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biz! > Unit 7-analysing the strategic position of a business > Flashcards

Unit 7-analysing the strategic position of a business Flashcards

1
Q

what is a business’s mission?

A

its core purpose an focus, its reason for existence, normally set out in a written mission statement

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2
Q

what is meant by the philosophy and values of a business?

A

the set of beliefs and principles that a business works towards, and explains it’s overall goals and purpose

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3
Q

what is meant by corporate objectives?

A

goals set for the business as a whole that will lead to the achievement of the mission
-must be SMART

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4
Q

what are some internal factors that affect corporate objectives?

A

-business ownership: the type of ownership will likely have an impact on objectives
-business culture: collective beliefs, values and attitudes within a business
-business performance: has an effect on the resources available, finance available, HR etc

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5
Q

what are some external factors that affect corporate objectives?

A

-pressures for short-termism: excessive focus on short-term decisions/ results.
-changes in the economy
-government policy
-environmental factors
-demographic trends
-competitor’s actions
-technology

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6
Q

what is a strategy?

A

a plan of action to achieve a long-term goal. it relates to what needs to be achieved

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7
Q

what are tactics?

A

short-term actions necessary to achieve the plan or strategy

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8
Q

what is functional decision making?

A

the decision making within the functional areas of business: marketing, finance, ops and HR

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9
Q

what is a SWOT analysis?

A

measures the internal:
-strengths
-weaknesses
and the external:
-opportunities
-threats

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10
Q

what is the value of a SWOT analysis?

A

-helps identify core competencies
-focus on the future
-may identify opportunities
-source of strategic planning
-helps to redefine and set it’s overall objectives

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11
Q

what does a balance sheet represent?

A

a snapshot of a business’s financial position at a given time. Shows what a business owns (assets) and what it owes (liabilities, including shareholder’s equity)

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12
Q

what are assets?

A

-assets: anything that a business owns, benefits from or has the use of in generating income

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13
Q

what are tangible and non-tangible assets?

A

-tangible: non-physical assets such as land, buildings and machinery
-non-tangible: non-physical assets such as patents, copyright and goodwill

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14
Q

what are liabilities?

A

what a business owes; the legal debts or obligations that arise during the course of business operations

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15
Q

what are current liabilities, non-current liabilities and shareholder’s equity?

A

-current: debts that will be repaid within 1 year and include payables, overdrafts and corp tax
-non-current: debts that will be repaid in more than 1 year and include bank loans, mortgages and debentures
-shareholder’s equity: the money attributable to the business owners, including money invested by shareholders, reserves and retained earnings

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16
Q

what is working capital and what is the formula?

A

the cash available to a business for its day to day ops; provides a measure of the business’s short-term financial health.
>current assets - current liabilities

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17
Q

what are net assets (or net worth) of a business and what is the formula?

A

shows the overall worth of a business to it’s shareholders and is the difference between non-current assets and working capital - non-current liabilities

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18
Q

what does an income statement measure?

A

a company’s financial performance over a specific accounting period.

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19
Q

what are the 2 ways in which profit can be used?

A

-retained profit: profit kept within the business to fund expansion or capital investment
-distributed to shareholders: paid in the from of dividends

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20
Q

what is profit quality?

A

the degree to which profit is likely to continue into the future, eg: profit’s sustainability

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21
Q

what is ratio analysis?

A

a tool used in financial analysis to express relationships between an organisation’s accounting numbers in order to establish trends and comparisons

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22
Q

formula for return on capital employed (ROCE)

A

net operating profit / capital employed x100

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23
Q

what does liquidity measure?

A

the extent to which a business is able to pay it’s short term debts

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24
Q

current ratio formula

A

current assets / current liabilities

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25
Q

what is a gearing ratio?

A

a measure of an organisation’s leverage and shows the extent to which it’s operations are funded by loans rather than equity

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26
Q

gearing ratio formula

A

non-current liabilities/ total equity- non-current liabilities x100

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27
Q

payable days formula

A

payables/ cost of sales x365

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28
Q

receivable days formula

A

receivables/ revenue x365

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29
Q

what are efficiency ratios used for?

A

to analyse how well a business uses its assets and liabilities internally

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30
Q

what are inventories?

A

refers to a business’s holdings of raw materials, work in progress and finished goods

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31
Q

inventory turnover formula

A

cost of goods sold/ avg inventories

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32
Q

what do ratios need to be compared with for them to be useful?

A

-compared against previous year’s results to check for improving or declining rates
-compared with results from other businesses in the same industry

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33
Q

what is meant by ‘window dressing’?

A

actions taken by organisations to improve the appearance of their financial statements

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34
Q

what are some examples of how businesses might use window dressing?

A

-one off events such as the sale of an asset, which improves profit figure
-using intangibles such as a brand name and goodwill to create an inflated value for the business
-artificially improving the liquidity position of a business through a short term borrowing to improve the cash position
-bringing sales forwards to improve revenue

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35
Q

what data other than financial statements can be used to asses the strengths and weaknesses of a business?

