Business Analysis and Strategy Quiz
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Questions and Answers

What is the primary objective of using a SWOT analysis?

The primary objective of using a SWOT analysis is to develop a strategic plan that considers various internal and external factors to maximize strengths and opportunities while minimizing weaknesses and threats.

Define what constitutes a weakness in a business context.

A weakness in a business context occurs when a business performs poorly in an important area of operations or fails to leverage existing strengths.

List two examples of weaknesses a business might encounter.

Examples of weaknesses include a limited product range and a poor investment record in technology.

How does a high level of staff turnover impact a business's operations?

<p>A high level of staff turnover can negatively impact a business's operations by affecting morale, increasing training costs, and reducing overall productivity.</p> Signup and view all the answers

What does failing to achieve industry benchmarks indicate about a business?

<p>Failing to achieve industry benchmarks indicates that a business may have significant weaknesses affecting its performance compared to competitors.</p> Signup and view all the answers

What is the primary focus of strategic decisions in a business?

<p>Strategic decisions focus on the overall direction and policy of a business.</p> Signup and view all the answers

How does a corporate plan relate to divisional strategies?

<p>A corporate plan outlines overarching organizational goals that guide divisional strategies.</p> Signup and view all the answers

What distinguishes tactical decisions from operational decisions?

<p>Tactical decisions are medium-term and more impactful than operational decisions, which are short-term and administrative.</p> Signup and view all the answers

What is the purpose of functional strategy within an organization?

<p>Functional strategy focuses on single operational areas like production, marketing, or HRM.</p> Signup and view all the answers

How does a SWOT analysis help organizations?

<p>A SWOT analysis identifies internal strengths and weaknesses, as well as external opportunities and threats.</p> Signup and view all the answers

What time frame do corporate plans typically cover?

<p>Corporate plans typically cover the medium to long-term time frame for organizational goals.</p> Signup and view all the answers

What role do management assessments play in developing a corporate plan?

<p>Management assessments of market opportunities and resources inform the corporate plan's objectives.</p> Signup and view all the answers

What relationship exists between corporate plans and tactical decisions?

<p>Corporate plans guide the formulation of tactical decisions to achieve set objectives.</p> Signup and view all the answers

How can a business reduce the threat of substitutes?

<p>By investing in research and development and patenting the substitutes.</p> Signup and view all the answers

What role does price sensitivity play in the threat of substitutes?

<p>Higher price sensitivity increases the threat of substitutes as consumers are more likely to switch to cheaper alternatives.</p> Signup and view all the answers

What is one method a business can use to reduce rivalry among existing competitors?

<p>Forming cartels or utilizing anti-competitive tactics.</p> Signup and view all the answers

Explain the significance of the Ansoff Matrix for businesses.

<p>The Ansoff Matrix provides strategic options for business growth aimed at increasing profitability and revenue.</p> Signup and view all the answers

What does horizontal integration involve in the context of business rivalry?

<p>Taking over rivals to reduce competition within the industry.</p> Signup and view all the answers

How does the cost of changing influence the threat of substitutes?

<p>If the cost of changing is low, consumers are more likely to switch to substitutes, increasing their threat.</p> Signup and view all the answers

What effects does the degree of rivalry among existing businesses have on prices and profits?

<p>Higher rivalry typically leads to lower prices and reduced profits for businesses in the industry.</p> Signup and view all the answers

What impact does the threat of new entrants have on existing businesses in an industry?

<p>It can lead to lower prices and profits due to increased competition.</p> Signup and view all the answers

What marketing tactic might a business employ to combat rivalry, despite potential legal implications?

<p>Predatory pricing to undercut competitors.</p> Signup and view all the answers

Name two barriers to entry that can protect existing businesses from new entrants.

<p>Patents and economies of scale.</p> Signup and view all the answers

How does the bargaining power of buyers affect pricing in an industry?

<p>Buyers can push for lower prices, affecting profit margins.</p> Signup and view all the answers

Why is customer loyalty important in countering the threat of new entrants?

<p>It helps maintain sales despite the competition introduced by new entrants.</p> Signup and view all the answers

What is one way existing companies can increase customer loyalty?

