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A Level Revision > Business Theme 3 > Flashcards

Business Theme 3 Flashcards

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1
Q

What does SMART in Smart Objectives mean?

A

Specific, Measurable, Achievable, Relevant and Time-bound.

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2
Q

What is a mission statement?

A

A mission statement is the main goal for a business, explaining what its purpose is.

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3
Q

What is a corporate objective?

A

A corporate objective outlines the general policy or direction of an organization to fulfil its mission statement.

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4
Q

What are the common business objectives?

A

Profit maximization
Survival
Growth
Diversification
cash flow
Ethics

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5
Q

What is the hierarchy of objectives?

A

Mission Statement
Corporate Aims
Corporate Objective
Functional Objectives

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6
Q

What are the benefits of a mission statement?

A

Every member understands what they are striving towards
Makes decision making easier
Can give responsibility to a workforce

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7
Q

What are the limitations of a mission statement

A

If its unrealistic, the mission statement may get ignored
May demotivate workforce if management ignore suggestions from employees
Only effective if everyone supports them

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8
Q

What are the interests of Employees as stakeholders?

A

Regular income
Job Security
Safe place of work
Opportunities to further career

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9
Q

What are the interests of customers as stakeholders?

A

Fair prices that do not fluctuate
Safe products
Good customer service and after-sales service

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10
Q

What are the interests of shareholders as stakeholders?

A

Increase in dividends
Rising share prices

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11
Q

What are the interests of creditors as stakeholders

A

Repayment
Return on investment

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12
Q

What are the interests of suppliers as stakeholders

A

Secure supply contract to businesses
Fair prices

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13
Q

What are the interests of the local community as stakeholders

A

Local employment
Low levels of employment
Giving back to their community

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14
Q

What are the 4 boxes in Ansoff’s Matrix?

A

Market Penetration
Product Development
Market Development
Diversification

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15
Q

What is the purpose of Ansoff’s Matrix?

A

Helps a business analyze its strategy through the products that it offers and which markets it is competing in.

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16
Q

What are the uses of Ansoff’s Matrix?

A

A business can better understand the options that are available, helping them choose how it wants to grow
Helps businesses concentrate on the elements of the marketing mix that are most likely to affect them

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17
Q

What are the drawbacks of Ansoff’s Matrix?

A

The four cells of the model do not always line up with real scenarios
Ansoff’s is the most used model in strategy, if a business wants to be innovative, using this may be counter productive

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18
Q

What are Porters 4 points in strategy?

A

Cost Leadership
Cost Focus
Differentiation
Differentiation Focus

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19
Q

What does cost leadership mean?

A

When a firm leads the market in terms of the lowest possible costs, using economies of scale and supply chain innovation to achieve this

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20
Q

What does cost focus mean?

A

Companies concentrate on providing a specialized service to a niche market, aiming to attract customers by offering the lowest price for the product or service

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21
Q

What does cost focus mean?

A

Companies concentrate on providing a specialized service to a niche market, aiming to attract customers by providing distinctive attributes that provide the unique needs of the consumers

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22
Q

What does differentiation mean?

A

Looks outwards from a business to better understand customer needs and fulfil them, creating a unique product for the mass market.

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23
Q

What are the uses of Porters Strategic Matrix?

A

Helps businesses better understand the options of competitive advantages available to them
Businesses are able to assess potential risk

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24
Q

What are the drawbacks of Porters Strategic Matrix

A

Porter claimed that every business must fit into one single category to achieve strategic success, however there are many examples that buck this trend
If market changes, strategy would no longer be relevant