A

-marketing data: the market itself, consumer behaviour, competition
-operations data: productivity, unit costs, quality, capacity utilisation
-HR data: labour productivity, absenteeism, labour turnover, labour costs per unit

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36
Q

what are core competencies?

A

the combination of pooled knowledge and technical capacities that allow a business to be competitive in the market place

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37
Q

what should a core competency be like?

A

-difficult so competitors can’t replicate
-provide opportunities for a business to expand into new markets
-provide significant benefits to customers

38
Q

what is outsourcing?

A

the subcontracting of non-core activities of an organisation to free up cash, time, personnel and facilities, thereby concentrating on other areas in which it has a competitive advantage

39
Q

how might a business achieve long-term sustainable shareholder value?

A

-investment in research and development of new products and processes
-focusing on customer satisfaction and loyalty
-focusing on employee engagement and loyalty

40
Q

what is Kaplan and Norton’s balanced scorecard model?

A

a strategic planning and management system that is used in organisations to align their activities to their mission and strategy

41
Q

what does the Kaplan and Norton’s balanced scorecard model include?

A

financial: revenue, expenses, net income, cash flow, asset value
customer: satisfaction, retention, market share, brand strength
Learning/ growth: employee satisfaction, skills, turnover,education
Internal business process: inventory, orders, cycle time, quality control, resource allocation

42
Q

adv of Kaplan and Norton’s balanced scorecard model?

A

-provides a broader view that may detect weaknesses early
-allows employees to see their importance within an organisation - motivation

43
Q

disadv of Kaplan and Norton’s balanced scorecard model?

A

-complex, some areas can be difficult to quantify
-achieving the right balance between the dimensions can be difficult
-it is dependent on the complier’s perspective

44
Q

what is Elkington’s triple bottom line and what does it focus on?

A

assesses an organisation’s performance through three dimensions of performance: social, environmental and financial
-profit
-people
-planet

45
Q

what is the importance of competition in terms of political and legal factors?

A

to promote efficiency of the market economy and to protect the consumer from excessive market power.

46
Q

what is a cartel?

A

where businesses or countries act together as a single producer in order to influence the prices, production and marketing of certain goods and services

47
Q

what is the importance of the labour market in terms of political and legal factors?

A

designed to prevent the exploitation of employees by businesses by businesses by regulating the relations between workers, employees and trade unions. It seeks to ensure reasonable working conditions and prevent exploitation and discrimination.

48
Q

what is the importance of environmental legislation in terms of political and legal factors?

A

it is designed to minimise the negative impact of businesses on the environment
-pollution
-climate change

49
Q

what is the environment agency?

A

a public body established in 1996 to protect and improve the environment and promote sustainable development

50
Q

adv of legislation

A

-businesses are treated the same, level playing field
-measures such as those anti-competitive behaviour may make it easier for firms to compete
-some businesses may already be operating above the standards set

51
Q

disadv of legislation

A

-increases the amount of bureaucracy and red tape
-likely to add costs

52
Q

what other areas does the uk government have an impact on?

A

-entreprise
-the role of regulators
-infrastructure
-the environment
-international trade

53
Q

what is enterprise?

A

refers to the willingness to take initiative in setting up or taking on a project or business venture

54
Q

what is a patent box?

A

a special tax or regime for intellectual property revenues that businesses have been able to elect to enter

55
Q

what is infrastructure?

A

the basic physical and organisational structures (transport, utilities communications, etc.) needed for the operation of society or enterprise

56
Q

what is GDP?

A

a measure of the value of all goods and services produced within a country over a specific time period, and as such provides a primary indicator of a countries economic health

57
Q

what is a business cycle?

A

shows the fluctuations in economic activity, as measured by GDP, that an economy experiences over time.

58
Q

what are the 4 stages of the business cycle?

A

-uprising/ expansion
-boom
-recession
-through/slump

59
Q

what are direct and indirect taxes?

A

-direct: taken directly from individual’s or organisations’ incomes
-indirect: taxes on expenditure

60
Q

what are the different types of tax?

A

-income tax
-corporation tax
-national insurance payments
-value added tax
-excise duty
-green taxes

61
Q

what are exchange rates?

A

the price for which the currency of one country can be exchanged for another country’s currency

62
Q

what is inflation?

A

the general increase in prices and the fall in the purchasing power of money

63
Q

what is the monetary policy committee (MPC)?

A

a committee of the bank of england that regulates interest rates in an attempt to maintain economic stability

64
Q

what might high inflation bring to a business?

A

-cost pressures: higher borrowing cost, higher material costs , pressure on wage rates
-reduced sales: lower demand, lower consumer disposable income, save more in periods of inflation

65
Q

what is fiscal policy?