<p>By developing strong brands.</p> Signup and view all the answers

List one way economies of scale can act as a barrier to entry.

<p>They allow established businesses to lower costs and prices that new entrants cannot match.</p> Signup and view all the answers

What role does technology protection play in minimizing competitive threats?

<p>It safeguards innovations from being copied by new entrants.</p> Signup and view all the answers

How can the number of competitors in an industry affect competitive rivalry?

<p>More competitors typically increase rivalry, leading to price wars and reduced profits.</p> Signup and view all the answers

What is market diversification?

<p>Market diversification is when a business expands its activities outside its normal range.</p> Signup and view all the answers

Give an example of a company practicing diversification in its product offerings.

<p>Cadbury's moving into the market for toilet bleach is an example of diversification.</p> Signup and view all the answers

How can repackaging help in market development?

<p>Repackaging can help by resizing products into smaller quantities for new markets like consumers.</p> Signup and view all the answers

Why is market penetration considered a low-risk strategy?

<p>Market penetration focuses on increasing sales of existing products to existing markets, posing lower risk.</p> Signup and view all the answers

What is a potential reason for a company to pursue takeovers?

<p>A company may pursue takeovers to help it grow.</p> Signup and view all the answers

What drives a company to consider diversification?

<p>A new opportunity and available investment funds drive a company to consider diversification.</p> Signup and view all the answers

What is the relationship between risk and diversification?

<p>Diversification carries the greatest level of risk compared to other strategies.</p> Signup and view all the answers

What does changing a product for a new market entail?

<p>It involves developing new products that suit the preferences of a different market segment.</p> Signup and view all the answers

What is horizontal integration and how does it benefit firms in the same industry?

<p>Horizontal integration is the merging of businesses at the same stage of production, which benefits firms by removing competition, allowing for larger market share, and achieving economies of scale.</p> Signup and view all the answers

What role does a franchise play in business expansion?

<p>A franchise allows a business to expand rapidly by granting individuals the legal rights to use its brand and operational model in exchange for a fee.</p> Signup and view all the answers

List two advantages of horizontal integration for a business.

<p>Two advantages are increased market power and improved control over quality.</p> Signup and view all the answers

How does horizontal integration potentially lead to cost savings?

<p>Horizontal integration can lead to cost savings through increased economies of scale and by combining resources like HR and ICT services.</p> Signup and view all the answers

Explain the concept of synergy in the context of merged businesses.

<p>Synergy occurs when combined businesses create a more efficient and powerful organization than each could achieve independently.</p> Signup and view all the answers

What are potential risks of horizontal integration?

<p>Potential risks include reduced competition leading to market monopolization, which can invite regulatory scrutiny.</p> Signup and view all the answers

How does franchise operation enhance brand recognition for a company like McDonald's?

<p>Franchise operations enhance brand recognition by placing the brand in various locations, increasing exposure and customer accessibility.</p> Signup and view all the answers

What is the primary advantage of franchising over organic growth for a business?

<p>The primary advantage of franchising over organic growth is the speed of expansion, as franchises can quickly establish multiple locations with less capital investment.</p> Signup and view all the answers

Flashcards

Strategic Decisions

Decisions about the overall direction and policy of a business, usually long-term and high-level.

Divisional Strategy

Decisions related to a specific division within a company. Guided by the overall corporate strategy, they shape the plans for that division.

Corporate Plan

A document that outlines the company's goals and strategies for achieving those goals over the medium to long-term. It's based on market opportunities, economic conditions, and available resources.

Functional Strategy

Decisions that are specific to a single, functional area within a company, like production, marketing, or HRM. Guided by higher corporate and divisional plans.

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Operational Decisions

Decisions that are short-term, administrative, and carry low risk. They might be more focused on day-to-day operations.

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SWOT Analysis

A tool used to analyze the internal strengths and weaknesses of a business, as well as the external opportunities and threats it faces.

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Tactical Decisions

Tactical decisions are medium-term, less impactful than strategic decisions, and guide specific actions.

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Strategic Analysis

A process of analyzing and evaluating a company's resources and capabilities, and the external environment it operates in. It helps identify potential areas for improvement.

