unit 7 - analysing the strategic position

What is a mission statement

a short statement of the organisations purpose to motivate employees to work towards the same goals

What are corporate objectives

Objectives that relate to the business as a whole. Usually set by top management.

What are Functional objectives

Goals of each of the functional areas of a business ie marketting goal

internal influences on objectives

• the ambitions of the chief executive, leadership and personality

• the financial positiion of the business

• HR and the skills of the staff

What are some external influences on business objectives

• competitive enviroment

• change in consumer tastes, social enviroment

• economic enviroment

• changes in legislation

• Technological enviroment

• Pressure from shareholders to peform (peformance data)

What is a strategy

medium or long term goals that achieve objectives in the long term ie increasing market share, the strategy would be to target a new market segment

What is a tactic

Short term to increase profits, ie advertising campaigns

What is the links between mission, objectives and strategy

Aims → Objectives → Strategy → Plans/tactics

What is SWOT analysis

strengths, weaknesses, opportunities, threats

Why is SWOT analysis good for a business

evidence to decide an effective future strategy,

What are the 2 financial ratio analysis methods

• balance sheets

• income statements

What is a balance sheet

A financial statement for stakehoders that reports assets, liabilities, and owner's equity on any specific date

What is an income statement

A financial statement that reports a company's revenues and expenses and resulting net income or net loss for a specific period of time. usually annually or every 6 months

What are the 2 assets

Current (Cash, inventories) and non current (property, machinery)

What are current liabilities

liabilities due within a short time, bank overdraft and payables to suppliers

what are Non-current liabilities

debts of the business that will be payed after more than a year , bank loans

What are inventories

stocks of goods and raw materials

how to calculate capital employed

equity + non currrent liabilities

What is net working capital formula

current assets - current liabilities

what are debentures

a type of long-term fixed interest loan

what is total equity formula

total assets - total liabilities

What are payables

short-term liabilities owed to suppliers for purchases made on credit

What are receivables

amounts due from individuals and companies that are expected to be collected , ie Klarna credit

What is share capital

The total value of capital raised from shareholders by the issue of shares

What are reserves

retained profit, amounts retained by a business for use in future

What is capital expenditure

money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, and equipment.

What is revenue expenditure

A cost that keeps an asset in its normal operating condition and is treated as an expense

formula for gross profit

net sales - cost of goods sold

what is cost of goods sold

the amount of money a firm spent to buy or produce the products it sold during a specific time period

What are expenses in an income statement

indirect costs or fixed costs eg salaries, rent etc

Formula for operating profit

Gross Profit - Expenses

Formula for profit after tax

Operating profit - interest costs and corporation tax

Why is it important for stakeholders to see the profit after tax

because it helps them see how much the business is retaining and not giving out in dividends, if they are retaining too much it may put off shareholders as they are not getting a high return

What are the 4 ratios

• profitability ratios

• liquidity ratios

• gearing ratios

• efficiency ratios

What are profitability ratios

Measures of the operating success of a company for a given period of time. ROCE most impotant for this

Formula for ROCE

operating profit / capital employed. x 100

What are liquidity ratios

Ratio that shows if a business has enough cash to pay its short-term debts as they come, Current ratio

formula for current ratio

current liabilities/ current assets

What are gearing ratios

Measure the extent to which the business relies on borrowed money, ie how much borrowed to have factories ect. Gearing ratio

formula for gearing

non current liabilities/ capital employed x 100

What are efficiency ratios

How efficiently a business uses its recourses and investments, Main are payable days, recievable days , inventory turnover

formula for inventory turnover

cost of sales/ inventory = expressed as times per year that inventory is replaced

formula for recievable days

recievables / revenue x 365

formula for payables days

payables/cost of sales x365

what are the limitations of using financial ratios

• dont consider qualative info

• can’t guide future peformance

What are the 3 functions we analyse their Peformance data

• Marketting

• HR

• Operations

How do we measure marketting peformance

• market share

• brand image

• customer service

• new product sales as a percentage of all sales

How do we measure HR peformance (formulas In unit 6 flashcards)

• labour turnover and retention

• labour productivity

• employee costs as a percentage of turnover

• labour cost per unit

How do we measure operations peforma

core competences

Unique abilities a business possesses in order to gain a competitive advantage

short-termism

The tendency for managers to focus excessively on short-term performance objectives at the expense of longer-term strategic objectives. It has negative implications for the likelihood of ethical lapses as well as company performance in the longer run.

performance metrics

Measures of various business activities (or outcomes) that indicate whether an organization is meeting its operational or strategic goals. Examples include market share, customer profitability, revenues, percentage increase in sales over a period, service-call response time, number of items shipped on time.

