Theme 3 LOAs

Question 1

Ansoff matrix - reason to use market penetration

Answer 1

-existing products in existing markets

-lower risk approach to growth according to Ansoff

-as requires least amount of investment in market research

-as existing markets needs should be understood

-less strain on cash reserves

-high current assets and current ration

-good liquidity

Question 2

Ansoff matrix - reason not to use market penetration

Answer 2

-existing products in existing market

-least amount of growth potential

-not extending product portfolio

-or targeting new market segment

-sales less likely to growth in comparison to other Ansoff strategies

-less likely to achieve EOS

-FC or marketing spread less

-lower unit FC

Question 3

Ansoff matrix - reason to use product development

Answer 3

-new product in existing market

-e.g updated version

-help improve customer loyalty

-as customers return to purchase improved version

-having high customer loyalty will make customers less sensitive to changes in price

-inelastic LOA

Question 4

Ansoff matrix - reason not to use product development

Answer 4

-new product in existing market

-e.g updated versions

-requires regular investment into r&d

-may require recruiting experienced engineers

-increasing outflows for high wages of engineers

-strain on cash reserves

-lower current assets + ratio

-poor liquidity

Question 5

Ansoff matrix - reason not to use market development

Answer 5

-selling existing product in new market

-require valid market research

-to understand needs in new market

-as may be cultural differences that need to be understood

-increased expenses

-reducing OP margin

-less retained profit

-used to invest into….

Question 6

Ansoff matrix - reason to use market development

Answer 6

-selling existing product in new market

-allows business to spread risk across different markets

-makes them less vulnrable to changes in PESTLE

-such as fall in income in one country

-still have inflows from sales from customers in additional markets

-high current assets + ratio

-good liquidity

Question 7

Ansoff matrix - reason to use diversification

Answer 7

-selling new products in new market

-greatest growth opp

-increased size of product portfolio and target new segment

-experience increase in sales

-achieve EOS

-FC of marketing spread over more

-lower unit FC

-increased OP margin

Question 8

Ansoff matrix - reason not to use diversification

Answer 8

-selling new products in new markets

-greatest risk according to Ansoff

-to successfully diversfiy will need heavy investment into marketing

-as new markets needs will need to be identified through valid market research

-product developed through r&d

-place strain on cash reserves

-lower current asset + ratio

-poor liquidity

Question 9

Benefit of high barriers to entry

Answer 9

-if operates in market with high barriers to entry

-e.g requires significant r&d, presence of copyright, existing business have EOS

-will reduce threat of new businesses entering market

-reducing level of competition

-making market more inelastic

-inelastic LOA

Question 10

Drawback of high barriers to entry

Answer 10

-if business wants to compete in market with high barriers to entry

-will require significant investment into r&d (if applicable)

