buiness unit 3 part 1 Flashcards

Question

where could sales forecasting be inaccurate?

Answer 1

business is a new start up market subject to disruption from technological change demand is sensitive to change in price and income (elascity) product is a fashion item significant change in market share management have demonstrated poor sales forecasting ability in the past

Answer 2

they would make use of judgements and opinions

Answer 3

could be described as an educated guess. -forecast based on hunch would be likely to be influenced by the experience of the forecaster, perhaps influenced by market research or from discussions that he or she has had with other in the market. -experienced marketing manager with alot of year experience would have strong insights into the sales prospects for individual products, business units and so on. -starting point is the previous year or period data. -advatages of using hunch

Answer 4

would involve getting a group of market experts to provide an opinion on the forecasting task, e.g to estimate future sales growth in a market. method would involve a series of steps where the experts does give a confidential opinion on the task and then revise their forecasts based on the submission of each experts to the group. -aim is to reach a consensus forecast.

Answer 5

experts could reconsider their judgements after reading feedback from other members of the expert group. it is flexible enough to be used in a variety of situations and be applied to a range of complex problems. precipitant's have time to think through their ideas leading to a better quality of response. - it would then create a record of the expert groups responses and ideas which could be used when needed.

Answer 6

-does all depend on the content and the structure of the questionnaires. -would assume that experts are willing to come to a consensus and allow their opinions to be altered by the views of other experts -expert panels do often loose members because of boredom, and disillusionment with the process. -monetary payments to the experts could lead to bias in the result of the study. -method would be more than likely to require a substantial length of time to complete and could be costly in terms of the researchers time.

Answer 7

-they will get together employees who have experience of the market and bounce ideas of each other in order to determine their collective best estimate of what is likely to happen in the future. -use could be made of previsions cycles of similar products.

Answer 8

- dealing with wide issues than just numbers, such as forecasting where there could be a shift in popularity from mountain bikes to road bikes. advantages - would involve people knowledge of the market and uses their intuition and hunches. which could provide a greater insight into future trends than statistical data. - it could also consider known future conditions.

Answer 9

-would involve people perception of what could happen, which could be biased to further their own ends. -often experts do disagree completely.

Answer 10

- time series analysis would use evidence from past sales record to predict future sales pattterns. business could look at its sales over the last few year and work out what is happening. -figures could reveal a upward trend that is encouraging, or a downward trend that is worrying. -in reality sales are likely to have fluctuated both up and down over a period of time.

Answer 11

seasonal analysis, sales are measured monthly or weekly to examine the seasonality of demand. for example the sales of ice cream would be a lot higher in the warmer seasons. trend analysis it would focus on long term data that has been collected over a number of year. the objective would be to determine the general trend of sales rising falling or stagnant. cycle analysis, long term figures are used but now objective would be to examine the relationship between demand levels and economic activity. for example by asking the question what is the relationship between demand for the products or products and the stage in the economic or business cycle. random factor analysis it does attempt to explain how unusual or extreme sales figures occur. for example if sales of ice cream does double for a two week period could it be explained by weather conditions. It does attempt to provide explanations for unusual or abnormal sales activity.

Answer 12

take three adjacent figures for each month and divide by three.

Answer 13

-would help the business to plan -could help the financial planning, including cash flow management -would help with the production planning e.g. ordering in the correct number of raw materials. -human resources planning, getting the right number and type of staff in the job that are needed. -it could motivate managers to reach targets

Answer 14

-it does use information from the past and does not consider what could happen in the future (such as compeitor launching a new product or if the economy could go into recessions, supplies of raw material could be disrupted). -it could be only useful when sales have been stable with then no major upsets. - it is only accurate as the information collected -it does assume that consumers would maintain their buying habits. a new business or company could emerge that does offer the same or better products causing sales forecasting to change and therefore the three point average. - does no account for qualitative issues.

Answer 15

depreciation is the wearing out, using up or other reduction in the useful economic life of a fixed asset whether arising from use, passing of time or absolence through either change in technology or demand for goods and services produced by the asset.

Answer 16

it does involve allocating the cost of the fixed asset over its useful life. to calculate depreciation charge for an accounting period factors such as -the cost of the fixed asset -the estimated useful life of the asset -the estimated residual value of the asset are all relevant

Answer 17

an asset could be seen as having an economic (useful) and physical life. -a lot of fixed assets would suffer physical deterioration through usage and the passage of time. -despite care and maintenance could be seen as extending its physical life it would eventually reach a condition where the benefits had been exhausted. - a business could however not wish to keep an asset until the ends of its physical life, there may be a point when it become uneconomic to continue the use of the asset. - economic life of the asset would be determined by factors such as technological process and change in demand.

Answer 18

at the end of the useful life of a fixed asset the business would dispose of it, and any residual from the disposal will represent its residual value.

Answer 19

depreciation = original cost - residual value/ expected life (years)

Answer 20

net book value = original cost - depreciation the resultant figure would tell a business how much value the product does depreciate by each year. the business could then work out the net book value of an asset by

Answer 21

-over time machines do become won out and obsolete. if they were valued in the company books at their cost price it would have put a false picture of their true worth and it would cause the business in general to be overvalued. if it was known that the business was window dressing its accountants in such a way that it would affect the company's reputation and could affect their ability to borrow money. by depreciating the value of their machinery the company is in a better position to appreciate its real value and there is also a legal requirement to devalue fixed assets in order to reflect their true worth.

Answer 22

gross profit margin is the percentage of revenue that is turned into gross profit.

Answer 23

it would indicate how effectively a company is at turning their revenue into gross profit.

Answer 24

net profit margin is the percentage of revenue that is turned into net profit

Answer 25

how effectively a company is at turning their revenue into net profit

Answer 26

a change in expenses or a change in revenue could cause the movement. More expensive cost of sales could cause a decline in revenue.

