Unit 7 Flashcards
Analysing the strategic position of a business
Mission
-the mission of a business is its core purpose and focus
-it’s reason for existence
-normally set out in a written mission statement
Corporate objectives
The goals set for the business as a whole that will lead to the achievement of the mission
Short termism
An excessive focus on short-term results (profit) at the expense of long term interests
Pressures for short termism
-pressure from investors for short term outcomes
-the fact that directors’ positions are dependent on shareholders
-the frequency of financial reporting and scrutiny of the media
Strategy
A plan of action to achieve a long term goal. It relates to what needs to be achieved.
Tactics
Relate to the short term actions necessary to achieve the plan or strategy
Functional decision making
The decision making within functional areas of business: marketing, finance, operations and Human Resources.
Examples of strengths from SWOT analysis
-specialist marketing expertise
-a new, innovative product or service
-the location of the business
-quality processes and procedures
-any other aspect of the business that adds value to the product or service
Examples of weaknesses in SWOT analysis
-a lack of marketing expertise
-undifferentiated products or services (i.e in relation to competitors)
-the location of the business
-poor quality goods or services
-a damaged reputation
Opportunities from SWOT analysis
-a developing market such as the internet
-mergers joint ventures or strategic alliances
-moving into new market segments that offer improved profits
-a new international market
-a market vacated by an ineffective competitor
Threats from SWOT analysis
-a new competitor in the home market
-price wars with competitors
-a competitor that has a new innovative product or service
-competitors that have superior access to channels of distribution
-taxation is introduced on the product or service
What is the value of SWOT analysis?
-helps a firm to identify its core competencies, enabling it to build on its strengths
-it helps a firm to focus on the future, given its past and present condition
-it may identify opportunities that a firm can focus on to achieve maximum gains
-it is a source of strategic planning as well as marketing
-it helps the firm to redefine and set its overall objectives
Balance sheet
A report that summarises all of an organisation’s assets, liabilities and equity at a given point in time
What are assets?
Anything that a business owns, benefits from or has the use of generating income
What are tangible assets?
Physical assets such as land, buildings and machinery.
What are intangible assets?
Non-physical assets such as patents, copyrights and goodwill.
What are non-current assets?
Assets that remain at the business longer than a year. Examples include land, buildings, vehicles, machinery and equipment.
What are current assets?
Assets owned for less than a year and include inventories, receivables and cash.
What are liabilities?
What a business owes; the legal debts or obligations that arise during the course of business operations.
Current liabilities
Debts of a business that will be repaid within 1 year and include payables, overdrafts and any corporation tax or dividends due for payment.
Non current liabilities
Debts of a business that will be repaid in more than 1 year and include bank loans, mortgages and debentures
Shareholders’ equity
The money attributable to the business owners, including money invested by shareholders together with any reserves and retained earnings.
Working capital
The cash available to a day to day business for its day to day operations; it provides a measure of the business’s short term financial health, and is calculated as current assets less current liabilities
Net assets of a business
The overall worth of a business to its shareholders and is the difference between non-current assets and working capital less non current liabilities
