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Flashcards

7 - analyse strategic position

Olivia Harlington Business Studies A level English 135 cards

Cards in this deck (135)

  1. 1what does SWOT analysis stand forstrengths, weaknesses, opportunities, threats
  2. 2what are the key questions a business should ask themselves before deciding on objectives and strategywhere are we now, where do we want to go and how will we get there
  3. 3true or false - in SWOT analysis strengths and weaknesses are internal and opportunities and threats are externaltrue
  4. 4give 3 advantages of SWOT analysislogical structure, focuses on strategic issues, analysis of external environment
  5. 5give 3 disadvantages of SWOT analysisoften lacks focus e.g. too many strengths, independent?, can quickly become out of date
  6. 6what can you use to identify opportunities and threatsPESTLEC
  7. 7describe political in PESTLECcompetition policy - CMA, industry regulation, govt spending and tax policies, incentives e.g. grants
  8. 8describe economic in PESTLECinterest rates, exchange rates, inflation, consumer spending, unemployment, economic growth
  9. 9describe social in PESTLECdemographic change, impact of pressure groups, changing consumer tastes and fashion, changing lifestyles e.g. more 1 person households
  10. 10describe technological in PESTLECdisruptive technology, adoption of mobile tech, new production processes, big data, data mining, dynamic pricing
  11. 11describe legal in PESTLECemployment law, minimum/living wage, health and safety laws, environmental legislation
  12. 12describe environmental in PESTLECsustainability, tax practices, ethical sourcing (supply chain), pollution and carbon emissions
  13. 13describe competition in PESTLECrivalry, threat of new entrants, availability of substitutes, cheaper alternatives
  14. 14what is the formula for working capitalcurrent assets - current liabilities
  15. 15what are current assets made ofinventories, receivables, cash
  16. 16what is the equation for net assetstotal assets - total liabilities
  17. 17what is the equation for total equityshare capital + retained earnings
  18. 18what 3 things can we compare company accounts withother businesses within the industry, spot trends over time, industry standards
  19. 19what is window dressingpresenting company accounts in a manner which enhances the financial position of a company, manipulating numbers
  20. 20true or false - window dressing is illegalfalse
  21. 21how can you achieve window dressingsale and leaseback, bringing sales forward, short term borrowing, changing depreciation policies
  22. 22define ratio analysisfinancial data to gain insight to business performance
  23. 23what does a profitability ratio meancompare profits with the size of the firm, often described as performance ratios
  24. 24what does a liquidity ratio meanwhether a firm is likely to be able to meet its short term liabilities
  25. 25what does a gearing ratio meanfocus on long term liquidity and shows whether a firms capital structure is likely to be able to continue to meet payments and repay long term debts
  26. 26define capital structurehow much is funded by debt
  27. 27what does a financial efficiency ratio meanconcentrate on the management of working capital, used to assess management of assets and liabilities
  28. 28what is the formula for current ratiocurrent assets / current liabilities
  29. 29how is current ratio shownn : 1
  30. 30what is the formula for return on capital employed(operating profit / total equity + ncl) x 100
  31. 31what is the formula for gearing(ncl / total equity + ncl) x 100
  32. 32what is the formula for receivables days(receivables / revenue) x 100
  33. 33what is the formula for payables days(payables / cost of sales) x 100
  34. 34what is the formula for inventory turnovercost of goods / average inventories held
  35. 35what is the formula for gross profit margin(gross profit / revenue) x 100
  36. 36what is the formula for operating profit margin(operating profit / revenue) x 100
  37. 37what does the current ratio meanbetween 1.5-2 would be acceptable, well below 1 indicates liquidity issues, could still run out of cash - depends what CA are made of
  38. 38what does return on capital employed meanhow much you're getting back from investing in the business, high ROCE is good, keeps shareholders satisfied, 20% is satisfactory but could be less (depends on industry average)
  39. 39what does gearing meanhow much capital is made up by debt, shareholders are interested, above 50% is seen as high, acceptable is 25%-50%
  40. 40what does receivables days meanhow long you're waiting to get paid, could become bad debt, more receivables = more risk a could not get paid, cash flow!, improve by offering discounts or having a contract, not unusual to wait months
  41. 41what does payables days meanhow long you take to pay someone else, you want this to be high, cash flow!
