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Edexcel Business A-Level > Theme 3 > Flashcards

Theme 3 Flashcards

1
Q

An Objective should be …. (SMART)

A

Specific
Measurable
Agreed
Realistic
Timely

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2
Q

Types of resources to consider when making a strategy

A
  • Human = Skilled workers
  • Physical = Update machinery
  • Financial = Funding
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3
Q

Ansoffs matrix and when is the strategy used

A

Market penetration
- Works well in emerging markets NOT SATURATED
- Gain market share by sales promotion , advertising

Market development
- New promotions
- New distribution channels
- Expanding

Product development
- Research and development
- Competitive advantage

Diversification
- Risky
- Used when business depend on limited product range

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4
Q

Porters three generic strategies

A
  • Cost leadership - low production costs
  • Differentiation - Unique attributes allow firms to charge higher prices
  • Focus - Niche market must either lower costs or show differentiation
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5
Q

Kays three capabilities to success

A
  • Architecture = stakeholder relationship
  • Reputation = customer satisfaction
  • Innovation = Research and development
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6
Q

Purpose of Kay’s three capabilities

A

Build a business a DISTINCTIVE capability
- Set buiness apart
- Added value
- Competitive advantage

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7
Q

SWOT analysis

A

Strengths - Internal
Weakness - Internal
Opportunities - External
Threats - External

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8
Q

PESTLE analysis
(external business influence on business strategy)

A

Political
Economical
Social
Technological
Legal
Envioromental

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9
Q

Porters five forces model (decide how to gain competitive advantage )

A

Barrier to entry
- Patents / trademarks
- Price war / predatory pricing

Buyer Power
- Low buyers in high market = high buyer power

Supplier Power
- It will cost a firm to change suppliers

Threat of substitutes
-Ensure little differentiation
- Relative price and quality the same

Industry rivalry
- Big promotional campaigns to bring awareness

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10
Q

How can a business gain internal economies of scale

A
  • Big firms negotiate prices with their suppliers
  • Big firms hire specialist managers which improve efficency which then reduces costs
    -Newest machinery will improve efficiency and reduce costs
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11
Q

Inorganic growth

A

Mergers and takeovers

  • Will generate more revenue/ cost savings by benefiting from EOS
  • Gains access to new markets
  • Gains access to new technology
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12
Q

Organic growth

A

Expansion from WITHIN the business
- Reinvest profits into business
- Done when market is going quickly or the business is outgrowing its competitors

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13
Q

Advantages of Organic growth

A
  • Management style doesn’t have to change
  • Less risk by using refined profit
  • Easier to control
  • No changes are felt by workers so productivity and efficacy remains high
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14
Q

Disadvantages of Organic growth

A
  • Long
    -Market size is unaffected as if the market doesn’t grow then its market share is restricted
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15
Q

Problems large businesses may face

A
  • Diseconomies of scale
  • Hard to motivate people
  • Weak internal communication
  • Reduced working capital
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16
Q

Financial risks with quick inorganic growth

A
  • Mergers may have different objectives
  • Adjustment period may lead to poor customer service
  • Duplicate roles may lead to lay offs
  • If one business is diversified the other business must not make mistakes
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17
Q

Why might business restrict their growth

A
  • Maintain culture
  • Harder to manage
  • May require additional finance
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18
Q

Kays distinctive capabilities (remaining small in a competitive market )

A

Product differentiation
- Offer a unique service
Responding to customer needs
- Small communication allowing quick response
Customer service
- Offer a personal experience
- Help reach corporate objectives

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19
Q

How to calculate cyclical variation on a scatter graph

A

Total value - Moving average (line of best fit value)

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20
Q

Three methods a business looks at before deciding to invest

A
  • Payback period
  • Calculating average rate of return
  • Discounted cash flows
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21
Q

Payback period calculation

A

amount invested
—————————-
annual net cash flow

Lower payback the more favourable it is

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22
Q

Average rate of return calculation

A

Average Net return
————————— x 100
Investment

Higher the ARR more favourable the project

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23
Q

Advantages of Payback period

A
  • Easy to calculate
  • Good for short term return projects
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24
Q

Disadvantages of Payback period

A
  • Ignores cash flow
  • Ignores time value of money
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25
Q

Advantages of Average rate of return

A
  • East to claulcaute
  • Takes cash flow into account
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26
Q

Disadvantages of Average rate of return

A
  • Ignores the timings of the cash flows
  • Ignores time vale of money
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27
Q

Advantages of Discounted cash flow

A
  • Takes in the time value of money
  • Adjusts cash value to the present value
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28
Q

Disadvantages to discounted cash flow

A
  • Hard to calculate
  • Hard to calculate discount since they can’t be certain of the interest rate
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29
Q

