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Business A-level Edexcel > Theme 3.1 Business Objectives And Strategy > Flashcards

Theme 3.1 Business Objectives And Strategy Flashcards

1
Q

What is a mission/corporate aim?

A

An organisations aims/long term intentions, its ultimate purpose.

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2
Q

What is a mission statement?

A

Sets out the purpose and primary objectives of a business in the present

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3
Q

What are the characteristics of a mission statement?

A

-provide a clear sense of purpose
-differentiates the business
-defines the brackets the firm operates in
-excites, inspires, motivates and guides

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4
Q

Advantages of a mission statement

A

-focuses energy and clarifies purpose
-helps attract people and resources
-can be a great PR tool
-should motivate stakeholders

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5
Q

Disadvantages of a mission statement

A

-not always supported by actions of the business
-often too vague and general
-often states the obvious
-often seen as a PR exercise
-not a true reflection of reality
-must be supported by senior management

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6
Q

What influences a mission statement?

A

-purpose
-strategy
-values
-standards and behaviour
-size of the business
-competition
-social responsibility

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7
Q

What are corporate aims?

A

Give a business direction and provide a purpose for what is done everyday

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8
Q

What are corporate objectives?

A

Should flow from the mission statement and corporate vision

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9
Q

What is a SMART target?

A

Specific
Measurable
Achievable
Realistic
Time related

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10
Q

What are functional objectives?

A

Departments/functions (HR, marketing, finance and operations) set their own objectives which should flow from the corporate objectives

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11
Q

What is ansoff’s matrix?

A

shows the strategies that a business can use to expand, according to how risky they are

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12
Q

What are the key features of product development?

A

-new product/service for existing market
-means R&D innovation
-can respond to customer needs
-good where product needs to be differentiated

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13
Q

What are the key features of market development?

A

-existing product sold in a new market
-new geographical market/ new channel of distribution/ new demographic

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14
Q

What are the risks of product development?

A

-not knowing product
-high R and D costs
-competition reactions
-risk cannibalisation
-may shorten lifecycle of existing product
-damage brand

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15
Q

What are the rewards of product development?

A

-launch substantially improved version of product
-introduce complementary products
-new product innovation

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16
Q

What are the risks of market penetration?

A

-competition reaction
-relatively short term
-market may already be saturated
-cannibalisation
-low risk limited reward

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17
Q

What are the rewards of market penetration?

A

-gain share from competition
-encourage customer buy/consume more
-create changes to marketing mix
-allows extension strategies

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18
Q

What are the key features of market penetration?

A

-trying to sell more of existing product to existing market
-steady, safe growth
-encourage them to order more often

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19
Q

What are the risks of market development?

A

-product may not be accepted/desired/understood
-lack of knowledge of customer
-business may not understand new market and alienate customers

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20
Q

What are the rewards of market development?

A

-enter new market; not reliant on one
-allows business to change promotional tactics
-new distribution channels

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21
Q

What are the risks of diversification?

A

-relies on heavy investment
-cultural differences
-brand name may be diluted
-very high risk strategy

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22
Q

What are the rewards of diversification?

A

-allows for R and D into new products and market research
-acquisition of other businesses
-spread risk
-gives balance to products with high return

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23
Q

What are the key features of diversification?

A

-new product sold in a new market
-need a clear idea of what the business expect to gain and honest risk assessments

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24
Q

Uses of Ansoff’s Matrix

A

-identify all your current products/services and their markets, then consider options for expansion

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25
Q

Limitations of Ansoff’s Matrix

A

-only shows part of the picture and is in its purest form
-not the whole picture: SWOT and PESTLE needed for a view from more then one angle

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26
Q

What is competitive advantage?

A

It is gained over competitors by offering greater value e.g. lower prices

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27
Q

What is SWOT analysis?

A

Helps a business assess its competitive strength and the nature of its external environment

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28
Q

Use of SWOT analysis

A

-logical structure
-focuses on strategic issues
-encourages analysis of external environment

29
Q

Limitations of SWOT analysis

A

-too often lacks focus
-independent?
-can quickly become outdated

30
Q

What does PESTLE(C) stand for?

A

Political
Economic
Social
Technological
Legislation
Environmental

(Competitor behaviour)

31
Q

What is Porter’s Matrix?

A

Shows the strategy a business is best placed to use based on its competitive advantage

32
Q

Uses of Porter’s Matrix

A

-can gain competitive advantage
-gain higher profits if use cost leadership
-differentiated products = less elastic than competitors
-focus strategy can gain a higher degree of customer loyalty

33
Q

Limitations of Porter’s Matrix

A

-cost leadership could be used by competitors; risk customer loyalty
-differentiation = higher costs
-products being copied will eliminate differentiation
-focus strategy = little opportunity for growth

34
Q

How can low cost be achieved?

A

-lower cost
-production on large scale to exploit EoS
-can offer lower prices
-little product differentiation

35
Q

How can differentiation be achieved?

A

-doing something different; USP = customers will pay more
-target larger market to achieve competitive advantage across whole market

-superior quality
-branding
-wide distribution
-sustained promotion

36
Q

How can focus be achieved?

