theme 3

• What are corporate objectives?

  targets set for the whole firm to reach in a given time in order to give a clear sense of direction or a clear target that provides focus for any activity to increase productivity and co-ordination.
• What should typical corporate aims include?


  Growth, maximising profit, entering new markets, surviving the the first two years of being in business, .

  This should allow decisions to be made quickly.
• What are mission statements?


  Catchy summary of the reasons why a business exists. Missions can be thought of why a business exists. It gives staff a genuine sense of purpose, explaining without the need for extra management input, why they are doing their job and why their job is worthwhile.
• What are the major factors affecting the actual sense of mission created within a business?

  PURPOSE: why the business exists

  VALUES: What the business believes in doing and guiding principles behind how it should be done.

  STANDARDS AND BEHAVIOURS: The way in which people in the business act towards both stakeholders and others in the business.
• What are corporate strategies?

  the overall plan that a business chooses to follow in order to reach its overall objectives. A successful strategy should consider both the firms strength and firms environment.
• What is porters generic strategy matrix?

  A matrix which shows the four major strategic choices that Porter suggests can lead to long-term success.

  Either through: COST LEADERSHIP OR DIFFERENTIATION

  
• What is porters low cost strategy?

  exploiting better economies of scale than rivals, or higher productivity in factories than anyone else can manage
• What is Porters differentiation strategy?

  Cost effective: Adding features that cost more to add than a consumer is willing to pay is not profitable.

  Sustainable: A method of differentiation that lasts is the key: doing something to a product that rivals can quickly copy will not provide long term success.
• What is the Ansoff Matrix?

  A strategic matrix to show the major choices open to a business considering its strategic direction and highlight the level of risk involved in each choice.

  
• Explain market penetration category involved in ansoff matrix.

  MARKET PENETRATION: involves boosting market share through selling more of the same product to the same target market.

  Does this by:

  > finding new customers within the target market

  > taking new customers from competitors

  > increasing usage of the product among existing customers
• Explain market development category involved in ansoff matrix.

  MARKET DEVELOPMENT: when the business aims the products at new markets. Can be done by:

  > entering new geographical , often breaking into foreign markers or by repositioning the product to aim at a different type of customers
• Explain product development category involved in ansoff matrix.

  PRODUCT DEVELOPMENT: Still be selling to current markets so is likely to have a sound understanding of customer needs, wants and preferences but also selling new products to these customers. New products could be:

  >changes made to an existing products

  > developing and launching brand new products
• Explain diversification category involved in ansoff matrix.

  DIVERSIFICATION: meaning selling new products to new markets
• What is a SWOT analysis?

  identifies a business strengths and weaknesses along with the opportunities and threats it faces.

  
• What is the top-down approach?

  This method tends to use external management consultants working directly with the boss of the business.

  Benefits include: a dispassionate approach to identifying strengths and especially weaknesses

  However: managers may fail to share all necessary information with those conducting the swot in an attempt to present their area if responsibilities in a more favourable light.
• What are key external areas to consider when looking for opportunities and threats?

  DEMOGRAPHY- changes to population, especially in its structure.

  NEW LAWS AND REGULATIONS- can open up opportunities or make existing products obsolete overnight. e.g. sugar tax

  TECHNOLOGICAL FACTORS- both opportunity and threat

  ECONOMIC FACTORS- e.g. economic growth, inflation, exchange rates, unemployment's, interest rates etc..
• What type of analysis could be done for a firm to understand the external environment?

  Political

  Economic

  Social

  Technological

  Legislation

  Environmental

  PESTLE ANALYSIS
• What is Porter's Five Forces Model?

  analyzes the competitive forces within the environment in which a company operates to assess the potential for profitability in an industry

  
• How do the five forces shape strategy?

  May identify changes in the balance of one or more forces against the business. In these cases a business can look to produce a strategy that addresses this issue before it causes the firm a major problem.
• What are reasons why a firm grows?

  To increase profitability- more customers can bring more

  To achieve economies of scale

  Increased market power over customers and suppliers

  Increased market share and brand recognition
• What are the types of economies of scale?

