Theme 3 Business Objectives and strategies Flashcards
What are coporate objectives?
Coporate objecgives are the goals or targets business aims to achieve as a whole over a specific time period.
Name the main purposes of a coporate objectives
- to provide strategic focus
- to measure the performance os a business as a whole
- to inform decision making
- to set a scene for more detailed functional objectives
What does SMART stand for?
Specific, Measurable, Achieveable, Realistic, Time bound
What is a mission statement?
A short paragraph or a few sentences that explains the business purpose and why it exists
What does a mission statement need in order to be effective?
- Provide a clear sense of business purpose
- Be easy to understand and rembemer
- Help differentiate business from its competitors
- Be designed for all relevant stakeholders
Why a mission statement can be of value to the business
- It can provide a clear sense of purpose and ensure that the decisions a business makes are aligned with its mission/coporate aims
- Customers may aree and buy into the misson of the business and its core values. This can give the business a competitive advantage, differentiating it from competitors
- it can provide a sense of direction for emloyee, increasing motivation
- It can ensure everyone in the business is working towards the same goal
What are some downsides to a mission statemnent?
- the mission statement is not always supported by the actions of the business, therefore there may be a disconnect between the mission statement and what the business is actually doing
- missions statments are often too vague and generic and merely state the obvious
- they are sometimes viewed as bein created for public relations purposes rather than acting as a focus on business strategy
Which matrix helps business determine its product and market growth strategy?
Ansoffs matrix
What is market penetration?
Where business aims to sellits existing products into existing markets. the aim is to increase amrket sare by sellin more of business existin product to existing customers.
What is product development?
Where business aims to introduce and launch a new product into existing markets. This strategy is driven by investment ini new product development and requires consistant and long term investement in research and development.
What is market development?
When business looks to sell its existing products into new markets . It is a logical strategy where exisitng markets are over saturated or in a decline
Who argued that differentiation and low cost are effective strategies for firms to gain competitive advatage?
Porter
What is cost leadership?
A strategy where the business aims to become the lowest cost producer in a mass market
How can Cost leadership be acheived?
- Achieveing economies of scale
- High capacity utilisation
- increased efficiency
What is capacity utilisation?
Its a measure of the actually level of output that a firm produces as a percentage
What is capacity?
Maximum level of output a frim can produce over a given time period
What are the downsides to opertaing below maximum capacity?
- Business will have resources it is not utilasing
- Business operates inefficiently by wasting resources
- increased unit costs of production
What are some downsides of operating too close to business maximum capacity?
- Firms as little to no flexibility
- It may have to turn down new customers
- Puts pressure on employees
How can a business increase its capacity utilisation?
Different marketing strategies:
- use marketing techinques that increase the demand
- higher sales would lead to business producing at a higher level
- droppin prices down
- promotional techinques
- analysing its distribution startegies
- try to find new distributing channels or places to sell their goods in order to increase demand
Rationalisation:
- reducing costs
- closing down outlets
- selling assets
- making some workers redundant
how to cope with high capacity utilisation?
Outsurce some of its operation
reduce demand for its products by increasing the price
create waiting lists for their orders
expand the organisation
invest in new technology
what is cost focus?
Strategy whereby a business minimises costs wihin a focused niche market
What is differentiation?
Strategy wereby a business ooperating in a mass market aims to differentiate itself from other business.
How can differentiation be achieved?
- having strong brand image
- having product quality that is superior to competitors
- adding value
what is differenatiation focus?
A strategy whereby a business aims to differentiate is a focused or niche market
What is the purpose of a product protfolio analysis?
it asses the position of each product or brand in firms portfolio to help determine the right marketin strategy for each product.
What is product porfolio?
A product portfolio is the collection of different products or brands that a business sells, allowing it to spread risk and target different market segments
Name some disadvanbtages of Porters Generic Strategies
Stuck in the Middle – If a business fails to fully commit to cost leadership or differentiation, it may struggle to compete effectively.
Cost Leadership Risks – Cutting costs too much can lead to lower quality, damaging reputation and customer loyalty.
Differentiation Challenges – Unique products require high investment in R&D and marketing, which might not always pay off.
Focus Strategy Limitations – Targeting a niche market can be risky if demand declines or if larger competitors enter.
Competitor Reactions – Rivals can imitate differentiation strategies or start price wars, reducing competitive advantage.
Give a disadvatnage of using ansoffs matrix
Oversimplification – It might oversimplify complex business situations and ignore external factors like market conditions or competition.
Ignores Internal Factors – The matrix doesn’t consider internal challenges like company resources, capabilities, or organizational culture.
Risk Underestimation – The matrix might not fully capture the risk involved in pursuing new markets or products.
Short-Term Focus – It focuses more on growth strategies without considering long-term sustainability or strategic alignment.
Limited Flexibility – The four strategies may not account for more nuanced or hybrid approaches to business growth.
Name a few advatnages of abusiness using Ansoffs Matrix
Clear Strategy Options – It provides four structured growth strategies (market penetration, market development, product development, and diversification).
Risk Assessment – Helps businesses understand the level of risk associated with each strategy.