Answer 27

gross profit/ sales revenue x 100

Answer 28

net profit/ sales revenue x 100

Answer 29

it does tell us what returns (profits) the business has made on the resources available to it (investment)

Answer 30

net profit/ capital employed x 100

Answer 31

you could either -improve operating profit without increasing in capital employed -maintain operating profit but reduce the value of capital employed

Answer 32

current ratio does indicate whether the business could pay debts due within on year out of the current assets. the current ratio does reveal how much cover the business has for every £1 that is owned by the firm.

Answer 33

current ratio = current assets/ current liabilities answer is X: 1

Answer 34

an current ratio of 1.5-2.0 is encouraging it would suggest that the businesses has enough cash to be able to pay its debts but not too much finance tied up in current assets that could be re invested or distributed to shareholders.

Answer 35

a low current ratio does suggest that the business is not well placed to pay its debts, it could need to raise extra finance, extend it time it takes to pay creditors.

Answer 36

no such thing as an ideal current ratio. all different business and industries work with different levels of cover. however a ratio of less than one is often a cause for concern particularly if its persist for any length of time.

Answer 37

would need to turn short term debt into long term debt.

Answer 38

acid test ratio adjust the current ratio to remvoe the value of stocks from the current assets total-stocks are assumed to be the most illiquid part of current assets it is harder to turn them into cash quickly.

Answer 39

acid test ratio = current assets - stocks/ current liabilities answer is always to X:1

Answer 40

an acid test ratio of over 1.0 is generally good news the business should be able to pay its debts even if it cannot turn stocks into cash. however the value of stocks a business does need to hold would vary considerably from industry to industry. e.g a supermarket would have very poor atr and high creditors, but creditors would not worry about large businesses like these not paying their debts.

Answer 41

gearing is the proportion of finance that is provided by debt relative to the finance provided by equity ( or shareholders). it is a measure of liquidity but does also focus on the long term financial stability of a business

Answer 42

the higher the level of borrowing the higher risks there are to the business. a business with a gearing ratio of more than 50% would traditionally said to be highly geared. something between 25-50% would be considered normal for a well established business that would be happy to finance its activities using debt.

Answer 43

financing a business through long term debt is not necessarily a bad thing. long term debt is normally cheap and it does reduce the amount that shareholders do have to invest in a business.

Answer 44

gearing could be reduced by issuing more share capital repay long term loan retain more profit and don't pay dividends A mature business that does produce strong and reliable cash flows could handle a much higher level of borrowing than a business where the cash flows are unpredictable and uncertain.

Answer 45

could -borrow to fund growth -turn short term debt into long term debt -buying back shares

Answer 46

a fixed asset is a asset of a business that is intended for continuing use rather than a short term temporary current asset such as stock. example of fixed asset would include land and buildings, plant and machinery, fixtures and fittings, motor vehicles and IT equipment.

Answer 47

Current assets are the assets a business owns which are either cash, cash equivalents, or are expected to be turned into cash during the next twelve months.

Answer 48

Long-term liabilities are the monies the business has borrowed for a period of more than a year – mainly bank loans.

Answer 49

Share capital is the money invested in the business by the owner

Answer 50

Current liabilities are what the business owes in the short run

Answer 51

Creditors – money owed by the business in the short term (suppliers who are owed money by the business are known as "trade creditors").

Answer 52

Stocks – finished goods, work in progress and raw materials (note: you may also see stocks called "inventories").

Answer 53

Shareholder funds are the share capital and reserves added together.

Answer 54

Capital is the amount of long-term money put into the business to buy assets. Main forms of capital: owner's money (share capital) and long term bank loans.

Answer 55

window dressing is the legal method of manipulating accounts to present a financial picture which is to the benefit of the business and improves the appearance of the company's financial statements.

Answer 56

it is common when a business had a lot of shareholders so the management can give the appearance of a well run company to investors that probably do not have much day to day contact with the business. -could be used when a company want to impress a lender in order to qualify for a loan. - or if a business is closely held the owners would be usually better informed about company results, no reasons for anyone to apply window dressing to financial statements.

Answer 57

-to attract investments -to please shareholders -to make it easier to sell the business

Answer 58

cash -postppone paying suppliers so that the period end cash balance does appear higher than its should be sales- sales manipulation offering commission to sales staff recording sales as revenue early fixed assets -undervaluing the cost of depreciation fixed assets -revaluing any fixed assets e.g property fixed assets- sell off those fixed assets with large amounts of accumulated depreciation associated with them , so the net book value of the remaining asset does appear to indicate a relatively new cluster of assets. expenses- would reduce any unnecessary costs e.g. withhold supplier expenses, so that they are recorded in a later period sales, would allow future predicted inflation current assets, boosting liquidty e.g sales and lease back current assets/ creditors running just in time stock control short term solutions hiding long term problems

Answer 59

- all accounts are unreliable (evaluation) trust issues, pr disasters -operational difficulties cut back trade credit -could be unable to sell an overvalued asset -inflation could be different to predications -all short-term solutions possibly hiding long term problems

Answer 60

market share - would outline the dominance a business has in the market. - business could have set objective to increase market share by a certain percentage (e.g 10% over 5 yers) - the greater the market share does mean that the business could influence the market rather than having to follow others.

Answer 61

sales targets -increasing sales does not neccesarily mean greater profit however it is an indicator of a growing business and does go hand in hand with icnreasing market share - a business which is entering a new market/ diversifying could have sales targets as their number one objective to ensure that they build up a strong customer base - sales equals to cash inflow

Answer 62

-increasing productivity does mean that a business is using up there resources more efficiently. -should result in falling average costs and improve quality -employees would be motivated and satisfied within their jobs. -productivity is also a useful way of analysing whether or not new investment into capital equipment or training have worked.