Probability definition

A

Likelihood of an event happening

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30
Q

Advantages of using a decision tree

A
  • Works out the probability using REAL figures
  • Quantitive and objective
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31
Q

Disadvantages of using a decision tree

A
  • Ignores qualative data (employee opinions )
  • Hard to make accurate
  • There is a wider range of outcomes than the diagram shows
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32
Q

What does the square and circle represent on a descion tree

A

Square = Decision
Circle = Possible Outcome

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33
Q

Total float time definition

A

Length of time you can delay an activity without compromising the completion deadline of thee project

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34
Q

Advantages of critical path analysis

A
  • Identifies critical activities
  • Can measure float times
  • Critical paths can forecast cash flow
  • Critical at his give a competitive advantage
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35
Q

Disadvantages of critical path analysis

A
  • Esitmates
  • Long planning time
  • Sets tight deadline which could lead to employees cutting corners
  • Doesn’t account delay factors ie weather or illness
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36
Q

Short - termism definition

A

Business increases financial performance over short periods

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37
Q

Short - termism purpose

A
  • In limited companies = keep shareholders happy
  • Manager bonus
  • Used in VERY new businesses
  • Lack of investment
  • Short term contacts to allow flexibility
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38
Q

Long- termism definition

A

Business focuses on reaching long term goals

39
Q

Long - termism purpose

A

-Concentrates on businesses overall performance
-Investing in R&D , staff training and long term projects

40
Q

Evidence based descions making (advantages )

A
  • Can be justifies by facts
  • Use valid descions making tools ie critical pathway
  • Record to show how a decision was reached
41
Q

Evidence based descions making disadvnatges

A
  • Long time to reach a descion
  • Different interpretation are made
  • Facts may overlook ethics
42
Q

Subjective descions making advantages

A
  • Quick descions making
  • Used when a opinion is needed
  • Used when there is a lack of data
43
Q

Subjective descions making disadvantages

A
  • Biased opinions can lead to a poor decision
  • Hard to justify
  • Snap decsions can be made without thinking of consequences
44
Q

Corporate culture

A

Way people do things in a firm and the way they expect it to be done

45
Q

Strong corporate culture

A

When employees agree with corporate values , which leads to less supervision due to staff loyalty.
Employee motivation will increase and they’ll work more productivily

46
Q

Weak corporate culture

A

Employees don’t share corporate values and are FORCED to COMPLY with them

47
Q

Four types of corporate culture

A

Power
Role
Person
Task

48
Q

Power culture

A
  • Authority is limited to a small number of people
  • Usually resistant to change due to limited opinions or little faith in manager
49
Q

Role culture

A
  • Authority is based off of job title
  • Poor inter department communication
  • Slow response to change
  • Avoid risk
50
Q

Person culture

A
  • Objectives are based on personal aims/ ambitions
  • Joint descions making
  • Workers when deciding on change will look at personal benefit rather than what’s best for the firm
51
Q

Task culture

A
  • Get specific tasks done
  • Small teams
  • Objectives are made for specific departments
  • Used to change
52
Q

Factors affecting corporate culture formation (7)

A
  • Business founders
  • Business history
  • Nature of buiness and products
  • Business enviormonet
  • Recruitment and promotion of staff
  • Working conditions
  • Custoner service attitudes
53
Q

Why might a manager want to change the corporate culture

A
  • Familiarty
  • To be more competitive
54
Q

Why is changing corporate culture difficult (4)

A
  • Employees can resist change
  • Staff behaviour changes
  • Expensive
  • HR might need to change their system to adapt
55
Q

Internal stakeholders (3)

A
  • Manger
  • Shareholdrs
  • Employees
56
Q

External stakeholders (5)

A
  • Customers
  • Supplers
  • Local community
  • Government
  • Pressure groups
57
Q

Shareholder v stakeholder objective conflicts

A

Shareholder wants to maximise profits to revaive a greater dividend
A stakeholder may want the business to pay workers above minimum wage or make the products ethically sourced

58
Q

Ethics

A

Behaviours that are considered morally acceptable by society

59
Q

Trade-off between ethics and profit

A

If a business acts ethically it wont be as profitable or it will have to charge higher prices risking reduced sales

60
Q

CSR Corporate social responsibility

A

Business should go above and beyond from what is required by the law to help society ie
- Donte to charities
- Host or sponsor community events

61
Q

CSR advantages

A
  • Improves brand loyalty
  • Improved staff moral = more motivated
  • Good public opinion
62
Q

CSR disadvantages

A
  • Cost of shareholders gaining smaller funds
  • Customers might have to pay more
  • Makes small business look bad as they can’t afford to do it
63
Q

Stakeholders that are interested in a businesses profit-loss account

A
  • Managers
  • Employees
  • Suppliers
  • Loan provides
  • Shareholders (interested in net after tax for their dividend payout)
64
Q

Solvency v Liquidity

A

Solvency is the ability for a business to pay its debts
Liquidity is how quick assets can be turned into cash

65
Q

Gearing ratio shows ..