Decision-Making Support – Guides businesses in choosing the best strategy based on their goals and market conditions.
Competitive Advantage – Helps businesses identify opportunities for growth and stay ahead of competitors.
Resource Allocation – Assists in prioritizing investments in new markets or products efficiently.
Define marketing strategy
A marketing strategy is a plan designed to achieve a business’s marketing objectives by targeting specific customers and using appropriate marketing tactics
Provide so limitations of portfolio analysis
Simplification of Reality: Portfolio analysis often oversimplifies complex business situations by categorizing products into just a few categories (e.g., stars, cash cows, etc.), which may not fully capture the nuances of each product’s performance or market conditions.
Limited Focus: It primarily focuses on the current product portfolio and may overlook future market trends, changes in customer preferences, or innovation opportunities that could affect long-term success.
Overemphasis on Market Share: Portfolio models like the BCG matrix emphasize market share, which may not always reflect profitability or the long-term sustainability of a product.
Ignores External Factors: Portfolio analysis tends to ignore external factors such as economic conditions, competition, or regulatory changes, which can significantly impact product performance.
Time-Consuming: The process of analyzing and updating a portfolio can be time-consuming and may require extensive data collection, which could delay decision-making.
What does SWOT stand for?
Strenght , weaknesses , opportunities and threats
Why is SWOT analysis useful?
its helps business to discover;
what busniess does better than competition
what competitors do better thgqn business
whether business is making the most of the opportunites available
ho business should respond to changes in external enviroment
What does PESTLE stand for?
Political
Economic
Social
Technological
Legal
Environmental
Limitations of SWOT analysis
it can lack focus or contain too many elemnts . it also doeasnt proritize the issues that the busniess faces
give 3 ways in which there can occur a chnage in competitive enviroment
- new entrant, increasing rivarly
- two business may merge together
- business may develop new innovative products
What are mergers?
A merger is when two or more companies combine to form a new organization, typically to increase market share, reduce competition, or achieve cost savings
what does Porters 5 forces analyses
The nature of competiton with in an industry
what is threat of new entrants
A barrier to entry is something that makes it difficult for new businesses to enter a market. This can include high startup costs, strong competition, legal restrictions, or the need for specialized knowledge.
what is degree of competitve rivarly
The degree of competitive rivalry in Porter’s Five Forces refers to the intensity of competition between existing firms in an industry. High rivalry can result in price wars, advertising battles, and product innovations, which can reduce profitability. Factors influencing this rivalry include the number of competitors, industry growth, and the differentiation of products.
what is the barganing power of buyer?
The bargaining power of buyers in Porter’s Five Forces refers to the influence that customers have on a business. When buyers have high bargaining power, they can demand lower prices, better quality, or more services. This typically happens when there are many alternatives available for buyers, or when they purchase in large quantities. The stronger the buyers’ power, the more pressure it puts on businesses to meet their demands
what barganing power of siuppliers
The bargaining power of suppliers in Porter’s Five Forces refers to the influence that suppliers have over the cost and availability of goods or services. When suppliers have high bargaining power, they can demand higher prices or impose stricter terms on businesses. This usually happens when there are few suppliers, or if the supplier offers unique or essential products that are difficult to replace. High supplier power can reduce a business’s profitability as it may have to pay more for inputs
what is threat of substitutes?
The threat of substitutes in Porter’s Five Forces refers to the likelihood that customers will switch to alternative products or services that can meet the same need. When there are many substitute products available, or if substitutes offer better value, it can reduce demand for a company’s offerings and put pressure on prices. The higher the threat of substitutes, the more businesses need to innovate or improve their products to maintain customer loyalty.
Some disadvatnages of using proters 5 forces?
Oversimplification: It may oversimplify complex industries by focusing only on five forces, without considering other important factors like technological change or customer preferences.
Static Model: Porter’s Five Forces represents a snapshot of the competitive environment, but it doesn’t account for dynamic changes or long-term trends, such as shifts in consumer behavior or industry evolution.
Ignores External Factors: The model doesn’t consider broader external factors like political changes, economic crises, or environmental issues that could also impact competition.
Focus on Competition: The model primarily focuses on competition and may overlook opportunities for collaboration or strategic partnerships that could also influence business success.
Not Industry-Specific: The relevance and application of Porter’s Five Forces can vary across industries, and the model might not be as useful for all business sectors, especially in fast-changing or niche markets.
Assumes Rational Behavior: It assumes that businesses make rational decisions based on competition, but in reality, businesses may act in unpredictable or irrational ways.
List 3 advantages of suing Porters 5 Forces
Helps Identify Industry Attractiveness: It provides a clear framework to assess the competitive intensity within an industry, helping businesses understand how profitable or risky entering or staying in a market might be.
Focuses on External Factors: The model helps businesses focus on external factors (like competitors, suppliers, and substitutes) that could impact their strategy, allowing them to better anticipate market shifts and challenges.
Guides Strategic Decision-Making: By understanding the five forces, companies can make more informed decisions about pricing, product development, market entry, and competitive strategies to improve their position in the market