Answer 63

environmental impact -is the business controlling their externalities? - if not then this could then impact upon the consumer perception of the company's ethics. -does the company have strategy in place? -how are they affected by government regulation?

Answer 64

surely a succesufl business is one that does meet the needs and want of their customer. - a customer could be a paying customer supplier, a retailer or a wholesaler depending on the market analysed. -all staff training and development would usually result in improved customer service. -investments into new technology, the use of tqm methods and the continual market research should all help to improve the quality of the products sold.

Answer 65

advantages include experts can reconsider their judgements after reading feedback from other embers of the expert group it is flexible enough to be used in a variety of situations and be applied to a range of complex problems pacipitants have time to think through their ideas leading to a better quality of response the Delphi method does create a record of the expert groups responses and ideas which can be used when needed

Answer 66

- it does assume that experts are willing to come to a consensus and allow their opinions to be altered by the views of other experts -monetary payments to the exerts may lead to a bias in the results of the study the method would more than likely require a substantial period of time to complete and could be costly in terms of the researchers time. expert panel would often loose embers because of boredom and disillusionment with the process. all does depend on the content and structure of the questionaries

Answer 67

- a means of controlling income and expenditure -regulate the spending of money and highlight losses, waste and efficiency. -act as a review and allow time for corrective action to take place -they allow delegation without loss of control- subordinates can be set their own targets

Answer 68

-they help in the coordination of a business and improve communications between different sections of the business. - budgets provide clear targets to be set and should help employees to focus on costs -can act as a motivator for staff if budget is met.

Answer 69

-they can be time consuming for mangers in small business especially for those who are not particularly numerate. -some peroneal can resent having to meet budget targets that they have had no part in constructing. poor motivation and missed targets can result. -if the actual figures are very different from the budgeted ones the budget can loose its significance.

Answer 70

-the budget must not be too flexible as business opportunities might be missed. -poorly constructed budgets can lead to poor decision making.

Answer 71

a variance is any unplanned change from the budgeted figure, they occur when an actual figure for sales or expenditure differs from the budgeted figure. variance can be favourable or adverse.

Answer 72

when the difference between the actual and budgeted figures will result in the business enjoying higher profits than shown in the budget for example when -expenditure is less than expected revenues are higher than expected

Answer 73

it does occur when the difference between the figures in the budget and the actual figures will lead to the business profit being lower than planned for example when -expenditure is higher than expected -revenues are lower than expected

Answer 74

-does involve mangers starting with a clean sheet where they must justify all expenditure

Answer 75

-it improves control -help with the allocation of resources -limits the tendency for budgets to increase annually with no real justification for the increase -reduced unnecessary costs -motivate mangers to look at alternative options.

Answer 76

-an effective bonus scheme for salesman -a successful advertising campaign -favourable weather -the demise of a competitor

Answer 77

-the successful activities of competitors -they may have lost an important contract -ineffective advertising -logistical problems that meant the stock did not arrive with the customer on time. -bad weather -general economic conditions (recessions) -changes in consumer tastes

Answer 78

-workers may have been better trained/ motivated leading to improved labour productivity. -reduced costs of imported components due to a strengthening of sterling -raw material costs have fallen

Answer 79

-a strike by workers -bad weather in the growing region for crops such as sugar or coffee -a devaluation of sterling -unexpected price rises from suppliers

Answer 80

a financial plan for the future concerning the revenues and costs of a business. -is a financial plan -sets out financial targets -is expressed in money -contains agree plan for action over a given period expressed in numerical terms

Answer 81

- the process by which financial control is excersied within an organisation -budgets for income/ revenue and expenditure are prepared in advance and then compared with actual performance to establish any variances. -mangers are responsible for controllable costs within their budgets and are required to take remedial action if the adverse variances are regarded as excessive.

Answer 82

-establish priorities and set targets -turn objectives into practical reality -provide direction and co ordination -assign responsibilities -allocate resources -communicate targets

Answer 83

-delegate without loss of control -motivate staff -improve efficiency -forecast outcomes -monitor performance -control income and expenditure

Answer 84

-managerial responsibilities are clearly defined -managers have a resposibility to adhere to their budgets -performance is monitored against the budget

Answer 85

-corrective action is taken if results do differ significantly from the budget -unaccounted for variances are investigated -departure from budgets are permitted only after approval from senior management.

Answer 86

historical budgeting -use last year figures as the basis of the budget -realistic in that it is based on actual results -however circumstances could have changed e.g new product, lost customers, credit cruch) -does not encourage efficiency

Answer 87

-budgeted costs and revenues are set to zero -budget is based on new products for sales and costs i.e built from the bottom up -make budgeting more complicated and time consuming, but potentially more realistic

Answer 88

-focusing on activities that require attention, not those that are running smoothly -budget control and analysis of variance facitlites management by exception since it highlights areas of the business which deviate from predetermined standards. -items of income or spending that show no or small variances require no action. instead concentrate on items showing a large adverse variance.

Answer 89

a variance does arise when there is a difference between actual and budget figures, it could be favourable (positive) or adverse (unfavourable worse than expected)

Answer 90

favourable -actual figures are better than the budgeted figure -costs lower than expected, revenues/ profits are higher than expected adverse actual figures worse than budgeted figure -costs higher than expected revenues/ profits lower than expected

Answer 91

was it foreseen? was it foreseeable? size -absolute size in money terms -relative size in percentage terms cause and whether it is a temporary problem or the result of a long term trend

Answer 92

act only if the variance is outside an agree margin don't waste time investigate the cause of a significant variance was it avoidable or unavoidable act to remedy the problem if appropriate

Answer 93

an adverse variance could be a result of something that is good that has happened within the business, for example higher production costs than budget (adverse variance) that occur because sales are significantly higher than the budget (favourable budget)

Answer 94

-are only as good as the data being used -can lead to inflexibility in decision making -need to be changed as circumstances change -take time to complete and mange -could result in short term decisions to keep within the budget rather than the right long term decision which exceeds the budget.

