Unit 7a - Mission, corporate objectives and strategy notes (includes SWOT)

Question 1

What is a mission statement ?

Answer 1

A mission statement sets out the purpose of an organisation and gives its reasons for existing.

Question 2

What do mission statements commonly focus on?

Answer 2

• What the business wants to be.
• The values of the business.
• The range of the firms activities.
• The importance of different groups, such as employees, customers and investors.

Question 3

What is the purpose of a mission statement?

Answer 3

• By setting a mission- everyone within the business knows what they should be doing.
• All their actions should be directed towards the same thing.
• This should make decision making easier- when faced with a series of options, managers can compare them in relation to the businesses mission statement.
• They can also motivate employees- as they know why they are employed and what the business is trying to achieve.

Question 4

What is the difference between a mission statement and a vision statement?

Answer 4

• Mission statement: states a businesses purpose- why it exists.
• Vision statement: sets out what it wants to do or be in the future.
• Mission statement: relates to the businesses current position and is intended to provide information to stakeholders.
• Vision statements: tend to be longer term as they look to the future and can be a source of inspiration to stakeholders such as employees and suppliers.

Question 5

What do each do?

• Mission statement
• Vision statement
• Strategy
• Corporate objectives

Answer 5

Mission: Purpose & reason for existing.

Vision: The businesses aspirations.

Strategy: The plan to achieve the vision.

Corporate objectives: Targets within the plan and measures of success.

Question 6

What will influence a businesses mission?

Answer 6

• The values of the founders of the business.
• The values of the businesses employees.
• The industry of which the business is part.
• Societys views.
• The ownership of the business.

Question 7

What are corporate objectives also known as ?

Answer 7

Strategic!

Question 8

What are corporate objectives?

Answer 8

• They are medium to long term goals established to coordinate the business.
• They turn the mission statement into something more quantifiable. Rather than simply being a statement of intent, an objective sets out clearly what has to be achieved.

Question 9

What corporate objectives may not be easy to measure?

Answer 9

Those related to social responsibility.

Question 10

What are some corporate (strategic) objectives?

(8)

Answer 10

Market position- share of sales in new/ exisiting market or growth rate.

Innovation- invention/ development of new goods/ services/ new processes or methods of producing/ supplying new products.

Financial resources- amount of capital available/ its sources and how will be used.

Physical resources- Buildings/ land/ equipment & technological resources available to the business.

Human resources- Motivation/ engagement amongst employees.

Productivity- efficient use of resources to gain the maximum output from minimal inputs.

Social responsibility- Has become more common as businesses have responded more fully/ openly to stakeholder needs.

Profits- Overall level of profit/ profit measured against other factors such as revenue/ capital invested.

Question 11

What are strategic decisions?

Answer 11

They are judgements made by senior managers that are long term, involve a major commitment of resources and are difficult to reverse.

Question 12

What are external influences on corporate objectives and strategic decisions?

Answer 12

• State of the economy.
• Global prices.
• Technological changes.
• Migration

Question 13

What are internal influences on scorporate objectives and strategic decisions?

Answer 13

• Performance.
• New leader.
• Business culture.

Question 14

What is short-terminism?

Answer 14

The pressure to deliver quick results to the potential detriment of the longer term development of a company.

Question 15

What are the possible problems with short-terminism?

Answer 15

• Can prevent senior managers thinking in the long term may act as a disincentive to setting corporate objectives which encourage strategic decisions like research into new products & processes, training of employees to provide high level skills and creating new production facilities which may only break-even in the long term.
• Instead- it encourages decisions which frequently involve cost-cutting and loss of jobs. Critics argue it prevents the UK developing businesses that are internationally competitive and are essential to the future success of the economy.

Question 16

What are tactical decisions?

Answer 16

They are short-term decisions- taken by junior managers, usually involving relatively few resources, that are made to implement a strategy- they also tend to involve less uncertainty.

Question 17

What are the differences between strategic & tactical decisions?

