Unit 3 - Business decisions and strategy (UNIT3BUSINESSDECISIONSANDSTRATEGY)
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Unit 3 A level Business Edexcel Summary
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Unit 3 - Business decisions and strategy (UNIT3BUSINESSDECISIONSANDSTRATEGY)
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PEARSON (PEARSON)
A very useful summary with how each aspect links to each other in order for you to see correlations and develop an A* answer. Specifically focused on 3.1, 3.3, 3.4, 3.6
Unit 3 - Business decisions and strategy (UNIT3BUSINESSDECISIONSANDSTRATEGY)
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Mission is the overall aim or objective & makes shareholders aware of what the business
does and why & it encourages employees to work towards its aims. Mission statement also
indicates the business’ beliefs which gives staff a sense of shared purpose & common goals-
social solidarity- motivation- productivity. Businesses don't have to prove anything so they
can lie about things- which is bad practise & if it gets out, their reputation will be damaged if
it doesn’t reflect their stated values. Use is limited as it doesn't go into detail about how the
mission is achieved- it doesn't set out any corporate strategies or tactics.
Businesses set objectives to enable them to achieve their mission. Objectives turn the
corporate aims of a business into specific goals (short-med term- SMART). If an objective is
agreed upon, managers can make sure that everyone is working towards a goal, and
coordination between departments should improve. Working towards an objective-
motivating for employees. Objectives help in decision making as they make it easier to see
what the business is trying to achieve. If objectives don't align with the mission statement,
the business can lose credibility with its stakeholders. Managers can compare performance
with their objectives to measure the success of the business and review their decisions.
Specific, Measurable (5%), Agreed (by those it effects e.g. sales people), Realistic
(unrealistic will demotivate staff), Timely (12months- seen as urgent and won’t forget about
it)
Tactics are short term plans, usually a reaction to opportunities or threats and impact human
(are staff skilled enough? Long term strategy-recruit more staff or investment in technologies
which lead to redundancies as some jobs are no longer needed), physical (invest in
production line to increase it) and financial (how decisions are being funded? Long term
strategy of growth and expansion may be financed from changing from Ltd to PLC)
resources.
Ansoff Matrix is 4 corporate strategies that a business can use to
set its direction for growth and development. Its a tool used for comparing the level of risk
involved with different growth strategies & helps managers decide on a direction for strategic
growth.
● Market penetration- increase market share in existing markets (using sales
promotions, pricing strategies and advertising). Works best in a growth market- not in
saturated where there's no demand.
● New product development- selling new products in existing markets. Best when the
market has growth potential & business has high market share and strong R&D &
USP
, ● Market development- selling existing products to new markets (done through
repositioning so a business focuses on a different segment of the market). Research
needs to be done on the target market so products and promotion can be adapted to
target new audiences. Can be done using new channels of distribution or expanding
into new geographical markets to exploit the same segment.
● Diversification- selling new products into new markets. Risky as no experience. Used
when a business needs to reduce their dependence on a limited product range or if
high profits are likely, which reduces the risk.
It doesn't just lay out potential strategies for growth- it also forces managers to think about
the expected risks of moving in a certain direction. It fails to show that market development
and diversification strategies also tend to require significant change in the day-to-day
workings or tactics of the business. Seems like it oversimplifies the options for growth. Does
Not take into account competitors actions & isn't useful for large, multinational businesses
because they’ll likely already be operating in each of the four quadrants. Useful for small-
medium sized businesses that are established and looking to grow.
Porter: strategies for competitive strategies
● Cost leadership- business with the lowest cost of production. Big firms with large and
efficient production facilities, benefitting from EOS can use this strategy. In a price
war, a firm can maintain profitability while the competition suffers losses. If prices
decline, the firm can stay profitable because of its low costs.
● Differentiation- requires a product with unique attributes which consumers value &
business can charge premium prices for. Businesses that are innovative, have strong
branding and quality products can benefit from this strategy. Risks include imitation
by competitors and changes in consumer tastes.
● Focus- concentrates on niche markets and either minimising costs or showing
differentiation. This strategy suits firms with fewer resources who can target markets
with specific needs. Needs loyal customers so other firms find it hard to compete.
Best used based on competitive advantage and market scope. Business’ placement
depends on whether it's aimed at a broad or narrow market and whether it offers cheaper,
unique or quality products compared to competitors. If a business doesn't have a clear
focus, this would guide them to a more channelled direction. It oversimplifies the market
structure and has a narrow focus on cost leadership or differentiation, and does not account
for businesses who successfully achieve both & offer a wide range of products. Also, it only
tells a business where it stands, it doesn't give any information on how to improve, e.g. a
business in a dynamic market where there are fast-moving trends and the business needs to
be quick in responding to changes.
Kay’s model for business success
- Focus on what business is good at
- Based on architecture (relationship between stakeholders- strong= more likely to be
successful because there's better communication between relevant people- increase
sales), reputation (keeping customers satisfied- good customer service/ high quality
products- loyal customers- hard for business to compete. Customers- likely to
recommend- word-of-mouth advertising- build strong brand with good reputation) and
innovation (investing into R&D= new and innovative products= USP & first move
advantage= competitive advantage)
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