Answer 95

strategic by senior management tactical by middle management operational by junior management

Answer 96

are long term and will affect the direct that the business takes. these decision would affect the entire business and would be made by the owners or senior management. strategic decisions are often complex and may result in major organisational change internal to the business or in the market, or in the new markets they operate in. all strategic decisions would involve a large financial commitment in order to carry out the decision. it could take a few years and a few million pounds to see if strategic decisions would have had the positive affect anticipated by the business. -they could be decisions that are made by CEOs of the business, people at the tope end of the business, these decisions would affect a five year plan for example.

Answer 97

are not as far reaching as strategic decisions they tend to be medium term. they should aim to implement strategic decisions. tactical decisions are less complex than strategic decisions and are usually carried out by middle management. tactical decisions could also be more flexible it if it failing to meet its objectives then it could be changed. -they are seen as decisions that do help to enable business to achieve all ling term aims and objectives. department/ functional area/ specific location

Answer 98

they are the day to day decisions that are made in a business. these are the lower-level decisions that would tend to be short term and have little risk. a business would have to make hundreds of operational decisions in a typical day by a range of employees as they do not need the careful thought and planning of strategic and tactical decisions. a lot of decisions at this level are routine and could be made quickly. they are decisions that are taken in the business which do allow or the usual running of the operations of the business to take place.

Answer 99

a method for analysing a business its resources, and its environment. often used as part of strategic planning

Answer 100

it does often look at internal strengths, internal weaknesses, opportunities in the external environment, threats in the external environment

Answer 101

what the business does better than the competition what competitors do better whether it is making the most of the opportunities available how a business should respond to change in its external environment

Answer 102

internal factors positive factors strengths negative factors weakness external factors positive factors opportunities negative factors threats

Answer 103

strengths and weaknesses -are internal to the business -relate to the present situation opportunities and threats -are external to the business -relate to changes in the environment which would impact the business

Answer 104

strengths are -things a business is good at -a characteristic giving it an important capability -provide a clear advantage over rivals -distinctive competencies and resources that would help the business achieve its objectives -strengths help to build up competitive advantage and serve as a cornerstone of strategy -strengths should be protected and also build upon.

Answer 105

-market share -economies of scale -high quality -leadership and management skills -financial resources -research and development capabilities -technological leadership

Answer 106

-technological leadership -brand reputation -protected ip -distribution network -employee skills -high productivity -flexibility of production

Answer 107

weaknesses are -a source of competitive disadvantage -things the business lack or does poorly -place the business at a disadvantage -could hinder or constrain the business in achieving its objectives -management should seek ways to reduce or eliminate the weakness before they are exploited then by further competition. -they should be seen as areas for improvement.

Answer 108

-low market share -inefficient plant -outdated technology -poor quality -lack of innovation -a weak brand name -high costs

Answer 109

-cash flow problems -undifferentiated product -inadequate distribution -quality problems -low productivity -skills gap de motivated staff

Answer 110

an opportunity is any feature of the external environment which creates positive potential for the business to achieve its objectives.

Answer 111

-technological innovation -new demand -market growth -demographic change -social or lifestyle change -government spending

Answer 112

-high economic growth -trade liberalisation -eu enlargement -diversification opportunity -deregulation of the market

Answer 113

threats are the any external development that could hinder or prevent the business from achieving its objectivates.

Answer 114

-new market entrants -change in customer tastes or needs -demographic change -consolidation among buyers -new regulations

Answer 115

-economic downturn -rise of low cost production abroad -higher input prices -new substitute products -competitive price pressure

Answer 116

swot analysis should be more than a list -it is an analytical attempt to support strategic decisions -strategy should be devised around strengths and opportunities -the key words are match and convert

Answer 117

you should match strengths with opportunities you should convert weaknesses intro strengths

Answer 118

weaknesses possible response outdated technology- acquire competitor with leading technology skills gap invest in training and more effective recruitment overdependence on a single product- diversify the product portfolio by entering new markets poor quality- invest in quality assurance high fixed costs -examine potential for outsourcing or offshoring

Answer 119

a mission statement is a exercise in public relations or a key part of providing the direction that management and employees need as they go about their business

Answer 120

A mission statement attempts to put into words what a business or organisation is all about. It attempts to define in a punchy, understandable phrase: * The overriding goal of the business * The reason for its existence * A strategic perspective * A vision for the future

Answer 121

* Contains a formulation of objectives that enables progress towards them to be measured * Differentiates the business from its competitors * Defines the markets or business in which the firm wants to operate * Is relevant to all major stakeholders - not just shareholders and managers * Excites, inspires, motivates & guides

Answer 122

* Brief * Flexible (able to accommodate change) * Business specific and distinctive * Effective at communicating key values * Realistic and achievable * Based on consultation * Supported by senior management

Answer 123

* Not always supported by actions of the business * Often too vague and general * Often merely statements of the bleeding obvious * Often seen as a PR exercise * Sometimes regarded cynically by staff * Sometimes not a true reflection of reality * Not supported wholeheartedly by senior management

Answer 124

* Helps to ensure that all stakeholders are clear on the purpose of the business so everyone can be focused on the same goals and objectives. * Helps with the strategic planning since this should be the starting point. * Gives some transparency for investors – they understand how their capital will be used. * Helps customers understand the ethics and objectives of a company

Answer 125

-seen as crucial in the strategic planning of a business organisation -could be the foundation stone of an overall strategy and then be followed through into the development of a more specific functional strategies -by defining a mission statement an organisation does make a clear statement of its purpose

Answer 126

when someone first set up a business he she could have unstated aims or objectives for example to survive the first year. other businesses could wish to state exactly what they are aiming to do such as amazon. an aim is where the business wants to go in the future, its goals. its a statement of purpose e.g we want to grow the business into Europe. business objectives are the stated measurable targets of how to achieve business aims for example we want to achieve sales of £10 million in European market in 2018.

