3.1 - Business Objectives and Strategy

Question 1

Define Aims

Answer 1

Are things the business intends to do in the long term

Question 2

Define a mission statement

What is its use

Answer 2

Is a formal statement which explains the overriding purpose and values of a business

Done to make a commitment to its customers and used to bring a firms workforce together with a shared purpose

Question 3

What will different stakeholders look for in a mission statement (6)

Answer 3

Owners - will want to maximise shareholder value
Managers - will look to core aims and objectives to lead their employees with
Employees- will look for motivational statements that make them feel proud to work for the business
Pressure groups- look for a clear environmental/ethical message
Customers - look to see ethical core principles
Competitors- look to see of the business is competitive, organised and innovative

Question 4

What are the possible limitations of mission statements

Answer 4

Can be unrealistic
Can be a waste of management and time
Can lead to conflicts if not properly written
Can become obsolete as the business develops

Question 5

Define corporate objectives

Answer 5

Are objectives of a medium to large sized business as a whole with a corporate vision

Question 6

Define departmental and functional objectives

Answer 6

Are objectives of a department within a business

Question 7

Define corporate strategy

Answer 7

Is a medium to long term plan for achieving the corporate objectives

Question 8

Define Ansoff’s matrix

Answer 8

Is a marketing model that can be used to help a business decide its strategic direction in terms of growth

Question 9

Describe 
Market penetration 
Market development 
Product development 
Diversification 
In terms of Ansoffs matrix

Answer 9

Market penetration - existing product in a existing market
Market development - existing product in a new market
Product development - new product in a existing market
Diversification- new product in a new product

Question 10

Define Market penetration in Ansoffs matrix

Advantages and disadvantages

Answer 10

Is a growth strategy where the business focuses on selling existing products into existing markets

A:
Good knowledge of customers and consumers
Easier to sales forecast

D:
Lack of ambition may demotivate employees

Question 11

Define Market development in Ansoffs matrix

Advantages and disadvantages

Answer 11

Is a growth strategy aimed at expanding the market through new users

A: Huge potential Economies of scale
D: Means changes in distribution channels, legislation and managing staff

Question 12

Define Product development in Ansoff’s matrix

Advantages and disadvantages

Answer 12

Is a growth strategy involved in bringing a new product to the market.

A: Avoid decline stage of the product life cycle
D: High risk level, can be expensive

Question 13

Define Diversification in Ansoff’s matrix

Advantages and Disadvantages

Answer 13

Is a growth strategy aimed at reducing risks by expanding the range of products sold

A: Motivates employees, can lead to drastic growth if successful
D: Very high risk, may effect performance of existing products in other markets

Question 14

Define Porters strategic matrix

What are the three factors of the matrix

Answer 14

Identifies the sources of competitive advantage for a business

Cost Leadership
Differentiation
Focus (cost and differentiation)

Question 15

Explain Cost leadership as a strategy in porters matrix

Answer 15

Involves striving to be the lowest cost provider in the market to increase profits and market share

Question 16

Explain differentiation as a strategy in porters matrix

Answer 16

Involves a business operating in a mass market but adopting a unique position through quality, design and customer service to charge a premium price

Question 17

Explain Focus strategy as a strategy in porters matrix

Answer 17

Cost focus - emphasis on minimum costs within a niche market

Differentiation focus - pursuing different strategies within a focused market

Question 18

Define Kay’s theory of distinctive capabilities

Answer 18

Is that a business has a valuable capability that it possesses but other firms have difficulty replicating

Question 19

What are the types of distinctive capabilities

Answer 19

Architecture- refers to the contracts and relationships with an organisation to grow

Reputation- refers to the positive associations a business builds , linking closely to brand image

Innovation- refers to a new product or process to grow

Question 20

Define portfolio analysis

Answer 20

Is a method of categorising all the products of a firm to decide where each fits within the strategic plans (boston matrix)

Question 21

Define SWOT analysis

Answer 21

Is an analysis of the internal strengths and weaknesses of the business and the opportunities and threats presented by its external environment

Question 22

Explain an Internal Audit

What are examples of what it includes

Answer 22

Is an analysis of the business itself and how it operates , identifying the strengths and weaknesses.

Products and their costs and quantity
Finance, profit, assets and cash flow
Production, capacity and efficiency

Question 23

Explain an External Audit

Give examples of what it includes

Answer 23

Is an analysis of the environment in which the business operates

Size and growth potential of the market
Characteristics of customers in the market
Number and size of competitors
PESTLE factors

Question 24

Explain strengths as a part of SWOT analysis for a business

Give examples

Answer 24

Are positive aspects of the business that may be identified , what helps make the business successful.