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25
What is the purpose of a portfolio
Helps spread risks, if one product does poorly, it can be supported by other products
26
What is Kay's model of distinctive capabilities?
Architecture Reputation Innovation
27
What does Architecture mean in Kays Distinctive capabilities?
Positive management of relationships encouraging individuals to meet company aims maintaining a culture of cooperation
28
What does Reputation mean in Kays Distinctive Capabilities?
Conveying to consumers the quality of products Selling at a price that is neither too high nor too low
29
Why is Innovation in Kays Distinctive Capabilities difficult to convert into a competitive advantage?
Costs and uncertainty Management required to inspire innovation Allocation of rewards
30
What is a tactical decision?
Shorter term decisions that a business makes in order to support its strategy
31
What is a strategic decision?
Long term decisions that a business makes in order to build its strategy and achieve its ultimate goal
32
What does a SWOT analysis stand for?
Strengths Weaknesses Opportunities Threats
33
What are the strengths for a business?
Internal factors: Innovation quality efficiency research and eeveopment investment in fixed assets training profitability communications
34
What are the weaknesses for a business?
Internal factors: Limited opportunities for employee training high staff turnover too many products nearing end of life cycle poor communications bad reputation negative cash flow limited experience in markets poor location
35
What are the opportunities for a business?
External factors: new markets opening abroad fall in exchange rate social trends shifting to green products main rival is in financial trouble government policy encouraging spending
36
What are the threats to a business?
External factors: Ageing population = fewer sales taxes increasing for particular firms maturation of product life cycle is imminent competition levels are high pressure groups threaten business to change technology makes products obsolete
37
What does PESTLE stand for?
Political Economic Social Technological Legal Environmental
38
What does Political mean in PESTLE
Businesses are affected by taxation, and must compensate for increases, however by increasing price, or lowering costs they might deter consumers
39
What does Environmental mean in PESTLE
By becoming environmentally friendly, can attract ethical consumers, however requires particular skills, which may be a high cost
40
What does Social mean in PESTLE
following trends and changes in fashion, the ability to react.
41
What does Technological mean in PESTLE
using improved processes can increase efficiency, and reduce costs overall, however equally competitors could use these
42
What does Legal mean in Pestle
Businesses must comply with legislation and may need to purchase new equipment. Can look attractive to consumers if following legislation correctly
43
What does Economic mean in PESTLE
Consumer demand increases as economy moves through the business cycle Exchange rates also have an impact
44
What are Porters 5 forces?
Bargaining Power of Market Suppliers Bargaining Power of Market Buyers Threat of New Entrants to the Market Threats of Substitute Product/Services Rivalry of the market
45
What are some objectives of growth?
Economies of scale Increased market power over customers and suppliers Increased market share and brand recognition Increased profitability
46
What are the problems with growth?
Diseconomies of scale Internal communication Overtrading
47
What are the tactical reasons for merging or takeovers
Increase business's market share Gain skilled staff Increase technology Gain ownership of intellectual property Expanding to other location
48
What are the strategic reasons to for merging or takeovers
Increase profitability Increase greater brand awareness Increase distribution capabilities Moving a business to new markets
49
What does merging mean?
The coming together of 2 companies, that supports the strategies of the merging companies as best as possible.
50
What does a takeover mean?
The buying out of one company by another, usually through the purchase of shares
51
What is horizontal integration?
Takeover or merger of a business within the same industry
52
What is upwards vertical integration?
Takeover or merger of a business to fulfil a role formerly completed by the business further down the supply chain
53
What is backwards vertical integration?
Takeover or merger of a business that would had previously supplied good to the business
54
What is a conglomerate integration?
When 2 businesses in completely different markets merge or takeover
55
Reasons for Horizontal integration?
Instantly increases market share Buyers benefit from economies of scale Expansion can help enter a new market segment
56
Reasons for vertical integration?
Maintain and control the supply chain Personally manage the standard of quality Keeps supplies away from rival companies Access to market
57
What are some ways a business can grow organically?
Launching a new product/service Increasing advertising and promotion Opening new stores/branches Introducing a new brand Market research and development Entering/leaving market segments Expanding the business's workforce
58
What are some advantages of organic growth?
Works out cheaper for business in long run Businesses have more control over their internal factors and so there is less risk overall Organic growth means that they are not forced to change their corporate cultures Maintenance of growth is manageable
59
What are the disadvantages of organic growth?
Much longer process than inorganic growth May take longer to react to market changes Funds for supporting growth are normally invested in generating more sales organic growth is not always enough to sustain a business
60
What is the purpose of simple payback?
Benefits the business as calculations show them how long their money will be at a risk
61
What are the limitations of simple payback?
Not a definitive estimate Only focuses on short term, ignoring potential long term benefits Only focuses on payback, not profitability
62
How do you calculate payback?
Payback = sum invested/ net cash per time period
63
What are the limitations of appraisal?
Can take time to gather information required for investment appraisal Many unforeseen costs and taxes By putting a figure on the risk, owners may lose sight of the rewards from taking risks Often only look at short term rewards instead of long term potential
64
What are decision trees?
Help with making choices, considering the choice in question, the probability of success, and financial gain
65
What do the 2 shapes in a decision tree represent?
Square - A decision that a business needs to make Circle - The chance of success
66
What are the benefits of using decision trees?
They focus on uncertainty, ensuring managers act carefully Makes it easier to see the full picture Shows value as well as probability Useful for forecasting something that had happened before
67
What are the limitations of using decision tress?
Only really work for tactical decisions rather than strategic decisions Takes time Only generally concerned with monetary gain External changes can occur
68
What is critical path analysis used for?
To utilize the least resources to complete a project in the least amount of time.
69
What are the advantages of critical path analysis?
useful for project based management Identifies when resources are required Estimates minimum completion time Reduces waste as management can plan ahead
70
Limitations of critical path analysis
Not as useful in large scale operations as diagram becomes long and complicated Requires good resource management Does not consider external factors Only helpful as a guide at the start, as it is not flexible for changes to be made
71
What influences corporate decision making?
Risk Attitude to risk Past successes Nature of the industry Stakeholder power Ethical values Resources available
72
What is short-termism?
Form of decision making that works mostly toward meeting quarterly figures
73
What is long-termism?
Form of decision making more focused in the long term, generally having more invested in research and development
74
What is the process for evidence based decision making?
Set objectives Gather objectives Analyze data Select a course of action Implement the plan Review the effect
75

A Level Revision (19 decks)

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