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A LEVEL BUSINESS : ADVANCED INFO > Paper 2- Theme 3.1 Business objectives and strategy ✅ > Flashcards

Paper 2- Theme 3.1 Business objectives and strategy ✅ Flashcards

1
Q

define SWOT analysis

A

a method used to analyse a business’ internal strengths & weaknesses and external opportunities & threats, and help with strategic planning

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2
Q

define Key Performance indicators

what are they used for

examples

A

• quantifiable measures of internal aspects of business performance that are determinants in whether the business is currently successful

  • considered to ensure a robust identification of internal strengths and weaknesses
  • can also be compared against previous years, competitors or industry averages
examples:
FROM ALL FUNCTIONS (hr, finance, marketing, sales, 
- sales volume
- unit cost
- market capitalisation 
- market share
- capacity utilisation
- staff turnover
- brand value
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3
Q

define opportunity

A

favourable external factors, out of a business’ control, that could give the firm a competitive advantage or economic benefit, if pursued

  • external
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4
Q

define threat

A

external factors that may prove detrimental to business finance or provide competitive disadvantage, if not dealt with accordingly

  • external
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5
Q

define strengths

A

an aspect of business’ operations or performance that has competitive advantage or is superior to other aspects of their own business

  • internal
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6
Q

define weakness

A

an aspect of a business’ operations or performance that has competitive disadvantage or inferior to other aspects of their business

  • internal
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7
Q

examples of external influences

A
  • fiscal policy (interest rates, inflation)
  • legislation & protectionist measures
  • monetary policy (government spending and taxes)
  • unemployment rate
  • external shocks (unpredictable natural disasters or war)
  • changes in market - consumer trends, changes in demographic
  • changes in competition
  • technological changes
  • supplier
  • exchange rate
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8
Q

strengths of SWOT analysis

A

•identify threats and encourage strategic planning to deal with

• highlight opportunities
—> first mover advantage

• identifying core SWOT leads to fact-based analysis
—> fresh perspectives new ideas

• encourages strategic planning of turning weaknesses to strengths (long termist)

  • > or focus on maximising strengths (short termist)
  • ——> however this could also create LT sustainable competitive advantage

• help understand where competitive advantage of business is

  • > or where competitors are better
  • — greater insight when using consultative approach
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9
Q

weakness of SWOT analysis

A

• oversimplifies the factors influencing the opportunities or threats facing the business
—-> may lack comprehension in strategy

•success dependent on managerial skill to interpret and generate strategy
—> invest into recruitment and training for success

• time consuming and complicated
—.> not all might be used

•depends on accuracy of information

  • –> if primary, higher costs
  • –> if secondary, available to rivals and less reliable
  • snapshot of current situation
  • may restrict growth if mainly focusing on nullifying threats
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10
Q

define market capitalisation

A
  • how much it would cost to buy all shares in business
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11
Q

define PESTLE analysis

A

a method used to analyse the external environment that a business operates in
- and the P E S T L and E factors that may influence business operations

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12
Q

list PESTLE factors

A 
Political
Economic
Social
Technological
Legal
Environmental
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13
Q

define each PESTLE factor

A

Political - how government policies could affect business

Economic - how the state of the economy may affect business

Social - how factors about the demographic and behaviour of customers may affect business

Technological - how changes in technology may affect business

Legal - how legislation changes may affect business

Environmental - how environmental issues and damage may affect business

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14
Q

political factors

A 
• government spending
• industry regulations
• government policy
- competition policy
- monetary policy
- fiscal policy
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15
Q

economic factors

A
  • business cycle
  • consumer spending
  • employment rates
  • exchange rates
  • inflation
  • interest rates
  • economic growth
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16
Q

social factors

A
  • consumer tastes and trends
  • demographic changes (currently ageing)
  • changing lifestyles (healthy eating)
  • pressure groups impact
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17
Q

technological factors

A
  • new production processes
  • mobile technology
  • disruptive technologies
  • big data (used for finding solutions in masses of information as markets expand)
18
Q

define destructive technologies

A
  • innovations with a product or service that is likely to create a new market and eventually transform an existing market
19
Q

legal factors

A
  • legislation
  • –> employment (wages, rights)
  • –> health and safety
  • –> environmental
  • protectionist measures
20
Q

environmental factors

A
  • pressure to become sustainable
  • —> from media, pressure groups and because of resource depletion
  • pressure to limit pollution and emissions
  • pressure to dispose waste in a environmentally friendly way
21
Q

different between policies and legislation

A

policies are guidelines to achieve an outcome

legislation is law

22
Q

strengths of PESTLE analysis

A

• encourages research of wider business environment
1 ——> can anticipate future business threats ….. develop contingency plans
2 —-> can spot potential business opportunities ….. first mover advantage

• can assess possible implications of entering a new market
—> less risk

• more accurate overview of external influences than SWOT
—> used together to assess extent of opportunities and threats further

•provides simple, easy to use framework for analysis
—> minimal cost on training

•encourages development of strategic thinking in organisation
—> empowers workers as ideas may be used, increased motivation