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Strengths

Strengths are internal capabilities or resources that give a business a competitive advantage.

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Weaknesses

Weaknesses are internal factors that hinder a business's performance or prevent it from taking advantage of opportunities.

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Opportunities

Opportunities are external factors that a business can leverage to its advantage.

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Threats

Threats are external factors that pose a risk to a business's success.

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Diversification Strategy

Expanding a business's activities beyond its usual range. This could involve entering new markets, offering new products, or both.

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Market Penetration

Focusing on increasing sales of existing products to existing customers. This is typically a lower risk strategy.

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Developing New Products for New Markets

Developing new products designed for new markets. This is a higher-risk strategy than market penetration.

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Developing New Products for Existing Markets

A business strategy that creates more value for customers through a combination of different products and services. It's a broader approach than simply selling more of the same.

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Repackaging and Resizing

Repacking or resizing a product to target a new market.

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Takeovers

One company taking over another, often to gain control and expand its activities.

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Mergers

Two companies joining together to form a new company.

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Why Companies Takeover or Merge: Gaining Size and Market Share

Companies join together to increase their overall size and market share. This can lead to greater buying power and a stronger position in the market.

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What is the Ansoff Matrix?

The Ansoff Matrix is a framework used to analyze growth strategies that businesses can use to expand their operations.

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What is Market Development?

This strategy involves selling existing products to new markets. It's about finding new customer bases while sticking to familiar products.

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What is Product Development?

This strategy involves developing new products for existing markets. Think about offering new solutions to your current customers.

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What is Diversification?

This strategy involves selling new products to new markets. It's a combination of market and product development, requiring significant planning and resources.

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What is Threat of Substitution?

The potential for substitute products is a threat to a business. If customers can easily switch to alternative products, it limits your pricing power and profitability.

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What is Rivalry Among Existing Businesses?

The degree of competition among existing businesses can greatly influence pricing and profits. Intense rivalry can lead to price wars and profit erosion.

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How can a company reduce the threat of substitution?

Companies can reduce the threat of substitution by making their products more difficult or costly to replace, making them unique, or improving their performance.

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How can a company reduce rivalry among existing firms?

Companies can reduce rivalry among existing firms by forming alliances, differentiating their offerings, or implementing cost-reduction strategies to gain a price advantage.

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Threat of New Entrants

The ease with which new businesses can enter an industry. If entering is easy, competition increases and existing businesses struggle to make high profits.

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Threat of Substitutes

This force examines how easily existing businesses can leave a market if profits are low. If leaving is easy, it forces businesses to keep prices low to compete.

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Competitive Rivalry

The intensity of rivalry among existing businesses in the industry. High rivalry leads to price wars, advertising battles, and other aggressive tactics.

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Bargaining Power of Suppliers

The power of suppliers to influence the prices they charge to businesses. Suppliers with strong bargaining power can increase prices, hurting the businesses that rely on them.

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Bargaining Power of Buyers

The power of buyers (customers) to influence the prices they pay for goods and services. Strong buyer power gives customers the ability to negotiate lower prices.

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Barriers to Entry

Actions taken by existing businesses to prevent new competitors from entering their market. This can include patents, brand building, or creating high entry costs.

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Protection of Intellectual Property

Using specialized knowledge, patents, or other techniques to protect your business and make it difficult for others to copy.

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Time and Cost of Entry

The amount of money and time needed to establish a business in a particular industry. Higher costs and time create a barrier to entry.

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Horizontal Integration

The merging of businesses at the same stage of production, often involving similar services and goods.

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Franchise

A legal right to use the brand name, products, and business style of an existing company. The franchisee pays a fee to the franchisor for this right.

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Benefits of Horizontal Integration

Benefits include removing competition, controlling quality, potential economies of scale, and increased market power.

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Franchising

A franchisee can use the franchisor's established brand, products, and business model in a specific area to operate their own business.

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Franchise Benefits

A franchisee may operate under a pre-existing brand, enjoying its reputation and established customer base.

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Expanding via Franchising

Franchises can help expand a business quickly and reach new markets without the need to create an entirely new operation.

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Impact of Expanding via Franchising

It can lead to increased capital, cost reductions through shared resources, and the combination of new ideas and innovation.

