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LO8: Asses the performance of businesses to inform future business…
LO8: Asses the performance of businesses to inform future business activities
factors affecting the success/failure of a business
financial factors e.g. cash flow, profit, sales revenue. share price
non-financial factors e.g. reputation, product range, size of workforce, recruitment planning
positive factors e.g. large market share, reputation for quality, committed workforce
negative factors e.g. making a loss, bad publicity, large numbers of employees leaving
past factors e.g. reputation build over previous years, state the economy in previous years
present factors e.g. successful marketing campaign, good planning and decision making
future factors e.g. outcome of impending legal action, changes to business aims, and increases interest rates
some factors have a short term impact on the business and other long term impact
e.g. a shortfall of staff in the customer services functional area caused by poor recruitment planning could be remedied using a recruitment agency in a matter of days. on the other hand, a kitchen appliance manufacturer that receives bad publicity because of several of its washing machines explode causing serious harm may suffer a loss of reputation that takes years to recover from
how to conduct SWOT analysis
SWOT analysis - a tool used to analyze the strengths, weaknesses, opportunities and threats to a business's operations
strengths & weaknesses
internal factors i.e. come from within the business
within the control of the business
examples of strengths include the skills of the owner, a reputation for quality, helpful staff
examples of weaknesses include inflexibility, poor cash flow management, high breakeven point
opportunities & threats
external factors i.e. come from an external source
beyond the control of the business
examples of opportunities include the increase use of mobile technology, increasing popularity of organic food, increase in consumers with environmental conscience
examples of threats include new competition, change in legislation, increase in taxes
what is a threat may be an oppurtunity for another business - the trend towards healthy eating might be a threat towards a sweet shop but an opportunity to a salad bar
interpret business performance
in order to make wise decisions on what to do in the future, a business needs to interpret its past and present performance. it requires a careful study of the data and info provided
asking questions e.g. is level of profit acceptable, sufficient funds available to pay bills, is marketing campaign working, are expenses too high
comparing with organisational objectives e.g. have growth objectives been met, have financial objectives been exceeded, has the business been enterprising
looking for trends e.g. is revenue increasing over time, are profits falling, are employees taking off more sick days, is output increasing
benchmarking against industrial average e.g. are wastage rates high or lower than the industrial average, is the company growing faster or more slowly than the industrial average
comparing with similar businesses e.g. does the competition charge lower prices, are the businesses products of better quality than similar businesses
interpreting past and present performance allows a business to make informed decisions on future business objectives and make recommendations for future business activities