theme 3 key terms

Risk transference

This is the involvement of handing risk off to a willing third party. For example, numerous companies outsource operations such as customer service, payroll services, etc

Scenario planning

The process of anticipating possible changes in a business's situation and devising ways of dealing with them

Succession planning

A human resourcing process for identifying and developing new leaders who can replace old leaders when they leave, retire or die

Corporate objectives

These are the specific, measurable goals that an organization aims to achieve to fulfill its mission and vision.

Business aim

A general statement outlining what a business wants to achieve in the long-term, such as growth, profitability, or market expansion.

Mission

A statement that defines an organization's purpose, outlining its core values and goals while guiding its strategies and decision-making.

Mission statement

A formal summary of the aims and values of a company, detailing its core purpose and direction for stakeholders.

Corporate strategy

A plan that outlines how a company will achieve its long-term objectives, allocate resources, and position itself in the market.

Ansoff’s matrix

A strategic planning tool used to identify and evaluate growth strategies by focusing on existing or new products and markets.

Market penetration

A growth strategy aimed at increasing sales of existing products in existing markets, often through enhanced marketing efforts or competitive pricing.

Market development

A growth strategy that involves entering new markets with existing products, aiming to expand the customer base and increase sales.

Product development

A growth strategy that focuses on creating new products for existing markets. This approach aims to meet customer needs and drive sales through innovation.

Diversification

A growth strategy that involves entering new markets with new products, aiming to spread risk and enhance overall business performance.

Porter’s generic strategy

A framework outlining three strategic options—cost leadership, differentiation, and focus—used by organizations to gain a competitive advantage in their industry.

Porter’s five forces model

A framework that analyzes the competitive environment of an industry by examining five key forces: supplier power, buyer power, competitive rivalry, threat of substitution, and threat of new entry.

Growth

The increasing of an overall size of a business

Economies of scale

Cost advantages gained by producing on a larger scale, leading to lower per-unit costs.

Purchasing economies of scale

Cost advantages gained by purchasing inputs in bulk, resulting in lower per-unit costs for large-scale operations.

Managerial economies of scale

Cost savings achieved through more efficient management and administration as a company grows, improving overall operational efficiency.

Technical economies of scale

Cost advantages obtained by using more advanced production techniques and machinery, allowing for increased efficiency and lower costs per unit.

Financial economies of scale

Cost advantages that large firms experience in accessing capital markets at lower interest rates and better terms compared to smaller firms.

Marketing economies of scale

Cost advantages that arise when larger firms reduce per-unit costs through effective marketing strategies and greater bargaining power.

Diseconomies of scale

The disadvantages or increased per-unit costs that arise when a company or organization grows too large, leading to inefficiencies in production and management.

Overtrading

A situation where a business expands its operations too rapidly without having sufficient financial resources to support that growth, leading to cash flow problems and potential insolvency.

Inorganic growth

Expansion achieved through mergers and acquisitions rather than internal development.

Organic growth

The strategy of increasing a company's revenue and profits through internal initiatives, such as improving sales, increasing production capacity, or introducing new products, rather than through mergers or acquisitions.

Takeovers

A form of inorganic growth in which one company acquires control of another company, often resulting in integration of operations and assets.

Mergers

The combining of two or more companies into a single entity, typically to enhance competitive advantages and increase market share.

Vertical integration

When companies take control of another part of it’s supply chain

Forward vertical integration

When one company takes control of another later in the supply chain ( a car company buys a car dealership)

Backward vertical integration

When a company acquires control over an earlier stage of its supply chain, such as a manufacturer buying a supplier.

Horizontal integration

The consolidation of companies or assets that are at the same stage of production in the same industry, often through mergers or acquisitions.

Conglomerate integration

The process of merging or acquiring companies that operate in completely different industries, resulting in a diverse portfolio.

Investment appraisal

The process of using forecast cash flows to assess the financial attractiveness of an investment decision

Payback period

The length of time required to recover the cost of an investment from its cash inflows.

Average rate of return

A financial metric used to evaluate the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.

Net present value

A method of evaluating investments by calculating the difference between the present value of cash inflows and outflows over a period of time.

Decision trees

A decision support tool that uses a tree-like model of decisions and their possible consequences, including chance event outcomes, resource costs, and utility.

Critical path analysis

A project management technique used to determine the longest sequence of dependent tasks and ensure timely project completion by analyzing the necessary tasks.

Earliest start time

The earliest time at which a task can begin in a project schedule, considering dependencies and preceding tasks.