Answer 127

a objectives could give the business a clearly defined target. all plans could them be in made to achieve these targets. this could motivate employees. it would also enable the business to measure the progress towards its stated aims.

Answer 128

Survival – a short term objective, probably for small business just starting out, or when a new firm enters the market or at a time of crisis. Profit maximisation – try to make the most profit possible – most like to be the aim of the owners and shareholders. Profit satisficing – try to make enough profit to keep the owners comfortable – probably the aim of smaller businesses whose owners do not want to work longer hours. Sales growth – where the business tries to make as many sales as possible. This may be because the managers believe that the survival of the business depends on being large. Large businesses can also benefit from economies of scale.

Answer 129

objectives should be written using the smart model to make it easier to understand and achieve Specific objectivities should be specify what the business want to achieve. they should be clear so that all stakeholder under stand what the objective is. e.g a hotel could have an objective of filling 60% of its beds a night during October, specific to that business. Measurable-objective should be measured to make sure the objective has been achieved. this measurement should be numeric. e.g £10000 in sales in the next half year of trading Achievable- are the objectives achievable and attainable? and also are they agreed by all those concerned in trying to achieve the objective There is no point in setting an unrealistic target, this can be demotivating` Realistic-is the business likely to achieve the objectives with the resources available Time limited or constrained - a time scale need to be set for achieving the objectivise. e.g by the end of next year.

Answer 130

SMART objectives contain the potential to focus attention and gain commitment from all levels within a business to agreed performance targets. They will also encourage teamwork, and they direct resources to where they can be most effective.

Answer 131

if the firms are aiming to grow in the long term they could -invest in training their staff -building up their brands -expanding into new markets -putting money into developing new products

Answer 132

firm that wants to maximize profit in the short-term and is not concerned about the long term might cut back on all the above activates. in addition it could -make stuff redundant -change to cheaper suppliers -increase productivity at the expense of quality -set a high price for maximum immediate profit -sell assets

Answer 133

-survival -profit maximisation -sales maximisation -growth / increase market share -increase shareholder value -corporate social responsibility/ environmental/ ethical -increase productivity/ improve quality

Answer 134

-provide services -to avoid wasteful duplication of resources where a natural monopoly does exist such as litter collection and beach cleaning -to control strategic industries -to prevent exploitation by monopoly suppliers -to help people in need, whether its age, disability poverty or illness.

Answer 135

they do relate to the business as a whole. they are usually the top management of the business and they provide the focus for setting more detailed objectives for the main functional activates of the business.

Answer 136

-desired performance and the results of the business. it is important that corporate objectives cover a range of key areas where the business wants to achieve results rather than focus on a single objective.

Answer 137

area market standing example market share, customer satisfaction, product range innovation example new products, better processes, using technology. productivity example optimum use of resources, focus on core activities physical and financial resources example factories, business locations, financial, supplies

Answer 138

profitability example levels of profit, rates of return on investment management example management structure, promotion and development employees organisation structure, employee relations public responsibility example compliance with laws social and ethical behaviour..

Answer 139

it is a description of what a business sets out to achieve in the medium to long term. the vision statement should provide a clear guide to senior management of the future direction of the business and help to direct strategic decision making across the business.

Answer 140

* A clear vision can give the business a clear identity and ethos. * Can help in setting objectives and support the business strategy. * Focus senior managers on the tasks to achieve the vision. * Communicates to employees how they can contribute, and can improve employee engagement. * Commits resources to achieving the vision.

Answer 141

strategy is the way a business operates in order to achieve its aims and objectives. The formulation of strategy is basically the same thing as constructing a business plan. Implementation is putting the plan into practice.

Answer 142

a plan should not be rigid it should be sufficiently flexible to allow for changing circumstances. it should include a feedback loop for regular check if the plan is working and adapting it as and when necessary. the setting and achievement of objectivise within a large business is a hierarchal process that does start at the top with the then setting of a corporate strategy, and is put to action by business function that design strategies to fulfil their objectivise.

Answer 143

strategic decisions do concern the general direction and overall policy of a business. tactical decision would tend to be a medium term decision that is a lot less far reaching than strategic decisions. operational decisions are administrative decision that will be short term and carry little risk.

Answer 144

is concerned with the strategic decisions a business makes that affect the entire business. At the corporate level, strategy is concerned with setting objectives for overall financial performance, proposed mergers or acquisitions, long term human resource planning and the allocation of resources to different business divisions.

Answer 145

is a course of action that ultimately leads to the achievement of the stated goals of the corporate strategy. Once the corporate strategy is established then the strategic planning that follows is used to establish the strategic direction, i.e. sets out in broad terms of how the objectives will be achieved.

Answer 146

the overall corporate strategy will be communicated to the divisional managers. This information shapes the plans the divisional managers create.

Answer 147

relates to a single functional operation such as: production, marketing or HRM and the activities involved within each of these functions. The decisions made at this level of strategy are guided and limited by the higher level corporate and divisional strategies and will support those strategies

Answer 148

long term -involves high commitment of resources -difficult to reverse -usually taken by senior management -made infrequently

Answer 149

medium term less resources involved can be changed in a reasonably short time scale -usually taken by middle management -made occasionally

Answer 150

short term few resources involved fairly easy to reverse usually taken by junior management made regularly

Answer 151

a corporate plan is a statement of organisational goals to be achieved in the medium to long term. it would be based on management assessment's of market opportunities, the economic situation and the resources and technologies available to the business. a corporate plan would make clear measurable objectives and formulate strategies for achieving these objectives. the corporate plan would include methods for monitoring the achievement of objectivise and the tactical decisions that are made to achieve these objectivise.

