3.7 Analysing the strategic position of a business

give examples of influences on overall missions

culture of business and ethos/ values of founder

what are corporate objectives designed to do

steer a business towards achieving its overall mission

what is short termism

focusing on the short term results at the expense of long term interests

how can short-termism influence corporate objectives

managers may seek short term profit at the expense of long term investment in research and development

what is long-termism

decision are considered with the future of the business in mind

how does public vs private business ownership influence corporate objectives

owners in the private sector are likely to place emphasis on profit maximisation

while public sector organisations are likely to emphasises providing for societal needs (eg NHS)

what is a strategy

a long term plan requiring many resources

it can be difficult to reverse once implemented

what is a tactic

a short term plan often requiring a few resources

usually can be stopped/ reversed if required

what do businesses use strategies to do

work towards their overall corporate objectives

how do strategic decisions differ from functional decisions

they influence departmental/functional decisions to support the overall organisation

what is SWOT analysis used to explore

a businesses:

internal strengths

internal weaknesses

external opportunities

external threats

whats an example strength of a business - SWOT

being a reputable brand

whats an example weakness of a business - SWOT

cash flow concerns

whats an example opportunity for a business - SWOT

a growing market causing more demand for their product

new technology available

give two example threats to a business

a declining market

increased competition

regulatory changes

what are a business’ core competencies

give examples

the unique abilities of a business which differentiate them from competitors

eg superior customer service, innovative design, efficient supply chain

whats the advantage of a business’ core competencies

they allow them to attract/retain customers

they’re difficult for competitors to imitate

What is a disadvantage of focusing too much on core competencies

the business may neglect other important areas, potentially limiting growth and diversification

what is a competitive advantage

a distinct benefit that a business holds over its rivals enabling it to perform better or achieve higher profitability

what is Elkington’s triple bottom line

firms should commit to being conscious of their societal and environmental impact (in addition to their financial performance) rather than just focusing on generating profit (the standard bottom line)

what are the 3 factors of elkingtons triple bottom line

people, profit, plant

what does the people section of Elkingtons triple bottom line outline

the firm should be committed to positively impacting society

what does the planet section of Elkingtons triple bottom line outline

a firm should be conscious of their environmental impact

what does the profit section of Elkingtons triple bottom line outline

a firm should consider the financial return decisions will generate for shareholders

what do competition laws do

ensure fair competition between businesses by preventing monopolies and anti competitive practises

(eg a business acquiring/taking over another large company resulting in substantially less competition in the market)

what are examples of labour market legislations

minimum wage

working conditions

anti discrimination laws (eg the equality act 2010)

what does environmental legislation do

regulate pollution, waste management and gas emissions

to encourage sustainable practises and mitigate the impacts of climate change

what are the advantages of emerging economies

low costs advantages

provide investment opportunities

what is enterprise in terms of the political environment

how government policies and decisions impact a company's ability to operate and grow

(they may help or restrict growth)

what are regulators (and why do they exist)

governmental organisations established to ensure businesses are following industry rules/regulation

what is taxation

the tax paid by businesses on any profits made

what is fiscal policy

the government's use of taxation and spending to influence the economy

what is monetary policy

a central bank’s (eg Bank of England’s) control of money supply and interest rates to control economic activity

how can increased interest rates affect business decision making

consumers may have less disposable income and thus decrease their spending - this can decrease demand for a business' products

a business may also have to pay higher interest on its own loans

what is protectionism

policies protecting domestic industries against foreign competition through tariffs, quotas etc

what is open trade

an agreement between countries to trade with each other without erecting barriers to trade (eg USMCA)

what happens when a currency appreciates

their imports increase (as their currency is worth more in other currencies so they can afford to buy more to bring into the country)

their exports decrease (as other currencies need more to equal the appreciating currency so they order less)

what happens when a currency depreciates

their imports decrease (as their depreciating currency is worth less in other currencies so they can afford to buy less)

their exports increase (as other currencies need less to equal the appreciating currency)

what are payable days

the no of days a company has to pay its suppliers

what are receivable days

the number of days a company takes to collect payments

what does PESTLE identify

the external factors effecting a business (eg their strategic position)

what is the P in PESTLE

political - impact of gov policies, trade agreements, tax laws etc

what are the Es in PESTLE

economic - growth, inflation, exchange rates, consumer confidence

environmental - sustainability

what is the S in PESTLE

social - demographic changes, lifestyle trends, ethical concerns

what is the T in PESTLE

technological - advances in automatic, R+D investment

what is the L in PESTLE

compliance with laws (eg health and safety, consumer rights)

what are porters five forces

threat of new entrants - can intensify competition and effect brand loyalty

bargaining power of suppliers - influences costs

bargaining power of buyers - to negotiate lower prices

threat of substitutes - how easy is it for customers to go elsewhere

industry rivalry (threat of competition)

what does a high gearing ratio show

a business has a high amount of long term debt

which could be risky especially during a rise in interest rates

however it also suggests a high return if investments are profitable

what does a low gearing ratio show

good keeping of finances

but could indicate under utilisation of growth opportunities

what does Carroll suggest about corporate social responsibility

they should integrate social and environmental concerns into their operations and interactions with stakeholders promoting ethical and sustainable practices

what is the order of Carroll’s CSR pyramid

Philanthropic - give back to society (TOP)

Ethical - do the right thing

Legal - obey the law

Economic responsibilities - be profitable (BOTTOM - most important as it enables the others)

give examples of factors influencing investment decisions

economic conditions

risk vs return

strategic goals

legislation

what is payback period

the amount of time it takes to recover from an initial investment cost

what is net present value

the value of future cash flows discounted to its present value

what is the average rate of return

the average annual profit made from an investment as a percentage of the initial investment

what does a high current ratio mean

they have a high number of current assets to current liabilities - so they’re more capable of paying off their obligations

what does a business do if it has a stakeholder focus

prioritse returns for investors

what does a business do if it has a shareholder focus

considers the needs of all stakeholderswhile aiming to maximize shareholder value.

what are some negatives of globalisation

increased competition

cultural differences (eg Mcdonalds Vietnam)

political risks