3.7- Analysing The Strategic Position Of A Business Flashcards
(132 cards)
1
Q
Corporate aims
A
What the business wants to achieve
2
Q
Mission statement
A
The overall reason for the business’s existence
(Puts corporate aims into words that inspire)
3
Q
Reasons for a business to have a mission statement
A
• consistency
• motivation
• clear goals
• team work
• increased productivity
4
Q
Reasons for a leader to use a mission statement
A
• easier decision making
• consistency
• positive effect on employees
• branding
5
Q
Factors that influence mission statement
A
• business size
• nature of the owners
• changes over time
• external factors (pestle)
• business performance
• strengths and opportunities
6
Q
Corporate objectives
A
The medium-long term target for the whole enterprise
7
Q
Influences on corporate objectives
A
• competitors
• changing in government policy
• negative publicity
• financial crisis
8
Q
Functional objectives
A
Objectives for each department
9
Q
Strategy
A
Medium to long term plan of action developed to achieve the business’s objectives
10
Q
Tactics
A
Short term plan for implementing strategy (day to day activities)
11
Q
Order the types of objectives/aims
A
Mission/corporate aim
Corporate objectives
Functional objectives
Strategies
Tactics
12
Q
What does SWOT stand for?
A
S- strengths
W- weaknesses
O- opportunities
T- threats
13
Q
In SWOT analysis which factors are external?
A
Opportunities and threats
14
Q
In SWOT analysis which factors are internal?
A
Strengths and weaknesses
15
Q
Advantages of SWOT analysis
A
• structured
• helps achieve objectives
• helps build a competitive advantage
• highlights threats and opportunities
• comparable with competitors
16
Q
Disadvantages of SWOT analysis
A
• time consuming
• external factors can change rapidly
17
Q
Core competences
A
The unique strengths of a business that cannot be easily replicated by a competitor
18
Q
difficulties of using non-financial methods
A
- doesn’t reflect profitability
- hard to source
- often difficult to judge over time
19
Q
short termism (and which performance methods are likely to be focused on)
A
having a ‘short termism’ approach tends to emphasise on certain performance methods such as
- share price
-revenue growth
-gross and operating profit
- unit cost and productivity
-return on capital employed
20
Q
long termism (and which performance methods are likely to be focused on)
A
having a ‘long termism’ approach tends to emphasise on certain performance methods such as
- market share
-quality
-innovation
- brand reputation
- development of employee skills and experience
- social responsibility and sustainability
21
Q
What are the 4 parts of kaplan and nortons balanced scorecard?
A
-financial perspective
- customer perspective
- company’s internal processes
- learning and growth
22
Q
Kaplan and nortons balanced scorecard
A
A planning and management tool designed to match a business’s activities to the aspiration set out in the organisation’s vision and strategy
(financial data alone is insufficient to measure a firm’s performance)
23
Q
KPI
A
key progress indicators, a quantifiable measure of performance over time for a specific objective
24
Q
Advantages of Kaplan and nortons balanced scorecard
A
- provides a broader perspective of business performance
- specific targets can be monitored
- links objectives more closely to strategy
- allows employees to see where their role fits in the business
- allows weaknesses to be spotted
25
Disadvantages of Kaplan and nortons balanced scorecard
- hard to balance
-difficult to quantify certain objectives
- too many targets can be demotivating
- does not cover sustainability
- time consuming
- opinion based
26
Triple bottom line model
People
Profit
Planet
(When all happen it’s sustainability)
27
what are the 3 areas of the triple bottom line and what do they overlap to make?
- people
- profit
- planet
overlap to create sustainability
28
Advantages of the triple bottom line model
- improved brand reputation
- minimises compliance risk ( prevents fines for environmental issues)
- improves sustainability
- improved investment opportunities
29
Disadvantages of the triple bottom line model
-may be difficult to assess non-financial inputs/outputs
- lack of comparability across groups
- may have competing strategies
- will increase cost of operations
30
political environment
the government actions that impact on the strategic and functional decisions made by a business
31
legislation
the process of creating and enacting laws in order to protect individuals, businesses and society as a whole
32
competition law
used to promote fair competition in markets and stop abuse of consumers (prevents monopoly power)
Takeovers and mergers are closely monitored ( eg. Tesco would not be allowed to merge with Sainsburys)
33
What can firms not do due to competition law?
- agree prices with competitors
- limit production in order to reduce competition
- partition markets or customers between each other (eg. operating in agreed areas to avoid competition)
34
Competition policy
seeks to improve the competitive nature of markets
35
How is competition policy achieved?