Answer 152

Cost how much does that cost does the business have the finance to be able to do this? Need to make sure that you are able to cover costs Potential returns does it lead to positive financial position? Timescale Stakeholder views doe all stakeholder agree do they win? Would it please people?

Answer 153

Availability of physical resources are the resource available both physical and human have you got the right staff available, are they good enough? Human resources Leadership styles not all people trust autocratic leaders, they do not have opinions and could be fearful to intervene if they disagree Competitors do you take decisions to keep up with your competitors?

Answer 154

Competitors do you take decisions to keep up with your competitors? Economy firms will try to save money, business will take tactical decisions to save money. A supermarket could have to make decisions whether they should bring out a new range or not. Weather/seasons could impact tourism, in businesses . As well as certain business do rely on the weather. Consumer trends will impact what you see and what you do as a business?

Answer 155

a decision tree is a diagram which illustrates the various strategic choice available to a firm their cost and expected values. using these can provide an effective, visual comparison of different options allowing for decision makers to take informed decisions based on potential financial returns.

Answer 156

* Clearly lay out the problem so that all options can be considered. * Allow managers to analyse fully the possible consequences and risks of a decision. * Provide a framework to quantify the values of outcomes and the probabilities of achieving them. * Decision trees give an easy-to-understand visual representation of the problem

Answer 157

* Can oversimplify a decision and focus too much on the financial outcome. * Don’t include other factors such as manpower considerations, managers’ opinions and marketing issues. * Probabilities are difficult to predict and may reflect bias. * There may be other options that are not included in the decision tree

Answer 158

* Can be time consuming to construct and may be interpreted with bias. * Time lags often occur in decision-making so information may be out of date. * Use probabilities which only gives an estimate which may be inaccurate.

Answer 159

* the effects of decisions on stakeholders e.g., workforce, management, suppliers and customers * training costs * recruitment costs * capacity management * marketing impacts

Answer 160

Porter’s Five Forces is considered a macro tool in business analytics – it looks at the industry’s economy as a whole, while a SWOT analysis is a microanalytical tool, focusing on a specific company’s data and analysis. originally developed by Harvard business schools Michael porter in 1979. The five force model does look at five specific factors that determine whether or not a business can be profitable in relation to other business in the industry

Answer 161

Michael Porter outlined five forces or factors which determine the profitability of an industry. He argued that the aim of competitive strategy is to cope with and ideally change those forces in favour of the business. Where the collective strength of those five forces is favourable, a business will be able to earn above average rates of return on capital. Where the collective strength of the five forces is unfavourable, a business will be locked into low or wildly fluctuating returns

Answer 162

1. Competitive rivalry This force examines how intense the competition is in the marketplace. It considers the number of existing competitors and what each one can do. Rivalry competition is high when there are just a few businesses selling a product or service, when the industry is growing and when consumers can easily switch to a competitor’s offering for little cost. When rivalry competition is high, advertising and price wars ensue, which can hurt a business’s bottom line.

Answer 163

- Number of competitors - Quality differences - Other differences - Switching costs - Customer loyalty - Costs of leaving market

Answer 164

2. The bargaining power of suppliers This force analyses how much power a business’s supplier has and how much control it has over the potential to raise its prices, which, in turn, lowers a business’s profitability. It also assesses the number of suppliers of raw materials and other resources that are available. The fewer supplier there are, the more power they have. Businesses are in a better position when there are multiple suppliers. Learn more about finding suppliers and B2B partners.

Answer 165

Supplier Power: - Number of suppliers - Size of suppliers - Uniqueness of service - Your ability to substitute - Cost of changing

Answer 166

3. The bargaining power of customers This force examines the power of the consumer, and their effect on pricing and quality. Consumers have power when they are fewer in number but there are plentiful sellers and it’s easy for consumers to switch. Conversely, buying power is low when consumers purchase products in small amounts and the seller’s product is very different from that of its competitors.

Answer 167

Buyer Power: - Number of customers - Size of each order - Differences between competitors - Price sensitivity - Ability to substitute - Cost of changing

Answer 168

4. The threat of new entrants This force considers how easy or difficult it is for competitors to join the marketplace. The easier it is for a new competitor to gain entry, the greater the risk is of an established business’s market share being depleted. Barriers to entry include absolute cost advantages, access to inputs, economies of scale, and strong brand identity.

Answer 169

Threat of New Entry: - Time and cost of entry - Specialist knowledge - Economies of scale - Cost advantages - Technology protection - Barriers to entry

Answer 170

This force studies how easy it is for consumers to switch from a business’s product or service to that of a competitor. It examines the number of competitors, how their prices and quality compare to the business being examined, and how much of a profit those competitors are earning, which would determine if they can lower their costs even more. The threat of substitutes is informed by switching costs, both immediate and long-term, as well as consumers’ inclination to change. Learn how to perform a competitive analysis to stay ahead of other players in the market. To take full advantage of this strategy make sure you’re able to properly calculate cost of goods sold (COGS).

Answer 171

threat of subsition -substitute performance -costs of change

Answer 172

* It makes a firm assess its current market position in terms of its strengths and weaknesses. * It enables a firm to build on its strengths and protect itself against its weaknesses. * It will show where there are market opportunities to exploit. * It will enable a firm to reduce the impact of any threats.

Answer 173

maintain or increase the market share of current products -this could be achieved by a comibation of compeitive pricing strategies, advertising, sales promtion and perhaps more resources dedicated to personal selling. secure dominance of growth markets restructure of a mature market by driving out competitors this would require a more aggressive promotional campaign supported by a pricing strategy designed to make the market unattractive for competitors increase usage by existing customer for example by introducing loyalty schemes

Answer 174

A market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.

Answer 175

Market development is a more risky strategy than market penetration because of the targeting of new markets.

