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Unit 7: Analysing the Strategic Position of a Business - Coggle Diagram

- - - - can be seen as the biggest competition threat to businesses because new tech is continuously expanding
      - threats of new entry may also impact competition because with correct marketing or observing a gap they can overtake the market that the original company was operating in
    - - Similar impact on suppliers as well- for smaller business the suppliers may have more power because they negotiate to give the suppliers a higher price.
    - - May be a reason businesses strive to grow, could charge higher prices because of the dependency that the suppliers have on the company, (suppliers won't want to leave despite higher charges because tescos are so big they will alwys receive a profit- confidence that the supplier will always be paid back)
    - - Rivalry can increase if a competitor takes a risk- for example lowering a price or changing the brand to be more environmentally friendly/ socially responsible
    - - depends on the strategic positioning that the substitute product is being branded at. Low price for high quality may attract customers from the original company (or low price/low quality
        
        Substitutes would not be a threat if they had been positioned at the same vantage point for the original company (customers wouldnt move) or low quality/ high price
- - - - Net profit per year/ initial cost of investment
  - - - Assumptions need to be made by management when preparing for the important forecasts
        
        Using sensitivity analysis helps guide businesses in directions that take into account how reliable the assumptions may be, what may happen if the reality is different and which are most significant to forecast
    - - Cash flow forecasts- timing and amount of inflows and outflows, receivables and payables days
      - Budgeted profit- sales volume, overheads, unit prices, GPM's
      - Investment appraisal- timing of cash flows, period project will run, amount of initial investment
      - Break-even analysis- selling prices and variable costs, fixed costs
    - - Depends on- the data that is used in the forecasts. Planning, detail, attention may be great- but its not significant if the data was originally poor
    - - Depends on- skill of the manager. Sensitivity analysis is a complicated concept and not all managers may understand how to use it. Therefore not appropriate for specific situations in the business- manager that has just gone through a takeover may not understand because they are not familiar with the other businesses data patterns.
- - - - Once all levels have been met, the business can argue to be sustainable
    - - People measures the extent to which a business is socially responsible. It is difficult to calculate- therefore reliability and consistency become problems when needing to report the data. Bad business rep and loss of suppliers and consumers- especially if their target demographic are people who are highly opiniated on human rights. May mean that the business needs to change their whole USP and target market which may cause a temporary loss of profits because rebranding increases costs.
      - Profit measures financial achievement based on their financial data.
      - Planet measures the impact of performance based on their environmental factors. These objectives are more tangible, meaning that the manager will be able to clearly communicate the objectives towards employees (for example low carbon emissions or use of sustainable inputs like renewable energy). Getting the message across will cause the objectives to effectively come across in the production or manufacturing process which can meet the demand of their demographic. Prioritising these will give them a competitive advantage.
        
        This depends on the business' target market or whether they have the resources to do this. For example, their customers may not be focused on environmentally friendly products. Also, a small business may not have the cash to purchase environmentally good materials as they tend to be more expensive. Therefore, these types of businesses may want to focus on their profit or people objectives.
        
        Specifically small businesses will want to focus on their profit objectives as there main objective is to survive.
  - - - Businesses may not be able to efficiently use their resources if they are restricted in how they can act because of social expectation. Not using all resources, or only using some resources can increase costs for the business. Furthermore, the business may lose customers who disagree with the CSR approach, believing that the only social requirement should be to provide wealth for shareholders, reducing their sales. From a reduction in costs and sales, the business in question may have reduced profit
    - - Taking a CSR approach means that businesses can achieve increased productivity. This is because one way that CSR is implemented into a business is through creating safe working conditions and fair pay. According to Maslow's hierarchy of needs, employees need to feel safe in the workplace (safety and security on the hierarchy) in order to achieve self actualisation, which, according to Maslow, is where employees reach their fullest potential. This can lead to increased productivity and as a result improved efficiency. Furthermore, a faster workforce may mean that jobs and tasks are completed faster, meaning managers can send employees home early. As a result, businesses have reduced labour costs, causing their variable costs to decrease. This means that profit can possibly be increased.
        
        Conclusion: most important reason why businesses should invest in csr is because they tend to invest more into education services. By investing into more social industries, businesses may gain promotional opportunities, such as a school using a stationary companies pens. This gives competitive edge as businesses who are not csr focused do not gain this opportunity to further promote the business.
  - - - Economic- a business is only useful to society if it makes a profit. Before it can move on to any other "responsibilities" a profit needs to be made.
        
        Once a profit has been made, the business needs to ensure that it fulfills its responsibility of following the law (link to legislation)
        
        Ethical- the business can then move on to fulfilling the ethical responsibilities required. These go beyond the requirement of the law, such as treating employees and suppliers with moral regards.
        
