3.7 Analysing the strategic position of a business

What are the influences on the mission of a business?

• Ownership: form of business (e.g. sole traders can do what they like, but limited companies must appease shareholders and directors) and if it’s for-profit or non-profit

• Short-termism: shareholders can demand quick returns for their investment, leading to short-term objectives to increase profits, which may not be optimal in long run

• Internal environment: size, culture, resources, views of leaders/management (e.g. ethics/social responsibility)

• External environment: political, legal, economics, social, technological, environmental, competition

What is the distinction between strategy and tactics?

• Strategy: medium to long-term plan of action to achieve business objectives. It can only be made once an organisation outlines its aims and objectives

• Tactics: short-term plans for implementing strategy, so more focused on day-to-day activities

What is the impact of strategic decision making on functional decision making?

• Functional decisions: decisions made in individual departments (e.g. HR). Managers make decisions to implement to overall strategy, so they’re based on strategic decisions of business. They tend to be more short-term and lower risk than strategic decisions

What are internal influences on marketing objectives?

• Corporate objectives: this department must ensure its objectives are aligned company’s overall goals

• Finance: finance department allocates this department’s budget. If budget is cut: marketing objectives must be scaled down

• Human resources: HR planning identifies how many staff is needed. If business decides to change staffing levels: marketing will have to adjust its objectives to match what’s achievable with staff levels (e.g. if there are fewer operations staff: decreased capacity limits how much marketing can increase sale volume)

What are external influences on marketing objectives?

• State of economy: an economic boom is a good time to increase sales volumes; income levels are higher, but not in a recession

• Technology: in fast-moving market, marketing objectives tend to be focused on sales and price; new tech causes prices to change quickly

• Competition: in highly competitive markets, if a competitor is focused on low prices: this department may alter their objectives so customers see them as price competitive

• Ethics and environemtal factors: ethical and environmental awareness is increasing amongst customers, so harmful actions can damage brand image

• Law: government regulations directly impact this department’s objectives (e.g. predatory pricing/cutting prices to force a competitor out of business is illegal in UK)

What are internal influences on operational objectives?

• Corporate objectives: (e.g. if a business is concerned about its environmental impact: production process must be more environmentally friendly)

• Nature of product: (e.g. a computer technology company may focus on innovation, whereas a family-run bed and breakfast may focus on increasing capacity utilisation by filling more rooms)

• Availability of resources: many businesses would like to increase output but are limited by their scarce resources

• Other departments: objectives and decisions made in finance, marketing, HR departments will affect what this department can actually achieve, and vice-versa

What are external influences on operational objectives?

• Market conditions: (e.g. if customers are spending less money in a particular market/more competitiors in a market: this can affect operational objectives)

• Technology: production process must adapt to new tech

• Product demand: businesses must ensure that output/supply is not higher than demand, so they may set an objective to increase production flexibility

• Changing customer needs: (e.g. if customers shift to ethical firms: this can affect costs and environmental objectives)

What are internal influences on financial objectives?

• Corporate objectives: they must be consistent with the corporate objects of the business (e.g. a company with a strong environmental concern may focus on minimising carbon footprint over maximising profits)

• Other departments: they may be limited by what’s happening in other departments of business (e.g. if a business has a high sales staff turnover: an objective to increase revenue may be unrealistic; experienced staff are need to encourage more customer spending)

• State of business: (e.g. new businesses may set ambitious targets for revenue; they’re trying to grow quickly and establish themselves in marketplace)

What are external influences on financial objectives?

• State of economy: economic boom may encourage businesses to set ambitious profit targets, but in a downturn, they may set targets to minimise costs

• Competition: if new competitors enter the market/demand for competitor's’ products increase: a business may set an objective to cut costs to be more price competitive

• Ethics and environmental factors: (e.g. using fair trade supplies may affect cost objectives; more expensive)

• Availablity of finance: cash flow targets may depend on how easy it is for a business to get credit

• Shareholders: shareholders usually want best possible return on their investment, pressuring business to set objectives to increase profits/dividends

What are internal influences on HR objectives?

• Culture of business: (e.g. fast food restaurants may not be worried about high labour turnover, so they’d not want HR to spend time and money reducing it)

• Other departments: marketing, operations, finance departments all give HR info to predict workforce needs

• Availability of finance: more funding available within business means more can be used to work towards HR objectives

What are external influences on HR objectives?

• State of economy: an economic boom/recession will affect HR activities (e.g. recruitment, training)

• Technology: advances in technology may mean HR recruit people, who can use a certain type of software

• Ethical and environmental factors: (e.g. condemning zero-hours contracts may affect HR objectives)

• Law: HR may have to change their objectives to fit in with any new employment legislation

What is the value of SWOT analysis?

• SWOT analysis: four-factor model, detailing strengths, weakness, opportunities, threats facing business to help managers make strategic decisions. Strengths and weaknesses of each department are internal factors, but opportunities and threats are external factors