Business Strategy (A Level) (Cambridge (CIE) A Level Business): Flashcards

True.

Implementation involves allocating resources and setting departmental objectives, and progress is measured against targets so managers can adjust the strategy when needed.

Regular scanning of markets, technology and laws helps managers adjust plans before problems grow.

SWOT analysis is an analytical tool used to identify a business's internal strengths and weaknesses and its external opportunities and threats.

False.

Financial and operations data and staff or customer feedback should be reviewed carefully rather than relying on hunches, and findings should be cross-checked with independent reports.

They must decide whether the whole business, a specific product or a new project is to be analysed.

Examples include skilled staff, patents or intellectual property, a loyal customer base and effective leadership.

Social or technological developments that threaten the obsolescence of a business's products are a threat in a SWOT analysis.

Strengths should be harnessed, weaknesses eliminated, opportunities seized and threats mitigated.

Matching strengths to opportunities and threats to weaknesses helps managers decide which goals to tackle first.

True.

SWOT highlights issues but gives no clear action steps, so extra tools and planning are often still needed.

It needs only discussion and basic research, and it can be updated quickly when conditions change.

A SWOT analysis shows conditions at one moment in time, so it is only a snapshot that can go out of date quickly.

The points in each box reflect who is in the room, so subjective opinions can lead to flawed conclusions.

Involving stakeholders brings diverse perspectives, giving a broader understanding of the business and increasing the usefulness of the analysis.

PEST analysis examines the political, economic, social and technological factors outside a business that are likely to affect its activities and outcomes.

It helps them understand the complex context in which the business operates, recognise potential threats and identify future difficulties so that appropriate strategies can be put in place.

True.

Political factors include government stability, trade rules, taxes, minimum-wage laws and health and safety regulations.

False.

Rising fuel prices are an economic factor, as they raise delivery costs for businesses such as online retailers.

Economic factors include inflation, exchange rates, GDP growth, unemployment and the cost of living.

A higher sugar tax may push soft-drink makers to launch low-sugar recipes.

Faster 5G networks let video-streaming businesses offer higher-quality content on mobile devices.

A rise in eco-conscious shoppers can boost sales of environmentally friendly products, such as refillable toiletries.

PEST analysis helps managers develop strategies to capitalise on positive external influences and minimise the impact of negative ones.

It could add automatic rule checks, such as requiring licence numbers and collecting any required taxes, so that it avoids fines for breaking local laws.

The five forces are industry rivalry, threat of new entry, buyer power, supplier power and threat of substitution.

False.

When few customers buy most of the output, buyer power is high, so those customers can demand lower prices.

High barriers to entry keep new rivals out of an industry and preserve the power of existing businesses.

True.

When few suppliers offer unique inputs, they can dictate terms and charge higher prices.

A business can compete on the basis of cost or differentiation, in either the mass market or a niche market.

Cost leadership is most suitable for a business with a significant cost advantage over rivals.

Making products distinct from those of rivals allows the business to charge a premium price and achieve a high profit margin.

Cost focus is a niche market strategy that involves being the lowest-cost competitor within the market niche.

A business that fails to adopt one of Porter's generic strategies risks being stuck in the middle, unable to compete successfully with rivals.

False.

Porter saw a mixture of strategies as not feasible in the long term, because low prices combined with high quality can harm consumer perceptions of the product.

They give no guidance on specific tactics or implementation, and they overlook external factors such as technological change, economic conditions and changes in laws.

Blue Ocean strategy is the simultaneous pursuit of differentiation and low-cost strategies to open up a new market space and create new demand.

The four actions are raise, create, reduce and eliminate.

Blue Ocean strategy captures uncontested market space with products other businesses have not yet adopted, making competition irrelevant.

Core competencies are the capabilities critical for a business to achieve competitive advantage by delivering real value to customers.

Collective learning is a business's knowledge, including assets such as patents and designs as well as industry know-how, built up over time.

Core competencies combine collective learning with technical skills, such as production skills, unique processes and applications of technology.

False.

A business may have many strengths, but they are only core competencies if they possess three key features.

Core competencies must provide broad market access, create customer value and be difficult to imitate.

Applying it widely spreads the cost of building the skill or technology over many products, making it valuable and efficient.

Without an advantage such as higher prices, greater loyalty or a stronger reputation, it will not help the business achieve long-term success.

The business loses its advantage, which is why true core competencies rely on specific knowledge, unique culture, protected intellectual property or complex processes.

Because rivals find core competencies hard to copy, they give a business sustainable differentiation, so its products stand out in the market.

They can be applied to launch new products or enter new markets quickly and with greater confidence.

True.

Paying other firms to handle key tasks can mean losing in-house know-how needed to fix problems fast.

It can blind a business to new opportunities, making it slow to adapt when markets change.

Large investments in new technology or processes may never pay off if rivals catch up or demand stays low.

The Ansoff Matrix helps a business with a growth objective to identify an appropriate strategic direction and the level of risk of the chosen strategy.

The Ansoff Matrix classifies growth strategies by the market (existing or new) and the product (existing or new).

Market penetration is a growth strategy that involves selling more existing products to existing customers.

True.

Market penetration is the least risky strategy because the business stays with existing products and existing customers that it already understands.

It can encourage more regular use of the product, increased usage of the product and stronger brand loyalty.

Market development involves finding and exploiting new market opportunities for existing products.

Selling an existing product to different customer profiles, such as other businesses as well as consumers, is known as repositioning the product.

A business can enter new markets abroad or seek complementary locations for its existing products.

Product development involves selling new or improved products to existing customers.