  42. 42what does inventory turnover meanhow often you sell your stock, depends on industry e.g. bakery will have higher turnover than car dealership, improved by getting rid of stock or introduce lean production methods
  43. 43what does gross profit margin meangross profit per £ of sales, improve by increase price or decrease variable costs, if too low may not cover overheads
  44. 44what does operating profit margin meanoperating profit per £ of sales, improve by boosting GPM, cut overheads or increase sales, if too low may not be enough to reinvest
  45. 45define holisticlooking through lots of different ways
  46. 46define core competenciesunique strengths of a business that cannot easily be replicated by a competitor
  47. 47true or false - core competencies are permanentfalse
  48. 48give 3 advantages of core competenciespatents, brand loyalty, innovation, operate at high efficiency
  49. 49what does short and long term performance have to do withstrategy
  50. 50give some details of short termismlooking to increase profits fairly immediately, not sustainable, use lots of short term debts, focus on share price and op profit and gross profit, incentives for smaller goals
  51. 51what is commonly used by businesses focused on short termismredundancies
  52. 52give some negatives of short termismlack of quality, innovation, brand reputation could decrease
  53. 53why might some businesses choose to focus on short termismimprove financial performance, there could be frequent changes in leadership or strategy
  54. 54give some details of long termisminvesting, sustainability, focus on long term goals, not too focused on immediate profit
  55. 55summarise kaplan and norton's balanced scorecard modelPUT IMAGE HERE
  56. 56summarise Elkington's triple bottom linePUT IMAGE HERE
  57. 57give 3 positives of Kaplan and Norton's balanced scorecard modelbroad view of performance, links measurement with longtermism, involves everyone and not just finance, flexible (KPIs chosen by business)
  58. 58give 3 negatives of Kaplan and Norton's balanced scorecard modeldanger of too many KPIs, not easy to balance between all 4, may still be focused on financial perspective, needs to be regularly updated to be useful
  59. 59give 3 positives of Elkington's triple bottom linegood for all stakeholders and not just shareholders, matches growing demand for ethics, encourages to care for environment, good for image, staff can care for the business
  60. 60give 3 negatives of Elkington's triple bottom lineneed profits to become ethical, difficult to maintain a good image, more scrutiny if you make a mistake, may not suit all businesses
  61. 61name 3 TYPES of lawscompetition laws, labour market laws, environmental laws
  62. 62define enterprisingwhere new businesses are formed an new goods and services are created and brought to the market
  63. 63why might the government encourage enterprising and what do they do (the government)creates jobs, leads to economic growth, creates competition, social benefits e.g. less crime
    give incentives such as grants or decreases in tax
  64. 64what is the impact of regulators on businessese.g. OFCOM, CMA, OFSTED
    can set price caps e.g. if no competition doesnt mean you can choose what you want, ensures customers arent exploited, effective regulation can lead to greater choice and lower prices
  65. 65define infrastructurethe physical assets underpinning the UKs network for transport, energy generation, waste management etc
  66. 66what is free tradewhen you dont have to pay tariff (tax)
  67. 67give 2 benefits of free tradedoesnt become tit for tat with other countries, wider variety of products
  68. 68what is the goal for UK inflation rate2%
  69. 69what is GDPgross domestic product
    level/value of output of an economy
  70. 70summarise the business cyclePUT IMAGE HERE
  71. 71what are the main causes of changes in the business cycleconsumer confidence, changes in value of consumer spending and business investment, changes in government policy which can induce change in the economy, ohter externals e.g. pandemics, terrorism, extreme weather
  72. 72name 3 strategies for a business during an economic recessionshut down areas / reduce staff, change what you sell, growth? (price of land can fall)
  73. 73name 3 strategies for a business during economic recoveryexpansion (IF DEMAND), produce luxury products, merge/takeover
  74. 74what is fiscal policygovernments use of taxes and spending to influence the economy
    making changes to tax rates and how much they spend
  75. 75define exchange ratesprice of one currency expressed in terms of another
