strategic position

• Mission


  The overall aims / intentions/purpose of a business, communicated to shareholders with a mission statement
• Influences on a business

  • Size
  • Activities (nature of the business)
  • Owner/shareholder relationship
  • Long/short term intentions
  • External factors (competition)
  • Strengths and opportunities
  • CSR
• Corporate objectives


  Goals for the whole organisation, rather than for each of the functional areas
• Internal influences on a business

  • Business ownership (profit making or not)
  • Relative power of stakeholders
  • Ethics and CSR
  • Culture
  • Resource constraints (financial, human, physical)
• External influences on a business

  • Pressure for short-termism (focusing on profits for shareholders)
  • The external environment (economic policy, environment, demographic trends, competition)
• Short/long term objectives depend on any financial crises (recessions), competition or government policies
• Strategy


  The medium to long term plans for a business to achieve its objectives, what is going to be done
• Tactics


  The short term activities than explain how a strategy is going to be carried out, how it is going to be done
• Mission influences corporate objectives and strategies, they become more detailed at functional levels
• Strategy formulation


  1. Gathering information from the internal and external environment

  2. SWOT analysis

  3. Strategic choice

  4. Implementation

  5. Evaluation
• Strategic decisions


  • Concerns the general direction and overall policy of an organisation, made by senior managers due to high risk and significant long term effects
• Functional decisions


  • Concerned with each functional area to support strategic decisions, usually made by middle management with slightly less risk
• SWOT analysis


  Assesses the overall position of the business by analysing internal and external factors in an audit
• SWOT analysis factors


  • Strengths
  • Weaknesses (internal)
  • Opportunities
  • Threats (external)
• Advantages of SWOT analysis

  • Structured approach
  • Comparisons with any competitors
  • Uses internal and external factors
• Disadvantages of SWOT analysis

  • Time consuming
  • Must be constantly updated to ensure that external factors are accurate
• Balance sheet


  A financial document that shows a company's assets, liabilities and shareholder equity
• Assets


  • Current assets (stock, receivables)
  • Non-current assets (land, machinery, patents, brand names)
• Liabilities


  • Current liabilities (payables, bank overdrafts)
  • Non-current liabilities (long-term bank loans)
• Equity


  • Share capital
  • Reserves
  • Retained profits
• Assets = Liabilities + Equity (balance)
• Income statement


  Describes the income and expenditure of a business over a given period of time, to review success and profitability and make comparisons
• Ratio analysis


  • Profitability
  • Liquidity
  • Gearing
  • Efficiency
• Advantages of ratio analysis

  • Allows comparisons to be made (inter-firm, intra-firm, over time)
  • Assesses profit levels, liquidity/cash flow problems, vulnerability to interest rates, stock control
• Limitations of ratio analysis

  • Data must be completely reliable
  • Don't explain why
  • Ignores qualitative factors including external factors
  • Financial data must be published
• Non-financial data


  • Business objectives (growth, social, ethical)
  • Marketing (sales volume/value, brand loyalty, market share)
  • Operations (Labour productivity, capacity utilisation, unit costs)
  • HR (labour turnover, retention, employee costs, labour costs)
• Limitations of non-financial data

  • No standardisation
  • Subjective
  • Difficult to measure the relative importance of measures
• Core competencies


  The unique abilities of a business that enable them to gain a competitive advantage
• Benefits of core competencies

  • Contribute to the benefits that the customer receives
  • Provide access to a wide variety of markets
  • Difficult for competitors to replicate
• Short-termism


  A tendency for businesses to prioritise current performance rather than long-term sustainability
• Long-term


  Being able to deal with significant changes in the external environment
• Balanced scorecard


  A model that assesses performance through four different perspectives: financial, customer, internal business processes, learning and growth
• Advantages of balanced scorecard

  • Broad view with specific targets
  • Motivates employees
  • Uses constant monitoring
• Disadvantages of balanced scorecard


  • Difficult to quantify certain objectives
  • May cause confusion
  • Hard to balance the objectives
• Triple bottom line


  A framework to assess performance in terms of profit, people (social responsibility, employee welfare) and planet (using environmentally friendly activities)
• Competition legislation


  • Anti-competitive agreements
  • Abuse of a dominant market position
  • Merger control
  • Competition Act (1998) by the CMA
• CMA


  Competition and Markets Authority
• Employment legislation


  • Equality Act (2010)
  • Employment Act (2008)
  • Minimum wage
  • Contracts
  • Unions
• Environmental legislation


  • Environmental Protection Act (1990)
  • Climate Change Act (2008)
• Enterprise Investment Scheme


  Offers tax incentives for SMEs because this benefits the economy