1.3-1.5 biz quiz

mission statement

a statement of purpose of why the business exists - more grounded in reality & the business’ objectives

vision statement

an aspirational description of what an org would like to achieve in the long-term future

vision statement advantages

• help motivate employees w/ positive aspects of business - could attract better employees

• show customers what the business is about

vision statement disadvantages

• very vague, doesn’t distinguish one business from another

• used for PR/marketing, not followed in business

• don’t actually provide direction to internal stakeholders

strategic objectives

medium to long term objectives set up by senior managers to guide company in right direction to achieve aims. risky, large investment, not easily reversed

tactical objectives

medium to short term objectives set by middle managers to achieve strategic objectives. low risk, few resources, easy to change

operational objectives

day to day objectives set by floor managers/workers so company can reach its tactical objectives

SMART criteria

Specific, Measurable, Attainable, Relevant, Time Based

corporate social responsibility (stakeholders)

business model that helps company be socially accountable to itself, stakeholders, & the public - goes beyond the laws

ethical objectives

• pay workers fair wages above legal limit

• invest in local community to improve citizens’ lives

• reduce waste & pollution to help environment

• pay suppliers asap

• use suppliers that guarantee fair trade & equal employment

SWOT analysis

Strengths, Weaknesses, Opportunities, Threats

economies of scale

the decrease in per unit production costs as output or activity increases

• the cost to produce one item falls as businesses grow

technical economies

being able to buy new machinery, increases capacity for production + reducing avg cost per unit

managerial economies

being able to employ specialist managers that are valuable + can reduce avg cpu

financial economies

being able to borrow money at lower interest rates + have access to more sources of finance

marketing economies

when the costs of advertising per unit falls

purchasing economies

buying goods in bulk and receiving a discount

internal economies of scale

The Massive Firms earn More Profit

capacity utilization

when a business produces more w/ the same resources they already have

• no purchase of new equipment, tech, marketing

• can be calculated as percentage (80% capacity/utilization)

diseconomies of scale

when the per unit production price increases as output/activity increases

• cost to produce one item increases as businesses grow

communication problems

hard to get the right msg to the right person at the right time; causes errors or repeated work

coordination problems

hard to make sure everyone knows what they need to do & how to do it so there’s no repeated work

motivation

hard to make sure everyone feels like part of the org; decreases motivation + productivity

types of internal diseconomies of scale

communication & coordination problems, motivation

external economies of sale

suppliers, infrastructure, specialized labor

suppliers (ext econ of scale)

offer a cheaper price due to internal economies of scale

infrastructure (ext econ of scale)

gov improves roads, communication links, taxes/regulations

specialized labor (ext econ of scale)

a business locates an area w/ improved labor quality

external diseconomies of scale

raw materials, worker shortage, suppliers

raw materials (ext disecon of scale)

materials are overused and go up in price

worker shortage (ext disecon of scale)

workers leave an area (recession, danger, etc) & leave businesses w/o workers

suppliers (ext disecon of scale)

experience internal diseconomies of scale + raise prices

STEEPLE

Socio-cultural, Technological, Economic, Environmental/ecological, Political, Legal, Ethical

STEEPLE analysis

takes into consideration all external factors which a business needs to be aware of when operating

reasons to stay small

• less complications w/ growing/maintaining a large business

• greater focus: can focus on things they do well

• motivating for employees to work close together

• competitive advantage thru personalized service

reasons to grow

• survival

• economies of scale

• higher status & recognizability

• could be market leader

internal growth

business expansion by opening new branches/shops/factories, increase marketing, train staff, offer new products (organic growth - slow, low risk)

external growth

business expansion thru merging w/ or taking over another business from the same/diff industry (inorganic growth - quick, risky)

merger

form of external growth, results in 2 firms combining to form a third entity - new company replaces previous 2

acquisition

form of external growth when company buys at least 50% of other company’s shares - separate companies, A controls B

joint venture

when 2+ businesses work together on a project - share capital, risks, rewards - create separate business division

strategic alliance

similar to joint venture (business collab), more than 2 business, no new business created, more fluid (members can change)

franchise

business in which owner sells rights to logo, name, brand to a franchisee - strict requirements