Investment appraisal & Strategic decision and positioning

what is payback period

time it takes for return on investment

what is the average rate of return

the total return for a project to meet the target return

what is discounted cash flow (NPV)

net present value calculates the monetary value now of the project future cash flow

give examples of factors influencing investment decisions

the corporate aims and objectives

how much risk is involved

how changes in external environment could have an impact on the investment

what is discounting (NPV)

the method used to reduce the future value of cash flow to reflect the risk that they may not happen

what does Ansoff’s matrix help a business determine

its product and marketing strategy

what are the four aspects of Ansoffs matrix

market penetration

product development

market development

diversification

what is market penetration - Ansoff’s matrix

existing products into existing markets to increase market share

to increase market share

what is product development - Ansoff’s matrix

introducing new products into existing markets (eg diet coke)

what is market development - Ansoff’s matrix

selling existing products into new markets

eg through new geographical markets / distribution channels / new pricing policies

what is diversification - Ansoff’s matrix

selling new products in new markets

eg through a joint venture or merger

what are porters generic strategies

ways a business can achieve competitive advantage through either cost leadership or differentiation

what is the objective of a low cost strategy - porters generic strategies

becoming the lowest cost operator and gaining economies of scale

why is cost leadership important - porters generic strategies

If selling prices are broadly similar, the lowest-cost operator will enjoy the highest profits whilst gaining market share

What are some businesses which are example of low cost strategy

ryanair, aldi, poundland

what does a differentiation strategy aim to offer

a product that is distinctively different from the competitions - customers must value the differentiation

what are some methods to achieving differentiation

superior quality

branding

wide distribution (its essential for retailers to stock)

sustained promotion

what does it mean to be stuck in the middle

Being unable to pursue both a low-cost or differentiation strategy resulting in a lack of competitive advantage due to poor performance overall