- curtailing monopoly power and protecting competitive markets
- restricting mergers and prohibiting cartels
- improving the way in which markets work
- creating fairness in markets
36
How much market share does business need to be considered a monopoly?
at least 25%
37
monopoly power
the ability of a business to set price above those that would be charged if there were competition
38
What are the benefits of competition law?
-lower prices
-improved quality
-increased choice
-innovation
-competitive advantages
39
What are the protected characteristics under the equality act 2010?
-age
-disability
-gender
-marriage and civil partnership
-pregnancy/maternity
-race
-religion
-sex
-sexual orientation
40
What are the 3 other rights do employees have other than the discrimination act?
- Employment relations act
(allowing trade union membership)
-Employee act
(uk law relating to dispute resolution)
-Children and families act
(shares parental leave and paternal pay. allows flexible working for all employees)
41
Labour market law
designed to protect the worker from discrimination within the workplace and to make it easier for businesses to recruit workers
42
Wage discrimination
when a business pays a worker a different rate when providing the same job
43
Labour market reforms
Labour market reforms engage in topics like unemployment benefits, labour laws, and the role and implications of trade unions, focusing on shaping the relations between workers, employers, and the government.
44
Arguments for increasing the national living wage
-encourages people to supply labour
-reduces inequalities
-reduces welfare burden
-increases demand in the economy
-improves standards of living
45
Arguments against increasing the national living wage
-may create unemployment
-interferes with the workings of the market
-reduces uk competitiveness
-lowers supply of goods and services as workers become too expensive, increasing business costs
46
Environmental law
legislation designed to influence the behavior of individuals and businesses in order to reduce the negative impacts on the natural environment
47
What are some things the government can do to reduce negative effects on the natural environment?
- limits to emission levels to sea, rivers and air
-guidelines, limits and bans on waste disposal
-quotas on use of finite resources
-imposing fines to businesses who do not comply with the above points
48
environmental protection act
businesses must improve the control of pollution arising from industrial and other processes
49
Environment Act
A business must clean up any contaminated sites that it owns
50
What are the 4 factors of production?
-Land
-Labour
-Capital
-Entrepreneurial skill
51
Why does the government support start up businesses?
-provide employment
- may grow to be much larger businesses
-provide future tax receipts
-can encourage start ups to be more environmentally friendly
-helps the uk to be more globally competitive
-may be able to relocate a start up in areas with low employment rates
52
What do regulators do?
-monitoring and regulating prices in the market
-maintain high standards of customer service
-open up new markets to competitive forces (aiming to remove barriers to entry)
53
regulation
is the creation of rules and sanctions within an industry in order to modify the economic behavior of firms
(undertaken by the government to create competitive markets)
54
De-regulation
the opening up of markets to new competition through the removal of rules and regulations that created barriers to entry
55
arguments for de-regulation
-making markets competitive will lead to greater efficiency
-businesses reduce costs
-businesses strive to meet consumer demand (reduce price and greater range of products)
56
What can governments do to improve infrastructure to make businesses more efficient?
-transport networks (improves ease and speed of connections eg. rail
-provision of utilities (ensuring electricity, gas, water etc are adequately supplied))
-provision of information (ensuring access to fast information eg. broadband)
57
Pollution permit
Permit which allow businesses to produce a legal level of pollution each year
-they are tradeable on the market, meaning if a business does not use them all they can sell them to other businesses
-this provides a business a financial incentive to reduce pollution
58
International trade
the exchange of goods and services between countries
59
GDP
measures the value of all goods and services produced in an entire economy over a period of time (usually a year)
-stands for gross domestic product
60
How is GDP calculated?
total consumer spending
+
business investment
+
government spending
+
value of exports
_
value of imports
61
Economic growth
consists of the key economic factors that influence the behaviour of businesses and their customers
62
How can economic growth be supported by the government and businesses?
-more government spending (improved infrastructure)
-subsidies
-grants
-paying workers fairly
-tax reductions
-increasing quality of labour (training)
63
Business confidence
how confident business are, linked closely to economic and political factors.
eg. if a business is not confident in the economy and government they're less likely to take out loans
64
What are the 4 parts of the business cycle? (GDP)
-Boom
-Recession/ downturn
-Slump/ depression
-Recovery/ upturn
65
Boom
A period characterised by:
-high levels of consumer spending
-high business confidence
-high profits
-high investment
-costs rise
-businesses work at full capacity
-high demand for luxury goods
-shortage of resources
66
What is on the x and y axis of the business cycle?
