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Business Year 13 > Theme 3 > Flashcards

Theme 3 Flashcards

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1
Q

what is a objective

A

statement of specific outcomes that the business wants acheive

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2
Q

the hierarchy of business objectives

A

mission
corporate/strategic
functional
team
indvidual

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3
Q

Purpose of corporate objectives :

A

provide strategic focus
measure performanceof the firm as a whole
informed decision making
set th scene for more detailed functional objectives

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4
Q

the mission statement is :

A

the over riding purpose of the business
the reason for its existence
a strategic porspective
supports the stated vision for the future

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5
Q

SMART objectives

A

specific
measureable
acheivable
relevant
time bound

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6
Q

what is ansoffs matrix :

A

a markting planning model that helps a business determine its product and market strategy

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7
Q

what is a market

A

the group of people to whom you are selling your product

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8
Q

what is the boston matrix

A

business model which helps business analyse thier product portfolio

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9
Q

intrest rate :

A

the cost of borrowing, the reward for saving

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10
Q

what are external influences :

A

factors outside the business over which they have no control to which they have to react

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11
Q

what is vertical intergration

A

when a business takes over with another business at a different stage of the production process of the same good

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12
Q

what is a stratergy

A

this is the long term plan on how you are going to acheive your aims and objectives

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13
Q

core capabilities

A

the things a business does best

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14
Q

oppourtunity

A

something that can help the ompany meet it’s business objectives

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15
Q

barriers to entry

A

intial outlay may be too high
legal barriers
economies of scales
control of a supply of raw materials

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16
Q

objectives of growth

A

to acheive economies of scale
increased market power over customers and suppliers
increased market share and brand recognition
increased profitabilty

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17
Q

what is economies of scale

A

when unit costs fall as outputs increase

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18
Q

cost per unit

A

total costs / number of units produced

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19
Q

oppourtunity costs

A

forgone costs

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20
Q

contribution

A

selling price - veriable costs

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21
Q

what is a takeover

A

involves one business acquiring control of another business

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22
Q

what is a hostile takeover bid

A

when a business buys out shares from shareholders

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23
Q

possible reasons for takeover

A

increase market share
access eos
acquire intangable assets
acquire new skills
secure better distribution
spread risk by diversifying

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24
Q

drawbacks of a takeover

A

high costs
upset customers and suppliers
resistnace from employees
incompatibilty of management styles
high failure rate

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25
what is a merger
a combination of two previously seperate brands which is achieved by forming a completly nre firm into which the two original businesses are intergrated
26
why do forecast sales
a vital planning activity the sales forecast forms the basis for most other common parts of a busisness
27
advantages of using extropolation
a simple method of forecasting not much data required quick and cheap
28
disadvantages of using extropolation
unreliable if there are significant fluctuations in historical data Assumes that past trends will continue into the further unlikely in many competitive markets ignores qualitative factors
29
what is correlation
looks at the stregnth of a relationship between two variables
30
investment appraisal
the process of analysing wether investments projects are worth wile
31
what is worthwile
will it hep the business to acheive it's objectives
32
three main methods of investment appraisal
payback period avrage rate of return discounted cash flow
33
payback period
the time it takes for a project to repay it's intial investment
34
average rate of return
looks at the total accouting return for a project to see if it means the target return
35
discounted cash flow
net present value calculates the monetary now of the profits future cash flow
36
benefits of using payback period
simple and easy to calculate focuses on cash flow emphasises speed of return straight forward to compare competing projects
37
drawbacks of using payback period
ignores cash flow after payback has been reached takes no account of the time value of money may encourage short term thinking ignores qualitative aspects of a decision does not actually create a decision for investment
38
what is the ARR (Average Rate of return)
the annual percentage return on an investment project based on average returns earned by the project
39
benefits of ARR
simple to understand and easy to calculate focuses on the overall profitablilty of an investment project uses all the returns generated by a project
40
drawbacks of ARR
ignores the timing of retruns focuses on profits rather than cashlow does not adjust for the time value of money
41
what is discounting
the method used to reduce the future value of cash flows to reflect the risk that they may not happen
42
how to calculate ARR
1. calculate the average annual profit from the investment project 2. divide the average annual profit by initial outlay 3. compare with the target percentage return
43
how to calculate payback
identify net cash flow for each period keep a running total of the cash flow
44
what are the results of each method of investment appraisal
payback = time day years ARR = % retrun discounted cash flow = monetary value ( £ )
45
what is a decision tree
a mathematical model used to help managers make decisions. Uses estimates and porbabilities to calculate likely outcome. helps deciede wether the net gain from a decision is worthwile
46
profitability
the rate of profit per product
47
net gain
when the money generated from the porject is greater than the money spent on the project
48
expected value
the financial value of an outcome calculated by multiplying the estimated financial effect by it's probability
49
advantages of decision trees
choicesare set out in a logical way potential option choices are considered at the same time use of probabilities enables the risk of the options to be considered likely costs are considered aswell as potential beenfits, measured financially
50
disadvantages of decision trees
probabilities are just estimates use qualitative data only assigenments of porbabilities and expected values prone to bias decision making technique doesn't necesarily reduce the amount of risk
51
Critical Path Analysis
and planning method that allows a project to be completed in the shortest amount of time
52
information needed for CPA
a list of all activites required to complete the project the duration each that each activity will take to complete the dependecies between the activities
53
what is critical path analysis
the sequence of project activities whcih add up to the longest overall duration the crytcial path determines the shortest time possible to complete the project
54
CPA calculates ...
the longest path of planned activities of the end of the project the earliest start time (est) latest finish time(lst) crytical path total float
55
why is the crytical path so important
any delay of an activity on the critical path directly impacts the planned project completion date
56
calculating ests
the first node will always have an est of zero ests are calculated from left to right add the duration of an activity to the est of a previous node if more than one activity leads to a node the highest figure becomes the new est
57
calculating lfts
give the last node of the project an lft = to the est work backwards from right to left subtract the duration of the activity from the lft
58
what is the total float
the durattion an activity can be extended or postponed so that so that the project still finishes within the minimum time
59
oginisational culture =
the set if shared beliefs and actions that afe built into the way that people in an orginisation behacve
60
factors influencing culture of an orginisation
influence of the founder size and satge of the business leadership/management style market indsutries working enviroment external enviroments attitude of orginisation and risk taking
61
why change culture
improve business performance respond to significant change
62
features of a strong culture
source of competitive advantage clear set of values , missions and goals performance orientated encourages suitable risk taking and innovation strong internal communication engaged employees not easily copied
63
what are ethics
moral guide lines which govern acceptable behaviour
64
common areas where ethics are tested
advertising personal seling suppliers pay and rewards contracts pricing
65
benefits of ethics
higher revenues = demand for positive consumer support improved brand and business awareness and recognition better employee motivation and recruitment new sources of finance
66
possible drawbacks of ethics
higher costs higher overheads a danger of building up flase expectations
67
different approaches to business ethics
the amoral business the legalistic business the responsive business the ethical business
68
amoral business
seeks to win at all costs and anything is accpetable
69
legalistic business
will obey the law but no more than that
70
resposive business
accepts that being ethical can pay off
71
ethical busniess
ethical practice is at the core of the business
72
income statement
this measures the business performance iver a given period of time usually one year
73
balance sheet
a snapsheet of the business assets and it's liabilities on a particular day
74
cash flow statements
show how the business has generated and disposed of cash and liquid funds during a specific period
75
liabilities
an outside claim on the business assets
76
current assets
can change in value durimg this amount financial period

Business Year 13 (6 decks)

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