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Theme 3 Flashcards

1
Q

what is a mission statement?

A
  • a mission statement sets out the purpose of a business: why it exists
  • typically focuses on:
    the values of the business
    the scope of the business
    the importance of different stakeholder groups
    the impact the business intends to have on society
    the long term aims of the business
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2
Q

what influences a businesses mission statement?

A
  • the values of the founders
  • the industry the business is in
  • the views of society
  • the size of the business and type of ownership
  • the culture of the business
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3
Q

what are the focuses of corporate objectives?

A
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4
Q

what factors affect corporate objectives?

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5
Q

what is short termism?

A

short termism is the pressure of achieving short-term gains over long-term success.

Sometimes short termism and the pressure for instance success influence corporate objectives and decision-making as much as any other internal or external factor.

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6
Q

what is the ansoff matrix and what is it used for?

A

a tool that helps businesses to choose the market they wish to operate in and the products they will sell within that market.

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7
Q

what is market penetration?

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8
Q

what is product development?

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9
Q

what is market development?

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10
Q

what is diversification?

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11
Q

what is the boston matrix and why is it useful?

A

categorise a companies products with specific characteristics in order to make strategic decisions about them.
Assessed using:
- current and projected sales
- current and projected costs
- the level of competition
- unique characteristics and strengths
- risks that may affect performance

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12
Q

what is porters strategic positioning theory?

A

porter maintained that businesses can compete on either price, perceived value or by focusing on a very specific kind of customer

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13
Q

what is cost leadership strategy?

A
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14
Q

what is differentiation strategy?

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15
Q

what is segmentation strategy?

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16
Q

what is a competitive advantage and how can a business achieve one?

A

exists where a business creates unique value for its customers that is greater than that offered by competitors.

– Innovation (the ability to create new and unique processes and products)
– architecture (the relationship within a business that creates synergy and understanding between suppliers)
– reputation (brand values are hard to replicate and may take years to develop)

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17
Q

what factors should a business consider when choosing one of porters strategic positioning strategies?

A
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18
Q

what is a strategy?

A

– A strategy is a long-term planner approach their business will take to achieve its objectives.
– strategies involve a major commitment to resources

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19
Q

what are tactics?

A

– Tactics are the day-to-day decisions taken by middle managers.
– they are frequent and involve fewer resources but taken to achieve the strategic direction of the business

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20
Q

what is the objectives hierarchy?

A
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21
Q

what is SWOT analysis and why is it helpful?

A
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22
Q

what is the value of SWOT analysis?

A

– assists strategic thinking in structural way
– low-cost, simple approach
– can be combined with other decision-making models such as PESTLE

– subjective and depends on the opinions of managers
– does not offer clear solutions.
– classification may depend on perspective

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23
Q

how can PESTLE be used to analyse external influences?

A
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24
Q

what is the changing competitive environment and what does this include?