  76. 76how do exchange rates impact business activityprice of exports, cost of goods bought overseas, revenues and profits overseas (why business are multinational), converting cash receipt from customers overseas
  77. 77what are the 2 acronyms for remembering exchange ratesSPICED
    WPIDEC
  78. 78how do you convert to a foreign currencyhome currency x exchange rate
  79. 79how do you convert to your home currencyforeign currency / exchange rate
  80. 80what might cause an increase in exchange ratesincreasing demand for exports, increase in interest rates (more attractive to hold the currency), foreign direct investment into the country
  81. 81define inflationa sustained increase in the average price level of an economy
  82. 82what is demand pull infationwhen there is excess demand so this drives the prices up
  83. 83what is cost push inflationwhen costs rise so consequently prices increase
  84. 84what is the consumer price index (CPI)the current measurement of inflation, measures 'basket of goods' representing what people in the UK buy
    EXCLUDES HOUSING ITEMS
  85. 85what is the monetary policyusing interest rates to try and control spending
  86. 86define interest ratethe cost of borrowing and rewards for investing
  87. 87name 2 impacts of increasing interest rates on consumersmore putting in banks, less people making investments, less disposable income as more spent on repayments, confidence falls
  88. 88name 2 impacts of increasing interest rates on businessesless sales on luxuries, revenues may fall as demand falls, less growth, high gearing can increase costs
  89. 89name 2 impacts of decreasing interest rates on consumersmore spending, more disposable income, less likely to save, more likely to borrow
  90. 90name 2 impacts of decreasing interest rates on businessesmore growth as cheaper to do so, sale of luxury items increase, large purchases increase/investments
  91. 91what is quantitative easingwhere more money is produced and given to banks
  92. 92define open tradea country can trade freely with others
  93. 93define protectionismwhere a government controls the amount of imports entering a country such as by imposing tariffs or quotas
  94. 94name 3 benefits of open tradeincrease of competition, makes use of surplus raw materials, lower price for consumers (because of no tariffs), more diverse products for customers
  95. 95name 2 drawbacks of open tradesome countries could unethically produce goods to lower costs for a competitive advantage, competition for businesses in home country so profits could decrease
  96. 96name 2 benefits of protectionismprotects local jobs, stops cheap imports coming in so makes it more of an even playing field
  97. 97name 2 drawbacks of protectionismtariff can become tit for tat, could increase production costs (importing raw materials)
  98. 98define globalisationthe process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies
  99. 99name 2 factors contributing to globalisationcontainerisation, technology, different tax systems, less protectionism, economies of scale, business wants to expand their risk
  100. 100what are the benefits of globalisation to consumerscheaper prices, wider range of products, more jobs
  101. 101what are the benefits of globalisation to businessesmore revenue streams (diversification), cheaper costs, access to economies of scale, wider choice for suppliers
  102. 102give 3 drawbacks of globalisationmore difficult for small / new businesses, increase of competition, pollution, different rules in each country e.g. labour laws, exchange rates
  103. 103define emerging marketsinternational area that has the potential to grow and develop in terms of productive capacity, market opportunities and competitive advantages
    a country in the process of rapid economic growth and industrialisation
  104. 104what are the key features of an emerging marketeconomies making a transition, rapid industrialisation, have potential to become developed countries, faster long term economic growth than most developed economies, growing middle class, domestic businesses struggle to access global markets
  105. 105what does BRIC stand forbrazil, russia, india, china
  106. 106what does MINT stand formexico, indonesia, nigeria, turkey
  107. 107what are the key benefits of emerging marketsconsumers have more disposable income, high demand, high growth potential, close to large markets, if domestic market is saturated
  108. 108what are the key drawbacks of expanding into emerging marketsVERY high risk, could have political instability, exchange rate issues, ideas could be copied, risky because of culture and corruption, competition
