Theme 3 Flashcards
strategy
the medium to long term plans of a business to achieve its corporate objectives. details how objectives will be met through decisions and activities relating to all aspects of the business.
tactics
short term actions taken by a business. made on a day to day basis, made by managers lower down the hierarchy.
mission statement
a brief written statement that states the main purpose of a business or organisation. this provides a common focus for everyone within an organisation and, therefore, a common sense of direction.
corporate objectives
medium to long term goals of a business that form its guiding principles.
corporate strategy
medium to long term plans of a business, detailing how objectives will be met through decisions and activities relating to all aspects of the business.
product portfolio analysis
a technique used to analyse the range of products and brands that a business has under its control. this can help a business identify where each of its products are positioned in the market and identify potential gaps.
distinctive capability
the combined expertise, knowledge and experience of the leaders and founders of a business that create the unique set of qualities. these qualities are difficult to imitate and this gives a business a competitive advantage [the three attributes are architecture, innovation and reputation]
SWOT analysis
a diagnostic tool used to identify the internal strengths and weaknesses and the external opportunities and threats to a business.
Political
the government actions that influence the behaviour of businesses and their customers [PESTLE]
economic
factors that influence how resources are allocated in society and impact on investment and consumption decisions [PESTLE]
social
characteristics of society and trends in consumer behaviour that influence the behaviour of businesses and their customers [PESTLE]
technological
scientific advancements that influence behaviour of businesses and their customers [PESTLE]
legal
the collection of legislation that impact on the activities of organisations [PESTLE]
environmental
external influences linked to the natural environment that impact behaviour of individuals to reduce the negative impacts on the natural environment [PESTLE]
economies of scale
advantages of a business when unit costs fall as scale of production increases.
internal economies of scale
advantages of an increase in the scale of operations, leading to a fall in unit costs.
external economies of scale
advantages of an increase in the scale of production within the industry in which it operates leading to lower unit costs.
diseconomies of scale
disadvantages of a business increasing the scale of its operations, leading to a rise in unit costs.
internal communication
transferring information between interested parties within an organisation.
overtrading
a business expands too rapidly resulting in it operating at a level beyond its resources, causing liquidity problems. also applies to a business where supply exceeds demand due to fast growth.
merger
a form of external growth when two or more businesses agree to become integrated to form one business.
takeover
a form of external growth when one business gains control over another and becomes the owner (can be hostile or friendly)
horizontal integration
businesses that operate at the same stage of production join together [a form of external growth]
vertical integration
businesses that operate at different stages of production join together [a form of external growth]
conglomerate
the integration of two or more unrelated businesses.
inorganic growth
when a business expands the scale of operations through external means (e.g. integration and acquisitions)
organic growth
when a business expands in size internally by increasing the scale of its operations.
quantitative sales forecasting
numerical techniques used to predict future sales volumes.
time-series analysis
technique that shows past sales figures in date order to inform sales forecasting [a type of quantitative sales forecasting]
moving averages
technique that shows whether a tread is significant by smoothing out fluctuations in data [a type of quantitative sales forecasting]
scatter graphs
technique that plots the relationship between two variables to help identify a correlation to inform sales forecasting [a type of quantitative sales forecasting]
extrapolation
using past data to extend a trend for longer. this is a useful technique when the market is relatively stable.
investment appraisal
techniques that analyse the predicted financial outcomes fo potential investments.
investment criteria
a set of guidelines against which an investment can be judged.
corporate social responsibility (CSR)
a business decision to accept responsibility to its stakeholders for social, environmental and ethical actions.
CSR pyramid
A theory that highlights the four aspects of corporate social responsibility. society expects businesses to meet these obligations.
economic responsibility
part of the CSR pyramid. responsibility of a business to be profitable.
legal responsibility
part of the CSR pyramid. responsibility to obey the law (e.g. health and safety regulations)
ethical responsibility
part of the CSR pyramid. responsibility to behave in a way seen as morally correct (e.g. treatment of employees and suppliers)
philanthropic responsibility
part of the CSR pyramid. responsibility to give back to society (e.g. through charitable acts)
payback
cumulative cash flow = no. of years
initial investment - cumulative cash flow = x
net cash flow of following year/x = no. of months
average rate of return
total net cash flow/no. of years = x
x/initial investment x 100
net present value
net cash flow x discount factor of that year
add up
decision trees
a model that visually presents courses of action when making a decision.