Relaunching heritage products at commercially convenient intervals is one way to pursue product development.

False.

Redesigning packaging and aesthetic features offers an improved product to existing customers, so it is a recognised method of product development.

Diversification is a growth strategy that involves targeting new customers with entirely new or redeveloped products.

False.

Diversification is the most risky growth strategy because the business moves into a new market with a new product at the same time.

Force field analysis involves managers identifying the driving and restraining forces that surround a strategic change decision.

External driving forces include a volatile market and disruptive technologies, such as AI.

False.

Government legislation is an external restraining force. Internal restraining forces include fear of the unknown and the existing organisational structure.

Each force is weighted from 1 to 5 by its relative importance, where 5 is most important and 1 is least important.

Driving forces total 9 and restraining forces total 10. As the restraining forces outweigh the driving forces, there is little chance of success and the decision should be abandoned.

To maximise the chance of success, managers could strengthen driving forces or weaken or eliminate restraining forces.

True.

Force field analysis does not provide solutions. It identifies the forces involved, and managers must then develop appropriate strategies themselves.

It is simple and visual, so stakeholders understand it easily. It is also comprehensive, as it considers both driving and restraining forces.

It does not account for how forces might change over time, which is a problem in dynamic business environments.

It relies on the perceptions and judgements of individuals or teams, which can lead to bias in the analysis.

Scenario planning is used to prepare for different possible futures by imagining several plausible "what-if" situations, rather than predicting exactly what will happen.

Comparing scenarios helps managers spot overlapping strategies that help no matter which future arrives, such as building a flexible supply chain.

In scenario planning, a business agrees on a few key indicators to watch, so it knows which scenario is becoming more likely.

Scenario planning helps avoid surprises because possibilities are thought through in advance. It also focuses on flexibility, as the firm builds capabilities that help in several different futures.

A decision tree is a quantitative method of tracing the outcomes of a decision so that the most profitable decision can be identified.

Decision trees use research-based estimates and probabilities to calculate likely outcomes.

Constructing a decision tree may reveal options that had not been considered. It also forces managers to consider the risks of their choice before implementation.

False.

Qualitative elements, such as human resource impacts, are not considered, and this may affect the probability of success of a decision.

The time lag between constructing a decision tree and implementing the decision affects the reliability of expected values.

A decision point is represented by a square.

Points on a decision tree where there are different outcomes are represented by circles called nodes.

True.

A certain outcome has a probability of 1, while an impossible outcome has a probability of 0.

Expected monetary value is calculated using this formula:

Expected monetary value = (Expected value of success x Probability) + (Expected value of failure x Probability)

The expected monetary value is (£420,000 × 0.7) + (−£24,000 × 0.3) = £286,800.

The cost of the option must be deducted, using this formula:

Expected monetary value = (Expected value of success x Probability) + (Expected value of failure x Probability) - Cost

The business should look at other factors to inform its decision, as there is little between the two options.

Corporate planning is the process taken by senior managers to decide on long-term goals and draw up broad plans for how the entire organisation will achieve them.

Corporate planning sets a clear direction, so everyone works towards the same goals. It also aligns resources, so money, staff and equipment are used most effectively.

Strategic change is a major shift in a company's long-term direction, such as altering its goals, core policies or scope.

Incremental change is a series of small, gradual improvements to processes, products or structures, rather than a single large overhaul.

A radical shift that transforms an industry by introducing a new business model, technology or way of operating is called disruptive change.

Such a change can bring first mover advantage, securing market leadership. It can also offer rapid growth potential by creating a new market or completely changing an existing one.

Resistance to change is the unwillingness to adapt to new circumstances or ways of doing things.

False.

Different assessments reflect genuine debate over what is best for the business, as people disagree on what the problem is or how to fix it.

Managers can meet one-on-one with concerned employees to build trust. They can also offer incentives for early adopters, such as bonuses or public praise.

Corporate culture is the personality of an organisation, including the shared values, beliefs, attitudes and practices that shape the way people work together.

A weak culture may show a "them and us" attitude between workers and management. It may also have high staff turnover and low commitment amongst staff.

True.

A cautious culture tends to stick with familiar products, whereas a culture that values creativity encourages managers to try new ideas.

Transformational leadership is a style where leaders inspire and motivate employees to exceed normal expectations by creating a clear, positive vision of the future.

A transformational leader communicates a strong sense of purpose, explaining why change matters. They also lead by example, showing the commitment and behaviours they expect from others.

Contingency planning involves a business predicting risky or unwanted events, then developing a set of suitable responses.

Procedures commonly include evacuation plans that are drawn up and practised, emergency responsibilities for key staff and regular testing of alarm systems.

False.

Detailed contingency plans require time and investment, as risk assessments take management time, plans must be revisited and staff need training.

Staff have clear roles and responsibilities, resources are identified and available, and procedures are shared in advance.

Spending on resources for a crisis may be wasted if they are never needed.

True.

Even with detailed procedures in place, human reactions such as fear and panic cannot be fully mitigated.

Crisis management is the immediate handling of a disruptive and unexpected event, including communication, coordination, resource mobilisation and decision-making under pressure.

Autocratic leadership with centralised decision-making could help ensure business continuity during a crisis.

False.

Crises do not have to be large-scale. The unexpected loss of a CEO, a warehouse fire or losing customers' data can all need a prompt response.

A rapid response can contain or reduce damage to the business.

Keeping customers informed and telling the truth during a crisis shows transparency, which can protect reputation.

The rapid issue of press releases can reassure stakeholders and reduce recovery time.

Planning can improve business resilience and reduce negative impacts. It also gives stakeholders greater confidence in the business.