unit 7- strategic position Flashcards
what does the mission and corporate objectives set out
what the business aims to achieve
what does a mission statement set out
the purpose of a business existing
what are the 5 things the mission statements tend to focus on
- values of the business
- long term aim of the business
- impact the business tends to have on society
- importance of different stakeholder groups
- scope of the business (the areas in which it operates)
what are the 5 influences on missions
- the values of the founders
- the industry the business is in
- the views of society
- the size of the business and the type of ownership
- the culture of the business
what do the corporate objectives quantify
the mission of a business and set specific and measurable targets for the whole organisation
what are the 7 focuses of the corporate objectives
- growth
- shareholder value
- social responsibility
- profitability
- market standing
- innovation
- sustainability
what are the 5 external factors that affect corporate objectives
- economic conditions
- social change
- technological change
- global prices
- actions of competitors
what are the 5 internal factors that affect corporate objectives
- poor performance
- new leadership
- business ownership
- business culture
- business growth
what is short termism
the pressure on achieving short term gains over long term sucess.
what is a strategy
long term plan (A) or approach that a business will take to achieve its objectives (B)
what do strategies involve
a major commitment to resources
what are tactics
day to day decisions taken by middle managers
what is SWOT analysis
a strategic tool that a business can use to analyse its current position and the external factors that might affect it
what does the S in SWOT stand for
strengths
what does the W in SWOT stand for
weaknesses
what does the O in SWOT stand for
opportunities
what does the T in SWOT stand for
threats
what are the 3 benefits of SWOT analysis
- assists strategic thinking in a structural way
- low cost, simple approach
- can be combined with other decision making models
what are 3 limitations of SWOT analysis
- subjective- depends on opinions of manager
- does not offer clear solutions
- classification may depends on perspective
what does an income statement communicate
the revenue generated by a business and then the profit at various levels
what are the costs of goods sold
the direct costs associated with the production and sale of the product or service
what is gross profit
the profit after direct costs have been deducted. gives a broad indication of the success of a business’ trading activity
what is admin/rent/ salaries
operating costs are then deducted from gross profit
what is operating profit
the profit left after other indirect operating costs have been deducted
what are exceptional expenses and income
these could be expenses or incomes not associated with the direct activity of the business. they may be one off items. they are kept separate in order to give an indication of the quality of the profit
what is net profit
what a business has left to re invest or return to shareholders/owners after tax has been deducted
what is a balance sheet
a financial document that records the assets and liabilities of a business
what are non current assets
used to operate the business and include land and machinery and brands and patents
what are current assets
assets that the business expects to use or sell within the year. these can be converted into cash to pay of liabilities
what are current liabilities
payments due within a year
what are net current assets
current assets-current liabilities= the working capital a business has available
what are non current liabilities
debts that a business doesn’t expect to pay within a year
what are net assets
total assets-total liabilities = the value of the business
what is total equity
it represents how a business has been financed
what is a profitability ratio
provides a key measure of success for a business comparing profit to revenue and investment
what is efficiency ratio
provides an indication of how well an aspect of a business has been managed
what is liquidity ratio
assesses the ability of a business to pay its debt
what is gearing ratio
assesses the extent to which a business is based on borrowed finance
how to calculate gross profit
revenue - costs of good sold
how to calculate gross profit margin
gross profit / revenue x 100
how to calculate operating profit
gross profit - overheads (operating costs
how to calculate operating profit margin
operating profit / revenue x 100
how to calculate net profit
total revenue - total expenses
how to calculate net profit margin
net profit/ revenue x 100
how to calculate return on capital employed (ROCE)
operating profit/ capital employed
what is capital employed
it is the total equity plus any non current liabilities
how to work out the current ratio
current assets / current liabilities
how to work out gearing ratio
non current liabilities / total equity + non current liabilities x 100
what are highly geared business vulnerable to (50% or more)
increases in interest rates
what is the benefit of being a low geared business
might have the opportunity to borrow funds in order to expand
how to calculate the inventory turnover ratio
cost of goods sold / average inventories held
how to calculate receivable days ratio
receivables / revenues x 365
how to calculate payables days ratio
payables / cost of sales x 365
