Booklet 1

Question 1

What is a vision statement

Answer 1

What the business sets out to achieve in the medium-long term

Question 2

Benefits of a vision statement

Answer 2

1.Clear guide to senior managers
2. Give a business a clear identity and ethos
3. Can help in setting objectives and support business strategy.

Question 3

Drawbacks of vision statements.

Answer 3

1. Lack of specificity
2. Too ambitious-> demotivate staff
3. Lack clear measurable targets.

Question 4

What is a mission statement

Answer 4

What the business wants to achieve in the present, broad statement of its aims and values to guide everyday operations and decision making of the business.

Question 5

Benefits of mission statement

Answer 5

1.Helps ensure stakeholders are clear on the purpose of the business
2. Gives transparency for investors.
3. organisation cohesiveness.

Question 6

What does SMART stand for

Answer 6

Specific
Measurable
Achievable
Realistic
Time Limited

Question 7

What does SWOT stand for

Answer 7

Strengths
Weakness
Opportunity
Threats

Question 8

What is rationalisation

Answer 8

The process of reorganising a business to make it more efficient.

Question 9

How can a business rationalise

Answer 9

1. Close branches/mergers e.g. Argos closing stores with sainsburies merger
   2.transfer production overseas-> lower labour costs
   3.reduce product ranges e.g. supermarket stop selling as much vegan/vegetarian food
   4.IT Systems->reduce paper and labour capital subsitution

Question 10

What are porters five forces

Answer 10

1.Barriers to entry/Threat of new entrants
2. Supplier
3. Buyer power
4. Degree of competition
5. Threat of a substitute

Question 11

Benefit of porter five forces

Answer 11

+easy to use
+framework for further analysis
+Helpful paired with SWOT

Question 12

Weakness of porters five forces

Answer 12

-Only applicable to simple market structures
-Narrow focus(other factors than 5)
-outdated with more and more dynamic market these days

Question 13

Ansoff matrix

Answer 13

Market penetration(EE)
Product development(EN)
Market development (NE)
Diversification (NN)

Question 14

Market penetration strategies

Answer 14

Brand loyalty(club cards)
Attacking competitor sales
Lowering price or offering promotions

Question 15

Market development

Answer 15

Find new markets with similar needs
New customer who may use the products in a different way (lucozade)
Repackaging/resizing eg. Food companies selling to resteraunts start packing.

Question 16

Product development

Answer 16

New products at same customer
Innovation

Question 17

Diversification

Answer 17

New market new product
Risky
Higher cost

Question 18

All economies of scale

Answer 18

Risk bearing
Financial
Managerial
technological
Marketing
Purchasing

Question 19

Organic growth

Answer 19

Growth using the businesses internal factors e.g. expanding product range, new factories etc

Question 20

Evaluation of organic growth

Answer 20

+uses businesses internal strengths
+less risky
-long -> less profit in the short run
-limited resources ->limited opportunities e.g. market saturation

Question 21

Inorganic growth

Answer 21

Growth achieved through external methods, achieved through either a takeover or a merger.

Question 22

Evaluation of inorganic growth

Answer 22

+EOS
+Reduce competition
+Access new markets/broader customer base
-Expensive -> future debt
-Resistance to change/culture clash e.g. Walmart in Germany
-DEOS

Question 23

What are the types of mergers & Takeovers

Answer 23

1.Backward vertical(previous stage)
2.Forward vertical integration(next stage)
3.Horizontal Vertical integration(same stage)
4.Conglomerate (different market)

Question 24

Evaluation of horizontal integration

Answer 24

+Opportunities for large economies of scale
+Less comp->Greater market share and profits
-Risk investigation by CMA
-Cultural clash(Walmart)
-Expensive -> high gearing and debt

Question 25

Evaluation of backward integration

Answer 25

+Eliminate supplier power +Ability to offer consumers with lower prices -Inefficiency (less supplier power means no incentive to keep costs low) -Less flexibility -Risk of limited management in new areas

Question 26

Evaluation of forward Integration

Answer 26

+Tighter control over retail image e.g. Burberry +Greater relationship with customers +Expert staff in store e.g. Apple geniuses -Expensive -Loss of focus away from their main area of expertise -Different culture

Question 27

Evaluation of conglomerate Integration

Answer 27

+Opens up access to new markets +Spreads risk +Rapid growth -Expensive -High risk -Extensive market research needed

Question 28

What is Franchising

Answer 28

The legal right to use the brand name, products and business style of an existing business which is granted by the franchisor to the franchisee

Question 29

Evaluation to a franchisor

Answer 29

+Increased growth +EOS +Increased income(profits) -Loss of control -Don't take all profits -Potential loss of reputation

Question 30

Evaluation to a franchisee

Answer 30

+Ready made opportunity +Low risk +Centralised marketing/supply chain -Expensive - Usually high royalty fees -Limited opportunity to show initiative

Question 31

What is outsourcing

Answer 31

Use of external businesses or third parties to carry out a part of the production process or a business function rather than doing it in house

Question 32

Evaluation of outsourcing

Answer 32

+Reduced staffing cost +Existing workload and stress reduced +Less investment risk -May lead to poor customer service (call centres in India) -Existing employees may feel demotivated due to fall in job security -Quality of production may not be guaranteed

Question 33

What is market analysis

Answer 33

Collecting and interpreting data about customers and the market

Question 34

Sales forecasting(quantitative)

Answer 34

Use of existing data to predict future trends

Question 35

Time series analysis(quantitative)

Answer 35

Moving averages

Question 36

Correlation analysis(quantitative)

Answer 36

The strength of a relationship between two variables(positive, negative or no correlation)

Question 37

The Delphi method(qualitative)

Answer 37

Relies on a panel of experts who answer questions sent by the business and after each round there is an anonymous summary of the results, when then a new questionnaire is issued and this continues after several rounds until the range of answers is smaller

Question 38

Brainstorming

Answer 38

Group come together and share all their ideas to reach a judgement.

Question 39

Intuition

Answer 39

Using a gut feeling to decide an outcome

Question 40

What is budgeting

Answer 40

A forward financial plan over a specific period of time that measures expenditure and revenue

Question 41

Why would a business rationalise

Answer 41

1. Increase efficiency or overcome DEOS 2.turn around poor performance 3.underperforming parts of the business 4.Remove duplication following merger or takeover