Unit 3 Business Flashcards
(145 cards)
Business objectives and strategy
Business objectives are what a business hopes to achieve, and business strategy is what a business does to achieve these objectives.
mission statement
is a formal summary of the aims and values of a company, organisation, or individual.
corporate objectives
short term targets which are set to help achieve overall goals. In order to be helpful they need to be SMART….
Benefits of a Mission Statement
- Can create and help to support a shared vision for employees (Employees will be more motivated as they understand the aims of the business )
2.stakeholders will form a better impression/image of the business as the result of reading it (attracting investors)
3.Customers may agree with the business values and choose them over other competitors (results as differentiation from the business’s competitors)
Critical appraisal of mission statement
a mission statement of the aims of a business designed to give stakeholders a sense of direction common purpose ( used to create and help to support a shred vision for employees)
MOPS
M= market
O= objective
P= product
S= situations
SMART Objectives
S= specific (The objective should state exactly what is to be achieved)
M=measurable (An objective should be capable of measurement – so that it is possible to determine whether (or how far) it has been achieved)
A=achievable (The objective should be realistic given the circumstances in which it is set and the resources available to the business)
R=relevant (Objectives should be relevant to the people responsible for achieving them)
T=time bond (Objectives should be set with a time-frame in mind. These deadlines also need to be realistic)
Ansoff Matrix
Ansoff Matrix is a decision making model that can be used to help business analyse it’s strategic options opportunities for growth, It is a clear graphical representation of a corporate strategy….
Usefulness of Ansoff’s Matrix
- it is clear, graphical help, shows and assess risk, of a strategy
- asses the degree of risk
3.identifies, opportunity in sales growth
Drawbacks Of Ansoff’s
1.it is one decision making model, others may be used and could give different readings of the situation
- formal market research in each market may give better indication of the needs of each new market (more research is needed to understand market conditions and consumer preferences)
3.it is a theoretical and simplistic tool that takes no account of changing economic and market conditions ( like not considering any figures, just risk. doesn’t take into account actions of competitors and is subject of external factors that can’t be planned for)
Porter’s Strategic Matrix
A method that can be used in the development of a corporate strategy, helps to identify the sources of competitive advantage that business might achieve in a market (see table)
Market penetration
Safest option: Same product – same market
-Increase brand loyalty
-Encourage customers to use the product more often
-Encourage customers to use more of the product
-Lowering the price
-Useful if the brand is already well known and has loyal customers.
-Useful if the market is still growing
Market development
Same product – new market
(e.g. entering an overseas market)
-Changes may have to be made to adapt to new market such as brand name
Product development
-Same market – new product-
- Suitable for short product life cycle or dynamic markets
(E.g. Apple iPhone, iPad, Apple Watch…)
Diversification
-Highest risk: new product – new market
(E.g. Virgin Airlines, Internet services, cosmetics … )
-Well known brands can take more risks, so is suitable for these types of businesses
Cost leadership
-Striving to be the lowest-cost provider in the (mass) market
1.Keep prices the same but gain higher profit margins
2.Lowering prices to gain market share
-Firms need a large market share in order to achieve cost leadership
1.Economies of scale
2.Negotiating with suppliers
E.g. Tesco
Cost focus/differentiation focus
-Targeting a narrow range of customers (similar to niche)
-Used by small or very specific firms
- Cost focus: cost minimisation within a focussed/niche market (Aldi)
- Differentiation focus: differentiation within a focussed/niche market (Ferrari)
Differentiation
-Operating in a mass market with a unique position
-A firm needs to offer a level of differentiation from the competitors
1.Quality
2.Design
3.Brand
4.Customer service
E.g. Apple, RedBull
Benefit for Cost Leadership
-Can increase demand if price is competitive
Drawback for Cost Leadership
-Could result in lower brand image if prices are lowered
Benefit for Differentiation
-Can charge premium prices
Drawback for Differentiation
-Can be expensive to build up differentiation – market research, R&D and marketing needs to take place
-Others may copy the point of differentiation
Benefit for Focus
-As they focus on a narrow segment of the market they are able to gain an advantage of understanding its customers very well
-Can help to create a high level of customers satisfaction & loyalty
Limitations of Porter´s Strategic Matrix
-ignores other external factors
-It is only one tool! A business could use Ansoff or portfolio analysis (Boston Matrix)
-Markets are dynamic and different This matrix is quite generic and rigid.
-Ignores profit margins, profitability