Business Theme 3 (Edexcel) A Level

Definitions

Aim: A generalised statement of where a business is heading

Mission: An aim expressed in a particularly inspiring way.

Mission statement: A statement that sums up a firm's mission that is shared throughout the organisation

Corporate strategy : a medium-to-long term plan for meeting company-wide objectives

Porter's Generic Competitive Strategies (ways of competing): Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation" (creating uniquely desirable products and services) and "Focus" (offering a specialized service in a niche market).

He then subdivided the Focus strategy into two parts: "Cost Focus" and "Differentiation Focus."  

Key definitions

Distinctive Capabilities: Ways a firm operates that cannot easily be copied by rivals.

Economies of Scale: Factors that cause average costs to fall as output increases. 

Generic Strategy: A strategy position that will prove effective in every market (e.g. lowest cost, high differentiation) . 

Product Differentiation: The extent to which consumers perceive one product as being different from its rivals . 

Stock Units:The number of different brands and pack sizes stocked by a company.

The Ansoff Growth matrix is another marketing planning tool that helps a business determine its product and market growth strategy.

Market penetration - Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets.

Market development - Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets

Product development - Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets

Diversification - Diversification is the name given to the growth strategy where a business markets new products in new markets.

SWOT Analysis investigates a company's strengths and weaknesses and uses them to help foresee future oppurtunities and threats.

External influnce is a factor beyond a firm's contol that can effect its performance. Examples include; changes in customer tastes, laws and regulations and economic factors such as the level of spending in the economy as a whole. We can use PESTLE, which stands for;

• • Political
  • Economical
  • Social
  • Technological
  • Legal
  • Environment
• Political - current and future legislations, govenrment funding/grants/policies, international pressure and wars and conflict.
• Economical - taxations, market/trade cycles, distribution trends, interest rates, exchange rates,international trade and monetary issues.
• Social - lifestyle trends, demographic, customer attitudes/opinions, media, ads, religious, brand,company and events.
• Technological - technologies, legislations, innovation

Competiveness measures the firms ability to shine in comparison with its rivals.

Threat of new entry;

• time and cost of entry
• specailst knowlegde
• economies of scale
• cost advantages
• techonology protection
• barriers to entry

Competitive rivarly;

• number of competitiors
• quality differences /other differences
• swithching costs
• customer loyalty

Suppliers power;

• number of supilers /size of suppliers
• uniqueness of service
• your ability to subsitiutes
• cost of changing

Buyers power;

• number of customers
• size of each order
• differences between competitiors
• price sensitivity
• ability to subustitutes / cost of changing

Threats of subtitution;

• subtititues performance
• cost of change.

Growth means expansion, either due to rising sales or by increasing the scale of an enterprise by means of a takeover.

Why firms grow; to increase..

• profits , market share, market power, profitablilty and to achieve economies of scale.

Economies of scale - factors that cause avaerage costs to fall as the scale of output increases.

Diseconomies of scale - factors that cause avaerage costs to rise as the scale of output increases.