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Franchise System Support

Franchisees have the opportunity to use the franchisor's established systems, marketing materials, and training programs.

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Study Notes

Business Analysis and Strategy

  • Strategy is a business's plan to achieve objectives. Implementation is putting the plan into action. Strategies should be adaptable to changing circumstances.
  • Strategic decisions are long-term, tactical decisions are medium-term, and operational decisions are short-term.
  • SWOT analysis assesses internal strengths and weaknesses and external opportunities and threats. The goal is to maximize strengths and opportunities and minimize weaknesses and threats.
  • Porter's Five Forces model analyzes industry profitability: threat of new entrants, competitive rivalry, supplier power, threat of substitutes, and buyer power.
  • Tactical decisions support strategic goals and are adaptable to changing market conditions.
  • SWOT analysis information helps develop strategies to achieve business objectives. SWOT analysis can help identify strengths, resolve weaknesses and exploit opportunities, and avoid threats.
  • Supplier power can be limited through backward vertical integration, seeking new suppliers, finding substitutes, or minimizing information.
  • Threat of new entrants can be reduced through patents, strong brands, high advertising, and pricing strategies.
  • Buyer power can be reduced by forward vertical integration, increasing switching costs, and creating incompatibility between products.
  • Threat of substitutes can be mitigated through R&D, patenting, and marketing tactics.
  • Product development involves creating new products for existing markets. Diversification involves creating new products for new markets. Market penetration focuses on existing products in existing markets. Market development focuses on existing products in new markets. Diversification carries the highest risk compared to market penetration.
  • Business growth can be organic (internal) or external (acquisition/merger). Arguments for growth include eliminating competition, increasing market share, exploiting new markets, and economies of scale. Arguments against growth include costs, HR issues, diseconomies of scale, and negative publicity.

Vertical Integration

  • Vertical integration merges businesses at different stages of production. Backward vertical integration is merging with a supplier; forward vertical integration is merging with a customer.
  • Benefits include supply security, supply chain coordination, quality control, profit maximization, and economies of scale.

Franchises

  • Franchises allow a business to expand quickly with minimal investment. Franchisees pay for the right to use the franchisor's brand and system.
  • Franchisees benefit from national support, reduced risk, and initial training/equipment. They have limited independence and might face franchise termination without reason.
  • Franchises benefit the franchisor through increased commitment, swift market expansion, and shared risk. Franchisors must carefully manage franchisee operations to prevent reputation damage.

Horizontal Integration

  • Horizontal integration merges businesses at the same production stage.
  • Benefits include reduced competition, economies of scale, increased market power, synergy, increased capital, cost-cutting, and innovation.

Expansion Methods

  • Franchising or opening own stores have advantages: franchises are already successful, receive returns, no financing/site issues, quick market expansion, risk sharing, and no loss of individual outlets. Opening stores allows independence, control, retention of profits, and economies of scale.

Ansoff Matrix

  • The Ansoff matrix provides options for business growth, considering existing/new products and existing/new markets.

Corporate Strategies

  • Corporate planning involves setting medium/long-term organizational goals based on market opportunities, resources, and technologies.
  • Strategic decisions that affect the entire organization are strategic decisions. These include financial performance objectives, mergers, acquisitions, and resource allocation.
  • Strategic direction is the course of action toward achieving corporate strategy objectives.
  • Divisional strategy aligns with the corporate strategy.
  • Functional strategies support corporate and divisional strategies (e.g., production, marketing, HRM).

SWOT Analysis Details

  • Strengths: are internal aspects where the business excels and takes advantage of these successes.
  • Weaknesses: are internal aspects where the business performs poorly or doesn't take advantage of existing strengths.
  • Opportunities: are external conditions that favorably impact the business.
  • Threats: are external conditions that negatively impact the business.

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Unit 3: Business Analysis and Strategy PDF

Description

Test your knowledge on essential business analysis concepts such as strategic planning, SWOT analysis, and Porter's Five Forces model. This quiz covers various decision-making levels and their impact on achieving business objectives. Enhance your understanding of how to adapt strategies in a changing marketplace.

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