Analysing strategic position of a business

• Influences on the mission of a business


  -size of the business

  -range of activities undertaken by a business

  -nature of owners qns important stakeholders in a business

  -changes over time

  -actual perfomance of an organisation

  -external factors, competition economic conditions, and regulations

  -a businesses strengths and opportunities

  -extent to which a business demonstrates social responsibility in its actions
• Internal influences on corporate objectives


  -business ownership, who are owners and what do they want to achieve?

  -attitude to profit, is it running for profit or a not for profit?

  -ethical stance, do ethics play a role in decisions?

  -organisational structure, how's business structured?

  -leadership, how strong is leadership in objective setting?

  -strategic position and resource, what options + choices does business have on its market + resources

  -stakeholder influence, how influential are stakeholders
• External influences on corporate objectives


  -short termism, focus on achieving short term gains rather than long term?

  -economic environment, perspective on key economic indicators?

  -political/legal environment, impact on uncertainty about political/legal changes?

  -competitors, competitors actions?

  -social + tech change, how fast is tech and social change objectives?
• strategy


  a plan of action or policy designed to achieve a major or overall aim.
• Tactics


  An action or strategy carefully planned to achieve a specific end
• Links between mission, corporate objectives and strategy


  -missions are general statements of how you will achieve your visions and strategies are how you will achieve your vision and objectives are specific actions and timelines for achieving the visions
• The impact of strategic decision making on functional decision making


  When a strategic decision is made new objectives need to be set that will affect functional departments. Each of the 4 departments will get its own objectives set, each of the 4 will aim to knit the objectives together in order to meet wider objectives of the business.
• Value of SWOT analysis


  SWOT (strengths, weaknesses, opportunities and threats) helps to build on what you do well, to address what you're lacking, to minimise risk, and to take greatest possible advantage of chances for success
• Balance sheets


  a statement of the assets, liabilities, and capital of a business or other organization at a particular point in time, detailing the balance of income and expenditure over the preceding period.
• Income statements


  accounting statements, also called "profit and loss statements," that show what has happened to an organization's income, expenses, and net profit over a period of time
• Cash Flow Statement


  A financial statement that shows the flow of money in and out of the business.
• How to assess financial performance of a business using balance sheets, income statements and financial ratios


  Balance sheet is an important financial statement that should be interpreted when considering an investing in a company. Strengths of a company's balance sheet can be evaluated by 3 investment quality measurements. Cash conversion cycle shows how efficiently a company manages its accounts receivable and inventory.
• Value of financial ratios when assessing performance


  Ratio analysis is a good way of evaluate the financial results of your business in order to gauge its performance. Uses of accounting ratios include allowing you to compare your business against different standards using the figures on your balance sheet.

  4 mains kinds of ratio analysis:

  -liquidity ratios

  -solvency ratios

  -efficiency ratios

  -profitability ratios
• Profitability


  ability to provide financial rewards sufficient to attract and retain financing
• Liquidity


  Availability of resources to meet short-term cash requirements.
• Gearing


  Non-current liabilities / Total Equity + Non-current liabilities x 100
• Efficiency Ratios


  indicate how well a firm's resources have been used, such as the amount of profit generated from the available capital used in the business.
• Payables days


  Payables ∻ Cost of Sales x 365
• Receivables


  amounts due from individuals and companies that are expected to be collected in cash
• Inventory


  a complete list of items such as property, goods in stock, or the contents of a building.
• turnover


  the voluntary and involuntary permanent withdrawal from an organization
• Marketing measurement of performance


  -What % of customers are repeat or same

  -of old customers what % are committed and loyal

  -What's the cost per head of gaining new customers

  -market share

  -gross profit margins

  -new product sales as a % of total sales
• Hr measurement of performance


  -recruitment cost of new staff

  -graduate trainee retention rate

  -customer calls handled per hour

  -lateness as a % of working days

  -annuals ratings of job satisfaction

  -diversity statistics at sr management levels

  -promotion date internal and external

  -training £s spent per employee
• Operations management to measure performance


  -Managing quality

  -Managing waste

  -Productivity

  -Managing time

  -managing growth
• benefits of using ration analysis


  is that it encourages a systematic approach to analysing performance.
• disadvantages of using ration analysis


  . Ratios deal mainly in numbers - they don't address issues like product quality, customer service, employee morale

  . Ratios largely look at the past, not the future

  . Ratios are most useful when they are used to compare performance over a long period of time or against comparable businesses and an industry

  . Financial information can be "massaged" in several ways to make the figures used for ratios more attractive
• Kaplan and Norton's Balanced Scorecard model


  A model that assesses performance using four different perspectives: financial, internal business process, learning and growth, and customers.
• background to Kaplan and Norton's Balanced Scorecard model


  . no single measures can give a broad picture of the organisation's health.

  . So instead of a single measure why not a use a composite scorecard involving a number of different measures.

  . Kaplan and Norton devised a framework based on four perspectives - financial, customer, internal and learning and growth.

  . The organisation should select critical measures for each of these perspectives.
• financial


  financial performance
• customer


  customer satisfaction
• internal processes


  businesses efficiency
• organisational capacity


  Knowledge and innovation e.g. employee retention
• core competencies


  those functions that the organization can do as well as or better than any other organization in the world
• Benchmarking


  a process by which a company compares its performance with that of high-performing organizations
• PESTEL


  Political

  Economic

  Social

  Technological

  Environmental

  Legal
• political


  -Competition policy

  -Industry regulation

  -Govt. spending & tax policies

  -Business policy & incentives
• economic


  -Interest rates

  -Consumer spending & income

  -Exchange rates

  -Economic growth (GDP)
• social

  -Demographic change

  -Impact of pressure groups

  -Consumer tastes & fashions

  -Changing lifestyles
• technological


  -Disruptive technologies

  -Adoption of mobile technology

  -New production processes

  -Big data and dynamic pricing
• legal

  -Employment Law

  -Minimum / Living Wage

  -Health & Safety Laws

  -Environmental legislation