-may need to source additional capital

-such as bank loan

-increasing non current liabilities

-regular outflows

-liquidity LOA

Question 11

SWOT - benefit of identifying strengths

Answer 11

-if business completes SWOT analysis

-may be able to identify their strengths

-can then focus their resources on

-increasing their level of differentiation

-gain comp adv porter

-inelastic

Question 12

SWOT - identifying strengths drawback

Answer 12

• cost of focusing on strengths e.g cost of r&d or building scale

Question 13

SWOT - identifying weakness benefit

Answer 13

-if completes SWOT analysis

-able to identify weaknesses

-can then focus their resources on improving weakness

-reduce chance of business failure

Question 14

SWOT - identifying opportunity benefit

Answer 14

-if completes SWOT analysis

-able yo identify potential future opportunities

-mean business could increase capacity

-increasing output

-FC spread less

-lower unit FC

Question 15

SWOT - identifying threats benefit

Answer 15

-if completes SWOT analysis

-able to identify potential future threats

-would be able to allocate resources to reduce threat

-e.g diversifying their product portfolio

-allowing business to spread risk

-less vulnerable to changes to external threats

-so if threat materialises they don’t experience fall in demand

-reduce SP

-increase OP margin

Question 16

SWOT - general drawback

Answer 16

-completes SWOT analysis

-will require significant investment in market research to identify SWOTs

-increase businesses expenses

-reducing OP margin

-less profit to retain and reinvest into other marketing activities

-reducing competitiveness

Question 17

impact of low threat to substitutes/amount of existing competition

Answer 17

-if business operates in market with low threat of substitutes

-due to having highly differentiated product

-reduce threat of customers switching to alternative businesses

-as there is reduced level of competition in market

-making market inelastic

-inelastic LOA

Question 18

impact of high threat of substitutes/amount of existing competition

Answer 18

-if business operates in market with high threat of substitutes

-due to not having a highly differentiated product

-will increase opportunities for customers switching to alternative businesses

-as if high level of competition in market

-making market elastic

-elastic LOA

Question 19

impact of high supplier power

Answer 19

-if market has high power of suppliers

-due to limited number of suppliers/high comp for raw materials

-suppliers will be able to negotiate higher prices for goods

-and demand short credit periods

-high cash outflows

-poor liquidity LOA

Question 20

impact of low supplier power

Answer 20

-if market has suppliers with low bargaining power

-due to large number of suppliers/lack of comp for raw materials

-businesses able to negotiate discounts from suppliers

-demand longer credit periods

-lower cash outflows

-good liquidity LOA

Question 21

impact of high buyer power

Answer 21

-if market has buyers with lot of bargaining power

-due to high amount of choice over who to buy from

-business more price elastic

-will need to decrease prices to attract customers

-lower GP margins

-lower OP

-lower RP

Question 22

impact of low buyer power

Answer 22

-if market has buyers with little bargaining power

-with little choice over who to buy from

-business will be more price inelastic

-can increase prices without customers being able to switch to other alternatives

-higher GP

-higher OP

-higher RP

Question 23

analysis of external EOS - labour

Answer 23

-as an industry grows more people are likely to be attracted to work within it

-will improve overall skill level of employees within industry

-when business within industry recruits, employees will already posses high level of knowledge + skills

-improving productivity

-increase output

-FC spread over more

-lower unit FC

-increased OP

Question 24

analysis of external economies of scale - increased outsourcing opportunities

Answer 24

-as an industry grows, more specialist businesses established to support industry

-increased opportunity to outsource to specialist

-use case study what skills they specialise in

-experts in field

-increased productivity

-FC spread over more

-lower unit FC

-increased OP

Question 25

analysis of diseconomies of scale

Answer 25

-if (identify from extract cause of diseconomy) -this will cause business unit cost to rise as output rises -means that their profit will fall -may be forced to increase SP -may lead to significant fall in demand -increased SR -increased GP -increased OP

Question 26

analysis of overtrading

Answer 26

-if business grows too quickly -risk overtrading -as they will have funded large volume of new businesses without sufficient resources -significantly depletes cash reserves -low current assets -poor liquidity LOA

Question 27

benefit of organic growth

Answer 27

-business growth organically -business hasn't merged of taken over another -more likely to be able to maintain strong culture -as growth has come from within business -meaning employees should already share business values -ensures that employees are motivated to work towards same goals -benefit of motivated workforce

Question 28

drawback of organic growth

Answer 28

-business grows organically -business hasn't merged or taken over another -growth is likely to take over a longer period of time -reduces ability to achieve EOS -in comparison to merging or taking over another business -FC spread over less -increased unit FC

Question 29

benefit of mergers and takeovers - easier to exploit EOS

Answer 29

-if business takes over or merges with another -significant increase in scale -without having to invest into NCA -as business has increased scale -will be able to exploit EOS -pick any EOS LOA

Question 30

benefit of mergers and takeovers - reduced competition

Answer 30

-if merger or takeover is within the same industry (horizontal integration) -will reduce level of competition within market -reducing choice for customers -making market inelastic -inelastic LOA

