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Importance of Business Planning - Due to
Due to limited capacity and resources, planning helps to allocate scarce resources to competing users
Importance of Business Planning - Determination
Determination and setting of goals for long- and short-term development of the business
Importance of Business Planning - Generic
Generic business strategies include meeting industry targets, maintaining sale and production volumes from year to year and maintaining sales composition
Importance of Business Planning - Objectives
objectives of business strategies include changing goals and performance measurement
Importance of Business Planning - Cost
Cost leadership vs cost differentiation requires businesses to make a choice as to the type of product / service they’re offering to the market and customer base
Importance of Business Planning - Strategic
Strategic initiatives include identifying a niche in the market and meeting this by delivering this product / service to meet consumer demand
Importance of Business Planning - Performance
performance management includes reviewing performance reports and determining where future improvements can be made
Goal Definition
a desired result a person or system envisions, plans, and commits to achieve a personal or organisational desired end point in some sort of assumed development, with a finite time frame
Objective Definition
A specific target for the business which must be specific, attainable, measurable, consistent, and related to time
Usually to maximise profit, yet others include quality of service to customers
Generic Business Strategy Definition
Is one which is designed to be used by no one specific business or industry sector but rather can be applied across businesses and industries
Cost leadership - focus
focuses on extreme efficiency
Cost leadership - relies
relies on tight cost controls so the company keep costs at absolute minimum
Cost leadership - having
having the lowest possible costs allows the business to pass this on to the consumer and sell at a low cost product thereby gaining market share
Cost leadership - this strategy
This strategy can be used by large firms which produce a large number of standardised products
Cost leadership - allows
allows the business to take advantage of economies of scale
Cost leadership - means
means the average cost per unit falls the greater the production levels
Cost leadership - aims
aims for a low cost product to be sold to a large customer base
Cost leadership - only large
Only large businesses can engage in it as it involves mass production and distribution
Differentiation - focuses
focuses on making the product/ service offered by the business in some way different to that of its competitors
Differentiation - example
iphone vs other models
Differentiation - allows
Allows for a higher price to be charged due to the customer loyalty that teams tend to build up
Differentiation - biggest
biggest advantage of this strategy is that the customer tends to remain loyal to the product buying it because they want it due to the product it is not the price of it
Strategic initiative / decisions - put in place
put in place to help the business gain a competitive advantage
Performance management - includes
includes activities which ensure that goals are consistently being met in an effective and efficient manner
Performance management - focus
focuses on the performance of an organisation, department, employee, or the process to build a product of service
Performance management - process
process by which organisations align their resources, systems, and employees to strategic objectives and priorities
Reducing costs and risks - business
Business owners need to take control of their companies and assess the risks inherit in firms and industries to determine how to best reduce these risks
Reducing costs and risks - risks
risks can be safety related, financial or operational
Reducing costs and risks - for each
for each potential risk there is an internal control that can be implemented to reduce that risk
Reducing costs and risks - strategic
strategic business planning will help reduce the costs and risks associated with a business
Cost definition
an economic sacrifice of resources for a particular purpose, such as making a product or providing a service
Fixed cost definition
costs that are relatively fixed over a range of activity, volume, or output, and do not change as a result of changes in volume
Variable cost definition
vary directly and proportionately with changes in the level of activity, volume, or output, which means that if volume or output goes up or down, costs will go up or down by a proportional amount
Mixed cost definition
costs containing both fixed and variable elements such as costs that will vary with changes in volume but generally by less than a proportional amount
Cost Volume Profit definition
CVP analysis enables decision makers to assess how changes in selling prices, costs, and volume impact on the performance of a business
Uses of CVP - identification
identification of the break even point which can reveal what margin of safety the business has with budgeted sales being above the break even point
Uses of CVP - where budgeted
where budgeted profits are unlikely to be achieved, management is able to identify how changes in selling prices or variable costs and total fixed costs can be made to reach a target profit
Uses of CVP - where a
where a constraint or manufacturing capacity exists, management of a multi-product business is able to determine the optimal production mix decision for maximising profits
Uses of CVP - by revealing
by revealing how profits are impacted by changes in selling prices, variable costs and total fixed costs, management is able to analyse and identify which combination of these variables provides optimal financial outcomes for the business
Uses of CVP - facilitates
facilitates the making of special decisions and can calculate the financial impact of a decision, such as make or buy, special orders, and closing down a line
