Business Strategies Flashcards
(48 cards)
1
Q
Meaning of a strategy
A
- long-term action plan to reach goal
- action plan to address opportunity or solve problem
- business needs strategy to achieve vision and mission
2
Q
Explain the strategic management process
A
- analyse vision and mission statement
- implement strategy using a template such as an action plan
- monitor implemented strategy to identify gaps in implementation
- take corrective action to ensure goals are met
3
Q
Give steps in evaluating strategy
A
- examine underlying basis of business strategy
- look forward and backward into implementation process
- take corrective action so that deviations may be corrected
- set specific dates for control and follow-up
4
Q
List industrial analysis tools
A
- SWOT
- PESTLE analysis
5
Q
Explain strength as part of SWOT
A
- factors within the business that contributed to the business achieving its goals
Eg. Skilled workers
6
Q
Explain weakness as part of SWOT
A
- Factors within business that prevent business from achieving goals
Eg. Insufficient capital
7
Q
Explain opportunity as a part of SWOT
A
- factors outside business that improve chances of success
Eg. New tech
8
Q
Explain threat as part of SWOT
A
- factors outside business that could prevent business from achieving goals
Eg. High interest rates
9
Q
List Porter’s five forces
A
- power of suppliers
- power of buyers
- power of competitors
- threat of substitution
- threat of new entrants to market
10
Q
Explain the power of suppliers as part of Porter’s 5 forces
A
- assess power of suppliers in influencing prices
- more powerful suppliers, less control business has
- suppliers that deliver high quality products may have power over business (high in demand)
- smaller number of suppliers, more powerful they are, as choice of suppliers is limited
11
Q
Explain power of buyers as part of Porter’s 5 forces
A
- conduct market research to gather more buyer information
- assess how easy it is for buyers to drive prices down
- a few powerful buyers are often able to dictate terms to business
- buyers buying in bulk can bargain for prices in their favour
12
Q
Explain power of competitors as part of Porter’s 5 forces
A
- competitors selling same or similar products may have greater impact on market of business
- if competitors have a unique product, they have greater power
- business with many competitors in same market have very little power in market
- some businesses have necessary resources to start price wars and continue selling at a loss until competitors leave the market
13
Q
Explain the threat of substitution as part of Porter’s 5 forces
A
- if product can be easily substituted, it weakens power of business in market
- assess if customers are using substitute products and determine reasons
- establish if sellers of substitutes have improved the product, or sell lower quality at a lower price
- if business sells unique products, it can’t be threatened by substitutes
14
Q
Explain the threat of new entrants to the market as part of Porter’s 5 forces
A
- if barriers to enter market are low, it’s easy for a new business to enter
- new competitors can quickly and easily enter market if it takes little time and money
- if there are few suppliers but many buyers, it may be easy to enter
- if business is highly profitable, it attracts potential competitors that want to benefit from high profits
15
Q
What does PESTLE stand for
A
- political
- economic
- social
- technological
- legal
- environmental
16
Q
Explain the challenges of political as part of PESTLE
A
- some government policies may affect business
- trade agreements may prevent business from importing certain products
- consumer rights organisations may prevent business from selling if they don’t meet certain requirements
17
Q
What recommendations are there for the political part of PESTLE
A
- trade only with countries that have favourable trade agreements with government
- network and lobby with NGOs and all consumer rights organisations
- review cash budget to cater for changes in inflation rate
18
Q
What challenges does the economic part of PESTLE face
A
- high inflation decreases market share of business as customers can’t afford high prices
- loans may be expensive due to high interest rates
- fluctuations in foreign currency may restrict imports
19
Q
Recommendations for economic part of PESTLE
A
- negotiate favourable interest rates with creditors
- negotiate payment terms with suppliers
- sell assets that are no longer profitable
- cut down on unnecessary spending
20
Q
Challenges of the social part of PESTLE
A
- customers may not be able to afford products due to low income levels or hight unemployment
- business may not be conversant with the language of consumers
- some customers may prefer to spend their money on medical bills for the treatment of chronic illness
- high crime rate may affect trading hours of business, resulting in decreased profit
21
Q
Recommendations for social part of PESTLE
A
- sell substitute products at lower prices
- business must be familiar with demands of consumers
- offer learnerships to members of community
- offer skills development programmes
22
Q
Challenges of technological part of PESTLE
A
- business may mot be aware of latest technology
- business may not be able to afford new technology
- employees may not be skilled enough to operate new equipment
- may not be able to cater to online transactions
23
Q
Recommendations for technological part of PESTLE
A
- continuous research on latest available technology in market
- select suitable suppliers for new equipment at reasonable prices
- train existing employees to use new equipment
- business must be geared for online trading
24
Q
