Strategy and Implementation

Question 1

What are strategic decisions?

Answer 1

long term, high risk decisions that determine the overall direction of the business

Question 2

What are tactical decisions?

Answer 2

> Medium term, less complex decisions, made by middle management in functional areas
Aim to meet the objectives in strategic plan of a business
Need to be flexible & adaptable due to PESTLE influences

Question 3

What are operational decisions?

Answer 3

decisions that concern the day-to-day activities of an organization

Question 4

What is strategic direction?

Answer 4

The course of action a business takes to achieve its goals stated by the cooperate strategy. Strategic planning is used which contains a clear mission statement, describes objective and decides which functions are focused on.

Question 5

What is cooperate strategy?

Answer 5

Concerned with the strategic decisions that affect the entire business. Overall financial performance, proposed mergers or acquisitions, long term human resource planning and allocating resources. Are the overall statements of intent set by the most powerful employees and everything ties into this broad strategy.

Question 6

What is divisional strategy?

Answer 6

Corporate strategy communicated to divisional managers (functional or geographical). This information shapes the plans these managers create, which helps to achieve the overall corporate strategy.

Question 7

What is functional strategy?

Answer 7

Relates to a single functional operation. The decisions are guided and limited by divisional and corporate strategy. The functional managers have the responsibility to nurture the systems that will allow overall goals to be achieved.

Question 8

What are tactics?

Answer 8

-Are the short term small steps that help achieve the overall strategy.
-Involve plans and practices, and need to be flexible in order to adapt to changing business strategy.
-They often have start and end dates with milestones, allowing them to be measurable.W

Question 9

What is a corporate plan?

Answer 9

A statement of organisational goals to be achieved in the medium to long term
-Internal influences help to plan and prepare resources.
-External influences are taken into account to see what affects the plan.
-Clear and measurable objectives, which formulates strategic decisions.

Question 10

Strengths of a corporate plan?

Answer 10

-Common sense of direction and confidence in the goals of the business.
-Able to understand the customers needs and wants more, so they can be matched more effectively.
-Helps businesses look at risks and opportunities.

Question 11

Weaknesses of corporate plans?

Answer 11

-Implementing business strategy requires collaboration between all stakeholders.
-Needs careful monitoring which increases management costs.
-A lot of time and money is invested in the plan, and sometimes no reward is gained.
-Forecasts need to be as accurate as possible.

Question 12

What is SWOT analysis?

Answer 12

Strengths- internal positives.
Weaknesses- internal negatives.
Opportunities- external positives.
Threats- external negatives.

Question 13

What does SWOT allow businesses to do?

Answer 13

Analyses its resources and environment to help plan business strategy.
Exploring new initiatives, executing new policies, identifying areas for change in a programme and redefining mid-plan.

Question 14

Benefits of SWOT?

Answer 14

Encourages a business to identify weaknesses and see threats coming. Therefore, it can be more flexible.

Question 15

Drawbacks of SWOT?

Answer 15

May oversimplify the issues a business faces.

Question 16

What is determined by Porter’s five forces?

Answer 16

collectively, an industry’s potential for profitability and competition. but forces do not guarantee that an individual firm will be/ not be profitable.
-Porter proposed that businesses could exert a force on a market rather than being passive participants.

Question 17

What are Porter’s five forces?

Answer 17

1. Buyer Power
2. Supplier Power
3. Threat of substitute products or services
4. Threat of new entrants
5. Rivalry among existing competitors

Question 18

Supplier power?

Answer 18

-The ability of suppliers to set prices.
-If suppliers have high power, they are able to push up prices for raw materials and components. This means lower profit margins for the business. Example: computer chips.
-If suppliers have low power, the business will be able to push prices down, allowing for greater profit margins. Example: farms supplying Tesco.

Question 19

What factors affect supplier power?

Answer 19

-Factors affecting supplier power= number of alternative suppliers, cost of switching suppliers, importance of volume orders to suppliers, if inputs make up a large proportion of costs.

Question 20

Buyer power?

Answer 20

-The ability of customers to determine price.
-With high buyer power, a business is forced to set lower prices, but with low buyer power, businesses can charge more for their products.

Question 21

What factors affect buyer power?