y- GDP
X- Time
67
Recession
(AKA: downturn, contraction)
a period characterised by:
-falling levels of demand
-decreasing profit
-lower business confidence
-lack of investment
-higher unemployment rates
-incomes go down
-a focus on survival
68
Slump/depression
A period characterised by:
-very low levels of consumer demand
-low levels of investment
-low levels of business confidence
-high unemployment rates
-increasing number of businesses fail
-deflation
-GDP low
69
Recovery/upturn
A period characterised by:
-slowly rising levels of consumer demand
-rising level of investment
-patchy but increasing business confidence
-production starts to increase
-potential shortages of resources and materials
70
Outsource
The practice of passing individual tasks, subareas, or business processes over to a third-party
71
Exchange rates
The price of one country's currency in terms of the other
72
Appreciation
An increase in the value of a currency or asset
73
Depreciation
A decrease in the value of a currency or asset
74
What does WPIDEC stand for?
Weak
Pound
Imports
Dearer (expensive)
Exports
Cheaper
75
What does SPICED stand for?
Strong
Pound
Imports
Cheap
Exports
Dear
76
Savings
Setting aside some money for future use (mainly used by individuals or retained profit in a business)
77
Investment
using money to make more money (has to be a fixed asset)
eg. savings (carry very little risk)
investment always carries risk
78
Fixed Asset
Assets which are for long-term use (usually 1 year+) and are not likely to be converted quickly into cash, such as land, buildings, and equipment.
79
Risks of investment
-market may change
-economic conditions may change
-fixed assets may be faulty and low quality
-opportunity cost may be higher than expected
-tech may advance more quickly than expected
80
Investment appraisal
the process of analysing whether investment projects are worthwhile
81
What are the types of investment appraisal?
- payback period
-average rate of return (ARR)
- net present value (NPV)
82
Payback period
the time it takes for a business to payback its initial investment
(measured in time)
83
How do you calculate payback period?
-keep a running total of the cashflows
-initial investment (year 0) is an outflow
identify the point when the running total moves from negative to positive
when the total flow becomes positive, that is the end of the payback period
84
What are the benefits of using the payback period as a method of investment appraisal?
-easy
-focuses on cashflow
-deals with speed (hi-tech/dynamic businesses)
-easy to compare to other projects
85
What are the disadvantages of using the payback period as a method of investment appraisal?
-ignored later returns
-money value changes
-may encourage short term thinking
-doesnt include qualitive aspects e.g. reputation
86
Net present value (NPV)
the net return on an investment when all revenues and costs have been converted to present value
87
Fiscal policy
Fiscal policy involves the use of government spending, direct and indirect taxation and government borrowing to affect the level and growth of aggregate demand in the economy, output and jobs.
There two main parts to fiscal policy:
Government spending
Taxation
88
Monetary policy
Monetary policy involves the use of interest rates and changes to the money supply to achieve relevant economic objectives.
The main objective of monetary policy has been keeping inflation low and stable. However, the Bank also tries to support stability of economic growth.
89
Balance sheet
Balance sheets provide a snapshot of the assets and liabilities of a business at a point in time
90
Assets
what a business owns
91
liabilities
what a business owes
92
Current assets
assets that will be used up or sold within a year (short term)
93
non-current/ fixed assets
assets that provide a benefit for a business in the long term
94
Current liability
what a business owes in the short term
95
non current/ fixed liabilities
what a business owes in the long term
96
calculation for working capital
current assets - current liabilities
97
calculation for Net assets
non-current assets
+
current assets
-
current liabilities
-
non-current liabilities
98
what is capital employed always equal to?
Net assets
99
Income statement
a financial statement showing a businesses revenues and costs and thus its profit or loss over a period of time
100
overheads
costs that do not alter when production changes
eg. fixed costs such as rent
101
liquidity
a firm's ability to pay their short term debts (current liabilities)
102
how do you calculate liquidity ratio
(AKA Current ratio)?
current assets : current liabilities
current assets/current liabilities
(eg. 3:1)
liquidity ration can also be known as working capital
103
What is the ideal liquidity ratio?
1.5: 1 to 2: 1
- a value below suggests liquidity issues
- value above shows assets may not be being used effectively
104
Gearing
investigates a firms reliance on borrowing and what proportion of capital invested has come from bank loans
105
Calculation for gearing
106
What percentage for gearing is considered high and low?
-if a business has a value above 50% it is said to be highly geared and is riskier
- if a business has a value of below 25% they're considered to have low gearing and may be sign of missing potential opportunities and not investing in growth
-there is no ideal level of gearing
107
Return on capital employed (ROCE)
return on capital employed lets owners and potential investors understand how efficient the business is at producing profit based on the capital invested into the business.
