Business Theme 3

Frage	Antworten
Mission Statement	a qualitative statement summarising the aims of an organisation. It uses language to motivate employees and convince customers, competitors and those outside the business of its' sincerity and commitment.
Corporate Aims	long-term intentions of a business.
Corporate Objectives	short-term targets that must be achieved in order to meet the stated aims of the business.
Stakeholder	An individual or group that has direct in the activities and performance of a business
Boston Matrix	the Boston Consultancy Group came up with matrix to help businesses organise their product portfolios in terms of market growth and market share.
Boston Matrix strategies:	star - hold problem child - invest cow - harvest dog - divest
Boston Matrix summary sentence	Kill the dogs and use the cows to turn the problem children into stars
Distinctive Capabilities	the ideas and resources that contribute to competitive advantage e.g. innovative product development for Dyson
Strategic decisions	decisions that require considerable expertise and reflect the long-term objectives of the whole company
Tactical decisions	decisions that reflect the short-term objectives of a company. They contribute to strategic plans or may reflect a need to respond swiftly to unforeseen opportunities/threats.
Ansoff's Matrix	a marketing planning model that helps a business determine its product and market strategy. It provides a framework, consisting of four cells that provide a company with options with a varying degree of risk depending on product and market type.
Porter's Generic Strategies	A model that guides businesses how to achieve competitive advantage depending on market type and if the business wants to achieve advantage through cost or differentiation.
SWOT analysis	a method for analysing a business, its environment and its resources. It investigates a company's current strengths and weaknesses and uses them to help foresee future opportunities and threats.
PESTLE analysis	A form of analysis that identifies external factors that could affect a business but are out of their control Political, Economic, Social, Technological, Legal and Ethical/Environemental
Porter's 5 Forces	a framework for analysing the nature of competition within an industry and looks at how constant change influences a business, helping it understand both the strength of its current position and the strength of a position it may consider in the future.
What are the 5 forces in Porter's 5 Forces Model?	1. Threat of New Entry 2. Buyer Power 3. Threat of Substitution 4. Supplier Power 5. Competitive Rivalry
Growth	expansion, either due to rising sales or by increasing the scale of an enterprise by means of a takeover.
Economies of scale	all the ways in which long-run increases in capacity and output can reduce average costs
7 types of economies of scale	1. Purchasing - bulk-buying 2. Technical - specialist equipment 3. Managerial - specialist managers 4. Marketing - fixed spend over larger range 5. Network - extra customers 6. Financial - easier access to finance 7. Risk-bearing
Internal Economies of Scale	arises when a business invest in expanding production
External economies of scale	unit cost reductions that are shared by a whole industry rather than a single business. They are common when many businesses are concentrated in one location.
Diseconomies of Scale	Increase unit costs as a business grows. They are often associated with communication issues or costs of co-ordination.
What are 3 problems with growth?	1. over-trading 2. diseconomies of scale 3. over-trading
Over-trading	when a business expands too quickly without having the financial resources to support a quick decision, which leads to cash flow problems.
6 symptoms of overtrading	1. high revenue growth but low gross profit and operating profit margins 2. persistent use of overdraft 3. increases in payables and receivables days ratio 4. increase in current ratio 5. very high inventory turnover 6. low capacity utilisation
Moving Average	takes a data series and smoothes the fluctuations in the data to show an average to minimise the extreme scores.
Extrapolation	the process of predicting based on what has happened before
3 Quarter Moving Average Method	1. Add up 3 figures from the sales column 2. Divide by 3.
4 Quarter Moving Average Method	1. Add up 4 x 2 figures from the sales column 2. Add these two figures together 3. Divide the total figure by 8.
Investment	spending capital on assets that will increase future profitability
Induced Investment	investment made by a business because an asset has become obsolete.
Autonomous Investment	An investment that a business makes out of choice
Investment Appraisal	Numerical techniques used to support decision making e.g. payback time, average rate of return and discounted cash flow
Payback definition	calculates the time it takes for a project to recover the initial cost
Payback formula	Add all net returns (annual revenue - annual costs) until it equals initial cost
2 Disadvantages of payback	1. Cash earned after payback is not considered 2. Ignores profitability in favour of speed of repayment
Average rate of return definition	measures the return from an investment annually as a % of its initial cost
ARR formula	average net return per year / initial cost x 100
A Disadvantage of ARR	Ignores the timings of payments and calculates only the average profits - they may fluctuate during the project which could result in cash flow problems
NET present value definition	deals with the effect of time on money
NPV formula	net return x discount factor = present value (present value + present value ...) - initial cost = NPV
2 Disadvantages of NPV	1. Choosing discount rate is difficult 2. Complex method that is easily misunderstood
Decision Tree	A diagram which shows all of the possible outcomes of a decision, together with the estimated probability of each outcome occurring, and the expected monetary value.
Critical Path Analysis	the process of planning the sequence of activities in a project in order to discover the most efficient way of completing it
2 Benefits of time-based management	1. Reduced lead times 2. Shorter Product Development times : first-mover advantage

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