Answer 21

whether the customer buys in bulk, the proportion of the business’ sales the customer buys, product USP, competitors, brand loyalty, price sensitivity.

Question 22

Barriers to entry?

Answer 22

-The factors that prevent new competition entering the market.
-If new businesses can easily enter the market, then existing businesses have to put more effort into keeping high profits. The opposite is true with high barriers to entry.

Question 23

Examples of barriers to entry?

Answer 23

Cost advantages (economies of scale) of existing businesses, high capital investment requirements, brand loyalty, access to distribution networks, access to production factors.

Question 24

Threat of substitues?

Answer 24

-The risk of alternative products/services.
-In telecommunication, there was no threat to terrestrial TV or fixed line phones, but now mobile phones and satellite TV are a threat.

Question 25

What factors affect the risk of substitutes?

Answer 25

rates of change in technology, availability for capital investment, switching costs for customers, level of substitution effect, price-performance trade off.

Question 26

Competition?

Answer 26

-How much competition exists in the market. -Determines the prices set and the profit made. -Factors determining the amount of competition: level of collusion, maturity of market, product differentiation, strength of brands, industry concentration.

Question 27

What makes an industry attractive?

Answer 27

-Where it is easy to make a profit, difficult for new businesses to enter the market, low risk of substitutes, low buyer power but loyal customers and low supplier power.

Question 28

Benefits of porters five forces?

Answer 28

shows current environment and suggests how to protect and grow products.

Question 29

Drawbacks of porters five forces?

Answer 29

assumes market forces stay static but they are always changing. Does not consider non-market forces such as legislation. Non predictive value.

Question 30

What is Anzoff's matrix?

Answer 30

A marketing planning model that helps a business determine its product and market strategy. -Shows the options to grow and how they manage product development.

Question 31

Elements of Anzoff's?

Answer 31

Diversification, market penetration, market development, product development.

Question 32

Market penetration?

Answer 32

Existing products in existing markets. -Aims to increase sales in its current market. -Can do this by: attracting customers who are not regular users (increase brand loyalty), attacking competitors' sales (happens in mature markets, by adjusting the marketing mix) and increasing consumption from existing users (by offering bundles and package deals). -Low risk but potentially low reward. -Example: Square One advertising a new buy one get one free.

Question 33

Market development?

Answer 33

-Existing products in new markets. -New geographical markets, new distribution channels or new pricing methods to attract different groups of customers. -Identifying users in different markets with the same needs as existing customers, identify new customers who would use the product in a different way. -Example: Lucozade marketing drink as a recovery drink for when you're ill, or Square One opening a new cafe in another area. -Greater rewards than penetration but more risk (Starbucks in Australia).

Question 34

Product development?

Answer 34

-Developing new products for existing markets that are similar to what the business is already selling. -Example: Mars selling ice cream and drinks. -Requires innovation and extension strategies for products (Apple and Dyson). -More risk. Walkers frozen potatoes.

Question 35

Diversifcation?

Answer 35

New products in new markets. Attempted if there is an opportunity and the investment is available or may be forced into it if the sales in existing markets are diminishing. -The greatest risk involves changing the product and market. -If successful, the benefits will be huge. -It also can spread risks as the business does not rely on a single market or product. -Example: Virgin diversifying into Virgin Atlantic.

Question 36

Benefits of Anzoff's matrix?

Answer 36

Helps understand growth strategy of the business, exploits new markets, indicates level of risk, help develop aims and objectives.

Question 37

Drawbacks of Anzoff's matrix?

Answer 37

Only a theoretical model, does not take into accounts of competitors.

Question 38

What is growth?

Answer 38

the expansion of sales revenue, in the hopes that profits will follow.

Question 39

What is organic growth?

Answer 39

Growth which takes place without any merger or takeover. Growth occurs through retained profits rather than seeking riskier methods of finance.

Question 40

What are the organic growth strategies?

Answer 40

-Opening more factories to increase capacity and opening more retail outlets. -Expanding the product range- to increase the potential customer base. -Targeting new markets. -Expanding the distribution network. -Benefiting from economies of scale.

Question 41

Advantages of organic growth?

Answer 41

Less risky as no large upfront cost involved. Less of a threat of brand dilution. Allows for greater consistency. Growth can be steady and controlled.

Question 42

Disadvantages of organic growth?

