Unit 7 Flashcards
What is a cooperate objectives
It is an objective that is set with the business as whole in in a time frame which will be aligned with SMART goals. to allow a business to achieve their mission.
- Cooperate objectives can lead to cooperate stratigies too.
Internal factors that influence cooperate objectives and decisons
-Business ownership: Types of ownership will have a different impact on the business e.g. sole traders and private limited companies will not be affected by short-termism
- Business culture: For decisons to be applied successfully will need to be aligned with the culture values in order to gain full support
- Business performance: Business performance will likely reflect on finance which in turn can affect the quality of how a business can run e.g. the quality of their employees.
External factors that influence corporate objectives and decisions
- Pressures for short-termism: Occurs when a business will have decison making which only has short term effects such as pleasing shareholder value. Which in turn can damage the long-term goals of an organisation due to the lacking fundamentals.
Examples of the causes of short-termism include:
- Pressures from investors for short-term outcomes
- Directors postions are dependent on shareholders
- the frequency of financial reporting e.g. red tape crisis
Strategy for a business
- A strategy is for a medium-long term value for a business.
Functional decision making
Refers to a decision which has been made to aim for the four fundamentals of a business which are :
- Finance
- HR
- Operations
- Marketing
What is SWOT analysis
Is an analytical tool which identifies the internal strength and weaknesses and the external opportunities and threats.
What is the value of SWOT analysis
- Managers can develop new stratiges which can build on the positives whilst alleviate the negatives
How can SWOT analysis be summed up
- Helps firms to identify their core competencies, which can help build on their strengths.
- Helps firms focus on their future given its past and present condition
- It’s a source of strategic planning
- Identifes the optimal ways to achieve gains for the business
What are liabilities
- They are what the business owes. What the business gain during the course of business obligations
What is capital employed
The value of total equity plus non-current liabilities.
- The total money invested into the business
What are Non-current liabilties
debts that will be repaid under 1 year.
What are assets employed
The value of non current assets plus current assets
What is profit quality
The level to which profit is likely to continue into the future.
How to work out capital employed
Net operating profit/captial employed X 100
What is liquidity
Measures the extent in which a business is able to pay their short-term debt.
Done by the current ratio analysis
What does the gearing ratio measure
The business leverage and shows the extent to which their operations are funded by loans rather than their equity
What is the gearing ratio
non current liablties/total equity + non current liablties X 100
How to calculate payable days
Payables/cost of sales X 365
How to calculate recievable days
Receivables/revenue X 365
What do receivable days mean
The number of days it takes to convert receivables into cash
What is inventory turnover
The number of times per period a business sells and replace its entire stock with inventories.
How to calculate inventory turnover
Cost of good sold/ average inventories
What comparisons can be made via fincial performance
- Compare against the previous year results to see how they can improve
- Compare results with any other business in the same industry
What is the historical nature of financial performance
- Changes in the economy
- Actions of competitors
- Advancements on technology
What is window dressing in assessing financial performance ?
- Made to appear better than they actually are e.g.
- One off events e.g. the sale of an asset
- Using intangible assets to up the brand value such as branding.
- Short-term borrowing to up their cash-flow positon
What are core competencies ?
- Is another way of looking at the key strengths of a business.
- It gives a company one or more competitive advantage when it comes to creating and delivering value to the customer.
What are the cons of core competencies
- Problems may occur with outsourcing. In order for a business to focus on its core competencies it may need to lose control of other factors of the business.
- Consumer needs change over time therefore the business will need to prepare for these changes
What should a core competency be ?
- Difficult for competitors to replace
- Provide opportunities for a business to expand in new markets
- Provide significant benefit to customers
What to do after identifying a core competency
- They need to be nurtured and protected due to the fact that they can detioriate overtime therefore a strategy should take place to defend this and maximise potential
What industry may short-termism thrive in ?
- Types of fast moving industries such as technological or social media.
How can long-termism be achieved ?
- Investment in research and development of new products and processes
- Focusing on customer satisfaction and loyalty
- Focus on employee engagement and loyalty
What is the reason for the Kaplan and Norton Scorecard model
- It attempts to achieve a balance between financial and other measures of performance to sustain long-term performance.
- The model recommends that managers track a small number of key measures.
What measures are included in the Kaplan scorecard ?
- Financial :
revenue
cash flow
asset value - Customer
Satisifaction
retention
market share
brand strength - Internal business process
Orders
Inventory
Cycle time
quality control - Learning/growth
Skills
Education
Turnover
Satiscation of employees
Cons of the Kaplan scorecard
- Complex, some areas are difficult to quantify
- Achieving the right balance is difficult
Pros of the Kaplan scorecard
- Provides a broader view and may detect weaknesses early
- Employees are able to see the importance within the organisation which can be a motivator
What is Elkington Triple bottom line
- Emphaises the three Ps:
Profit
People
Planet
What does the triple bottom line intend to do ?
- The economic value of business relations to the benfit of surroudings such as people and planet.
- Fair pratices in labour employment and the community in which it operates in
- The use of sustainable pratices and the reduction of environmental impacts
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