23
Q

weaknesses of a PESTLE analysis

A
  • time consuming and expensive, if use primary
  • –> if use secondary may not be accurate to base strategies off
  • constantly changing global dynamics may only provide snapshot (needs to be repeated)
  • –> also hard to predict changes, due to pace of change of environments
  • too much information collected may lead to ‘paralysis by analysis’ (struggle making decisions due to overthinking)
  • –> or not enough information leads to oversimplification
  • must provide critical and unbiased view about environment operated in
  • —> must recruit and train highly skilled staff
24
Q

what does changing competitive environment mean

A
  • means markets are constantly evolving

- many businesses enter and leave market

25
Q

define Porters 5 forces

A

a framework used to analyse the nature of competition in a market

  • it considers 5 competitive forces that affect the intensity of competition in an industry
26
Q

state porters 5 suggested forces

A
  • threat of new entrants
  • bargaining power of suppliers
  • bargaining power of buyers
  • threat of substitute products
  • rivalry amongst competitors
27
Q

factors affecting how industries are different

A
  • size
  • growth
  • structure
  • distribution
  • customer needs and wants
  • profitability
28
Q

position of each of the forces in a low profit industry (e.g. airlines)

A
  • high threat of new entrants (low barriers to entry because no firm has huge profit margins)
  • strong customers
  • strong suppliers
  • high threat of substitutes
  • intense rivalry
29
Q

define threat of new entrants

effect of high threat of new entrants

A

potential effect of a new business entering the market

(high barriers of entry = business in stronger position)

  • lose market share to them
  • increase rivalry
  • barriers of entry determine the strength of the position of the business in the current market
30
Q

define barriers to entry

examples

A

obstacles that a business has to face when it is considering establishing themselves and competing in a new market
—> reduces likelihood they enter market

e. g.
- economies of scale (must have bargaining power of supplier and have high output to compete in some markets)
- brand loyalty to current businesses, and reputation
- technology and innovation
- current business’ expertise and knowledge in current market
- legislation
- set up costs

31
Q

define bargaining power of suppliers

effect of high bargaining power of suppliers

A

how much negotiation power a supplier has over those who buy from them

  • may sell at higher price (reduce profits)
  • sell with less or no credit (worsen cashflow, limit working capital)

—> may restrict strategy —> can’t be a cost leader

32
Q

factors affecting the bargaining power of supplier

A
  • number of big competing suppliers
  • scarcity or uniqueness of what they are supplying
  • size of supplier
  • size of business purchasing from them
  • cost of switching supplier is high (e.g. contracts in place)
  • ethical stance
33
Q

define bargaining power of customers

effect of high bargaining power of customers

A

extent to which customers are able to pressure businesses to drive down the price

  • forces businesses to drive down price
  • forces businesses to improve quality or differentiate from other firms
34
Q

factors affecting the bargaining power of customers

A
  • availability of substitutes
  • necessity of product (e.g. normal goods)
  • volume of orders
  • cost of switching to other products/suppliers
35
Q

define threat of substitute products

effect of high threat of substitute products

A

another firm’s product that meets the same customers needs, in the same market, as a businesses’ own product

  • drive for differentiation
  • may drive costs down
36
Q

factors affecting the level of threat of substitutes

A
  • price of their product in comparison
  • level of customer loyalty, reputation and industry expertise
  • availability of substitute products

• technological change is rapidly increasing number of substitutes

37
Q

define rivalry amongst competitors

A
  • the level of competition between existing firms in a market
  • —- the central factor in Porter’s Five Forces analysis
38
Q

effect on strategy for business in highly rivalled market

A
  • spend on innovation and product improvements
  • price competition: competitive pricing
    OR
  • increase non price competition : advertising, sales promotion

—–> all result in higher costs and lower profit margins

39
Q

determinants of the level of rivalry amongst competitors in a market

A
  • numbers of competitors in the market (more competitors, higher competition)
  • —> and substitutes
  • market growth (high rivalry in declining or slow growth markets, as they can only grow through taking each others market share)
  • structure of cost –> high fixed cost % makes it hard to exit market, so more competitors
  • –> high fixed costs % also leads to high competition on volume, as profit margins are lower
  • level of differentiation and brand loyalty
  • level of overseas competition
40
Q

strengths of Porter’s Five Forces analysis

A
  • used by business, in alignment with Ansoff’s Matrix, to analyse the attractiveness of new industries
  • can assess the security of their market share and potential growth
  • —> identify threats, or opportunities for a new market
  • help estimate current competition and risk in industry
  • –> inform decision making of where to protect and where to grow its products
  • identify opportunities to expand business {through vertical integration e.g (acquire supplier)}
41
Q

weaknesses of Porter’s Five Forces analysis

A
  • doesn’t consider external forces that may affect market forces (assume they are static)
  • —-> e.g PESTLE
  • only provides snapshot of market, ALSO with increasing technology makes substitutes and threats to entry more dynamic
  • impractical for large firms who operate in many different markets, and have a large product portfolio
  • lack of statistical support as to which force is most important, subjective, up to management skillset

A LEVEL BUSINESS : ADVANCED INFO (23 decks)

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