theme 3

• Decision trees

  + analyses possible options and identifies opportunity costs

  + involves quantitative analysis into decision making process

  - accuracy of estimations

  - managerial bias

  - May lead to qualitative factors being ignored
• ROCE = (Operating Profit / capital employed) x 100

  capital employed= total equity + non- current liabilities
• Four different strategies firms can adopt

  • Market penetration
  • Product development
  • Market development
  • Diversification
• Market penetration


  Continuing to sell existing range of products to existing markets.

  Market penetration is the least risky strategy.
• Product development


  Bringing out new product offerings targeted at the same existing markets.

  Product development is a moderately risky strategy.
• Market development


  Continuing to sell existing product range but targeting new geographic markets or new market segments
• Diversification


  Developing new product offerings and targeting new markets.

  Diversification is the most risky but potentially most lucrative strategy.
• Organizational culture


  The personality of a business - the way things get done in that business
• Types of organizational culture

  • Power culture
  • Role culture
  • Task culture
  • Person culture
• Power culture


  • Revolves around the personalities of a few key central decision makers
  • Everybody reports to and gravitates towards these central individuals
  • Power culture works well if the central decision makers are highly respected, competent and strong leaders
  • Power culture breaks down if people start to have issues with the abilities of the central decision makers
• Role culture


  • Power is dependent on your position in the organizational hierarchy
  • Very procedural and bureaucratic
  • Role culture works well if the people in positions of power are talented and skilled
  • Role culture breaks down if the people in positions of power are not seen as effective
• Task culture


  • Fits with a matrix structure
  • Power comes from the knowledge, skills and experience people can contribute to a project team
• Person culture


  • Individuals are more important than the organization as a whole
  • Highly skilled, autonomous individuals operating independently
  • Person culture can work well in professions like law where highly skilled individuals operate in their own areas of specialism
• Porters 5 forces:

  . bargaining power of suppliers

  . bargaining power of buyers

  . threat of entrants

  . competitive rivalry

  . threat of substitutes
• Corporate Social Responsibility (CSR)


  Businesses having a greater obligation than just making profits, taking into account the needs of different stakeholders, the environment, and local communities
• Responsibilities in Carroll's CSR Pyramid

  • Economic
  • Legal
  • Ethical
  • Philanthropic
• Economic responsibilities


  Ensuring the organisation is profitable, minimising costs, and rewarding shareholders - the foundation for other CSR responsibilities
• Legal responsibilities


  Behaving in a way that goes beyond just sticking to the letter of the law, and embracing the spirit in which laws are created
• Ethical responsibilities


  Considering the needs of all stakeholders, not just prioritising shareholders, and doing what is right rather than just what is profitable
• Philanthropic responsibilities


  Using the organisation's resources and influence to contribute to local communities and do good, such as through charitable giving and employee volunteering
• Gearing Ratio= (Long term liabilities/capital employed) x 100

  capital employed= total equity+ non-current liabilities

  
  

  0-24% lowly gearing ratio

  25-50% moderately geared

  +50% highly geared
• Absenteeism= (number of staff absent on a day/total number of staff) x 100

  
  

  problems:

  . cost of sick pay

  . pressure on remaining workers

  . quality concerns

  
  

  solutions:

  . health and safety and employee safety

  . motivation

  . reward good attendance
• Organic growth

  
  

  By:

  . increasing sales

  . new products

  . new markets

  . franchising

  
  

  Benefits:

  . less risky

  . no integration

  
  

  Limitations:

  . slow

  . less economies of scale

  . rivals grow faster inorganically