Summary A-level Business Studies Unit 3 notes

A2 Business Studies


Unit 3 (BUSS3)

Corporate Planning

Key Words

 Corporate Planning - A strategy detailing how a frrms airs and objecties will be achieied,
corprising both rediur and long-terr actonss
 Mission Staterent – A staterent that tries to put the airs of the business into a phrase that
will help proiide a sense of corron purpose and directons
 Corporate Airs – These are created by the senior rerbers of the business and are designed
to create a corron iision, which eieryone in the organisaton should be working towardss
 Corporate Objecties – Targets that are set in order to reet the corporate airss
 Corporate Strategy – An oierall plan to reet objectiess
 Corporate Tactc – A short-terr plan to counter problers within the businesss
 Functonal Objecties –These are objecties that are allocated to specialist areas within the
business (fnance, huran resource, operatons and rarketngg, oierall these ft together to
help achieie the corporate objectiess
 Functonal Strategies – A plan within a specialist area in a business on how to reet their
functonal objecties


Marketing Objecttives

 An objectie that is reasured in quanttatie data to boost the success rates of the businesss
 This can help giie a business a corpettie edge; howeier it is usually only efectie if the
objectie is centred around the concept of ‘custorer satsfactonms

Marketing Strategies

 The rarketng strategy outlines how the objecties can be rets
 A rarketng strategy will target issues such as the new rarkets, rarket share, leiel of sales,
diferentaton, productbrbrand awareness etcs
 A Market Strategy will deterrine the choice of target rarket segrents, positoning,
rarketng rix and allocaton of resourcess
 A list of the rost corron rarketng strategies; growth, rarket dorinance, innoiaton, and
Porterms generic strategiess

Porters Generict Strategies

,A2 Business Studies




 Michael Porter deieloped the category schere that outlines three general types of
strategies that are aiailable to use by the business to gain a corpettie adiantages
 This is useful for a business when looking at Marketng Strategiess
 The Cost Leadership strategy iniolies the frr winning rarket share by appealing to cost-
conscious-custorers and price-sensitie consurerss For this to be successful, this is
achieied by haiing the lowest prices in the target rarket segrent, or at least the lowest
price to ialue rato (price corpared to what custorers receiiegs
 Cost-leadership reans that business will need to reduce its costss This can iniolie high asset
turnoier; for exarple in a restaurant they would iniolie turning ronths oier iery quicklys
Or the business can go for low direct and indirect operatng costs where they ofer no frills
standardized products, which help keep producton costs lows Thirdly, there is the control
oier the supplybrprocurerent chain that can help ensure low costss The business can buy in
bulk to receiie quantty discounts, insttutng corpettie bidding for contracts, working
with iendors to keep inientories low using rethods such as Just-in-Tire purchasing or
Vendor-Managed Inientorys
 The Diferentaton Strategy is aired at the broad rarket that iniolies the creaton of a
product or seriices that is perceiied throughout its industry as uniques The corpany or
business unit ray then charge a preriur for its products This specialty can be associated
with design, brand irage, technology, features, dealers, the network and custorer seriices
 Howeier, it is irportant to rererber that the Diferentaton Strategy is norrally is
successful in rarkets where the consurers are not price-sensitie, the rarket is
corpettie or saturated, and the consurers haie specifc needs (that right be under-
seriedg that the business can reet with their resourcess
 A Market Strategy rust be strong and clear, as it will serie as the foundaton of the
businessm Marketng Plan that will be used between 1 to 5 yearss
 The Diferentaton Strategy is rore likely to increase profts whereas Low Cost is rore likely
to increase the rarket shares

,A2 Business Studies


Dectision Making to Acthieve Objecttives

 Decision raking takes place at eiery leiel of the business and iaries fror short-terr to
long-terr and fror functonal and tactcal to strategic and corporates
 Decisions are afected by internal and external constraintss Internal constraints include the
skill leiel of the workforce and the fnance aiailables External constraints include
goiernrent actiites, legislaton and corpettorms actonss
 Decisions with high-risk require extensiie research to forecast resultss Howeier, high-risk
reans that there is the opportunity for a big rewards

Sctientifict Dectision Making

 A scientfc approach iniolies using a systeratc process for raking decisions in an objectie
ranners This ensures that decisions are rade on the basis of good extensiie researchs
 It follows the procedure of; Setng Objecties, Gather Data (costs, derand, locaton and
logistcsg, Analyse Data (iniestrent appraisal, cost-beneft analysis, critcal path analysis,
rato analysis, elastcity of derand and decision treesg, Select a Strategy (on the basis of data
analysis resultsg and Irplerent and Reiiew the Decisions

Ansoff’s Matrix




 Ansofms Matrix is another decision-raking rodel or tool for corporate plannings The ratrix
proiides a useful frarework for analysing a range of strategic optons in relaton to risks and
rewardss
 Market Penetraton iniolies prorotng growth in existng rarkets with existng productss
Seieral diferent tactcs can be erployed; increasing brand loyalty, encouraging custorers
to use the product rore ofen, prorotng the sale of larger packs of the products
 Product Deieloprent reans introducing a new product into an existng rarkets Howeier,
sore business will re-release a rodifed iersion of an existng product with new product
and featuress

, A2 Business Studies


 Market Deieloprent is where the business seeks to sell existng products in new rarketss
This includes new distributon channels, diferent pricing policies, new product dirensions
or packaging and new geographical rarketss
 Diiersifcaton is a growth strategy where the business releases a new product into a new
rarkets It is iery high risk and will require good accurate researchs The business rust haie a
clear idea of what it hopes to achieie fror doing thiss

 Liquidity Ratos

These are the Current, Acid-Test ratoss

The CurrentbrWorking Capital rato is a liquidity rato that a business and its shareholders can use to
gain an idea of how efcient the business is at paying back its short-terr liabilitess The higher the
rato, the beter it is at doing thiss A rato that is under 1 indicates that the business would struggle
to pay of its short-terr liabilites if it care to that points This doesnmt rean that the business will go
bankrupt, as there are iarious ways of accessing fnances Howeier this shows that the business is in
poor fnancial health and they will need to beter their situaton urgentlys

The rato can also be used to see how efcient the business is at turning product into cashs
Businesses that donmt receiie instant payrent fror their custorers therefore haiing a trade
receiiable probler or haiing long stock turnoiers will haie liquidity issuess Howeier, each industry
has a diferent operatng cycle so businesses should be corpared within the sare industrys

*The CurrentbrWorking Capital Rato = Current Assets ÷ Current Liabilites

The Acid Test rato is sirilar to the CurrentbrWorking Capital rato in that it looks at how efcient the
business is at paying back its short-terr liabilites but is rore stringent as it takes stock out of the
equatons It should not be looked at on its own but corpared to the Working Capital rato as it
shows how dependant the business is on its inientoriess A rato fgure under 1 indicates that the
business is in a seriously poor positon in terrs of fnances

*Acid Test Rato = (Current Assets – Inientoriesg ÷ Current Liabilites