108
calculation for ROCE
operating profit/ capital employed x100
109
Efficiency ratios
These ratios measure how efficiently the business manages its assets and liabilities, which will also impact a firms liquidity
these include:
-inventory (stock) turnover
-receivables (debtors) days
-payables (creditors) days
110
Inventory turnover
measures how quickly inventory (stock) is converted into sales
111
calculation for inventory turnover
cost of goods sold / average inventory held (£)
the higher the value the better
112
Factors influencing inventory turnover
-popularity/demand
-type of product
-type of business
-change in consumer tastes
-quality of research
-product portfolio
113
Receivables (debtor) days
shows the number of days it takes to convert receivables into cash
(ie. how long it takes to collect debts from customers)
-measured in days
-firms that offer long credit periods will have higher values
114
calculation for Receivables (debtor) days
receivables / revenue x365
115
Payables (creditors) days
Shows the number of days it takes to pay any payables owed
ie. how long it takes to pay the suppliers
-measured in days
-a firm will want a high number as it gives them more days
116
calculation for Payables (creditors) days
payables/ cost of sales x365
117
strategic positioning
refers to how a business is perceived by customers compared to similar businesses in the market
118
Porter's five forces
The model is a framework for analysing the nature of competition within an industry
119
What are porter's five forces and describe them?
-The threat of new entrants
*barriers to entry
*start up costs
*loyalty of customers to existing
businesses
-The threat of substitutes
*more alternatives provides greater risk
*new tech changes buyer behaviour
*how easy it is for customers to switch
brand
-The bargaining power of customers
*how powerful customers are
*amount of customers
*customers have lots of power in
supermarkets as products from
similar brands are placed next to each
other
-The bargaining power of suppliers
*how influential suppliers are
*weak suppliers means businesses
dictate negotiations
*fewer suppliers means suppliers have
more power
-The intensity of rivalry
*how intense competition is
*most intense when similar power, slow growth, lots of businesses, similar size
120
Social environment
Social changes including demographic and population movements
121
Demographics
demographics describe the characteristics and make up of a human population, including age, ethnicity, gender, religion, size of population and growth
122
What are the benefits and drawbacks of an ageing population?
+ more consumers
+more workers
+more skilled staff
+opportunities for new products designed for older people
-larger taxes (due to pensions, strain on NHS, state funded care homes etc)
-elderly will have less disposable income (pensions)
-businesses may pay more towards employee's pensions
123
What are the benefits and drawbacks of an increasingly diverse population due to increased migration?
+varied/diverse work force (new ideas)
+unskilled workers (hugely beneficial for businesses in hospitality industry)
+brings skilled workers
-may need to make specific accommodations (eg. religious festivals, specific foods etc)
-conflicting views may cause disputes (may need HR staff)
-language barriers
124
What are the benefits and drawbacks of a rapidly growing population?
+more workers
+more choice when employing
+more customers
+increase capacity utilisation
-strain on NHS causing corporation tax go up
-more competition
-may need to increase capacity (otherwise staff may be strained and quality goes down)
125
Corporate social responsibility (CSR)
involves companies achieving success whilst at the same time respecting and positively impacting its stakeholders, the environment and society in general
126
Carroll's corporate social responsibility pyramid
sets out a hierarchy of responsibilities that a business should meet to be truly socially responsible
127
What are the levels on Carroll's CSR pyramid (starting with bottom level)?
Economic responsibilities
Legal responsibilities
Ethical responsibilities (doing more in the business to be ethical)
philanthropic responsibilities (charity)
128
Pros and cons of CSR
+moral and ethical
+better reputation
+happier staff and suppliers
+can charge more for a product
-expensive
-customers may not want to spend extra (eg. cost of living crisis)
-may cause stakeholder conflict
-time consuming (research)
-customers may view it as a marketing ploy
129
What are the 5 types of social change?
-global population changes
-population movements
-urbanisation
-changes in consumer lifestyle and buying behaviour
-the growth of online business (ecommerce)
130
Pros and cons of improving technology
+increased efficiency
+staff able to do more skilled staff
-people lose jobs (eg. AI doing admin)
-may not accessible (eg. McDonald's screens may not be suitable for blind people so face to face communication can be better)
-people may not like it (eg. elderly)
- requires technology to use technology (eg. online menus require customers to have a phone)
131
How to calculate ARR?
(annual recurring revenue)
1. Add up all the positive cashflows
2. subtract the cost of the investment
3. divide by the lifespan of the investment (excluding year 0)
4. calculate % of the initial investment
132
What is meant by factors of production?
The input needed for creating a good or services (resources needed)
