3.7 - Analysing the Strategic Position of a Business

Question 1

What is a mission statement?

Answer 1

• A statement of the organisations purpose - what it wants to achieve in the larger environment

Question 2

What are some internal influences on objectives?

Answer 2

• Finance
• Resources available
• nature of product
• HR

Question 3

What are the external influences on objectives?

Answer 3

competition, change in demand, economy, legislation, shareholder pressure

Question 4

What are the impacts of strategic decision making on functional decision making?

Answer 4

decisions influence each functional area of the business, specifically marketing, HR, finance, operations

Question 5

What are the value of SWOT analysis

Answer 5

• identifies completion advantage and disadvantage
• identifies weaknesses, allowing them to be redressed
• reduces vast amounts of information a business into a manageable quantity

Question 6

What are balance sheets?

Answer 6

accounting statements that provide a snapshot of a company’s financial position at a particular time

Question 7

What are income statements?

Answer 7

A financial statement showing the revenue and expenses for a fiscal period.

Question 8

What are the stages of an income statement?

Answer 8

gross profit
operating profit
profit before tax
profit after tax

Question 9

What are profitability ratios?

Answer 9

Measures of the operating success of a company for a given period of time.

Question 10

What are liquidity ratios?

Answer 10

Measures of the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.

Question 11

What is gearing?

Answer 11

A long-term liquidity ratio that measures the percentage of a firm’s capital employed that comes from long-term liabilities, such as debentures and mortgages. Firms that have at least 50% gearing are said to be highly geared.

Question 12

What are efficiency ratios?

Answer 12

indicate how well a firm’s resources have been used, such as the amount of profit generated from the available capital used in the business.

Question 13

What is the formula for ROCE?

Answer 13

Operating profit / capital employed x 100

Question 14

What is the formula for current ratio?

Answer 14

Current liabilities / current assets

Question 15

What is the formula for gearing?

Answer 15

Non-current liabilities / total equity + non-current liabilities x 100

Question 16

What is the formula for inventory turnover?

Answer 16

Cost of sales / inventories

Question 17

What is the formula for receivable days?

Answer 17

Receivables / sales revenue x 365

Question 18

What is the formula for payable days?

Answer 18

Payables / cost of sales x 365

Question 19

What is the limitations of financial ratios?

Answer 19

-not useful in isolation
-hard for companies operating in multiple industries
-must be analyzed relative to one another
-determining a range of “acceptable” values can be difficult

Question 20

What are the marketing measures of performance?

Answer 20

• Brand image
• Customer service
• Effectiveness of marketing campaign
• New product sales as a percentage of all product sales

Question 21

What are the HR measures of performance?

Answer 21

• Labour turnover and retention
• Labour productivity
• Employee costs as percentage of turnover
• Labour cost per unit

Question 22

What are the operations measures of performance?

Answer 22

• Capacity utilisation
• Quality
• Productivity
• Speed of response and flexibility

Question 23

What are core competences?

Answer 23

Unique abilities a business possesses in order to gain a competitive advantage

Question 24

Short term approach for business success?

Answer 24

• Insufficient spending on research and development
• Greater emphasis on providing shareholders with high dividends rather than retaining profits
• External growth rather than organic growth

Question 25

Long term approach retains profit for investment in business success

Answer 25

- Research and development - Staff training - New machinery and technology

Question 26

What is Elkington's Triple Bottom Line?

Answer 26

Highlights that businesses may have different objectives, not just for profit. People, planet, profit

Question 27

What is competition?

Answer 27

law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies

Question 28

What is employment law?

Answer 28

- Pay - Working conditions - Equal opportunities - Trade union representation rights

Question 29

What is government policy?

Answer 29

The central ideas or principles that guide government in its work, including the kind of laws it passes.

Question 30

What is Gross Domestic Product (GDP)?

Answer 30

A measurement of the total goods and services produced within a country.

Question 31

What is fiscal policy?

Answer 31

Government policy that attempts to manage the economy by controlling taxing and spending

Question 32

What is monetary policy?

Answer 32

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.

Question 33

What are the different forms of taxation?

Answer 33

- Income - National insurance - Value added tax (VAT) - Excise duties - Corporation tax

Question 34

What are exchange rates?

Answer 34

a measurement of the value of one nation's currency relative to the currency of other nations

Question 35

What are the impacts of changing exchange rates

Answer 35

A high exchange rate means that the pound is worth more against other currencies. this means that UK goods are more expensive for foreign customers. a strong pound benefits UK firms that import foreign goods because they are now cheaper. A low exchange rate has the opposite effect because the pound is worth less against foreign currencies. this results in UK exports being cheaper but imports being more expensive.

Question 36

What is inflation?

Answer 36

a general increase in prices and fall in the purchasing value of money.

Question 37

What is protectionism?

Answer 37

the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports.

Question 38

What is open trade?

Answer 38

An economic policy of not discriminating against imports from and exports to other countries

Question 39

What isn globalisation?

Answer 39

the process by which businesses or other organisations develop international influence or start operating on an international scale.

Question 40

What is the importance for globalisation for businesses?

Answer 40

- comparative advantage - increased competition - migration - global economic cycles

Question 41

What are emerging economies?

Answer 41

Developing countries that over the past two or three decades have begun to develop a strong industrial base, such as Singapore and Hong Kong.