Answer 17

Strategic decisions:

• Long-term
• Involve high commitment of resources.
• Difficult to reverse.
• Usually taken by senior management.

Tactical decisions:

• Short-term
• Fewer resources involved.
• Easier to reverse.
• Normally taken by the junior management.

Question 18

What is a functional decision?

Answer 18

A functional decision is a judgement taken by managers responsible for one aspect of a businesses activities such as marketing/ human resources.

Question 19

What is SWOT analysis?

Answer 19

A method of strategic analysis which considers the internal & external environments of a business.

S- Strenghts
W- Weaknesses
O- Opportunity

T- Threats

Question 20

Swot analysis

What may be in a businesses strengths?

Answer 20

• A high level of cash.
• A strong brand name.
• A good distribution network.
• Highly skilled and loyal staff.

Question 21

Swot analysis

What may be examples of weaknesses a business may have?

Answer 21

• Large amounts of long-term borrowing.
• Under utilised capacity.
• A low net profit margin.
• A lack of new products under developing.
• A damaged reputation
• Poor quality goods/ services
• Undifferentiated products to your competitors.
• Lack of marketing expertise.

Question 22

Swot analysis

What opportunities may a business benefit from?

Answer 22

• Growth in a major market.
• An alliance with a competitor to develop new technology.
• Rising income levels amongst target consumer groups.

Question 23

Swot analysis

What are future threats a business may have?

Answer 23

• Being taken over by a larger competitor.
• A change in consumer tastes leading to a significant fall in demand.
• New laws increasing the businesse’s costs of production.
• New competitor in your market.
• Taxation introduced
• Price wars with competitors.
• Competitors that have new, innovative products/ services.

Question 24

From SWOT analysis- managers can develop a strategy or range of strategies that seek to do what?

Answer 24

• Build on strengths to exploit opportunities.
• Reduce or eliminate their weaknesses.
• Protect the business against threats.

Question 25

As SWOT analysis is not a one off exercise- what must happen?

Answer 25

Given a business is subject to constant change in its internal and external environment, this should be constantly monitored and analysed and strategies should be adjusted accordingly.

Question 26

What are the benefits of SWOT analysis?

Answer 26

• Low cost & straightforward technique- can be used by managers in all types of businesses- may be suitable to assist managers of small businesses in devising strategy.
• Its a source of strategic planning- as well as marketing.
• Helps a firm to identify its core competencies- enabling it to build on its strengths.
• Helps firm focus on its future- given its past & present condition.
• Can assist managers to think in a structured way, focus on both the internal operations of the business and its external environment.
• Encourages management teams to develop plans that are logical in the context of the businesses current position, whilst actively promoting a forward-looking approach which should be a central element of business planning.
• SWOT analysis & especially the ‘threat’ part of the analysis can help the managers to recognise and assess the risk which is an important part of making strategic decisions.
• Can be combined effectively with other management techniques such as PEST-C analysis to help to develop a businesses strategy.
• Can be used within a businesses functions, e.g. as an important part of developing a marketing strategy.

Question 27

What are the weaknesses of SWOT analysis?

Answer 27

• Only covers issues that can be classified as strength, weakness, opportunity or threat. Can be difficult to address uncertain/ two-sided factors, such as factors that could either be a strength weakness or both
• It can provide a lot of information but is unlikely to offer any solutions and its results will require further analysis by managers. Any benefit from the analysis will depend on the quality of the interpretation - if this is poor then the analysis is likely to be of little value
• The analysis offers no assistance to judging the relative importance of SWOT in contributing to the development of a strategy. As a consequence managers may underestimate the importance of one or more of the four elements
• Decisions on a business’s strategy should be based on reliable, relevant and comparable data. However SWOT analysis can be subjective depending on the opinions and positions of those collecting and analysing the data
• A SWOT analysis is only as good as the data on which it is based, if data used is poor the analysis is unlikely to be useful. The data can become outdated quickly.