        Only once these have all been expressed can the business move on to fulfilling philanthropic responsibilities. This is where the business gives back to society through things such as charitable donations.
      - Why is the pyramid a useful framework?
        
        Can ensure that a business doesn't become to over-ambitious when wanting to pursue csr- have they met all of the other requirements to be csr?
        
        Lack of opportunity costs- all sectors are focused on before csr is met with philanthropic responsibilities. Therefore business can see if there are areas they need to prioritise before they work for csr.
        
        A focus on receiving their profit (key to survival) is still regarded- ensures business doesn't become too ambitious with their csr goals and therefore loses a profit
- - - - Example ways that they can be measured:
        Customer- levels of satisfaction based on factors such as return rates and reviews
        Financial- measures financial performance based on factors such as operating profit
        Internal processes- measures business efficiency based on factors such as lead time and unit costs
        Organisational capacity- measures knowledge based on factors such as employee retention rates
        
        Advantages- gives a broad overview of the business and links the performance to the long term. Broad overview means that the business can recognise areas where they are slacking and improve so it doesn't damage the end goal. Also, if a business has a specific function they specialise in, such as csr, they can still ensure the other areas are up to par. Linking the performance to the long term means that the business stays focused on the mission and there is no confusion in the workforce.
        
        Disadvantages- Needs to be updated regularly to be successful. This means it takes up a large amount of time and may become costly. Being too focused on one factor of the operation may cause opportunity costs that a competitor takes advantage of. Senior management may still be too invested in the financial performance so the other factors (that evidently determine financial performance) will be ignored. Despite gaining a larger overview, it can be difficult to balance the 4 different perspectives. It is subjective when deciding which one may be the most important which in turn can cause confusion over what should be focused on. Therefore, the focus of the mission may actually get lost in the process.
        
        Conclusion: would not be a beneficial tool to use. The balance is too difficult to control so the time put into it would be wasted. It is too prone to missed out opportunities so therefore is too risky.
- - - - Employee rights include: being given reasonable notice before dismissal, available for taking time off to parent, redundancy and the request for flexible working
    - - Being protected from unfair dismissal, employers to recognise a union if more than 50% of employees are members.
  - - - ( can include extent of emissions, storing hazardous substances, packaging and the way that water is discharged)
      - Failing to comply with growing environmental laws can lead to serious fines and business reputation
        
        This is not just subject to the law- consumers who idolise environmentally friendly products is increasing so reputation could be further damaged from this if environmental laws are reached.
        
        Following the environmental law can also avoid damaging costs to a businesses such as the fines
        
        Can be used in essay plans as a point for why businesses should go environmental: not following regulations and receiving fines may be more damaging than the costs of buying expensive environmentally friendly alternatives. There are some businesses though that don't have enough money to buy the products so taking the fine may be accommodable.
  - - - There are laws within the UK that prevent competition called anti-competition agreements
        
        Include: Directly or indirectly fixing purchases, prices or discount factors.
        
        Price fixing can lead to businesses receiving serious fines. In regards to price fixing, businesses are not allowed to: agree prices with competitors, impose different minimum prices on different distributors or cut prices below costs in order to remove a smaller competitor out of the market.
    - - ( a business becoming so large that they dominate the market that they are in). Competition legislation is used here to protect businesses from possible abuse of dominant position.
      - Includes: predatory pricing or imposing exclusivity
- - - - £1= $1.50 which means that for every pound you can buy $1.50
  - - - This means they may be giving more money than they thought they would have to- could damage profits and affect budgets (create an adverse variance)
      - Suppliers may view the company to not be a reliable investment that will provide them with the sufficient funds that they need so they move on to a different company
        
        Due to reputations across suppliers they may find it difficult to find a suitable replacement cost wise or any replacement in general.
- - - - More people living alone- may be less willing to pay for luxury goods because necessities such as bills are more expensive
        May lead to an increase in customer complaints because consumers may be easily dissatisfied by the "slow" service
        More specific about what they buy and who they buy from- customers may be willing to pay higher prices for socially responsible products
- - - - Countries like China and India have had mass urbanisation schemes in contrast to the UK- use if case study given is based in China or India
- - - - Government spending
        
        Transfer payments- welfare payments made to benefit recipients such as state pensions
        
        Current spending- spending on state-provided goods and services such as education and health
        
        Capital spending- infrastructure spending such as new roads
        
        Government spending is needed to keep provision of public and merit goods which facilitates welfare support for low income households
      - Taxation
        
        Raises revenue for government finance to be fulfilled
        
        Addresses market failure and environmental targets- fe taxes may help correct market failures
- - - - HOWEVER- gearing can be a financially sound structure for a business to have if they have regular cash flows