A

the means by which the government adjusts its spending levels and tax rates to monitor and influence the country’s economy

66
Q

what are the effects of increases in taxation?

A

-increases indirect taxes such as VAT, higher prices, cuts customer demand
-producers may pay the increase in indirect taxes to avoid rising prices, cuts profits and may reduce investment levels by businesses
-increase in income tax leaves consumers with less disposable income, reducing demand

67
Q

what are the effects of decreases in taxation?

A

-reduces prices, may boost spending, especially for price-elastic products
-reductions in income tax result in consumers having higher incomes, increases demand for luxury goods
-falling corporate taxation promotes investment and output for the business,increasing economic activity
-restrictions in corporate tax might attract investment by foreign individuals and businesses

68
Q

what is monetary policy?

A

the process by which the monetary authority controls the money supply and interest rates in order to achieve healthy economic growth

69
Q

what is quantitive easing?

A

the introduction of new money into the money supply by a central bank through the purchase of predetermined amounts of government bond

70
Q

what is free trade?

A

the unrestricted purchase and sale of goods and services between countries

71
Q

what is protectionism?

A

refers to policies and actions by governments to restrict or restrain international trade, such as import tariffs, quotas or subsidies to local businesses

72
Q

what is globalisation?

A

the increased interdependence of economies, industries and markets around the world

73
Q

what are some reasons for greater globalisation of a business?

A

-improved transport
-technology
-more open trade
-multinational companies
-other reasons

74
Q

what are some positive reasons for globalisation?

A

-freer trade
-free movement of labour
-increased investment

75
Q

what are some negative reasons for globalisation?

A

-greater competition
-takeovers
-global economy

76
Q

what is an emerging market?

A

a national economy that is progressing towards becoming more advanced through rapid growth and industrialisation

77
Q

what is urbanisation?

A

the movement of people from the countryside to towns and cities

78
Q

why do consumer tastes change and evolve?

A

-changing fashion and inc awareness of alternative lifestyles
-rising incomes= afford more opportunities
-more leisure time= more opportunities
-advances in tech= convenient

79
Q

what are some benefits of the growth of online businesses?

A

-possible to buy anything from anywhere in the world
-possible to operate via a website and distribution centres, retail floor spaces no longer needed (eg: Amazon, Asos)
-click and collect services for supermarkets
-high street declined in importance with shops such as Debenhams struggling to survive

80
Q

what do online business need to do to achieve its full potential in this internet age?

A

-high-quality, friendly website
-carefully targeted audience
-content that is increasingly personalised
-mobile capabilities for modern consumers
-integrated sale channels

81
Q

what are the benefits of technological change?

A

-lower costs- improved efficiency, reduced waste, reduced administration expenditure and distribution costs
-improved communication
-increased sales-access to wider markets
-working environment
-quality

82
Q

what are the implications of technology on each of the functional areas?

A

-ops: the way that products are designed and made
-marketing: in the way products are sold to consumers
-HR: skills required and working environment
-finance: costs and potential savings to be made

83
Q

what is the corporate social responsibility (CSR)?

A

a business approach that contributes to sustainable development by delivering economic, social and environmental benefits to all stakeholders

84
Q

reasons for CSR

A

-cost savings
-brand differentiation
-customer and employee engagement
-the ‘right thing to do’
-resources
-prevent government intervention

85
Q

reasons against CSR

A

-profit- more costly
-customer perception
-state of the economy
-the market
-stakeholder’s views

86
Q

what does Carroll’s corporate and social responsibility pyramid show?

A

the main areas that a business’s duties to its stakeholders falls under
-philanthropic: be a good corporate citizen
-ethical: be ethical, obligation to do what is right and fair, avoid harm
-legqal: obey the law, law is society’s codification of right and wrong
-economic: be profitable, the foundation upon which all others rest

87
Q

what are the pressures for greater social responsibility?

A

-pressure groups
-state regulation
-drive toward self-regulation
-the media
-consumer perception

88
Q

what are porter’s 5 forces?

A

an analytical that provides a framework for analysing the nature of competition within an industry
-threat of new entrants
-bargaining power of buyers
-threat of substitute products or services
-bargaining power of suppliers
all lead to: rivalry amongst existing competitors

89
Q

how do the 5 forces shape competitive strategy?

A

-cost leadership strategy: aims to gain a competitive advantage by having the lowest costs in the industry
-differentiation strategy: for the development of a product that offers unique attributes that are valued and perceived by customers to be different from those of competitors
-focus strategy: entails narrow competitive scope where a particular segment of the market is targeted

90
Q

what is investment appraisal?

A

it is a tool used to evaluate the attractiveness (or unattractiveness) of an investment proposal

91
Q

what are some factors that might influence investment decisions?

A

-the economy
-competitive environment
-industrial relations
-corporate image anad objectives
-logistics

92
Q

what is sensitivity analysis?

A

an analytical tool that enables the impact of a change in a variable or given project or investment to be examined

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