Unit 3 business-definitions

Question 1

corporate objective definition

Answer 1

a specific performance goal set by senior management for the business to achieve over time.

Question 2

define functional objective

Answer 2

the day-day goal of functions/departments within a business, derived from the overall corporate objectives

Question 3

what does ansoff’s matrix identify?

Answer 3

an appropriate corporate strategy to achieve the objective of growth and the level risk associated with the chosen strategy

Question 4

what is the aim of portfolio analysis?

Answer 4

carry out a detailed evaluation of a full range of products so appropriate strategies can be identified and pursued

Question 5

what is a distinctive capability?

Answer 5

a particular business strength that is very difficult for competitors to copy

Question 6

Define overpayment in the context of mergers and takeovers

Answer 6

Overpayment occurs when the acquiring company pays too much for the shares in a target company, and is unable to recover the investment through increased revenue or cost savings.

Question 7

define niche market

Answer 7

a small market segment with specific needs or preferences that are not being met by mainstream products or services

Question 8

define ansoff’s matrix

Answer 8

a strategic planning tool that helps businesses identify potential organic growth opportunities by analysing their product and market strategies and the risk associated with each one. The four aspects are market penetration, market development, product development, and diversification.

Question 9

what is a synergy in the context of mergers and takeovers?

Answer 9

a benefit resulting from the combination of two or more companies, such as increased revenue, cost savings or improved product offerings.

Question 10

define risk bearing economies

Answer 10

when a firm can spread the risk of failure by increasing its number of products, which lowers the average cost

Question 11

define takeover

Answer 11

when one company purchases another company, often against its will. it buys a controlling stake in the target company’s shares, gaining control its operations

Question 12

define organic growth

Answer 12

organic growth (internal) is growth that is driven by internal expansion using reinvested profits or loans.

Question 13

What does forward vertical integration involve?

Answer 13

a merger or takeover with a firm further forward in the supply chain

Question 14

what is overtrading?

Answer 14

when a business expands too quickly without having the financial resources to support such a quick expansion, leading to a strain on its resources and an inability to meet its financial obligations (lack of liquidity)

Question 15

what is horizontal integration

Answer 15

a firm merges or acquires another firm in the same industry/market, and at the same stage of the production process.

Question 16

what is the advantage of small firms targeting niche markets?

Answer 16

they can target these markets profitably as they have relatively low overheads and do not need to achieve the volume of sales required by larger competitors

Question 17

define external economies of scale

Answer 17

when there is an increase in the size of the industry in which the firm operates. this allows the firm to benefit from lower avg costs generated by factors outside of the business.

Question 18

4 financial rewards of mergers and takeovers

Answer 18

-increased market share
-cost savings as a result of synergies
-increased company value
-higher sales revenue as a result of entering new markets

Question 19

internal economies of scale

Answer 19

a reduction in average costs as a result of the growth in the scale of production within the firm

Question 20

define extrapolation

Answer 20

the prediction of future sales from past data, often done by extending a line of best fit

Question 21

define investment appraisal

Answer 21

comparing the expected future cash flows of an investment with the initial outlay of that investment to see if it will generate acceptable returns

Question 22

formula for total float

Answer 22

total float= LFT for the activity-duration of the activity-EST

Question 23

what is discounted cash flow?

Answer 23

a method used to calculate the present value of future cash flows by discounting their future value. it accounts for the time value of money and opportunity cost.

Question 24

what is ARR?

Answer 24

it compares the average profit per year generated by an investment with the value of the initial outlay

Question 25

what is critical path analysis?

Answer 25

a project management tool that calculates the minimum time required to complete a project, identifying activities which of delayed, could delay the entire project

Question 26

what is a decision tree?

Answer 26

a quantitative method that traces the outcomes of a decision so that the most profitable decisions can be identified using estimates and probabilities

Question 27

formula to calculate expected monetary value

Answer 27

expected monetary value= (expected value of success x probability) + (expected value of failure x probability)

Question 28

what is a pressure group?

Answer 28

an organisation that seeks to influence the policies and actions of businesses or governments, with the primary objective of promoting a specific cause or agenda

Question 29

define sustainable sourcing

Answer 29

the practice of acquiring raw materials and components from sources that are environmentally and socially responsible

Question 30

define business ethics

Answer 30

the principles and norms that govern business behaviour

Question 31

example of a long-term approach to decision making

Answer 31

establishing nurturing, meaningful, and lasting relationships with suppliers

Question 32

what is role culture?

Answer 32

key decisions are made by those with specific job roles. power lies with those with particular job titles rather than those with desirable skills

Question 33

what is a person culture?

Answer 33

individuals with extensive experience and skills are loosely brought together. they have significant power to determine their own decision-making procedures and often work autonomously.

Question 34

what is the stakeholder approach?

Answer 34

a business strategy that focuses on interdependencies between stakeholder groups and take steps to ensure that the benefits and drawbacks of its operations are shared equally amongst them.

Question 35

define task culture

Answer 35

decisions are made by teams made up of employees with specific skills. Power lies with those with task related skills. emphasises team working and flexibility

Question 36

what is short-termism?

Answer 36

the focus of decision making on short-term priorities and objectives, often at the expense of long-term opportunities and goals

Question 37

how can a buoyant local economy increase labour turnover?

Answer 37

workers have more choice and may be able to find work opportunities elsewhere

Question 38

define capital employed

Answer 38

the total amount of capital invested in a business (total assets-current liabilities)

Question 39

gearing ratio formula

Answer 39

gearing=non-current liabilities/capital employed x 100

Question 40

define gearing ratio

Answer 40

a measure of the proportion of a company's capital funded by debt (e.g loans)

Question 41

ROCE formula

Answer 41

ROCE=operating profit/capital employed x 100

Question 42

how can a business reduce gearing? ( 3 ways)

Answer 42

-repaying loans -issuing more shares to create further share capital -retaining more profits to avoid further borrowing

Question 43

define ROCE

Answer 43

a measure of how effectively a business uses capital invested to generate profit

Question 44

define statement of financial position

Answer 44

it shows the financial structure of a business at a specific point in time, identifies the business's assets and liabilities, and specifies the capital used to fund the business

Question 45

define ratio analysis

Answer 45

extracting info from financial accounts to assess business performance

Question 46

what is the statement of comprehensive income?

Answer 46

it shows the income and expenditure of a business over a period of time and calculates the amount of profit made.

Question 47

define a transformational leader

Answer 47

someone who brings extensive changes to a business's aims, objectives, structure and culture with a new strategic direction and vision

Question 48

define divestment

Answer 48

the process selling assets or discontinuing investments

Question 49

what is succession planning?

Answer 49

it involves identifying and developing current employees who have the potential to move into key roles in the future

Question 50

what is a business continuity plan?

Answer 50

it sets out how a business will operate following a serious incident or disaster and how it expects to return to normal as soon as possible

Question 51

define organisational culture

Answer 51

the shared values, beliefs ad norms that shape the behaviour and attitudes of employees within a business