  Purchasing economies of scale- where firms are able to negotiate a cheaper unit of cost for suppliers as they buy in bulk

  Managerial economies of scale- able to justify employing a specialist training manager and recruitment manager= more expertise to the role.

  Technical economies of scale- where growth allows a firm to afford to buy specialist machinery and equipment to reduce cost.
• What are benefits of wider recognition of a company brand?

  Customers tend to buy brands they recognise, thus increasing recognition can lead to a further boost in sales.

  as brand recognition increases it is possible to make cuts to marketing budgets if awareness boosting advertising is no longer necessary, reducing firms overall operating expenses.
• What are the problems arising from growth?

  diseconomies of scale

  Poor internal communication

  poor employee motivation

  poor managerial co-ordination

  Overtrading
• Define diseconomies of scale

  the inefficiencies related to growing as a business that can lead to upward pressure on unit cost.
• Why does growth lead to a worsening of communication within an organisation?

  Larger organisation tend to rely on more written forms of communication than oral harming the effect of communication.

  Larger organisation= more layers of organisational structure, span of control is to wide

  less motivation meaning less communication
• What is overtrading?


  Occurs when a business experiences cash flow problems as a result of expanding too quickly without sufficient cash in the bank.
• What is organic growth?

  Growth which takes place without any merger or takeover. Growth occurs through retained profits rather than seeking riskier methods of finance.
• What is inorganic growth, what sort of businesses need to complete it?

  Means growth that occurs as a result of taking over or merging with another business. Done by businesses that:

  > have a poor record of new product development and innovation

  > need to grow very quickly

  > business looking to eliminate any competitors
• What are the advantages of organic growth?


  The leaders influence stays strong

  Reduction of finance risk

  Secure career paths
• What are the disadvantages of organic growth?

  Limited speed leading to limited size- far slower process than inorganic growth, may fall behind rivals growing inorganically

  failing to exploit a short-lived opportunity

  Predictability- organic is normally the same thing each year unmotivating staff
• what are reasons for mergers and takeovers?

  Growth- increasing the size of organisation is the general motive behind any merger or takeover

  cost synergies: increased size leads to economies of scale allowing it to reduce the unit cost

  Diversification- entering new products and markets to spread level of risk

  Market power- when two firms come together it increases power over its customers, increasing power over suppliers as well.
• Explain the difference between a merger and takeover.

  A merger occurs when two businesses of roughly the same size agree to come together to create a brand new single business where the owners of the two businesses will share the ownership of the new firm.

  A takeover occurs when one business buys 50% of another businesses shares, gaining control
• What are the different types of integration.

  Vertical integration

  Horizontal integration

  Conglomerate intergration
• What is vertical integration?

  refers to a merger or takeover involving two companies at different stages of the same supply chain.

  Forward= where a company buys a customer

  Backwards= when a company buys a supplier
• What is horizontal integration?

  Where a business buys or merges with a rival in the same industry at the same stage of the supply chain.
• What is conglomerate integration?

  Where a merger or takeover involves the coming together of two unrelated businesses. The main benefit is that the new business is no longer reliant on just one market or product , designed to spread risk for the new business.
• How do you conduct a swot analyse?

  Top down approach: This method tends to use external management consultants working directly with the boss of the business.

  consultant approach: A boss who takes the opportunity to travel around the business, engaging in conversation with those who understand each aspect best to understand what will work for the business.
• What are the benefits and drawbacks of the top down approach?

  + A quick and easy method of identifying strengths and weaknesses

  + may aloud the business to be shown in a new light

  - Managers may fail to share all necessary information with those conducting the SWOT in an attempt to present their area of responsibility in a more favourable light.
• What are the benefits and drawbacks of the consultative approach?

  + greater insight from a wider range of contributors

  + the chance for the boss to understand the whole business

  - staff may be even less willing to point out problems if they feel this will reflect badly on the leadership of the person they are talking to.
• What are the external strengths and weaknesses that need to be considered?

  Demography- changes to the population, especially in its structure could be relevant.

  New laws and regulations- this can open up opportunities or make existing products obsolete over night. e.g. sugar tax

  technological factors - changes in technology

  economic factors