unit 7 Flashcards
(27 cards)
what is strategy?
a long-term plan to achieve a business’s overall objectives
what is strategic direction?
the path a business takes to achieve its corporate objectives
what are corporate objectives?
high-level goals that guide a business’s overall direction
what is SWOT analysis?
a tool to assess Strengths, Weaknesses (internal), Opportunities, and Threats (external)
give two examples of internal strengths
strong brand loyalty, skilled workforce
give two examples of external threats
new competitors, changing regulations
what is PESTLE analysis?
a tool analysing external macro-environmental factors: Political, Economic, Social, Technological, Legal, Environmental
what does a political factor in PESTLE include?
government policy, taxation, regulation
what are the key internal influences on a business’s strategy?
financial resources, HR capability, operations efficiency, corporate culture
what are the key external influences on strategy?
market trends, competition, the economy, legal changes, and technology
what are financial ratios used for?
to assess the financial health and performance of a business
what is the formula for gross profit margin?
(gross profit / revenue) x 100
what is the formula for operating profit margin?
(operating profit / revenue) x 100
what is the formula for return on capital employed (ROCE)?
(operating profit / capital employed) x 100
what does ROCE show?
how efficiently a business uses its capital to generate profit
what is the formula for current ration?
current assets / current liabilities
what does a current ratio under 1 indicate?
potential liquidity problems - liabilities exceed assets
what is gearing?
the proportion of capital financed through debt
what is the gearing ratio formula?
(non-current liabilities / capital employed) x 100
what does high gearing mean?
business relies heavily on borrowed funds - higher financial risk
what are non-financial performance metrics?
measures like customer satisfaction, employee engagement, and market share
what is core competence?
a unique ability or advantage that gives a business a competitive edge
who proposed the idea of core competencies?
Prahalad and hamel
why are core competencies important?
they create long-term competitive advantage and add customer value
