Theme 3 Flashcards
Why would a business want to grow
Economies of scale Easier to gain finances from the bank Develop relationship with suppliers Meet shareholder objectives
What issues may a business face when the grow
Liquidity issues Diseconomies of scale Clash of objectives
What causes diseconomies of scale
Poor management Demotivated workforce Poor communication To many layers in hierarchy
What is overtrading
When you take on more demand than your able to cope
What is a mission statement
A summary of why the business exists
Whats a corporate objective E.G Tesla’s objective is to accelerate the world’s transition to sustainable energy.
Targets set for the whole firm to reach in a given time period
What it is a corporate strategy E.G. Tesla introduced Model 3, a low-priced, high-volume electric vehicle that began production in 2017.
A medium to long term plan to achieve the corporate objective
Observe the hierarchy of objectives, try to draw again without looking
…
Draw an ansoffs matrix
Advanatages of market penetration in the ansoffs matrix
- Low cost/ risk
- Market/ competitors familair to business
- Limited investment required
Disadvantages of market penetration in the ansoffs matrix
- Limited growth potential, market at maturity
- Business may be vunerable if it doesnt innovate. example of nokia
Advanatages of market penetration, in the ansoffs model
- Access to new markets, potential for considerable growth
- No expensive product development costs
Disadvantages of market development, in ansoffs matrix
- Limited understanding of new market-> expensive to do research to understand market
- Barriers to entry ( Culture/ language/ legisaltion)
- Competing against established firms ( Coke and Thumbs up)
- High marketing costs
Advantages of product development in ansoffs matrix
- Familiar with customers
- Responds to customer needs, meet demand
- First mover advantage
Disadvantages of product development
- Product development takes time and money
- Product canibalisation
Advantages of diversification in ansoffs matrix
- Spreads risk by entering different markets
Less significant due to the homogenisation of tastes and fashions
- Can cross subsidise
- Staff can motivated by success of the business (expansion)
Less motivating if there jobs are being outsourced
Disadvantages of diversification, in ansoffs matrix
- can be extremely high risk, dont know the market, or if there is demand for the product etc
Risk reduced if you do a merger
- Havent got a brand image/ reputation in the market
Less significant if there a conglomerate
Draw a Boston Matrix
Describe the parts of the boston matrix
- Star
- Cow
- ?
- Dog
- Star
* Leading brand in the market - Cow
- Successful product in mature market
- Used to subside ?
- ?
- Fast growing market but not yet established product
- Needs heavy investment (marketing)
- Lots of competition
4.
- Either reinvest to revitalize or discontinue
What is porters 5 forces
Model to illustrate attractiveness of a competitive environment
Draw porters 5 forces
Describe competitve rivalry in porters 5 forces
Competitve Rivalry
Looks at the number and strength of your competitors. How many rivals do you have? Who are they, and do they compare?
Where rivalry is intense, companies can attract customers with aggressive price cuts and non price strategys
Where competitive rivalry is minimal, then you’ll likely have tremendous strength and healthy profits.
Describe bargaining power of suppliers, in porter 5 forces
How easy it is for your suppliers to increase their prices,can you switch.
The more you have to choose from, the easier it will be to switch to a cheaper alternative. But the fewer suppliers there are, and the more you need their help, the stronger their position and their ability to charge you more. That can impact your profit.
Describe bargaining power of buyers, in porter 5 forces
How easy it is for buyers to drive your prices down. How many buyers are there, and how big are their orders?
When you deal with only a few savvy customers, they have more power, but your power increases if you have many customers.
Describe the threat of substitutes, in porters 5 forces
Likelihood of your customers finding a different way of doing what you do.
If there are substittues you need non price promotion to compete
Describe the threat of new entrants, in porters 5 forces
If it takes little money and effort to enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can quickly enter your market and weaken your position.
If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.
Describe porters strategic matrix