Answer 42

Missed opportunities from acquisitions. Potential growth is more limited. Lack of shared expertise. Dissatisfaction of shareholders.W

Question 43

What is external/inorganic growth?

Answer 43

When a business grows by joining with another

Question 44

What is a takeover?

Answer 44

An acquisition of one business by another which can be hostile or agreed.

Question 45

What is a merge?

Answer 45

involve a combination or consolidation of two firms to form a new legal entity

Question 46

Why do mergers/takeovers happen?

Answer 46

-Acquire technological expertise. -Reduce costs through economies of scale. -Move out of low growth mature markets. -Diverse into new products/markets.

Question 47

Advantages of external growth?

Answer 47

Immediate growth. Eliminates competitors. Access to more technology/machinery/workers. New target market and customers.

Question 48

Disadvantages of external growth?

Answer 48

Risk of brand dilution. Large upfront cost. Cultures and management may not be compatible. Lack of expertise in the market area.

Question 49

What is horizontal integration?

Answer 49

Merging with a competitor in the same/similar industry.

Question 50

Benefits of horizontal integration?

Answer 50

Increased economies of scale, increased market share and power, removes a competitor, opportunity to cut costs.

Question 51

Drawbacks of horizontal integration?

Answer 51

risk of diseconomies, management and worker culture could clash.

Question 52

What is vertical integration?

Answer 52

the combination in one company of two or more stages of production normally operated by separate companies. Forwards- with the business it supplies to. Backwards- with its supplier.

Question 53

Benefits of vertical integration?

Answer 53

-Security of suppliers and control of the supplier's prices. -Guarantee the quality of the raw materials. -Increased profit margins because raw materials are not from a third party.

Question 54

Drawbacks of vertical integration?

Answer 54

-Less scope for economies of scale because of different stages of the production process. -Possibility of complacency.

Question 55

What is conglomerate intergation?

Answer 55

Where a merger or takeover involves the coming together of two unrelated businesses. The main benefit is that the new business is no longer reliant on just one market or product , designed to spread risk for the new business.

Question 56

Benefits of conglomerate integration?

Answer 56

-Diversification spreading the risk taken by the business -Transfer of ideas between the different sections of the business -Economies of scale.

Question 57

Drawbacks of conglomerate integration?

Answer 57

-Shift away from core products. -Clashing of cultures. -No market expertise. -Not demanded by customers.

Question 58

What are the arguments of growth?

Answer 58

-Synergy- which is the idea is 2+2=5. By combining the two businesses, the total profits can be increased. -Access to new markets. -Economies of scale. -Increased market share and power in the market. -Cost savings- only need one HR team and one marketing team. -High returns to shareholders.

Question 59

What is a franchise?

Answer 59

A legal agreement that gives an individual the right to market a company's products or services in a particular area, for a percentage return of revenue.

Question 60

What is a franchisor?

Answer 60

the seller of the franchise

Question 61

Benefits of a franchisor?

Answer 61

Benefits: -Fast growth with low risk because the franchisee is paying for the growth. -Increased income from franchise fees. -Economies of scale can be accessed. -Can control marketing and what is sold. -Lower employment costs. -Franchisees are likely to be committed and hardworking.

Question 62

Drawbacks of a franchisor?

Answer 62

-Loss of control - franchisees may be harder to manage than appointed managers. -Not all profits return to the franchisor, representing an opportunity cost. -Potential loss of reputation. -Must ensure that the franchise agreements are carefully drawn up or disputes could occur. -Does not have complete control of the day to day running of the business. -Possibility of diseconomies of scale. -Have to supply them so less to use for pure outlets.

Question 63

What is a franchisee?

Answer 63

A business that agrees to manufacture, distribute or provide a branded product, under licence by a franchisor.

Question 64

Benefits to the franchisee?

Answer 64

-Supported by national advertising/promotion -Reduced risk of failure as they are selling an already proven product or service. -Support is offered by franchisor e.g. full training, and start-up equipment such as materials -Retaining degree of independence.

Question 65

Drawbacks to the franchisee?

Answer 65

-Not being able to operate with the same level of freedom. -Cannot sell the business without the franchisor's permission. -The franchisor can end the franchise without reason or compensation. -Royalty fees.

Question 66

What is rationalisation?