Answer 176

This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. A strategy of product development is particularly suitable for a business where the product needs to be differentiated in order to remain competitive

Answer 177

critical path analysis is a method of planning and controlling large projects and is used to make decision on the management of resources and time. it is a technique used to find cheapest and quickest way to complete a task.

Answer 178

the critical path is an a operation which consist of a sequence of activities. this is the on sequence which cannot afford any delays without prolonging the whole operation

Answer 179

a critical path analysis is used to allocate resources within a project, judge how long a project should take to complete and to recognise those tasks or activities that take place within a project that are critical to the project being completed on time. a critical task or activity is one that must be started and completed on time if the project is o be finished on time.

Answer 180

* CPA is an effective management tool for planning and controlling complex projects. Critical activities can be identified which forces managers to think about the process and supports a systematic approach to planning activities. Problems can be highlighted early so that whole projects are not delayed. * Allows effective management of resources. Allocating factors, such as labour, to where they are needed and can be most effective. Supports the transferring of resources for different tasks, if required.

Answer 181

* Reduces the need for working capital – parts used in the project can be ordered exactly when they are needed. Allows the use of just-in-time production. * Improves cash flow as a result of reduced need for working capital. Also helps with cash flow forecasts. * Can be used to check on the efficiency of individual activities and to identify if new resources are needed or if employees need training.

Answer 182

* Improves overall management of projects – managers understand what is involved and what needs to be done and when it needs to be done by. * Can be used to give a business a competitive advantage by being more efficient and supports time-based management.

Answer 183

* Information can be distorted or poor (over optimistic) methods of estimation of activity times can be used. Lack of experience of those preparing CPA leads to inaccuracies. * CPA can give the wrong results or fail to allow for external factors that will influence the total time taken

Answer 184

* Sub-contractors, who may be completing some of the activities on a project, can be outside the control of the project manager. * Supplies may be delayed; they may be of the wrong type or of poor quality. * CPA only identifies the critical activities; it does not ensure these are done on time. Close supervision may be needed which may reduce employee morale.

Answer 185

* Requires ongoing checking of activities. Changes may be required if there is a delay. The construction of critical path analyses can be time consuming. * CPA does not ensure quality – the focus is mainly on time and meeting deadlines.

Answer 186

a growth strategy where a business aims to sell exiting products into existing market. an aim: to increase market share by selling more existing products to the same target customers get existing customers to buy more widen the range of existing products.

Answer 187

-business focus on markets and products it knows well -can exploit insights on what customers want( and competitors_). unlikely to need significant new markets research But will the strategy allow the business to achieve its growth objective

Answer 188

a growth started where a business aims to introduce new products into existing markets

Answer 189

a strategy that often plays to the strengths of an established business strong emphasis on effective market research ( insights into customer needs) and successful innovation a great way of exploiting the existing customer base being first to market is usually important

Answer 190

a growth stratdey where the business seeks to sell its exsisting products into new markets

Answer 191

-new georgaphical markets e.g exporting to emerging markets -new distribution channels ( e.g using e commerce and mail order). -diffrent pricing policies to attract new customers in diffrent segments

Answer 192

a logical strategy where existing markets are saturated a or in decline. often more risky than product Deveolpment - particularly expansion into international markets. existing products could not suit new markets depends on customer needs

Answer 193

Starbuck's expansion into China is a classical example of a successful market development strategy. Tesco market development strategy to enter the grocery supermarket sector was a disaster for shareholders

Answer 194

the growth strategy where a business market new product in new markets

Answer 195

-inherently risky strategy -no direct experience of the product or market -few economies of scale (initially). -however a if successful overall risk of the business is spread. -approaches o diversification -innovation and research and development, develop new solutions Aquirre an existing business in the market -extend an existing brand into a new market

Answer 196

Cost benefit analysis (CBA) is a method for measuring, in financial terms, the costs and benefits of an investment project. It includes a consideration of the external costs and benefits to society as well as the costs and benefits to just the business.

Answer 197

Cost benefit analysis is often used by governments when they are considering a public project, such as the building of a new motorway, rail bridge or hospital. Many different options can be ranked in order. When carrying out a cost benefit analysis there are a wide range and variety of costs and benefits to be identified and given a value. These can be divided into two groups: * Private Costs and Benefits * Public Costs and Benefits.

Answer 198

These are costs that the business making the investment must accept. * They include training and recruitment costs, the purchase of new capital equipment, marketing costs etc.

Answer 199

These are benefits that the business gains from as a result of making the investment. * These benefits will include things such as increased productivity, increased sales, brand values and increased profits.

Answer 200

These are costs external to the business making the investment. * A building company will have an environmental impact as it builds houses – increased traffic, noise etc. * A farm extracting water from a river to irrigate its crops leaves less water further downstream for fishing. * A new factory may involve the loss of open space, increased traffic congestion and so on.

Answer 201

* These are benefits external to the business that result from making the investment. * An obvious external benefit from a large-scale investment would be jobs created by the business. * Other public benefits include further jobs created outside the business as a result of increased business activity and an increase in tax paid by employees to the government. * In areas where unemployment is high, crime and social problems might be reduced.

Answer 202

Social Benefit (private benefit + public benefits) – Social Cost (private costs + public costs) * If the social benefits are greater than social costs, then go ahead with proposal. * If the social costs are greater than social benefits, then do not go ahead with proposal.

Answer 203

* Considers a wide range of benefits and costs. * Impacts on society and the community are included. * Puts a value to external benefits and costs that would normally be ignored by private sector businesses. * Can be used to rank possible major projects in order of public cost. * It shows that a firm cares about the local community and the environment, which can be good for public relations

Answer 204

Internal (or organic growth) can be defined as: ‘Growth achieved through the expansion of current business activities’.

Answer 205

Organic growth happens when a business expands its operations rather than using takeovers and mergers. Whilst these approaches are not easy, they are generally considered to be lower risk. However, the major downside of focusing on internal development is that the speed of change or growth in the business may be too slow.