A
  • new entrant brining in more competition
  • new products that may be more innovative from rivals
  • consolidation: at times businesses may fail and leave the market, others may then take control of the available market share or maybe mergers and takeovers
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25
what are some different market structures?
- highly competitive market - uncompetitive market (one business may dominate: a monopoly) - semi competitive (a few business may dominate: an oligopoly)
26
what are porters 5 competitive forces?
- competitive rivalry - bargaining power of suppliers - bargaining power of buyers - threat of substitutes - threat of new entrants
27
what is rivalry within the market?
28
what is bargaining power of suppliers?
29
what is bargaining power of buyers?
30
what is threat of substitutes?
31
what is barriers to entry?
32
how can a business grow?
33
what are the objectives of growth?
34
what are economies of scale?
economies of scale occurred when unit costs fall as a business expands – these are the advantages of size.
35
what are some internal economies of scale?
– Purchasing economies (bulk buying) – technological economies (large businesses can invest in the best technology) – financially economies (large businesses may have more collateral and can raise more capital, especially the plc and receive a better rate of interest and terms of payment) – (larger businesses can employ specialist to manage a particular aspect of business this improves efficiency in different business functions)
36
what are some external economies of scale?
– Labour (the concentration of firms in one area may encourage a buildup of skilled labour force) – Corporation (where firms are concentrated together they are more likely to work together and collaborate)
37
what are some of the benefits and drawbacks of growth?
- economies of scale result in unit costs falling as the business grows in size - at a certain point the business will begin to experience diseconomies of scale - this is when unit costs starts to rise again as the business loses some of the efficiency it gained from growth - for many business there is an optimal size
38
what are diseconomies of scale?
when unit costs rise as a business expands - this is one of the advantages of staying small - communication problems (communication becomes harder across a larger organisation) - control (in order to control the organisation layers of management are added, this slows down decision making and quality becomes harder to monitor) - flexibility (the business may find it harder to adapt in the changing business environment) - motivation (workers in large organisations feel less significant)
39
what is over trading?
over trading occurs when business grows too fast and stretches their financial resources, such as cash. they may also face logistical problems if it cannot manage operations this may lead to business failure
40
what strategies may a business use to downsize when they’ve grown too big?
they may want to downsize to deal with diseconomies of scale or to improve efficiency - redundancies - closure of branches - discontinuing product lines - pulling out of international markets - delayering - reallocating business resources - cancelling expansion plans - outsourcing aspects of business operations
41
what is organic growth?
organic growth is when a business’s operations naturally get larger, this may be in the form of opening new branches of taking on a bigger workforce
42
what is inorganic growth?
when a business merges or takes over another business
43
what is a takeover or acquisition?
may be hostile or voluntary. one business will acquire another along with its assets if it is hostile the takeover is riskier
44
what is a merger?
two business come together in a joint venture for mutual benefit this may be to share strengths or with the purpose of business survival a new name will likely be created
45
what are some types of growth?
46
what are the rewards of inorganic growth?
- speedy growth - higher remuneration for senior staff - rewards for previous owners (large payouts for sale of company) - greater profitability if successful
47
what are the risks of inorganic growth?
- industry regulators may intervene or takeover if they believe it to be anti competitive - morale and productivity can be very low when a business has been taken over - both mergers and takeovers can stretch a firms finances especially if there is a bidding war
48
what are some methods of organic growth?
49
why is creating a new business model a type of organic growth?
this can help a business to create a presence in a new market or help them to move online allowing them to access new customers
50
what are the advantages of organic growth?
- less risk - controlled pace - cheaper than external growth - diseconomies of scale minimised
51
what are the disadvantages of organic growth?
- slow pace - external expertise (doesn’t take advantage of the resources, skill and knowledge gained from merging with another business) - competition (business may be left behind others using external growth to dominate the market)
52
what are some of the reasons for staying small?
53
what is some of the key information in a statement of comprehensive income?
54
what can be found out from a statement of comprehensive income?
- changes in sales revenue - changes in the direct costs of sale - how well a business is managing its operating costs - the profitability of a business - unusual incomes/expenses during the year
55
what stakeholders may be interested in a statement of comprehensive income and why?
56
what do different things in a statement of financial position mean?
57
what can be found out from a statement of financial position?
- the value of the business (equity) - the current assets a business holds - short term liabilities the business needs to pay within the year - the liquidity of a business - the long term debts of a business - how a business has been financed
58
what stakeholders may be interested in the statement of financial position and why?
59
what is return on capital employed (ROCE) ratio?
compares operating profit earned with the amount of capital employed by the business capital employed is total equity + any non current liabilities ROCE shows how efficiently a business is able to generate profit from the investment placed within the business
60
what is gearing ratio?
analyses how a business has raised long term finance. the ratio represents the proportion of a firms equity that is borrowed. a highly geared business has more than 50% of its capital in the form of loans - this means it is vulnerable to changes in interest rates a low geared business may have the opportunity to borrow funds in order to expand. business with secure cash flow or considerable assets may be able to borrow more for this purpose.
61
why is ratio analysis good and bad?
62
what is labour productivity?
a key measure of employee performance interprets output per worker over a given time period and directly affects profit margins and decisions around pricing
63
why is it difficult to interpret labour productivity?
generally speaking the higher the labour productivity the better the business is performing, however: - it does not take into account employer wage rates which can be a key factor in measuring employee performance - it does not take into account technology used in the production process - it may be affected by many other factors such as internal disruptions to production or, the nature of what’s being produced

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