Elkingtons Triple Bottom Line

profit, people, planet

Sustainability

meeting the needs of the present without compromising the ability of future generations to meet their own needs

Anti-competitive practices

Actions taken by businesses to limit the extent of rivalry that exists within a particular market, or the use of unfair trading activities

Fair Trading Act

Law protecting consumers rights over misleading conduct, false representation and unfair

selling practices

Competition Act 1998

laws prohibiting anti-competitive behaviours

environment protection act

laws to protect environment from pollution

enterprise

The process by which new businesses are formed in order to offer products and services in a market

regulation

the use of governmental authority to control or change some practice in the private sector

infrastructure

Fundamental facilities and systems serving a country, city, or area, as transportation and communication systems, power plants, and schools

international trade

Exchanging goods and services between countries

Common Market

a group of countries that have eliminated tariffs and harmonized trading rules to facilitate the free flow of goods among the member nations

gross domestic product

The sum total of the value of all the goods and services produced in a nation

business cycle

Fluctuations in economic activity, such as employment and production

business confidence

A measure of the degree of optimism among firms in an economy about the future performance of firms and the economy; it is measured on the basis of surveys of business managers. Is an important determinant of the investment component of aggregate demand.

recession

period of reduced economic activity

boom

A time of fast economic growth

exchange rates

a measurement of the value of one nation's currency relative to the currency of other nations

inflation

A general and progressive increase in prices

demand-pull inflation

increases in the price level (inflation) resulting from an excess of demand over output at the existing price level, caused by an increase in aggregate demand

cost-push inflation

rising prices as a result of rising production costs

hyperinflation

A very rapid rise in the price level; an extremely high rate of inflation.

deflation

A situation in which prices are declining

fiscal policy

Government policy that attempts to manage the economy by controlling taxing and spending.

monetary policy

Government policy that attempts to manage the economy by controlling the money supply and thus interest rates.

progressive tax

A tax for which the percentage of income paid in taxes increases as income increases

proportional tax

A tax in which the average tax rate is the same at all income levels.

government expenditure

The amount spent by the government in its provision of public services

quantitative easing (QE)

the purchase of long term government and private mortgage-backed securities by central banks to make credit available in hopes of stimulating aggregate demand

protectionism

the theory or practice of shielding a country's domestic industries from foreign competition by taxing imports.

quotas

limitations on the amount of specific products that may be imported from certain countries during a given time period

tarrifs

Taxes on imported goods

globalisation

The growing integration of the world's economies

emerging economies

Developing countries, such as India or Singapore, that over the past two or three decades have begun to develop a strong industrial base.

market share

a company's product sales as a percentage of total sales for that industry

Demographics

the characteristics of a population with respect to age, race, and gender.

urbanisation

Increase in the proportion of the countries population living in towns and cities

consumer lifestyles

ways consumers live and spend their time and money

CSR (Corporate Social Responsibility)

a business's obligation to pursue policies, decisions, and actions that align with the objectives and values of society

social audits

formal procedures that identify and evaluate all company activities that relate to social issues such as conservation, employment practices, environmental protection, and philanthropy

Carrol's CSR Pyramid

a model used to show how business make their decisions and which sets of responsibilities they address first

technological change

a change in the products and processes the firm uses to produce a given level of output with a given quantity of inputs

business ethics

rules about how businesses and their employees ought to behave

competitive environment

The immediate environment surrounding a firm; includes suppliers, customers, rivals, and the like.

Porter's 5 Forces

*Rivalry among competitors;

*Threat of new entrants;

*Threat of substitute products;

*Bargaining power of buyers;

*Bargaining power of suppliers;

barriers to entry

business practices or conditions that make it difficult for new firms to enter the market

payback period

The length of time that it takes for a project to fully recover its initial cost out of the net cash inflows that it generates.

average rate of return

Average net return / Investment x100