3.7.3

• Short-termism


  Where a business prioritises short-term rather than long-term performance
• Short-termism emphasises certain performance measures

  • Share price
  • Revenue growth
  • Gross & operating profit
  • Unit costs & productivity
  • Return on capital employed
• Possible Indicators of Short-termism

  • Bonuses based on short-term objectives
  • Low investment in R&D
  • High dividend payments rather than reinvesting profits
  • Overuse of takeovers rather than internal growth
• Core Competencies


  Something unique that a business has, or can do, strategically well
• Criticism of Core Competencies Approach

  • Over-zealous outsourcing has damaged business competitiveness
  • Difficult to identify core competencies that are genuinely unique
  • Possible for a business to become complacent about its core competencies
• Limitations of financial data in assessing performance

  • Financial ratios tend to look at historical financial performance
  • Financial ratios focus on measures that are possibly most important to shareholders than business management
  • Financial data is not the best way of understanding how a business is performing in terms of key competitive performance
• What ratios don't tell you

  competitive advantage, quality, ethical reputation, future prospects