New Business Student Book 2 - Part 1

• This document provides study notes on business decisions and strategy, and global business, tailored for students
• The notes cover key definitions, concepts, and frameworks relevant to the Pearson Edexcel International A Level Business specification

Corporate Objectives

• Objectives are what a business aims to achieve
• Corporate aims and objectives influence business strategy
• Business Aims: The goals a business wants to achieve long-term, less specific than objectives, acting as a vision
• Mission Statement: States the business's main purpose, reflecting goals and values and describing core activities
• Includes information on markets, commercial objectives, stakeholder values and ethics
• A good mission statement guides decision-making, clarifies direction, and unites workforce with shared purpose
• Mission statements can commit to customers and align employees with shared goals
• Main elements include: purpose, values, standards and strategy
• Corporate objectives must be Specific, Measurable, Agreed, Realistic and Time specific (SMART)
• Specific - Should be clear what the business is trying to acheive
• Measurable - Evidence to demonstrate if the objectives have been acheived
• Agreed - All people responsible have to be happy with the objectives
• Realistic - Ensured that the objective can be meet
• Time Specific - A deadline needs to be ensured

Departmental and Functional Objectives

• General objectives come from the mission statement
• Corporate objectives elaborate on business activities
• Departmental and functional objectives (HR, finance, operations etc.) support corporate objectives
• Functions should align to support corporate goals
• Objectives Hierarchy: Aims -> Mission statement -> corporate objectives -> Functional objectives
• Large firms typically have financial objectives due to many stakeholders
• Examples: Carrefour aims to increase market share by 5% over two years

Critical Appraisal of Mission Statements

• Some suggest mission statements can be unrealistic and over-optimistic
• This can demotivate employees
• They may waste management time and seen as insincere, or just marketing
• Mission statements must be constantly reviewed for relevance and appropriateness
• A critical reassessment consideres the purpose, audience and aims of corporate strategy

Theories of Corporate Strategy

• Businesses plan to achieve objectives through strategy
• First invovles using analytical tools to analyse the current position
• Second part invovles evaluating where the business wants to be
• SWOT and Five Forces analysis is used at the start
• The corporate strategy provides long-term plans to achieve the firms aims
• Gives the firm an advantage and fulfills stakeholder expectations

Ansoff's Matrix

• Helps businesses determine corporate strategy
• Risk increases further from existing products and consumers
• Four strategies: Market penetration, product development, market development, diversification
• Market Penetration: Growth in existing markets with existing products
• Involves: Increasing brand loyalty, regular product use, and increased consumption
• Suitable for successful products and lowers risk
• Product Development: New or modified products in existing markets
• Involves: Product innovation and continuous development
• Suited to quick product life cycles or changing technology; requires R&D investment
• Market Development: Existing products in new markets
• Involves: Entering new geographic markets; understanding local tastes
• Success relies on understanding local habits
• Enterprise Rent-A-Car is an example of a car renting business that has adopted this strategy successfully
• Diversification: New products in new markets
• Involves: Spreading risk, may take business outside of its expertise
• Strategy with the highest risk: used by large corporations

Porter's Strategic Matrix

• Identifies sources of competitive advantage
• Argues firms should adopt one strategy and not get 'stuck in the middle'
• Cost Leadership: Being the lowest-cost provider
• Involves: Large scale operations, economies of scale, efficient operations
• Offer basic products to lower costs
• Differentiation: Unique positioning in a mass market
• Involves: Adding unique value through design, brand identity or service
• Can require high R&D and effective marketing
• Airstream produces luxury caravans.
• Focus: Targeting a narrow customer range
• Is closely linked to niche markting
• Two forms: cost focus and differentiation focus

Boston Matrix

• Used to assist a business in identifying which strategy to adopt
• Used for portfolio analysis
• Matrix categorises products into one of four different areas based upon product growth
• The four classifications are: Stars, Cash Cows, Question Marks and Dogs

Effect of Strategic and Tactical Decisions

• Strategies define long-term direction; tactics respond to short-term opportunities/threats
• Most deicisons are tactical to help improve business conditions
• Human Resources: Strategic decisions have lasting impact (e.g., new growth strategy)
• Tactical decisions affect a small percentage of the workforce for less time
• Physical Resources: Strategic decisions impact resources depending on the decision
• Can have a large effect if a business develops a product
• Financial Resources: Startegic decisions can have a significant impact to the business
• For example: issuing $200 million in shares
• Tactical decisions can only have short-term effect, such as a delayed payment
• A theoretical model can help guide your analysis and for evaluation in exams

SWOT Analysis

• SWOT helps to analyse Strengths, Weaknesses, Opportunities, Threats
• Can help managaers with complex decisions and provide advantages and disadvantages of stratgies
• Should be used before drawing up a strategic plan
• Strengths: Positive internal aspects making the business successful
• A visionary leader and motivated workforce are helpful
• Weaknesses: Negative internatl aspects and business shortcomings
• High staff turnover can be a weakness
• Opportunities: External developments the business can expoloit and improve revenue
• This can be access to a new overseas market
• Threats: External dangers to damage the business performance
• This can be new legislation
• SWOT analyses help to make business decisions and improve performance