Unit 3 business-definitions Flashcards
corporate objective definition
a specific performance goal set by senior management for the business to achieve over time.
define functional objective
the day-day goal of functions/departments within a business, derived from the overall corporate objectives
what does ansoff’s matrix identify?
an appropriate corporate strategy to achieve the objective of growth and the level risk associated with the chosen strategy
what is the aim of portfolio analysis?
carry out a detailed evaluation of a full range of products so appropriate strategies can be identified and pursued
what is a distinctive capability?
a particular business strength that is very difficult for competitors to copy
Define overpayment in the context of mergers and takeovers
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.
define niche market
a small market segment with specific needs or preferences that are not being met by mainstream products or services
define ansoff’s matrix
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.
what is a synergy in the context of mergers and takeovers?
a benefit resulting from the combination of two or more companies, such as increased revenue, cost savings or improved product offerings.
define risk bearing economies
when a firm can spread the risk of failure by increasing its number of products, which lowers the average cost
define takeover
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
define organic growth
organic growth (internal) is growth that is driven by internal expansion using reinvested profits or loans.
What does forward vertical integration involve?
a merger or takeover with a firm further forward in the supply chain
what is overtrading?
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)
what is horizontal integration
a firm merges or acquires another firm in the same industry/market, and at the same stage of the production process.
what is the advantage of small firms targeting niche markets?
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
define external economies of scale
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.
4 financial rewards of mergers and takeovers
-increased market share
-cost savings as a result of synergies
-increased company value
-higher sales revenue as a result of entering new markets
internal economies of scale
a reduction in average costs as a result of the growth in the scale of production within the firm
define extrapolation
the prediction of future sales from past data, often done by extending a line of best fit
define investment appraisal
comparing the expected future cash flows of an investment with the initial outlay of that investment to see if it will generate acceptable returns
formula for total float
total float= LFT for the activity-duration of the activity-EST
what is discounted cash flow?
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.
what is ARR?
it compares the average profit per year generated by an investment with the value of the initial outlay
what is critical path analysis?
a project management tool that calculates the minimum time required to complete a project, identifying activities which of delayed, could delay the entire project
what is a decision tree?
a quantitative method that traces the outcomes of a decision so that the most profitable decisions can be identified using estimates and probabilities
formula to calculate expected monetary value
expected monetary value= (expected value of success x probability) + (expected value of failure x probability)
what is a pressure group?
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
define sustainable sourcing
the practice of acquiring raw materials and components from sources that are environmentally and socially responsible
define business ethics
the principles and norms that govern business behaviour
example of a long-term approach to decision making
establishing nurturing, meaningful, and lasting relationships with suppliers
what is role culture?
key decisions are made by those with specific job roles. power lies with those with particular job titles rather than those with desirable skills
what is a person culture?
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.
what is the stakeholder approach?
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.
define task culture
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
what is short-termism?
the focus of decision making on short-term priorities and objectives, often at the expense of long-term opportunities and goals
how can a buoyant local economy increase labour turnover?
workers have more choice and may be able to find work opportunities elsewhere
define capital employed
the total amount of capital invested in a business (total assets-current liabilities)
gearing ratio formula
gearing=non-current liabilities/capital employed x 100
define gearing ratio
a measure of the proportion of a company’s capital funded by debt (e.g loans)
ROCE formula
ROCE=operating profit/capital employed x 100
how can a business reduce gearing? ( 3 ways)
-repaying loans
-issuing more shares to create further share capital
-retaining more profits to avoid further borrowing
define ROCE
a measure of how effectively a business uses capital invested to generate profit
define statement of financial position
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
define ratio analysis
extracting info from financial accounts to assess business performance
what is the statement of comprehensive income?
it shows the income and expenditure of a business over a period of time and calculates the amount of profit made.
define a transformational leader
someone who brings extensive changes to a business’s aims, objectives, structure and culture with a new strategic direction and vision
define divestment
the process selling assets or discontinuing investments
what is succession planning?
it involves identifying and developing current employees who have the potential to move into key roles in the future
what is a business continuity plan?
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
define organisational culture
the shared values, beliefs ad norms that shape the behaviour and attitudes of employees within a business