A

Differentiated focus
-brand, image, quality
-aims to differentiate in 1(+) small segments

Cost focus
-seek to develop a lower cost advantage
-lowest cost producer will enjoy EoS
-e.g. budget food items low cost regional airline

37
Q

Advantages of low cost strategy

A

-high profit margins
-maintain market price and gain higher profit margins
-lower price and acquire market share
-high levels of productivity
-high capacity utilisation
-EoS
-bargaining power to negotiate lower prices
-lean production

38
Q

Disadvantages of low cost strategy

A

-few can operate as cost leader as multiple businesses cannot directly compete on cost
-standard product
-branding relatively unimportant

39
Q

Advantages of differentiation strategy

A

-brand makes business stand out
-helps develop a unique brand image
-adds value = higher price can be charged
-gives higher profit

40
Q

Disadvantages of differentiation strategy

A

-other businesses may be able to copy the strategy if it is not sustainable or defensible (e.g. patents, copyrights)

41
Q

Advantages of focus strategy

A

-easier to target a narrow market as communication and marketing can be focused
-possibly develop a better understanding of customer needs

42
Q

Disadvantages of focus strategy

A

-customer loyalty is vital if sales are to be maintained
-the market may disappear (or no longer be a viable option) if it shrinks in size

43
Q

What are distinct capabilities?

A

The competitive advantage a business achieves through developing a unique quality of the business through: reputation, innovation, architecture (relationships)

44
Q

What is architecture?

A

The way a business is organised- clear corporate objectives

45
Q

What is reputation?

A

How customers and potential customers see the company

46
Q

What is innovation?

A

Source of competitive advantage- difficult to maintain

47
Q

what are strategic decisions?

A

-long term direction of the business
-what the business will do to meet its aims and objectives
-proactive decision making
-forward thinking and future planning

48
Q

What are tactical decisions?

A

-short/medium term
-how the business will implement its strategy
-reactive to competitors actions
-present day thinking, what happens now that needs dealing with

49
Q

What is PESTLE analysis?

A

An analysis tool that aims to look at external factors and how they may have an impact on the business

50
Q

What are political and legal factors?

A

The governments actions and changes to the law that impact on strategic and functional decisions made by a business

-a change in government
-government intervention policies
-influence of the the EU on trading
-tax rates (e.g. VAT)
-tariffs (when importing)

51
Q

What are economic factors?

A

-an increase in interest rates
-an increase in inflation
-unemployment rates
-recession (temporary decline in economic activity)
-the business cycle

52
Q

What are social factors?

A

Are influenced by the make-up of humans within a specific area/business.

-change in demographics (characteristics) and its impact on products produced and markets
-cultural mix has changed
-social trends e.g. vaping

Examples:
Growing population
Changing family structure

53
Q

What are technological factors?

A

The ongoing development of invention, innovation and sharing of technology/ processes

-automation, new robotics and how it can improve productivity
-innovations of industry
-research and development in industry
-new computer systems
-trading online

54
Q

Benefits of technology

A

-improved efficiency
-more product innovation
-reduce wastage
-replace labour with capital
-more efficient marketing
-faster, easier, more efficient communication
-efficient stock management

55
Q

Limitations of technology

A

-cost
-shorten life of existing products
-require training
-security risk of fraud and data
-need regular update
-downtime needed and potential faults
-increased risk of job cuts which could damage reputation

56
Q

How does technological change support the functional areas?

A

Marketing
-social media
-personalised adverts
-big data

Finance
-payment methods
-banking apps
-less paper

Operations
-robotics
-stock control
-automation of product lines

HR
-automated messages
-shared documents
-online meetings

57
Q

What are environmental factors?

A

Customers, investors, and the government can put pressure on a business to be more eco-friendly

-climate change
-weather (e.g. tourism)
-sustainable production and corporate social responsibility
-disappearance of wildlife

58
Q

What is Porter’s five forces?

A

Threat of new entrants
Threat of substitute products
Buyer power
Supplier power
Intensity of rivalry with industry

59
Q

Examples of barrier to entry

A

Patent
High capital cost
Customer loyalty
Government policies and regulations
EoS
Access to resources/ distribution channels

60
Q

What are the characteristics of markets where rivalry is low?

A

-small number of firms within clear market leader
-low fixed costs
-brand loyalty
-high consumer switching costs
-no excess production capacity

61
Q

What are the characteristics of markets where rivalry is high?

A

-Entry in to industry is straight forward
-easy for customers to move to substitute
-little differentiation
-competitors similar size
-costly to leave industry
-market not gaining

62
Q

Benefits of Porter’s five forces

A

-Evaluate competitive forces that influence the business
-can help support strategic decisions

63
Q

Limitations of Porter’s five forces

A

-backward looking
-only looks at individual companies, not the industry as a whole
-doesn’t consider globalisation and technological advances

64
Q

What are the strategies of buyer power?

A

-look for new customers (geographical/segments)
-differentiate products to make it less easy for customers to switch
-drive rivals out of the market place
-promotional tactics
-price wars

65
Q

What are the strategies for supplier power?

A

-joint venture: work closely with supplier (possibly merge/ vertical integration)
-maximise EoS (e.g. place large order)
-become more attractive
-seek out new suppliers

66
Q

What are the strategies for the threat of new entrants?

A

-barriers to entry
-patent/copyright; increase cost for new entrants
-maximise EoS; produce cheaper— pass on to customer and reduce price
-Brand loyalty
-threat of retaliation

67
Q

What are the strategies for the threat of substitute products?

A

-develop a strong brand name
-promotions; give reasons to keep coming back
-low cost producer

68
Q

What are the strategies for the intensity of rivalry within the industry?

A

increase power
-differentiate
-low cost producer

Business A-level Edexcel (14 decks)

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