Answer 206

Internal growth builds on the business’ own capabilities and resources. For most businesses, this is the only expansion method used

Answer 207

- Designing and developing new product ranges - Implementing marketing plans to launch existing products directly into new markets (e.g. exporting) - Opening new business locations – either in the domestic market or overseas

Answer 208

- Investing in research and development to support new product development - Investing in additional production capacity or new technology to allow increased output and sales volumes - Training employees to help the best acquire new skills and address new technology

Answer 209

1. Less risk than external growth (e.g. through mergers and takeovers) 2. Can be financed through internal funds (e.g. retained profits)

Answer 210

3. Builds on a business’ existing strengths (e.g. brands, customers) 4. Allows the business to grow at a more sensible rate in the long run

Answer 211

1. Growth achieved may be dependent on the growth of the overall market 2. Hard to build market share if business is already a leader

Answer 212

3. Slow growth – shareholders may prefer more rapid growth of revenues and profits 4. Franchises (if used) can be hard to manage / monitor effectively

Answer 213

-takeover can help a firm grow. it can benefit from economies of scale such as bulk purchasing, manufacturing economies use of specialist and marketing economies of scale. -increased market share leads to increased market power in the market and a reduction in competition. -diversification business will benefit from spreading their risks across several products and markets. 11

Answer 214

-acquiring new products and technology. a takeover is one way to acquire technology that could be protected by patent or may be expensive or time consuming to develop internally. -strong brands are likely to attract a high degree of customer loyalty. which also reduces risk and allows for long term planning. -control of supply chain -rapid growth

Answer 215

-higher returns to shareholders -benefit from synergy - two businesses fit together in a way tat does allow costs to be reduced and profits increased. -acquisition of technology and expertise -underperforming management teams can be removed giving an immediate boost to performance

Answer 216

The Ansoff matrix outlines the options open to businesses if they wish to grow, with a view to increase profitability and revenue. The Ansoff matrix considers whether the marketing strategy is targeted at existing customers or new customers and if existing products should be used or alternatively, if new products should be developed.

Answer 217

Involves the development of new products for existing markets. Improve or relaunch the product into existing markets by changing an existing product (for example, repackaging or adding extra ingredients). * Developing new products (such as Mars ice cream). * Requires businesses to innovate and look at new ways of extending the product life cycle of their existing products

Answer 218

developing new products and new markets -it does involve offering a new product in different areas. it is when a company expands its activities outside its normal range e.g farmers starting up quad biking or cadburg moving into the market for toilet bleach. -developing new products for new market does involve changes to both a business product and market. diversification may be attempted if a business sees a new opportunity and has investment fund available

Answer 219

-it does Carrie the greatest level of risk as it does involve changes in both the market and the product. virgin trains have limited success but virgin money has been more successful. -diversification does spread the risk for a business as it allows a business to reduce its reliance on existing markets and products. - if sales are falling for existing products or in existing market then a successful launch and growth of a new product in a new market could help to maintain the overall performance of the business.

Answer 220

-it does concentrat on sales of exsistin products to exsisting mrkets. -attracting customers who have not yet become regular sellers but are occasional by increasing their brand loyalty. -taking customers from competitors. internet service provides are trying to win customers from competitors through pricing strategies and promotional activates. -persuading existing customers to increase usage perhaps by reducing the price or offering promotion e.g sky offers packages or bundles to get existing customers to increase their monthly subscription.

Answer 221

finding and developing new markets for existing products. -there are two broad market development strategies. identifying users in different markets with similar needs to existing customers. this strategy can be risky as different countries have different tastes and needs - the product could have to be adapted. also new distribution channels could have to be used.

Answer 222

Identifying new customers who would use a product in a different way. For example, using Lucozade as a sports drink rather than something to have next to your bed when you have flu or measles. Repackaging and resizing the product may open a new market. For example, a business selling food to the hotel or restaurant market may start selling to consumers by repacking the product in small quantities

Answer 223

quick access to resources and skills the business needs overcome barriers to entry helps spread risk (wider range of products and greater geographical spread)

Answer 224

revenue growth opportunities (synergy) cost saving opportunities (synergy) reduces competition may enable economies of scale

Answer 225

high cost involved problems of valuation clash of cultures upset customers

Answer 226

problems of integration ( change management) resistance from employees non existent synergy incompatibility of mangement styles, structures and culture questionable motives

Answer 227

high failure rate diseconomies of scale

Answer 228

a joint venture is when two or more companies share the cost, responsibility and profits of a business venture

Answer 229

-growth in turnover without losing identity -businesses can specialise in certain areas of venture -avoid the legal and administrative cost of takeovers

Answer 230

-always friendly never hostile -competition may be eliminated

Answer 231

-possibel control struggles and too much comprise which could result in failure of venture -dsagreements o how to proceed -profits and split and one company may feel they could have done it alone

Answer 232

-exsisting products are in the later stages of their life cycle -business lack knowledge or resources to develop organically -speed of growth is a high prioirty -competitors enjoy significant advantage that are hard to overcome

Answer 233

-speed of acess to new products or market areas -increase market share -aquire new skills acess economies of scale -secure better distribution

Answer 234

-acquire intangible assets (brands, patents, trademarks_ -overcome barriers to entry to target markets -defend itself against a takeover threat -enter new segments of exsiting market -to elimnate compeiton -spread risk by diversifying -to take advantage of deregulation

Answer 235

( takeover)

Answer 236

vertical integration occurs when two firms at different stages of production. It involves going up or going down the supply chain.

Answer 237

Identify and prioritise the activities * Identify which activities MUST be done before others * EST – identify earliest start time * LFT – identify latest finish time * Identify the FLOAT – tasks which can be completed outside the critical path * Identify the critical path – points connecting ESTs and LFTs (where these are the same)