Module 13 - Strategy And Analysis Flashcards
What should happen in the mission statement?
The overall aim of the business should be summarised into a concise mission statement and then translated into strategy and more specific objectives
(Not sure about second bit - think overall aim should be summarised into a concise mission statement)
What does the mission statement allow?
Communication of the overall aim to employees, customers, suppliers and other stakeholders
Models an entrepreneur can apply when gathering and analysis information
SWOT analysis
PESTEC analysis
Porters Five Forces
SWOT analysis is a technique which may be used by an entrepreneur to identify:
Strengths
Weaknesses
Opportunities
Threats
Which elements of SWOT analysis are internal
Strengths
Weaknesses
Which elements of SWOT analysis are external
Opportunities
Threats
In SWOT, could a business use strengths to counteract threats?
Yes
What is PESTEC?
A technique which may be used by an entrepreneur to identify external characteristics that could impact a business
What does PESTEC stand for?
Political
Economic
Social (attitudes)
Technological
Environmental
Competitive
When may Porters Five Forces be considered by an entrepreneur?
Why?
Prior to launching a product/service in a market or moving into a new market (or segment)
As this analysis addresses the competitive environment within an industry
Michael E. porter believed that competition within an industry is dependent on five basic forces:
Threat of new entrants
Bargaining power of suppliers
Bargaining power of customers
Threat of substitute products/services
Rivalry
What does Porters Five Forces look like?
What does Ansoffs matrix provide?
Four strategic directions which may help an entrepreneur formulate a business strategy
What does ansoffs matrix look like?
Axis of Ansoffs matrix
Existing markets / new markets
Existing product / new product
What are the four different strategies in Ansoffs matrix?
Market penetration
Product development
Market development
Diversification
Where is market penetration in Ansoffs matrix on the axis?
Existing markets
Existing product
Where is product development on the axis of ansoffs matrix?
Existing market
New product
Where is market development on the axis of ansoffs matrix?
New markets
Existing product
Where is diversification on the axis of ansoffs matrix?
New markets
New product
Relative risk of market penetration?
One
Relative risk of product development
Four
Relative risk of market development
Two
Relative risk of diversification
Sixteen
What are business operations?
Day-to-day activities of a business that are conducted to generate income
One way business operations may be summarised (four different factors)
Location - where it is run from
Equipment - assets (tangible and intangible required to run the business)
Labour - the human element
Process - the business processes and systems, control activities etc
When creating a mission statement an entrepreneur may ask what kind of questions about the business
Purpose / brand promise
What is different
Key values
What does it do for customers
What does it do for employees
The identification of an internal weakness may allow what? (Look in notes page 276)
An entrepreneur to exploit this and turn it into an external opportunity from the environment surrounding the business
E.g. an entrepreneur may be able to re-train or acquire something for the business to take advantage of an external opportunity
PESTEC
Examples of the Political characteristic
Legislation (anticipated or actual) (eg changes in tax bands and rates)
Government policy (eg no longer providing grants to certain small business start-ups)
PESTEC
Examples of the Economic characteristic
Level of disposable income available to consumers
Interest rates (eg lower interest rates may deter saving and encourage spending)
PESTEC
Examples of the Social characteristic
Attitudes towards single-use plastic (eg decreasing sales as consumers avoid buying plastic water bottles)
Demographics (eg an ageing population may increase spending on cruise holidays)
PESTEC
Examples of the Technological characteristic
Technology (E.g. advances in mobile phone cameras may impact the sale of digital cameras)
PESTEC
Examples of the Environmental characteristics
Ecological and environmental factors (eg need for more sustainable business practices - sales of solar panels may increase)
PESTEC
Examples of the Competitive characteristic
Competitors actions (eg new product launch / change in pricing)
Does a lower barrier to entry have a higher threat of new entrants?
Yes
May suppliers increase prices or reduce quality of goods/services they supply to exercise their bargaining power?
Yes
Description of bargaining power of customers
Customers with large volumes of purchases of undifferentiated items will experience strong buying power
As they can often find alternative suppliers or can play suppliers off one another
Threat of substitutes description
Substitutes are alternatives that, to the consumer, serve much the same purpose and can threaten to reduce market share
(Eg tablet devices reducing market share of laptops)
Rivalry (competitive rivalry) description
Rivalry among existing competitors or ‘jockeying’ for market share by reducing prices, substituting products/services, launching new products/services
(Eg apple and Samsung)
Having created a mission statement, analysed internal strengths and weaknesses, analysed external marker forces and analysed the competitive environment, an entrepreneur must then what?
Formulate a business strategy
Market penetration description
How is it achieved?
Existing marker / existing product
Grow business by maximising sales of existing products/services (eg significant promotional spend to boost sales of existing product)
Maximise sales through gaining market share from competitors (eg lowering price below comparable products)
Maximise sales through increasing consumption by existing customers
Product development description
Eg?
Grow the business by introducing a new product/service that is superior to existing products/services
(eg a car manufacturer releasing a newer model with additional and more modern features)
Market development description
For example?
Grow the business by launching existing products/services on a new market
(Eg new geographical area or a new online platform)
Diversification description
How is it often achieved?
Grow the business by introducing a new product/service in a new market
Often achieved through acquisitions of businesses in the new target market (eg under armour acquired several fitness apps to enter a market for services instead of goods)
Features of business operations:
Location - description
Where the business is run from - physical retail or office space, online or both (links to Place in marketing mix)
Features of business operations:
Equipment - description
Refers to the assets, both tangible and intangible, required to run the business
Useful life should also be considered due to future costs of repairs etc
(Tangible assets may be most essential and most start up costs)
(Intangible may include a patent to protect IP, or a license, software, businesses website)
Features of business operations:
Labour - description (page 285)
Refers to the human element (the entrepreneur and employees)
Features of business operations:
Process - description
What does it include?
Refers to business processes, systems and related control activities implemented to run the business
Includes structured activities performed by people or equipment to produce a certain outcome
Each business process has what?
An input
The processing of the input
An output
Example of process when making a product
Input = raw materials
Processing = actual manufacturing of the product (conversion)
Output = finished product, ready for sale
Within business processes, an entrepreneur should consider what?
Control activities around the security of assets (cash, equipment and stock)
Design of sales systems
Design of stock systems
Design of accounting systems required to run basic day-to-day activities
Is it more efficient for an entrepreneur to start by buying off-the-shelf software packages to avoid designing their own detailed systems with control activities and to pay for use of existing well-controlled warehousing facilities to avoid designing control activities around stock?
Yes
