Knowledge checks for Theme 3: Business decisions and strategy
Corporate objectives knowledge check
1. Explain the difference between a functional objective and a corporate objective.
Corporate objectives- The objectives of a medium to large-sized business as a whole.
Departmental and functional objectives- The objectives of a department within a business.
2. Why should objectives be SMART?
3. Why might corporate objectives mainly be expressed as financial objectives?
The majority of the time, corporate objectives are for larger businesses who want to
increase their market share and profit. Therefore, the majority of objectives will be financial
as it is the businesses main goal to survive and expand.
4. What is the purpose of a mission statement?
A mission statement declares the business’s overriding purpose but may also reflect its goals
and values. It describes in general terms what it considers to be the company’s core
activities and may also reference such information as the markets in which it operates, what
its key commercial objectives are, in what way it values its stakeholders, or what its ethics
involve.
5. State two areas of business activity that corporate objectives might refer to.
Social responsibility
Ethical practices
,Theories of corporate strategy knowledge check
1. Explain the connection between corporate strategy and business aims.
The corporate strategy is the long-term plan to achieve the aims of the entire business.
2. Why is a long-term decision to move into a new market an example of corporate
strategy?
A corporate strategy is the plans and policies developed to meet the company’s objectives.
If the business is failing in their current market or wish to expand into another due to less
competition and higher profit opportunities, then this is a corporate strategy as it meets the
company’s objectives.
3. What are the four strategies outlined by Ansoff’s Matrix?
Market penetration
Product development
Market development
Diversification
4. Which of Porter’s strategies is focused on achieving the lowest cost of production?
Cost leadership: This involves striving to be the lowest-cost provider in the market. This
does not necessarily mean that the business will offer the lowest price, although this may be
an option.
5. What is a distinctive capability?
A form of competitive advantage that is sustainable because it cannot easily be replicated
by a competitor.
6. Explain what is meant by a sustainable competitive advantage.
Sustainable competitive advantages are company assets, attributes, or abilities that are
difficult to duplicate or exceed; and provide a superior or favourable long-term position over
competitors.
7. How might a business use the BCG Matrix to make strategic decisions?
The Boston Matrix may be used to assist a business in identifying which strategy to adopt.
For example, if a firm believes that it has a ‘Star’ it may decide to adopt a market
penetration strategy to increase sales revenue and maximise market share while the
product is competitive. Similarly, a firm may choose to move a product out of a low-growth
market and target a market with high-growth prospects. On the other hand, the matrix
could be used to identify those ‘Dogs’ that need to be discontinued in order to cut costs and
follow its strategy of cost leadership.
8. What is the difference between a long-term strategy and a tactic?
Strategies set out the long-term direction that a firm will take to achieve its objectives. In
contrast, tactics are short-term responses to an opportunity or threat in the market.
,SWOT analysis knowledge check
1. Give three examples of information that an internal audit might find.
Products and their costs, quality, and development
Finance, including profit, assets, and cash flow
Production, including capacity, quality, efficiency, and stock management
2. Give three examples of information that an external audit might find.
The size and growth potential of the market
The characteristics of the customers in the market
The products on offer
3. Why might SWOT analysis help a business to make decisions?
SWOT may help businesses make decisions as it identifies their strengths, weaknesses,
opportunities, and threats. It may encourage a business to take their opportunities and
expand abroad or release a new product. It may also help the business understand their
weaknesses and how to target them and change.
4. Give three possible examples of uses for SWOT analysis.
Make a decision about which new product to launch
Help design a new marketing strategy
Prepare for a completely new business venture
5. How might SWOT analysis help to improve the performance of a business?
By clearly identifying the strengths, weaknesses, opportunities, and threats, it may be
possible to improve the performance of a business. However, this will depend on the action
it takes after carrying out the analysis.
, Impact of external influences knowledge check
1. Give two examples of political factors that might affect the food industry.
There are regulations related to wages, hygiene, and food quality that need to be
complied with. The minimum wage standards can differ from country to country. In
countries where wage rates are higher, the costs of labour are also high
Governments can also press the fast-food chains to include healthier items on their
menus
2. Give two examples of economic factors that might affect the holiday industry.
As the global economy grows, the income levels of those who were previously
unable to afford international tourism are now able to do so. Since living expenses
are growing slower than purchase power, people are able to afford luxuries such as
tourism. Such economic growth is expected to remain, and the tourism industry will
only be provided with benefits from it
Companies such as Uber and Airbnb are changing the way people travel. They have
presented economic models that are more consumer-friendly, and thus is making
tourism more accessible to people. Businesses on such a model are known as sharing
economies. We expect further use of such economies in the future
3. Give two examples of technological factors that might affect the motor industry.
Without a doubt, the biggest Technological shift impacting the automotive industry
is the advance of self-driving technology. With some automotive brands such as
Tesla already offering nearly completely autonomous motor vehicles, there is a huge
change to the way we commute on the horizon. This isn’t necessarily a good or bad
thing for the automotive industry, but it may mean that manufacturers of
conventional cars have to change their business strategy to stay relevant
Aside from the advent of self-driving cars, another big Technological advancement in
the automotive industry is, generally speaking, the safety of motor vehicles. It was
only in the 1980s that wearing seat belts became a requirement; similarly, it took
lower-end automotive brands until the early 2000s to begin rolling out airbags across
their models. Not only are standards improving across the industry, but so is the
underlying technology. Most recently, automotive manufacturers have begun
introducing emergency brake assist systems to their vehicles, vastly reducing the
likelihood of front-end collisions
4. Give examples of environmental factors that might affect the chemical-processing
industry.
Weather
Climate change
Laws regulating environment pollution
Air and water pollution regulations in Chemicals - Major Diversified industry
Recycling
Waste management in Basic Materials sector
Attitudes toward “green” or ecological products
Endangered species
Attitudes toward and support for renewable energy