Challenges of legal part of PESTLE
A
- certain acts may have direct impact on business
- high legal costs involved in obtaining a licence, trademark, parent may prevent some establishments
- legal requirements for operating certain types of business are time consuming
- legalities of business contracts may limit business operations
25
Recommendations of legal part of PESTLE
- comply with all relevant legislation that may impact business
- comply with legal requirements for operating
26
Recommendations for environmental part of PESTLE
- ingredients should be clearly indicated in labels to inform customers about possible side effects of products
- implement cost effective ways to dispose of waste
- implement recycling measures to prevent pollution of environment
27
Challenges of environmental part of PESTLE
- ingredients in business products may be harmful to customers if not indicated on label
- disposing of business waste may be expensive
- packaging of some products may not be environmentally friendly
28
List types of business strategies
- integration strategies
- intensive strategies
- diversification strategies
- defensive strategies
29
List types of integration strategies
- forward vertical integration
- backward vertical integration
- horizontal integration
30
List types of intensive strategies
- market penetration
- market development
- product development
31
List types of diversification strategies
- concentric
- horizontal
- conglomerate
32
List types of defensive strategies
- divestiture
- retrenchment
- liquidation
33
Explain forward vertical integration
- business takes over or merges with distributer
- involves expansion of business activities to gain control over direct distribution of products
Eg. Takealot purchasing MrD to deliver parcels
34
Explain backward vertical integration
- business takes over or merges with suppliers
- purpose is to decrease business dependency on suppliers
Eg. Netflix producing their own movies and shows
35
Explain horizontal integration
- business takes control of competitors selling in same market
- purpose is to reduce threat of competition and substitution
Eg. Facebook took WhatsApp and Instagram
36
Explain market penetration
- growth strategy where business focuses on selling existing products to existing markets
- new products penetrate existing market at low price until it is well-known to suppliers and prices can increase
- focuses on gaining a larger share of market by reducing prices to increase sales and promotion
Eg. New bacon brand offering bacon at below average price of other established bacon brands
37
Explain market development
- process of finding new markets for existing products
- business must research market it wants to enter
- involves targeting consumers in potential market that is outside normal target market
- change way products are distributed to reach a different market
Eg. Opening a second branch in a new city or business starting to export to different countries
38
Explain product development
- introduction of new product or service into existing markets
- business generates new ideas and develops new product or service
- business may need to acquire new technology to develop new products
- improve packaging of current products so they look and seem different and appealing to market
Eg. Coca-Cola introducing cherry and vanilla coke
39
Advantages of intensive strategies
- increase in sales and profitability due to variety of advertisements campaigns
- regular sales to existing customers may increase
- improved service delivery may increase sales
- eliminates competitors and dominates market prices
40
What are diversification strategies
Growth strategies which adds new products to new markets
41
Explain a horizontal strategy
- business adds new products that are unrelated to existing products, but appeals to existing customers
- occurs when business acquires or merges with a business that is at the same production stage but offers different products
Eg. Apple started with computers but then produced MP3 players and phones
42
Explain a concentric strategy
- business adds new product that is related to existing products and will appeal to new customers
- occurs when business wants to increase product range and markets
Eg. Coca-Cola producing Powerade, mineral water, ice teas
43
Explain conglomerate strategies
- business adds new products that are unrelated to existing products which may appeal to new customers
- business grows into new products, services, markets
Eg. Virgin Group - Virgin Active (gym), Virgin Mobile (cellphone service provider), Virgin money (insurance), Virgin Atlantic (airways), Virgin casino, Virgin wines, etc
44
Advantages of diversification strategies
- increased sales and business growth
- reduces risk of relying on only one product for sales
- improves business brand and image
- allows business to remain relevant in dynamic business environment
45
What are defensive strategies
- implemented to defend business existence
46
Explain divestiture
- selling some assets that are no longer profitable
- paying off debts by selling unproductive assets
- selling off product lines with slow growth potential
- decrease number of shareholders by selling ownership
47
Explain retrenchment
- terminating employment contracts of employees for operational reasons
- closing certain departments may result in some workers becoming redundant
48
Explain liquidation
- selling all asset and stopping operations to pay, or due to lack of capital
- selling entire business to pay shareholders fair prices for shares
- allowing creditors to apply for forced liquidation to have claims settled
- business in financial distress can apply for business rescue to avoid liquidation
