3.7 Analysing the strategic position of a business (A-level only)

3.7.1 Mission, corporate objectives and strategy

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Influences on the mission of a business

 

Internal and external influences on corporate objectives and decisions

Influences on corporate objectives should include the pressures for short termism, business ownership, the external and internal environment.

The distinction between strategy and tactics

 

The links between mission, corporate objectives and strategy

 

The impact of strategic decision making on functional decision making

 

The value of SWOT analysis

 

3.7.2 Analysing the existing internal position of a business to assess strengths and weaknesses: financial ratio analysis

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How to assess the financial performance of a business using balance sheets, income statements and financial ratios

Financial ratio analysis to include:

  • profitability (return on capital employed)  
  • liquidity (current ratio)
  • gearing  
  • efficiency ratios: payables days, receivables days, inventory turnover.

The value of financial ratios when assessing performance

Data may be analysed over time or in comparison with other businesses.

3.7.3 Analysing the existing internal position of a business to assess strengths and weaknesses: overall performance

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How to analyse data other than financial statements to assess the strengths and weaknesses of a business

Data other than financial statements should include operations, human resource and marketing data.

Data may be analysed over time or in comparison with other businesses.

The importance of core competences

 

Assessing short- and long-term performance

 

The value of different measures of assessing business performance

Methods of assessing overall business performance to include:

  • Kaplan and Norton’s Balanced Scorecard model
  • Elkington’s Triple Bottom Line (Profit, People, Planet).

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The impact of changes in the political and legal environment on strategic and functional decision making

The political and legal environment should include a broad understanding of the scope and effects of UK and EU law related to competition, the labour market and environmental legislation.

The impact of UK and EU Government policy related to enterprise, the role of regulators, infrastructure, the environment and international trade.

3.7.5 Analysing the external environment to assess opportunities and threats: economic change

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The impact of changes in the UK and the global economic environment on strategic and functional decision making

Economic factors to include:

  • GDP
  • taxation
  • exchange rates
  • inflation
  • fiscal and monetary policy
  • more open trade v protectionism.

Students should be able to understand economic data, interpret changes in economic data for the UK, the European Union and globally, and consider the implications of such changes for business.

Reasons for greater globalisation of business

 

The importance of globalisation for business

 

The importance of emerging economies for business

 

3.7.6 Analysing the external environment to assess opportunities and threats: social and technological

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The impact of the social and technological environment on strategic and functional decision making

Social changes to include demographic changes and population movements such as:

  • urbanisation and migration
  • changes in consumer lifestyle and buying behaviour
  • the growth of online businesses.

The social environment to include Corporate Social Responsibility (CSR) and:

  • the reasons for and against (CSR)
  • the difference between the stakeholder v shareholder concept
  • Carroll’s Corporate Social Responsibility pyramid.

Technological change should include the impact of technological change on functional areas and strategy.

The pressures for socially responsible behaviour

 

3.7.7 Analysing the external environment to assess opportunities and threats: the competitive environment

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Porter’s five forces, how and why these might change, and the implications of these forces for strategic and functional decision making and profits

An understanding of the five forces to include:

  • entry threat (barriers to entry)
  • buyer power
  • supplier power
  • rivalry
  • substitute threat.

Students should consider how the five forces shape competitive strategy.

3.7.8 Analysing strategic options: investment appraisal

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Financial methods of assessing an investment

Investment appraisal should include the calculation and interpretation of payback, average rate of return and net present value.

Factors influencing investment decisions

Factors to include investment criteria, non-financial factors, risk and uncertainty

The value of sensitivity analysis