Answer 66

when managers reorganise the business to make it more efficient. -Leads to reduced size, change in policy or altering strategy.

Question 67

What are the reasons for rationalisation?

Answer 67

-Restructuring the business to increase efficiency. -To turn around poor performance -To focus on core business -To sell off less profitable parts of business to improve overall performance -Following a merger or takeover to remove duplication of resources.

Question 68

What are the causes of rationalisation?

Answer 68

-Diseconomies of scale. -Increased costs. -Reduced consumer incomes and demand. -Market crash. -Competition authority. -Political shocks. -Environmental considerations.

Question 69

Examples of rationalisation?

Answer 69

Closing branches, transferring production, shrinking product ranges, installing new I.T systems.

Question 70

Advantages/disadvantages of rationalisation?

Answer 70

Advantages: -Lead to increased efficiencies. -May fall in line with consumer trends. Disadvantages: -Causes job insecurity and uncertainty, which can lead to industrial action. -Must be well planned.

Question 71

What factors affect the location of the business?

Answer 71

External economies of scale, costs, grants and schemes, target market, competitors, infrastructure, legislation, ethical and environmental considerations.

Question 72

What is relocation?

Answer 72

A business changing its location

Question 73

What is offshoring?

Answer 73

the practice of basing some of a company's processes or services overseas, so as to take advantage of lower costs.

Question 74

Why do businesses offshore?

Answer 74

-Take advantage of lower costs. Labour and land are often cheaper in some countries when compared to others. -Higher productivity. -It can be easier to enter new markets if you are based in that particular country. -Overcome domestic regulations. -Businesses can take advantage of talent pools - this is where potential employees already have the skills set necessary to carry out the work of the business. This lowers training costs.

Question 75

What is reshoring?

Answer 75

Process of moving operations back to company's domestic location

Question 76

Why do businesses reshore?

Answer 76

-Cost savings are no longer as significant. -It is easier to control quality issues. -Businesses can find it easier to ensure that their product is not being copied if they are able to monitor more closely who has access to their information. -Shorter lead times may result so delivery time to customers can be shorter. -They may be able to take advantage of government incentives such as lower tax rates.

Question 77

Regional factors affecting location?

Answer 77

-Access to markets. For some, being near the customer is essential. In retail, this has been broken down due to online e-commerce. Just in time systems and lead times. Trade blocks can disrupt access to international markets. -Cost and nature of production. If components are bulky, relocating near suppliers substantially lowers costs. Cost, availability and skills of labour and land. -Social reasons. Managers may want to live in an area with good facilities, a reason why it is hard to attract businesses to deprived areas. -Historical reasons. Businesses may want to remain where they were established even if resources are depleted and the reason they were located there in the first place are gone.

Question 78

International factors affecting location?

Answer 78

-Large businesses have the option to locate anywhere in the world. -Maximising economies of scale. -Access to international markets. -Tax advantages. -Freedom from restrictions.

Question 79

What are footloose businesses?

Answer 79

businesses who are not restricted to a particular location and can relocate depending on the economic situation.

Question 80

What is outsourcing?

Answer 80

A decision by a corporation to turn over the production of parts to independent suppliers

Question 81

Examples of outsourcing?

Answer 81

call centers in India; factories in China and Indonesia.

Question 82

Advantages of outsourcing?

Answer 82

-Significantly reduced staffing costs -Reduce HRM costs such as recruitment and training. -Existing workload and stress levels reduced. -Less investment risk: instead of investing in new production facilities, let the outside supplier take the risk of investing -Capital needs reduced; because there is less investment, there is less need to raise finance -Lower costs increase profits giving more capital for research and development, thus speeding the development of new products.

Question 83

Disadvantages of outsourcing?

Answer 83

-The potential of poor customer service. -Existing employees may feel demotivated if they believe their jobs are at risk. Demotivation can increase staff turnover and reduce productivity. -Quality of production/product cannot be guaranteed. -More difficult to implement JIT systems -Breakdown in communication in the production chain. Speedy and effective communication becomes much more difficult when the person speaks a different language -Loss of security of data — there have been cases where customer data has been made available to external organisations from subcontracting businesses; in the worst cases, the information has been passed to competitors or even criminal gangs -Lost tax revenues to the home government when offshoring is used.