National Year 13 Business
Chapters: 4
1. 3.7 Analysing the strategic position of a business
3.7.1 Mission, corporate objectives and strategy · 3.7.2 Financial ratio analysis · 3.7.3 Overall internal performance · 3.7.4 Political and legal change · 3.7.5 Economic change · 3.7.6 Social and technological change · 3.7.7 Competitive environment · 3.7.8 Investment appraisal
- Business Strategy – A business strategy is a long-term plan that takes a firm from where it is to where it wants to be. It starts from a mission (why the firm exists), turns it into SMART objectives, checks the firm's position with SWOT, chooses where to compete (Ansoff matrix: markets and products) and how to compete (Porter: cost leadership, differentiation or focus), and then puts the plan into action with people, money and control.
- Accounting Ratios: Liquidity, Solvency, Activity and Profitability – A ratio compares two related numbers from the financial statements. Liquidity ratios check if short-term debts can be paid; solvency ratios check long-term safety; activity (turnover) ratios check how fast assets are used; profitability ratios check how much profit each rupee earns.
- Business Environment: Meaning, Dimensions and Demonetisation – Business environment is the total of all outside forces, people and institutions that can affect a firm but that it cannot control. It is dynamic, uncertain, complex, relative and made of linked specific and general forces. Studying it helps firms spot opportunities, see threats, plan and cope with change. It has five dimensions: economic, social, technological, political and legal. Demonetisation of old ₹500 and ₹1000 notes in November 2016 is a big example of an environment change.
- The Competitive Environment: Rivals, Risk and Five Forces – The competitive environment is the market a business shares with its rivals. A firm studies rivals' strengths and weaknesses (price, quality, service, location, brand) to find its own advantage. Every business faces risk, where the chance of a bad result can be estimated, and uncertainty, where it cannot. Entrepreneurs accept risk because of possible rewards: profit, independence and pride. Porter's five forces explain how much profit an industry allows: rivalry, threat of new entrants, threat of substitutes, supplier power and buyer power. The stronger the forces, the lower the profit.
- Investment Appraisal: Payback, ARR and NPV – Investment appraisal means judging whether a big spend (a machine, a shop, a new product) is worth it. Payback period = how long until the cash coming in repays the cost. ARR = average yearly profit ÷ initial cost × 100. NPV = sum of future cash flows discounted to today − initial cost; a positive NPV adds value. Firms also test sensitivity (what if sales fall?) and weigh risks and non-financial factors.
2. 3.8 Choosing strategic direction
3.8.1 Which markets and products · 3.8.2 Strategic positioning
- Business Strategy – A business strategy is a long-term plan that takes a firm from where it is to where it wants to be. It starts from a mission (why the firm exists), turns it into SMART objectives, checks the firm's position with SWOT, chooses where to compete (Ansoff matrix: markets and products) and how to compete (Porter: cost leadership, differentiation or focus), and then puts the plan into action with people, money and control.
3. 3.9 Strategic methods
3.9.1 Change in scale · 3.9.2 Innovation · 3.9.3 Internationalisation · 3.9.4 Digital technology
- Business Growth and Economies of Scale – Firms grow organically (from inside: new stores, selling online, franchising, outsourcing) or externally (mergers and takeovers). Growth lowers average unit cost (total cost ÷ output) through economies of scale, such as purchasing (bulk discounts) and technical (bigger, better machines). If a firm grows too big, diseconomies of scale appear: poor communication, coordination and motivation push unit cost up again. Some firms then retrench, getting smaller to cut costs.
- Innovation in Business – Innovation means turning a new idea into a product or process that is actually used or sold. Firms innovate with small, steady improvements (kaizen) or with research and development (R&D) that is costly and risky but can bring big leaps. Digital tools speed this up. Patents, copyright and trademarks protect ideas so rivals cannot simply copy them.
- Globalisation and Global Governance – Globalisation is the growth of flows of goods, capital, information and labour that tie places together. Technology, transport and trade deals drive it. The flows are unequal: rich economies hold more power, poorer ones have weaker market access. TNCs spread production of one product across many places. Agencies like the UN, WTO, IMF and World Bank try to govern these flows, and treaties protect global commons such as Antarctica. Globalisation brings growth and cheaper goods but also inequality, conflict and environmental harm.
- E-business: Meaning, Scope and Benefits – E-business means doing all business activities (buying, selling, production, finance, HR, supply) through computer networks and the internet. E-commerce, online buying and selling, is only one part of it. Its scope covers B2B, B2C, C2C and intra-B links. It is cheaper to start, open 24 × 7, fast and global, but it lacks the personal touch and has security risks.
4. 3.10 Managing strategic change
3.10.1 Managing change · 3.10.2 Organisational culture · 3.10.3 Strategic implementation · 3.10.4 Why strategies fail
- Managing Change: Why Businesses Change and How to Lead It – Businesses must change to survive. Causes of change can be external (technology, laws, the economy, customers, rivals) or internal (new owners or leaders, growth, mergers, poor performance, new strategy). Change can be incremental (small, gradual) or disruptive (sudden and large). Kurt Lewin's three-step model says leaders must unfreeze old habits, make the change, then refreeze the new way. Lewin's force field analysis lists driving forces (for change) and restraining forces (against), scores them, and shows whether change is likely and which forces to strengthen or weaken. People resist change because of self-interest, misunderstanding and low trust, a different view of the change, or low tolerance of change. Managers can overcome resistance through education and communication, participation, facilitation and support, negotiation, manipulation and co-option, or coercion, from gentle and slow to forceful and fast. Flexible organisations, clear communication and a respected change leader make change easier.
- Organisational Culture: "The Way We Do Things Around Here" – Organisational culture is the set of shared values, beliefs, attitudes and habits that shape how people in a business behave. Like an iceberg, some parts are visible (dress, office layout, logos, stories, rituals) and most are hidden (values and assumptions). A strong culture is widely shared and guides behaviour; a weak culture is not. Charles Handy described four cultures: power culture (a web with one powerful centre), role culture (a temple of departments ruled by procedures), task culture (a net of project teams where expertise matters) and person culture (a cluster of equal experts serving themselves). Culture affects motivation, decision speed, customer service, risk-taking and the success of mergers. Changing culture is slow and hard because values are deep and people resist; it needs leaders to model new behaviour, changes to structure, rewards, recruitment and training, and new symbols and stories.
- Business Strategy – A business strategy is a long-term plan that takes a firm from where it is to where it wants to be. It starts from a mission (why the firm exists), turns it into SMART objectives, checks the firm's position with SWOT, chooses where to compete (Ansoff matrix: markets and products) and how to compete (Porter: cost leadership, differentiation or focus), and then puts the plan into action with people, money and control.