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Description
Flashcards by Hannah Jones, updated more than 1 year ago
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Created by Hannah Jones
almost 8 years ago
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| Question | Answer |
| 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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