expected value
final outcome of success x chance
final outcome of failure x chance
net gain
initial cost - expected value
risks
measurable unknowns in decision making.
uncertainties
non-measurable unknowns in decision making.
opportunity cost
the cost of one course of action in terms of the next best alternative forgone.
critical path analysis
a technique used to identify which tasks can be completed simultaneously and the order to complete them to find the shortest time possible.
total float time
the amount of extra time available to complete a non-critical activity without delaying the whole project.
calculation: LFT - duration - EST
short-termism
pressure on a business to perform in the short term.
long-termism
decision making is focused on achieving in the long term.
corporate culture
the values and standards shared by people and groups within an organisation.
power
a type of organisational culture. key decision makers that are central to the way the business operated. commonly found in family businesses.
role
a type of organisational culture. clear rules and procedures which result in a clear hierarchy. the organisation functions based on individual roles within the structure.
task
a type of organisational culture. the business focuses on achieving the desired outcome from a specific task or project. teams are made from different business areas and work together to complete tasks.
person
a type of organisational culture. a high degree of autonomy given to individuals within the organisation. employees are likely to be highly skilled in specialist areas.
stakeholders
any individual or group with an interest in the actions of a business.
internal stakeholders
individuals and groups from within the business with an interest in the actions of the business (e.g. managers, employees, owners)
external stakeholders
individuals and groups from outside of the business with an interest in the actions of the business (e.g. suppliers, community, government)
stakeholder objectives
the requirements and aims of each individual that are affected by the actions of a business.
shareholders
investors who are part owners of a company providing equity capital in return for a percentage of ownership.
stakeholder conflict
stakeholders have different objectives and therefore when a business makes a decision, there may be disagreements between some stakeholders.
business ethics
morality in decision making and doing what is ‘right’ within the business.
trade-off
when one decision results in the loss of an alternative outcome [not opportunity cost]
corporate social responsibility (CSR)
a business’ decision to accept responsibility to its stakeholders for its social, environmental and ethical actions.
financial statements
formal records that summarise a business’ financial performance, activities and worth over a specific period of time.
statement of comprehensive income
a formal financial document that summaries a business’ trading activities and expenses to show whether the business has made a profit or a loss over a specified period of time.
statement of financial position
a formal financial document that summarises the net worth of a business at a given point in time.
liquidity
a measure of business’ ability to meet day to day expenses a short-term debts and hence its ability to survive.
ratio analysis
comparisons made between two or more figures in a set of financial accounts.
gearing ratio
a measure of the proportion of a business’ capital that is funded through long term loans (debt/equity)
human resources (HR)
the function within a business that relates to the management and strategies involved in dealing with individuals and groups that make up the workforce.
human resource data
quantifiable information that can be used to measure workforce performance
labour productivity
a measure of workforce performance that looks at the output per worker.
labour turnover
the rate of change in a business’ labour force.
absenteeism
the name of staff who miss work as a proportion of the total number of staff.
financial rewards
the variety of methods that have money value and are used to incentive the workforce and influence their behaviour at work.
piece rate
a type of financial incentive. when payment is based on the number of items produced by an employee.
commission
a type of financial incentive. when payment is based on the number of unites sold.
bonus
a type of financial incentive. an additional, lump sum, one off payment to an employee for meeting individual, team or company targets.
salary schemes
a type of financial incentive. a basic rate of pay given to employees, usually paid monthly, but determined on an annual basis. it is normally based on level of experience and skills.
perfoRmance related pay (PRP)
when employees receive a bonus based on the performance of the employee measured againsT a pre agreed range of criteria.
employee share ownership
a human resource strategy that involves giving employees shares or the option to buy shares in the company.
consultation strategies
the process of seeking the thoughts and opinions of employees prior to making decisions.
empowerment strategies
a human resource strategy that involves delegating greater responsibility to employees, allowing them to use their abilities and to have a greater say in the decision making process.
poor business performance
when a business is failing to meet its corporate and functional objectives. if poor business performance is experienced for a sustained period of time then the need to make changes will become inevitable.
transformational leadership
leaders, with a clear vision, who are able to lead others to achieve the extraordinary.
scenario planning
the process by which organisations try to prepare for unexpected and potentially disastrous events.
risk mitigation
the actions taken by a business to minimise or eliminate risk through a process of identifying, assessing and prioritising potential threats.
succession planning
the process of planning for the loss of a leader or key member of staff.
