What is corporate strategy?
A medium to long-term plan that affects the entire business. Decided upon by senior management/leaders.
Decisions on how to achieve a business’s mission/vision/aims/objectives.
What is divisional strategy?
Plans that relate to divisions in a business e.g. a business may be divided by products. It is guided by the corporate strategy.
Divisional strategies focus on specific segments of the business.
What is functional strategy?
Plans that relate to a single functional operation such as: production, marketing or HRM and the activities involved within each of these functions. It is guided by the corporate strategy.
Functional strategies focus on specific areas within the organization.
What are tactics?
Short to medium term decisions that aim to implement strategic decisions. They are usually carried out by middle management.
For example, an advertising campaign.
What is a SWOT analysis?
A tool to identify and analyse the internal strengths and weaknesses of an organisation, as well as the external opportunities and threats created by the business and economic environment.
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats.
What is Porter’s 5 forces?
A model that suggests there are 5 main forces on a business that determine the behaviour of businesses and the likely levels of profitability.
This model helps analyze the competitive environment of an industry.
What is Ansoff’s matrix used for?
A strategic tool used by businesses to achieve growth
It suggests the level of risk associated with each strategy.
Name the four strategies in Ansoff’s matrix.
- Market penetration
- Product development
- Market development
- Diversification
These strategies consider targeting existing or new customers and using existing or new products.
What is horizontal integration?
Merging with or taking over another business in the same industry at the same stage of production
Example: JD Sports and Footasylum.
What is vertical integration?
Merging with or taking over a business at either the previous or next stage in the production process
Can be backwards (e.g., Ikea buying a forest) or forwards (e.g., Shell Oil buying petrol stations).
What is organic growth?
Expansion from within a business
Examples include expanding the product range or increasing sales.
What is external growth?
Growth that comes from buying new businesses
This includes mergers or takeovers.
Differentiate between a merger and a takeover.
- Merger: Involves two or more equals
- Takeover: Involves one larger company taking over a smaller one
Mergers require mutual consent, while takeovers may not be friendly.
What is a franchise?
The legal right to use the brand name, products, and business style of an existing business
The franchisor sells the brand name, while the franchisee buys it.
What is the definition of Rationalisation?
The reorganisation of a business to increase its efficiency
This often leads to a reduction in business size, a change of policy, or an alteration of strategy relating to particular products.
What does Outsourcing refer to in a business context?
The practice of hiring a third party to perform services or create goods that were previously done by the company’s own employees
This allows companies to focus on their core competencies while reducing costs.