Highly motivated and loyal workforce
A product with a USP
Loyal customer base

Question 25

Explain weaknesses as a part of SWOT analysis for a business Give examples

Answer 25

Are negative aspects of a business that may be identified , undermining the performance of a business Poorly motivated workforce with high staff turnover Poor cash flow and high debt Outdated capital

Question 26

Explain Opportunities as a part of SWOT analysis for a business Give examples

Answer 26

Are the options that a business may be able to exploit that could result in improvements New overseas markets opening up Fall in the cost of a raw material Fall in the exchange rate

Question 27

Explain Threats as a part of SWOT analysis for a business Give examples

Answer 27

Are the possible hazards that have the potential to damage the performance of the business New entrant in the market A looming recession New legislation

Question 28

What are the advantages and disadvantages of SWOT analysis for a business

Answer 28

``` A Source of information for strategic planning Helps in setting objectives Maximises response to opportunities Minimises level of threat ``` D Time consuming Can be expensive

Question 29

What can PESTLE analysis be used for

Answer 29

Shows the impact of external influences on a business

Question 30

What are political examples which can effect a business (3)

Answer 30

Members leaving or joining the EU, disrupting the financial markets Improved national security restricts the movement of goods Pressure groups who aim to reduce the consumption of a product

Question 31

What are economic examples which can effect a business (3)

Answer 31

Falling unemployment might increase demand for a product Lower interest rates makes borrowing cheaper and encourages investment Some businesses may suffer during a recession

Question 32

What are social examples which can effect a business (3)

Answer 32

More people going to university increases workforce quality Increased migration makes recruitment easier People becoming healthier creates opportunities for certain businesses

Question 33

What are technological examples that can effect a business (3)

Answer 33

Changes in technology can shorten product life cycles Developments in technology allows capital to replace labour, lowering unit costs Development of social media improves communications with customers

Question 34

What are legal examples which can effect a business

Answer 34

Businesses in the food industry are under pressure to reduce sugar in salt Advertising on cigarettes has been banned Legislation can effect tax laws

Question 35

What are environmental examples which can effect a business

Answer 35

People are buying more ethical and environmentally friendly goods New ways of generating power using renewable sources Trends in using recycled resources in production

Question 36

What is a competitive market What are the positive and negative outcomes for a business

Answer 36

Is where there is a large number of buyers and sellers, where products are close substitutes. Positive outcome -> Increased productivity (employees are more motivated) , increased innovation (product and process) Negative outcome -> Increased costs (advertising, promotions, customer service, training), decreased revenues, decreased profit

Question 37

What is a uncompetitive market What are the positive and negative outcomes for a business

Answer 37

Is where a market is dominated by a single producer (monopoly) or a few large businesses (oligopoly) Positive outcome -> Decreased costs, Increased revenues, increased profits Negative outcomes -> X-inefficiency, less innovation , government observation for monopolies, collusion for oligopolies

Question 38

Explain Porters five forces model What is its impact on a business

Answer 38

Is a framework for analysing the nature of competition within a industry. The ultimate aim of the competitive strategy is to cope with and potentially change the factors in favour of the business to boost returns

Question 39

List Porters Five Forces

Answer 39

``` Bargaining power of suppliers Bargaining power of buyers Threat of new entrants Substitutes Rivalry amongst existing firms ```

Question 40

Explain Bargaining power of suppliers as part of Porters Five Forces Model

Answer 40

Describes the power suppliers have over a business. Limiting the power, by seeking out new suppliers to increase competition or growing vertically to become a supplier, will improve the competitive position of the business.

Question 41

Explain Bargaining power of buyers as part of Porters Five Forces Model

Answer 41

Describes the power customers and businesses have over suppliers. If businesses have considerable market power they will be able to force suppliers to offer lower prices.

Question 42

Explain the Threat of new entrants as part of Porter Five Forces

Answer 42

Describes how easy it is for new firms to enter the market a business is operating in, barriers to entry. Firms can deter new entrants by creating patents/landmarks or developing strong brand loyalty

Question 43

Explain Substitutes as part of Porters Five Forces Model

Answer 43

Describes the amount of similar products sold by competitors. A firm can reduce substitutes through research and development to develop a USP and also predatory pricing to drive substitutes out of the market.

Question 44

Explain rivalry among existing firms as part of Porters Five Forces model

Answer 44

Describes the degree of rivalry which determines prices and profits for every single firm in the market. Firms can reduce this by collusion, mergers or instead bringing out new products