  109. 109define corporate social responsibility (CSR)duties of an organisation towards employees, customers, society and the environment
  110. 110define urbanisationincrease in the proportion of people living in towns and cities
  111. 111define migrationpermanent moving of people from one region to another
  112. 112define demographicstatistical study of human populations e.g. age, gender, migration, wealth etc
  113. 113what is the stakeholder conceptbusinesses owe it to society to be socially responsible - have to give something back, becoming increasingly popular
  114. 114what are the benefits for a business adopting CSRethical thing to do, improves image / reputation, socially responsible actions can be profitable, attract investors, can increase employee motivation
  115. 115what are the drawbacks for a business adopting CSRonly social responsibility is to create shareholder wealth, extra costs will be incurred which must be passed onto consumers, CSR could stifle innovation
  116. 116describe Carroll's CSR pyramid from bottom to topeconomic need finance to do anything) - legal (responsibility to obey laws) - ethical (morally and ethically, go beyond what the law asks) - philanthropic (giving back to society, further than just ethical, being charitable)
  117. 117name 3 problems with introducing new technologycould neglect those who dont use technology, could crash, could be hacked, more pressure/expectancies, maintenance, initial costs, staff training, staff resistance
  118. 118describe a monopoly marketone supplier, 25%+, one dominant company, high profits, charge higher prices, no competition, supernormal profit
  119. 119describe an oligopoly marketfew dominant firms in the industry, 4-6, highly competitive
  120. 120describe a monopolistic competition marketmany different firms in industry each one offers differentiated products, reasonably competitive, still quite good levels of profit
  121. 121describe a perfect competition marketmany many firms, lower profitability, highly competitive
  122. 122give the headings for porters 5 forcesintensity of rivalry within the business, bargaining power of buyers, threat of new entrants, bargaining power of suppliers, threat of substitute products
  123. 123define investment appraisal decisionsdeciding whether or not to undertake capital investment, uses forecasts and assumptions
  124. 124define net present valuenet return on an investment when all revenues and costs have been converted to their current work (should be most reliable method)
  125. 125name 2 benefits of a business using payback for investment decisionsnot difficult process, can see how quickly it will become profitable, easy to compare
  126. 126name 2 drawbacks of using payback for investment decisionsbased on assumption, only numerical, doesnt tell you very much
  127. 127what is the calculation for ARR(net return from investment / no. of years) / initial cost x 100
  128. 128give 2 benefits of using ARR as a method of assessing investmentsfocusing on profitability of an investment, easy to compare potential investments
  129. 129give 2 drawbacks of using ARR as a method of assessing investmentsignores timing of cash flows (average so bigger returns may come towards the end), ignores the fact that money loses value over time
  130. 130what does net present value take into considerationmoney loses value over time
  131. 131give a benefit of NPVmore realistic as it considers time value of money
  132. 132give 2 drawbacks of NPVonly good for comparison if all potential investments are at the same length of time, difficult to predict the 'value' of money
  133. 133give 2 qualitative factors when analysing an investmenthow will it affect employees - if choices to move etc?, leadership style / attitude to risk, size of business, reputation of the business, confidence in data, positions in the market, competitor actions, shareholder interests
  134. 134define sensitivity analysiswhen planning you change variables to calculate a range of financial outcomes
  135. 135give 3 examples of changing variables for sensitivity analysisexpected cash in flows, expected cash outflows, discount factors, number of years profit

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A level Business Studies Flashcards on 7 - analyse strategic position, created by Olivia Harlington on 30/09/2020.
Created by
Olivia Harlington · Sep 2020
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Mar 22, 2021
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