Strategy and implementation

Question 1

What is a strategy

Answer 1

Th way a business operates in order to achieve its aims and objectives

Question 2

What are the 2 parts of strategy

Answer 2

1 formulation
2 implementation

Question 3

What is formulation of a strategy
What is implementing the strategy

Answer 3

Same as constructing a business plan
Putting the plan into practice

Question 4

Why is the setting and achieving of objectives described as hierarchical in a large business

Answer 4

It starts at the top with the setting of corporate strategy an is put into action by business functions that design strategies to fulfill objective
Corporate strategy
Strategic direction
Divisional strategy
Functional level strategy

Question 5

Describe corporate strategy

Answer 5

Corporate level strategy is concerned with strategic decisions made that effects the whole business
It is concerned with setting objectives for overall financial performance , proposed mergers, acquisitions, long term human resource planning and allocating resources to different divisions

Question 6

What is strategic direction

Answer 6

The actions that lead to the achievement of the stated goals of the corporate strategy

Question 7

What is divisional strategy

Answer 7

It is directing the divisions in the company and communicating the strategy

Question 8

What is the functional strategy

Answer 8

A single operation e marketing or production and the activities within each operation

Question 9

What are tactical decisions

Answer 9

Medium or long term decisions made by middle managers - hey follow from a strategic decision and aim to meet objectives of a plan

Question 10

What is a corporate plan

Answer 10

A statement of organisational goals to be achieved in the medium or long term based on the managements assessments of market opportunities economic situation and resources available

Question 11

What is a SWOT analysis

Answer 11

Tool to identify a businesses strengths and weaknesses, opportunities and threats

Question 12

Why use a swot analysis

Answer 12

1 to develop a strategic plan which considers many internal and external factors and maximises strengths and opportunities whilst minimising impact of threats and weaknesses

Question 13

Why use a swot analysis

Answer 13

1 it considers many different internal and external factors and maximises potential straengths and opportunities whilst minimising impact of weaknesses and threats
2 It gives an overall picture of all potential influences on future business success and then adapt business strategy to reflect them

Question 14

What are the 4 stages to prepare and use a SWOT

Answer 14

1 internal analysis - examine the capabilities of the business by analysing its strengths and weaknesses
2 external analysis - gathering data on market and competitor activities, economic outlook and environmental impact on the business and decide does the data reveal external threat or opportunities
3 prepare a swot table - enter the information collected onto a swot table
4 use the swot to develop a business strategic pan

Question 15

Describe the 4 components of a swot

Answer 15

1 strengths - positive features of the sines identified at stage 1
2 weaknesses - negative features of the business identified at stage 1 occurs when a business performs poorly in an important area of operation or fails to take advantage of an existing strength
3 opportunities - prospects identified at stage 2 an opportunity exists if an external condition could positively impact of the businesses performance and improve competitive advantage if action is taken in time
4 threats - dangers identified at stage 2 , an external condition that could have a negative impact on businesses performance and reduce competitive advantages

Question 16

What will an effective swot allow a business to do

Answer 16

1 build on strengths
2 resolve weaknesses
3 exploit opportunities
4 avoid threats

Question 17

Who is Dr Michael Porter and what does he say

Answer 17

He is a professor at Harvard Business School and he believes under certai circumstances a business can exert an influence on the markets - they can be active not passive

Question 18

What did Dr Porter propose

Answer 18

A model of the business environment that stated industries and businesses were being influenced by 5 external forces and the interaction and influence of these forces determine the behaviour of business and the likely levels of profitability for the business

Question 19

How can manages use this model of potters 5 forces

Answer 19

1 to better understand the business in which they operate
2 properly consider external influences on business behaviour
3 understand how to set realistic objectives

Question 20

What are Porters 5 forces

Answer 20

1 barriers to entry - factors that prevent new competition entering the market
2 user power- power of customers to determine the price
3 supplier power - the ability of suppliers to set prices
4 substitutes - threat or risk of alternative products or services
5 competition - how much competition exists in the market

Question 21

What are barriers to entry

Answer 21

Factors that prevent new competition entering the market
2 if they are high monopoly profits can occur
2 when they are low normal profits can be earned
4 if new businesses can enter market easily then existing businesses will have a challenge to keep their profits high
5 new businesses will be attracted to the market if profits are high but barriers or entry exist or existing businesses attempt to create barriers stopping or reducing new businesses entering the market

Question 22

Give examples of barriers to entry

Answer 22

1 cost advantages of existing businesses
2 access to factors of production
3 high capital/investment requirements
4 strong brand identity of existing business’s products and high levels of advertising
5 access to distributing networks
6 predictable behaviours of existing businesses
7 access to technologies used in the industry

Question 22

What is supplier power

Answer 22

1 if supplier has high levels of power they are able to push up prices of raw materials and components so lowering profit margin
2 with lower levels of supplier power buyer can force prices paid for components and raw materials down resulting in higher profits for the business

Question 23

Give examples of factors that determine supplier power

Answer 23

1 number of alternative suppliers
2 importance of volume of orders to supplier
3 if inputs make up a large proportion of costs
4 if inputs help create differentiation of products made
5 the cost of switching to a new supplier
6 availability of alternative inputs
If backward vertical intergration exists

Question 24

WHat is buyer power

Answer 24

1 the ability of the customer within an industry to affect the price they pay
2 the higher the buyer power the lower th potential for the business to set prices for themselves,
3 if buyer power is low then the business is able to set the price high and achieve more profit

Question 25

Give examples of factors that determine buyer power

Answer 25

1 amount of bargaining leverage the buyer has
2 if the customer buys in bulk
3 if the buyer has information on costs, availability, alternative supplier
4 product USP and exclusivity
5 brand identity and loyalty of product bought
6 price sensitivity of the product
7 if vertical integration exists

Question 26

What is degree of competition in the market

Answer 26

1 can vary between a pure monopoly to perfect competition
2 the lower the level of competition the higher the profit margin
3 extent of competition between businesses in a market determines prices set for products and the profit made

Question 27

Examples of factors that determine number of competitors in the market

Answer 27

1 level of collusion in the market - do they act together to control prices and share out the market between them
2 maturity of the market ie is it stable with established brands and market leaders
3 industry concentration - is the market a monopoly or oligopoly with few businesses dominating or more like perfect competition
4 product differentiation in markets - is the market of very similar products
5 strength of brands in the market - are customers easily tempted to switched brands
6 existence of patents and licenses to operate in the market. Patents can give companies monopolies of production
7 if horizontal integration exists

Question 28

What is risk of substitute products or services

Answer 28

1 the more substitute products available the weaker the position

Question 29

F factors that determine the likelihood of availability of substitute products

Answer 29

1 rate of change of technology -faster rate more quickly substitutes are likely to occur
2 availability of capital for investment - are potential producers of substitutes able to raise capital for research and development of products
3 switching costs for customers - cost of changing to substitute
4 level of substitution effect - how close is the substitute
5 price performance trade off of substitute - how effective are the substitutes in cost and performance
6the existence of patents and licenses to operate in the market