Theme 3 Flashcards
(37 cards)
What are 4 focuses for corporate objectives?
- Innovation
- Profitability
- Growth
- Sustainability
What is a corporate objective?
Quantifies mission and sets measurable targets for business.
What is a mission statement and what does it include (2 things)
Sets out the purpose of a business.
- Business values
- Business Scope
What is the Ansoff Matrix? And the 4 segments
Tool to help businesses determine a market to operate in.
- Market Penetration (E,E)
- Product Development (N Product, E)
- Market Development (N Market, E)
- Diversification (N,N)
E = Existing
N = New
Describe each of the 4 segments of Ansoffs Matrix
Market Penetration
- Strategy to boost sales of current product
Product Development
- Develop new products for existing customers
Market Development
- Take existing product into new market / segment
Diversification
- Offer new products to new customers in new market
What is Porters corporate strategy?
3 strategies to compete in a market.
- Competitive advantage
(Low Cost & Differentiation) on X axis - Market scope
(Broad vs Narrow) on Y axis - Low Cost & Broad = Cost Leadership
- Low Cost & Narrow = Cost Focus (Cutting costs)
- Differentiation & Broad = Differentiation (USP)
- Differentiation & Narrow = Differentiation focus (Focusing on a niche)
Strategy Vs Tactics
Strategy
- Long term plan for business to achieve objectives
Tactics
- Day to day decisions achieve strategy
The Objectives Hierarchy from top to bottom
- Aims
- Mission Statement
- Corporate Objectives
- Functional objectives
(Objectives in specific areas: finance, operations etc)
Define SWOT
+ / - of SWOT Analysis
Tool to measure business position in market
(Strengths, Weaknesses, Opportunities, Threats)
+ Low Cost and simple
+ Can be combined with PESTLE
- Subjective (opinions of managers)
- No clear solutions
Define PESTLE
Way to analyse external influences that impact a business.
(Political, Economic, Social, Technological, Legal, Environmental)
What are Porters 5 forces and what are they used for?
Framework for analysing the competitive environment
- Competitive Rivalry
- Bargaining Power Of Suppliers
- Bargaining Power Of Buyers
- Threat Of Substitutes
- Threat Of New Entrants
3 Types of EOS explained
Technological - larger business invest in larger technology
Purchasing - Bulk Buying
Financial - Better interest rates and more capital
Problems due to diseconomies of scale
Communication
- Harder to communicate across business
Motivation
- Workers in large organisations struggle to see their impact
What is Overtrading
When business becomes too big and overstretch financial resources.
Types of business growth (Acquisitions)
(4)
Backward Vertical
- Taking over supplier
Forwards Vertical
- Taking over a customer such as retailer
Horizontal
- Merging with another business at same level in supply chain
Conglomerate
- Taking over unused business in different market
+ / - Of Organic growth
+ Controlled pace
+ Diseconomies of scale minimised
- Slow pace not good for stakeholders
- Competition may be growing faster
3 Reasons to stay small
- Lower Costs
- Convenience as USP
- Flexibility (fast decisions)
What is a moving average?
Average of a 3 to 4 period time period
- Just the mean of x NO. months
What is Quantitative Sales Forecasting?
- Limitations to Quantitative Sales Forecasting
Method to predict future sales using past quantitive factors.
- Short term (data looses value after 1/2 years)
- Less valuable in volatile markets
What is variance?
Difference between budgeted costs and actual costs
Variance = Actual - Forecast
Budget Variance % = (Actual Costs / Budgeted Costs) x 100%
What is an investment appraisal?
Techniques to assist businesses judge the desirability of investing in something
What is Simple Payback?
And Drawback
Investment Appraisal technique
-> Focus on time taken to recoup initial investment
- Profitability ignored
What is Average Rate Of Return? Formula?
And Drawback
Investment Appraisal technique
-> Measures profits of an investment over time
- Effects of inflation ignored
(Average Annual profit / Assets Initial Cost)
*Make sure its annual profits
What is Net Present Value “Discounted Cash Flow”
And Drawback
Investment Appraisal technique
-> Factors in future value of money by discounting cash flow
- Complex calculations
*(Estimating value of investment using future cash flows)