Latest finish time

The latest point in time a task can be completed without delaying the project's overall timeline, ensuring proper scheduling and resource allocation.

Critical path

The longest duration path through a project, determining the shortest time to complete the project by identifying critical tasks.

Quantitative sales forecasting

A method of predicting future sales based on numerical data, trends, and statistical analysis, enabling businesses to make informed decisions.

Moving average

A quantitative method used to identify trends in a set of raw data.

Extrapolation

Predicting by projecting past trends into future

Scattergram

Plotting the relationship between two variables, the relationship can be used to forecast sales if it’s predictable and thus has a strong correlation

Corporate influences

Factors affecting business decisions and strategies, including stakeholders, government policies, and market trends.

Short terminism

The focus on immediate results or short-term gains at the expense of long-term strategies or sustainability.

Long terminism

The belief in planning and making decisions for the long-term future, emphasizing sustainable strategies over immediate gains.

Evidence based decision making

The practice of making decisions based on data, facts, and analysis rather than intuition or personal experience, ensuring that conclusions are supported by solid evidence.

Subjective decision making

The process of making decisions based on personal feelings, opinions, or interpretations rather than objective data or factual information.

Corporate culture

The values, beliefs, and behaviors that shape how a company's employees interact and work together, influencing the overall environment and success of the organization.

Power culture

A type of corporate culture characterized by centralization of power in a few individuals, where decision-making authority is concentrated and the emphasis is on control and authority.

Role culture

A type of corporate culture that emphasizes defined roles and responsibilities, where employees are expected to perform specific tasks according to established procedures and rules.

Task culture

A type of corporate culture focused on project-based work, where teams are formed to achieve specific goals and the emphasis is on collaboration and flexibility.

Person culture

A type of corporate culture that prioritizes individuals and their personal growth, often encouraging autonomy and creativity over strict adherence to organizational hierarchy or roles.

Shareholder

A person or entity that owns shares in a company, granting them a claim on part of the company's assets and earnings.

Stakeholders

Individuals or groups who have an interest in a company's performance and decisions and have the ability to influence its decisions

Stakeholder approach

A business management strategy that considers the interests and well-being of all stakeholders, rather than just shareholders, in decision-making processes.

Shareholder approach

A business management strategy that prioritizes the interests of shareholders in corporate decision-making, often emphasizing profit maximization and financial returns.

Ethics

The principles that govern a person's or group's behavior, often guiding decisions about what is right and wrong in business practices.

Trade off

A balancing act between competing interests or values in decision-making, where gaining one benefit may result in the loss of another.

Corporate social responsibility

The practice of integrating social and environmental concerns into business operations and interactions with stakeholders, aiming to generate positive impacts on society while maintaining profitability.

Profit and loss statement

A financial report showing a firms revenue for a time period along with all the costs associated with generating that revenue

Balance sheet

A financial statement that summarises a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial position.

Ratio analysis

A quantitative method used to evaluate a company's financial performance by comparing various financial metrics, often expressed as a fraction or percentage.

Liquidity ratio

A financial metric used to assess a company's ability to meet its short-term obligations, calculated by comparing liquid assets to current liabilities.

Profitability ratio

A financial metric used to evaluate a company's ability to generate profit relative to its revenue, assets, or equity, often expressed as a percentage.

Gearing

A financial ratio that compares a company's borrowed funds to its equity, indicating the level of financial risk based on debt levels.

Labour productivity

A measure of output per employee

Labour turnover

Measures the proportion of employees leaving a business during a specific time period

Labour retention

Measures the proportion of employees remaining with a business during a specific time period

Absenteeism

Measures the proportion of staff absent from work during a specific time period.

Incremental change

Refers to small, gradual improvements or adjustments made over time within an organization, rather than significant, revolutionary overhauls.

Step change

Refers to a significant, often sudden, transformation or improvement in processes, products, or organizational structure that can lead to a dramatic shift in performance or efficiency.

Disruptive change

A significant transformation that fundamentally alters the way an organization operates, often rendered necessary by technological advancements or shifts in market conditions.

Scenario planning

A strategic planning method used to make flexible long-term plans by envisioning multiple future scenarios and assessing the potential impact on an organization.

Risk mitigation plans

Strategies to reduce potential risks and their impact on an organization, ensuring preparedness for unforeseen events.

Business continuity plan

A strategy that outlines how a business will continue operating during disruptive events, ensuring essential functions remain available.

Succession plans

Plans for identifying and developing new leaders to replace old leaders when they leave or retire.