisation are formed to address specific problems or progress projects
67
Person culture
Individuals see themselves as unique and superior to the organisation
68
Stakeholder
Any individual or organisation who has a vested interest in the activities and decision making of a business
69
Shareholder
Owner of a business
70
Ethics
Moral guidelines which govern acceptable behaviour
71
Ethical behaviour
Doing what is morally right
72
Corporate social responsibility
Concerned with: - the extent to which a business addresses the concerns and obligations to its wider stakeholders - actions a business takes over and above the minimum required by law in addressing societal needs and wants
73
Income statement
Measures the business’ performance (income and costs) over a given period of time
74
Statement of financial position
A snapshot of the business’ assets (what it owns or is owed) and it’s liabilities (what it owes) on a particular day
75
Cash flow statement
Shows how the business has generated and disposed of cash and liquid funds during a specific period
76
Gearing
Measures the proportion of a business’ capital (finance) provided by debt
77
Capital
Represents the finance provided to it to enable it to operate over the long term growth
78
Equity finance
Proportion and amount of the capital structure that is provided by shareholders or left as retained profits E.g Share capital Retained profits
79
Debt finance
Finance provided to the business by external parties | E.g bank loans
80
ROCE
Tells us what returns (profits) the business has made on the resources available to it
81
Ratio analysis
Involves the comparison of financial data to gain insights into business performance
82
Labour turnover
Measures the percentage of the workforce (employees) that leave a business within a given period (usually a year)
83
Absenteeism
An employees intentional or habitual absence from work
84
Empowerment
Involves giving people greater control over their working lives
85
Change management
The process that ensures a business responds to the environment in which it operates
86
Step change
Dramatic or radical change | Required when a business has suffered from strategic drift
87
Incremental change
Many small changes which take place as a business develops a responds to subtle changes in the external environment
88
Disruptive change
Change that arises from changes in the external environment which impact the market as a whole
89
Internal causes of change
Arises from factors within the control of the business
90
External causes of change
Arise from factors outside the control of the business I.e as a result of changes in the external environment
91
Scenario planning
- prepare for predictable and quantifiable problems - preparing for unexpected and unwelcome events Minimise the impact of a significant foreseeable event and to plan for how the business will resume normal operations after the event
92
Risk management
Identifying and dealing with the risks threatening a business
93
Crisis management
Handling potentially dangerous events for a business
94
Risk
Possibility of loss or business damage | A threat that may prevent or hinder the ability to achieve business objectives
95
Succession planning
Planning for the orderly replacement of key management and employees

Business Theme 3 (7 decks)

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