3 1 business objectives and strategy

A corporate objective is a specific performance goal set by senior management for the business to achieve over time.

True. Corporate objectives often focus on increasing market share or profit, achieving sales growth, or new product/market development.

SMART stands for:

False. Objectives should be specific, measurable, agreed, realistic and time-bound.

A mission statement is an expression of a business's overall aim as well as its core values and context.

False. Mission statements are sometimes criticised as being little more than an exercise in public relations.

A functional objective is the day-to-day goal of functions or departments within the business, derived from the overall corporate objectives.

Functional objectives must be carefully aligned across departments so that all parts of the business are working towards the shared goal.

A corporate strategy is a successful plan to achieve corporate objectives and helps to provide a competitive advantage.

Ansoff's matrix identifies an appropriate corporate strategy to achieve the objective of growth and the level of risk associated with the chosen strategy.

Diversification is a risky growth strategy, as it involves targeting a new market with entirely new or redeveloped products.

False. Porter's Generic Strategic Matrix recommends businesses adopt either a cost leadership or a differentiation strategy to achieve competitive advantage.

False. A business operating in the mass market could adopt either a cost leadership or a differentiation strategy, depending on what it is that makes them stand out from their competitors.

A cash cow is a product sold in lower-growth markets where it has a high market share and generates more cash than it needs to maintain its market position.

The aim of portfolio analysis is to carry out a detailed evaluation of a full range of products in order that appropriate strategies may be identified and pursued.

Targeting new markets with existing products is known as market development.

False. A market development strategy involves finding and exploiting new market opportunities for existing products.

A star is a product sold in high-growth markets and has a high level of market share.

A business that fails to adopt either a cost or a differentiation focus risks being stuck in the middle, unable to compete successfully with rivals in the market.

True. Dogs have little potential for future growth and should be divested so that finance and effort may be invested in other products.

A distinctive capability is a particular business strength that is very difficult for competitors to copy.

Tactical decisions are made to support the overall strategy and are usually short-term.

SWOT stands for:

False. Strengths should be harnessed in a SWOT analysis. Weaknesses should be eliminated.

An opportunity is an option a business may exploit to enjoy further success.

False. Economic indicators becoming more favourable is an opportunity in most cases.

A weakness is what a business does poorly, such as ways it lags behind competitors.

False. A SWOT analysis will vary significantly for businesses of different sizes with different objectives and operating in different sectors.

A threat is a hazard that has the potential to damage business performance.

False. A loyal customer base and effective leadership are examples of strengths.

PESTLE analysis examines the external factors that are likely to impact the activities and outcomes of a business.

PESTLE stands for:

A political factor is the extent to which local and national government decisions and attitudes are expected to influence a business.

An economic factor is the extent to which economic indicators such as inflation and exchange rates are expected to directly impact business performance.

A social factor is the extent to which personal attitudes and values, culture and demographic change are expected to affect the business.

True. PESTLE analysis can support effective decision-making by senior managers, who will better understand the complex context within which the business operates.

A legal factor is the extent to which changes in law and regulations are expected to impact a business.

False. Changing patterns of migration are an example of a social factor in PESTLE analysis.

True. A rise in the level of the national minimum wage is an example of a legal factor, though it is determined by the government, so it could also be a political factor.

False. A rising level of unemployment is an example of an economic factor in PESTLE analysis, though it is likely to have social consequences.