Question 31

drawback of mergers and takeovers

Answer 31

-if business merges or takes over another -will mean that 2 company's workforces will need to join -may cause difficulties establishing new set or corporate values -if joint workforce are unable to agree on values -business will develop weak or toxic culture -employees demotivated to work towards same goal -impact of demotivated workforce

Question 32

benefit of using decision trees

Answer 32

-allows business to make decisions that will return highest profit -as costs, revenue, risk considered before making decisions -correct decision made will increase retained profit -increased total equity -able to reinvest further expansion of business -increase capacity -EOS

Question 33

drawback of using decision trees

Answer 33

-future returns and probabilities are based on predictions (could be unreliable market research) -vulnerable to changes in external factors -PESTLE -could lead to predicted profitability being low than estimated -outcome may be in inaccurate -business makes decision that leads to lower profit or potential loss -explain impact

Question 34

Benefit of considering shareholders when making decisions

Answer 34

-prioritize shareholders -such as focus on lowering costs - porter -ensure business is profitable -profits can be returned to shareholders as dividends -share price remains high -can raise larger sums of share capital -continue to build scale

Question 35

Drawback of prioritizing shareholders when making decisions

Answer 35

-prioritize shareholders when making decisions -such as focus on lowering costs - porter to remain profitable -negative implications long term -may neglect into R&D or market research in order to grow -if they continue to use profits to return high dividends -loses any comp adv -reduced sales volume -reduced OP

Question 36

Benefit of prioritizing customers when making decisions

Answer 36

-prioritize customers when making decisions -such as ensuring employees deliver exceptional customer service -strong brand rep -increased differentiation - comp adv porter -price inelastic LOA

Question 37

Benefit of prioritizing employees when making decisions

Answer 37

-prioritizing employees -such as ensuring investment into employee welfare e.g training -Maslow esteem needs met -increased motivation -continue to deliver excellent customer service -high differentiation - porter -inelastic LOA

Question 38

Benefit of prioritizing suppliers when making decisions

Answer 38

-prioritize suppliers -offering long periods of trade credit -ensure strong relationship between business and suppliers -suppliers meet deadlines when supplying stock -no disruption to production process -short lead times -strong brand rep -inelastic LOA

Question 39

Benefit of prioritizing suppliers - ethical

Answer 39

-priortizing suppliers -such as choosing suppliers that are fair trade certified -strengthen brand -business viewed as ethical -differentiation -inelastic LOA

Question 40

Drawback of prioritizing stakeholder when making decisions

Answer 40

- by prioritizing given shareholder -example from business in question -likely to increase costs -explain why -reduced OP profit -reduced RP -lose comp adv

Question 41

Conflict when prioritizing shareholders when making decisions

Answer 41

-prioritizing shareholders -business has focus on lowering costs - porter -to ensure business is profitable -so profits can be returned to shareholders as dividends -less RP -to invest into considering other shareholders objectives -e.g investing into training to ensure employees are highly motivated

Question 42

Transformational leadership benefit

Answer 42

-use case study to identify new leader leadership style/vision -LOA linked to leadership style -impact of new leadership has on business

Question 43

Transformational leadership however

Answer 43

-use case study to identify how something other than leadership style may have larger impact -explain impact had on performance of business -link to core

Question 44

What is scenario planning

Answer 44

Visualizing possible futures for a business then planning how to get the best out of opportunities

Question 45

Benefit of scenario planning

Answer 45

Reducing negative impact

Question 46

Drawback of scenario planning

Answer 46

Costs

Question 47

Benefit of succession planning

Answer 47

Maintain strong culture - link to motivation

Question 48

Drawback of succession planning

Answer 48

Costs - external recruitment agencies (10% of salary)

Question 49

3 components of distinctive capabilities

Answer 49

- architecture - relationships in business (culture) - reputation - brand image -innovation - comp adv through developing new products