Theme 3

• what is a mission statement 


  This is when a business communicates its values and purposes to customers
• what does a SWOT analysis stand for

  strengths

  weaknesses

  opportunities

  threats
• what is a swot analysis

  this is when the business assesses its internal strengths and the nature of the external environment
• what is a pestle analysis used for

  assesses the key features of the external environment affecting the business
• what is a pestle analysis

  political

  economic

  social

  technological

  legal

  ethical / environmental
• political factors

  • competition policy
  • industry regulation
  • government spending and tax policies
  • business policy and incentives
• economic factors

  • incomes and consumer spending
  • interest rates
  • exchange rates
  • business cycle
• social factors

  • customer tastes/fashions
  • impact of pressure groups
  • changing lifestyles
  • demographic change
• technology factors

  • adapting technology
  • new production processes
  • adoption of mobile technology
• legal factors

  • employment law
  • customer protection
  • minimum / living wage
  • health and safety laws
• ethical / environmental factors

  • sustainability
  • tax practices
  • ethical sourcing
  • pollution and carbon emissions
• what is the ansoff matrix

  Ansoff's Matrix is a marketing planning model that helps a business determine its product and market growth strategy.
• what is market penetration

  Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets
• what is the aim of market penetration

  • increase market share
  • get existing products to buy more
  • widen the range of existing products
• benefits of market penetration

  • focuses on the market that they know very well
  • unlikely to need new market research
• negatives of market penetration

  will the business be able to grow
• what is product development

  this involves selling new products in existing markets
• strengths of product development

  • plays to the strengths of a well established business
  • A great way of exploiting current customer base
• what is market development

  this involves selling existing products in new markets
• approaches to market development

  • new geographical markets
  • new distribution channels
  • different pricing strategies to attract customers from different markets
• strengths of market development

  • avoid saturated domestic market
  • avoid intense competition in domestic market
• limitations of market development

  • often more risky - especially expansion into international markets
  • products might not suit different markets
• what is diversification 


  this is where products produce new products in new markets
• disadvantages of diversification

  • risky - no experience within that market
  • few economies of scale
• what is porter's strategic mix

  this is the idea that there are two ways to get a competitive advantage

  • cost leadership
  • diversification
• what is cost leadership

  this is a strategy where businesses aim to reduce their costs in order to be the lowest cost operator
• ways to achieve cost leadership

  • produce on a larger scale using economies of scale
  • improve productivity / efficiency
  • high capacity utilisation
  • use bargaining power to negotiate lower prices from suppliers
  • lean production
• what is diversification

  this is where businesses aim to offer products distinctively different from competitors
• ways to differentiate

  • superior quality
  • branding
  • wide distribution
• what are porter's five forces

  • Bargaining power of buyers
  • Bargaining power of supplier
  • Threat of substitute products
  • Threat of new entrants
  • And the effect this has on intensity of rivalry in the industry
• what is the threat of new entrants

  • If new entrants move into an industry they will gain market share & rivalry will intensify
  • businesses will have more companies to compete against for market share and customers
  • If barriers to enter the market are low then the threat of new entrants will be high and vice versa.
• what is bargaining power of suppliers

  • this is when a supplier can charge higher prices to businesses for their products
  • this can be done when there are only a few suppliers, the cost of switching is too high.
• what is bargaining power of buyers

  • Powerful customers are able to exert pressure to drive down prices
  • they could threaten to stop buying and go elsewhere
  • this will reduce the businesses profit margins and reduce the businesses competitiveness
• what is the threat of substitute products

  •  A substitute product is one that meets the same customer needs
  • If there are substitutes to a firm's products they will limit the price that can be charged and will reduce profits
  • Customer loyalty and availability will limit the extent of this threat
• reasons why businesses grow

  • increase market share
  • increase profitability
  • increase market power
  • achieve economies of scale
• what are the problems of growth

  • diseconomies of scale
  • poor internal communication
  • poor employee motivation
  • poor managerial communication
• what is a merger


  this is an agreement between two companies to come together and form one new business permanently
• what is a takeover 


  this is when one business expands by buying another
• what are the reasons for a merger or takeover

  • growth
  • cost synergies
  • diversification
  • market power
• what is vertical integration

  Occurs when one firm takes over or merges with another at a different stage in the production process but within the same industry

  Forward vertical integration:this an integration of a business that is closer to final consumers e.g. a manufacturer buying a retailer

  Backward vertical integration:here the aquisition is operates earlier in the supply chain e.g. a manufacturer buying a raw material or component supplier