Unit 7

Strategy
The medium to long term plan through which an organisation aims to attain its objectives
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Tactics
The means by which a strategy is carried out; a range of different tactics may be used as part of a single strategy
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Strategic decision making
Concerns the general direction and overall policy of an organisation. They have long term effects and therefore require detailed consideration and approval. They can be high risk.
3 of 63
Functional decision making
Tends to be short to medium term and is concerned with a specific functional area rather than overall policy. Usually taken to support the implementation of strategic decisions.
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SWOT analysis
Allows an organisation to access its overall position, or the position of one of its divisions or activities. Internal strengths and weaknesses, external opportunities and threats.
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Balance sheet
A document describing the financial position of a company at a particular point in time by comparing its assets and liabilities and shareholders equity
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Income statement
An account showing the income and expenditure of a company over a period of time.
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Management accounting
The creation of financial information for use by internal users in a business, to predict, plan, review and control the financial performance of the business
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Non current assets/fixed
Can be used repeatedly in the production process, although can depreciate or lose value over time. eg land, buildings, machinery
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Current assets
Short term assets that circulate in business on a daily basis and can be expected to be turned into cash within a year
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Financial accounting
The provision of financial information for external users
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Liabilities
Debts owed by an organisation to suppliers, shareholders, investors or customers who have paid in advance
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Total equity or total shareholders equity (capital)
Funds provided by shareholders to set up the business, fund expansion and purchase fixed assets
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Gross profit
Shows how efficiently a business is converting its raw materials or stock into finished products- Revenue minus cost of sales
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Operating profit
The revenue earned from everyday trading activities minus the costs involved in carrying out those activities. Also gross profit-expenses
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Ratio analysis
A method of assessing a firms financial situation by comparing two sets of linked data
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Profitability ratios
These compare profits with the size of the firm.
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Return in capital employed
Measures the profitability of a business by calculating its operating profit as a percentage of the capital that a business has at its disposal
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ROCE calculation
(operating profit or profit before tax/ total equity+non current liabilities)x100
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Liquidity ratios
These show whether a firm is likely to be able to meet its short term liabilities. Vital a firm holds sufficient liquidity to avoid difficulties when paying debts
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Current ratio
Measures liquidity by expressing current assets as a ratio to current liabilities. The preferred ratio is between 1.5:1-2:1
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Solvency
A measure of a firms ability to pay its debts on time. A firm that can meet its financial commitments is described as solvent.
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Gearing
Long term liquidity. Whether a firm will be able to continue to meet interest payments on, and to repay, long term borrowing
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Gearing calculation
(non current liabilities/total equity+non current liabilities)x100- Between 25%-50% is considered normal
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Financial efficiency ratios
The firms management of its working capital. They are used to assess the firms efficiency in its management of its assets and short term liabilities
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Payable days
(payables/cost of sales)x365
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Receivable days
(receivables/revenue)x365
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Inventory turnover
Cost of goods sold/average inventories held
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Core competences
The unique ability or abilities of a business that enable it to achieve a competitive advantage
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Short termism
A tendency for businesses to prioritise current performance rather than the long term sustainability of the business
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Kaplan and Norton's balanced scorecard
A strategic planning and management system used to ensure that a business's activities are linked to its vision statement
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Kaplan and Norton's balanced scorecard- 4 different perspectives
Financial- how a business is regarded by its owners or shareholders, customer, internal business-*** efficiently a business manages operations, learning and growth
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Elkington's triple bottom line
Describes a means of assessing business performance that considers three different factors: financial returns, social responsibility, and environmental values
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Gross domestic product
A measure of economic activity; the total value of a country's output over a given period of time, usually provided as quarterly or annual figures
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Business cycle
Boom, recession, slump, recovery
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Exchange rates
The price of one country's currency in terms of other currencies
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Inflation
An increase in the general level of prices in an economy. It also means a fall in the purchasing power of money.
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Fiscal policy
The use of taxation and government expenditure to influence the economy
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Monetary policy
Controlling the money supply and the rate of interest in order to influence the level of spending and demand in the economy
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Protection
The extent to which a government uses controls to restrict the amount of imports entering the country
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Gloabaliation
The increased integration and interdependence of national economies;it involves increased international trade, increased inward investment and an increased role for global multinational companies
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Emerging economies
Investment would be expected to achieve higher returns but accompanied by greater risk e.g. China, Brazil, Russia and India
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Carroll's CSR pyramid
A pyramid illustrating four tiers, economic responsibilities, legal responsibilities, ethical responsibilities, philanthropic responsibilities
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Technological change
Adapting new applications of practical or mechanical sciences to industry and commerce.
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Porters five forces
A model developed to analyse the competitive environment in which a business operates; the five forces are: the threat of entry, buyer power, supplier power, competitive rivalry and substitute threat
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Entry threat
The threat to existing firms in an industry from new firms entering and setting up in competition
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Buyer power
The power buyers have over the supplier of a particular product; many buyers each buying a small proportion of the total sales of a business, means less buyer power than a few buyers who each buy a large proportion of total sales.
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Supplier power
The power suppliers have over the buyer of a particular product; many suppliers each supplying a small proportion of total supplies of a business means less supplier power than a few suppliers who each supply a large proportion of total supplies
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Rivalry
The intensity of competition between firms in the industry
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Substitute threat
The threat to a firms existing market share from substitute products that might be introduced
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Barriers to entry
Factors that obstruct or restrict the entry of new firms into an industry or market
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Investment decisions
The process of deciding whether or not to undertake capital investment or major business projects
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Investment appraisal
A scientific approach to investment decision making, which investigates the expected financial consequences of an investment, in order to assist the company in its choice
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Payback period
The length of time that it takes for an investment to pay for itself from the net returns provided by that particular investment-netreturn/52, culmative return/
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Average rate of return
((total net return/no. of years)/initial cost)x100
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Net present value
The net return on an investment when all revenues and costs have been converted to their current worth
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Investment criteria
The ways in which a business will judge whether an investment should be undertaken
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Risk and uncertainty
The probability of unforeseen circumstances that may harm the success of a business decision
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Ansoffs matrix
A strategic or marketing planning model that can be used to help a business decide its strategic direction in terms of its product portfolio and target markets
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Strategic positioning
The view people take of a business that results from the business's strategic decision making
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Product differentiation
The degree to which consumers see a particular brand as being different from others
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Competitive advantage
A benefit that a firm has in comparison to its rivals, allowing it to achieve greater sales and profits and retain more customers that its competitors
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Competitiveness
The ability of businesses to sell their products successfully in the market in which they are based
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Other cards in this set

Card 2

Front

The means by which a strategy is carried out; a range of different tactics may be used as part of a single strategy

Back

Tactics

Card 3

Front

Concerns the general direction and overall policy of an organisation. They have long term effects and therefore require detailed consideration and approval. They can be high risk.

Back

Preview of the back of card 3

Card 4

Front

Tends to be short to medium term and is concerned with a specific functional area rather than overall policy. Usually taken to support the implementation of strategic decisions.

Back

Preview of the back of card 4

Card 5

Front

Allows an organisation to access its overall position, or the position of one of its divisions or activities. Internal strengths and weaknesses, external opportunities and threats.

Back

Preview of the back of card 5
View more cards

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