A

The proportion of the firms finance that’s not from non-current liabilities (long term debt)

66
Q

Gearing ratio % calculation

A

non-current liabilities
—————————— x 100
capital employed

Over 50 is high geared , less than 50 is low geared

67
Q

Capital employed calculation

A

Non current liabilities + total equity

68
Q

Benefits of high gearing (3)

A
  • Extra funds for expansion
  • Attractive growth phase in product life cycle
  • Growth will led to high profits even after loan repayment
69
Q

Risks of high gearing (2)

A
  • Not affording the repayments
  • Interest rates may go up higher than estimated
70
Q

Return on capital employed % calculation

A

operating profit
———————- x 100
capital employed

71
Q

Return on capital investment (ROCE) shows..

A

The comparison of how much money is made over the amount being put into the business
The higher the ROCE the better

72
Q

Uses of ROCE

A
  • Good way for stakeholder to look at firms performance
  • Can make business decisions
  • Compare other firms finances
73
Q

Limitations of ROCE

A
  • Only as good as the data provided
  • Internal strength isn’t shown (staff skill)
  • External factors aren’t assessed
  • Future changes (technological advances aren’t considered)
74
Q

Labour productivity calculation

A

Output per period
————————— — x 100
Number of employees

75
Q

Labour turnover calcaultion

A

Number of staff leaving
———————————————— x100
Average number of staff employed

76
Q

Differnce between labour turnover and labour productivity

A

Labour turnover = number of staff leaving
Labour productivity = Output per employee

77
Q

Labour retention calculation

A

Number of staff employed at start - number who left
————————————————————————— x100
Number of staff at start period

78
Q

Absenteeism calculation

A

Number of staff absebsce days in time period
—————————————————————- x100
number of staff employed x time period

79
Q

Difference between labour retention and absenteeism

A

Labour retention = Business ability to keep employees
Absenteeism = Proportion of days missed by employees

80
Q

Strategies to improve HR figures

A

Financial rewards - motivation
Employee share ownership - reduces staff turnover
Consultation strategy - involve in descions making
Empowerment strategy - more responsibility

81
Q

Internal causes for business change (4)

A
  • Change in organisational size
  • New ownership
  • Poor business performance
  • Transformational leadership
82
Q

How can change in organisational size affect business

A
  • More workers = more productivity = EOS = competitive advantages
  • Bad management of increase in workers can lead to slower production = diseconomies of scale
  • More workers = harder communication
  • Cash flow can be badly managed
83
Q

How can new ownership affect business

A
  • Change in management style
  • Stakeholder may notice a change - to ensure satisfaction good communication has to be maintained
  • EOS could occur
  • Finical performance may be affected
84
Q

How can poor business performance affect business

A
  • Reduces competitiveness
  • Negative productivity and efficiency
  • Affects stakeholders
  • Share value decreases
85
Q

How can transformational leadership affect business

A
  • Change business ethos (aim , principles)
  • Affect stakeholders (employee motivation or quality of customer service )
  • Employees are resistant to change
86
Q

External causes to business change

A

Political
Economic
Social
Technological
Legal
Environmental

87
Q

How can “the market ” affect business change

A
  • Change objectives
  • New entrants can cause a loss in market share
  • Removal of a competitor can improve a business financial performance
  • Acting quickly is advantageous
88
Q

Key factors in change success (4)

A
  • Change in organisational culture (power, job, person , task)
  • Change in organisational size (communication )
  • Changes speed (gradual or sudden)
  • Resistance to change (lack of understanding , lack of skills)
89
Q

Methods to overcome resistance to change (5)

A
  • Raise awareness for reasoning
  • Involve stakeholders in descions making
  • Listen to concerns
  • Bargain by offering incentives
  • Manipulate the information
90
Q

Risk mitigation definition and it’s forms

A

A plan that’s looks at reducing the probability of a risk
- Risk acceptance
- Risk avoidance
- Risk limitation (reduce risk)
- Risk transference (send to third party)

91
Q

Scenario planning

A

Business considers future events that may happen and plan how they would operate if the event occurred

92
Q

Business continuity planning

A

A recovery plan for a unspecified event , to allow a business to see how they would reach a mimimim acceptance level to resume to normal business

93
Q

Succession planning

A

Identification and development of staff that could fill key roles to allow a business to migrate risks free another staff has left

Edexcel Business A-Level (4 decks)

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