Theme 3

• Every business has aims, which are the reasons the business exists and are less specific than their objectives.
• A business’s aims are often communicated via its mission statement.
• A mission statement communicates a business’s overall purpose, along with its goals and values.
• A mission statement shows the core activity of the company, along with information on the market they operate within.
• A mission statement will display the business’s key commercial objectives, the value it shows towards shareholders and what its ethics are.
• A mission statement, if good, will guide the decision-making of the business.
• A business may create a mission statement to create a commitment to their customers and unite a business’s workforce based on a shared objective.
• Corporate objectives are the objectives set by senior managers and directors for a company.
• Corporate objectives should primarily focus on the desired performance and the results of the company, including goals such as market share, profit levels and resource usage.
• Corporate objectives utilise SMART criteria: Specific, Measurable, Agreed, Realistic, Time Specific.
• From general objectives that flow from the mission statement come more specific corporate objectives that detail specifically what the business does.
• A distinctive capability is a form of competitive advantage that is difficult for competitors to imitate and understand, and can be the source of a sustainable competitive advantage.
• John Kay identified three types of distinctive capability: Architecture, Reputation, and Innovation.
• Strategic decisions are based on the guidelines of the CEO and directors of a business, while tactical decisions come more at a managerial or supervisory level.
• A business can gain a competitive advantage in a variety of ways, such as having a greater quality or design, using creative advertising or by offering satisfactory after-sales care and service.
• Market Development is the marketing of existing products in new markets, the easiest of which being a geographically new market, but requiring a deep understanding of local habits, tastes and needs.
• Ansoff’s Matrix provides four possible strategies that a business may wish to adopt: Market Penetration, Product Development, Market Development, and Diversification.
• A business can also create an advantage through its reputation or ethical stance.
• Market Penetration is the strategy of achieving growth in existing markets with existing products, with the lowest risk and requiring the least amount of investment from the business.
• A business can also access economies of scale, being able to charge lower prices and provide more flexible delivery times.
• Product Development involves the business with marketing new products in an already existing market, linked to innovation and continuous development, but requiring significant investment and potentially high risk.
• Competitive advantage is a set of unique features of a company and its products that customers see as being greater than competitors, allowing a business to perform better than its competitors.
• Tactical decisions have to be made quickly without planning or research, meaning that they can easily backfire, if made poorly.
• Departmental and functional objectives set the day-to-day goals of the business, and may include human resources, finance, operations, logistics and marketing.
• Functional objectives support the corporate objectives within a business.
• A business aims to make profit, but may have other goals alongside this, such as maximising sales or serving a social purpose.
• Mission statements must be constantly assessed to ensure that they continue to be relevant to the business.
• If a rivalry is intense, businesses can decrease that intensity by forming cartels.
• More substitutes developing for a product can lead to fiercer competitive pressure on the business making that product.
• A business may buy the patent to the product and do nothing, just to stop it from reaching the market.
• Instead, competition comes in the form of new products and advertisements, resulting in higher costs but also allowing businesses to offer higher prices, gaining higher profits.
• To reduce the number of substitutes, a business may conduct research and development, patenting the substitutes themselves.
• Businesses can also reduce competition by buying their competitors, but this may be stopped by competition laws.
• In an industry with relatively few businesses, competition around price does not happen.
• Businesses can counter this by erecting a barrier into the industry, such as patents and copyright.
• The law of diminishing returns states that after some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output.
• Nearly every business starts small and then grows, often attracted by the benefits of increased revenue, lower unit costs, a higher level of brand recognition and a larger market share.
• A larger business is more likely to receive better rates when bulk-buying materials and components, as administration costs do not rise in proportion to the size of the order.
• Businesses can utilise marketing tactics to stop substitutes spreading.
• Businesses that make high profits are at risk of attracting new suppliers, which can undermine their prices.