AQA A level Business Theories

Power Culture (Handy's Organisational Culture Types)

Control radiates from the centre Concentrates power among a few Few rules and little bureaucracy Swift decisions are possible

Aim of the balanced scorecard

"to align business activities to the vision and strategy of the business, improve internal and external communications, and monitor business performance against strategic goals."

Physical environment (7P's)

The environment can influence your decisions to shop there as well as influence how long you stay and how much you buy.

What are the stages of bowman's strategic clock?

1. Low price, low added value 2. Low price 3. Hybrid 4. Differentiation 5. Focused differentiation 6. Risky high margins 7. monopoly pricing 8. Loss of market share

What are the three ways a businesses performance can be measured (Elkington)?

1. Planet - environmental performance 2. People - social performance 3. Profit - economic performance

Task Culture (Handy's Organisational Culture Types)

A culture where there is a focus on specific tasks and projects. Individuals are brought in to work on tasks as and when they are required, sharing ideas across functions. It may occur in organisations such as design and advertising agencies.

Drawbacks of the balanced scorecard model

A danger that a business will have too many performance indicators Need to have balance between the four perspectives - not easy Senior management may still be too concerned with financial performance Needs to be updated regularly to be useful

Growth Phase: Collaboration - Crisis of Red Tape (2 reasons)

A dangerous growth in organisational bureaucracy Slowing decision-making & missing external changes

Kaplan and Norton's balanced scorecard

A strategic planning and management system used to ensure that a business's activities are linked to its vision statement.

Growth Phase: Delegation - Crisis of Autonomy (2 reasons)

Business now has functional management But founder / leader still struggling to let go

Carroll's CSR Pyramid key points...

According to Carroll, 'CSR involves the coduct of a business so that it is economically profitable, law abiding, ethical and socially supportive'. Carroll produced a pyramid that identifies the different types of obligations that society expects of businesses.

Kotter and Schlesinger's Overcoming Resistance to Change: 1. Education

Appropriate if people lack information or have inaccurate information about the proposed change. Education may help people to understand why change is necessary. It may take time to convince people and win the argument.

Key features of Carroll's CSR pyramid

CSR is built on the foundation of profit - profit must come first Then comes the need for a business to ensure it complies with all laws & regulations Before a business considers its philanthropic options, it also needs to meet its ethical duties

Axis (blake mouton)

Concern for People (y-axis) Concern for Completing Task (x-axis)

What are the six growth phases in Greiner's model?

Creativity, Direction, Delegation, Coordination, Collaboration

What is 4 on Bowman's clock?

Differentiation: The aim of a differentiation strategy is to offer customers the highest level of perceived added value. Branding plays a key role in this strategy, as does product quality. A high quality product with strong brand awareness and loyalty is perhaps best-placed to achieve the relatively prices and added-value that a differentiation strategy requires.

Transnational strategy (bartlett)

High local responsiveness High global integration complex to achieve aim is to maximise local responsiveness but also gain benefits from global integration wide sharing of expertise

What are the four aspects of social responsibilities for a business?

Economic responsibilities, legal responsibilities, ethical responsibilities and philanthropic responsibilities

What is the bottom layer of the CSR pyramid?

Economic responsibilities: Be profitable- the foundation upon which all other layers rest.

What are the six methods of overcoming resistance to change (Kotter and Schlesinger)?

Education, participation, facilitation, negotiation, manipulation, coercion

Benefits of measuring the triple bottom line. Give two.

Encourages businesses to think beyond narrow measure of performance (profit) Encourages CSR reporting Supports measurement of environmental impact & extent of sustainability

What is the third layer of the CSR pyramid? Give on example.

Ethical responsibilites: Be ethical- Obligation to do what is right and fair, avoid harm. E.g. Treatment of suppliers and employees.

The income elasticity of demand is usually strongly positive for

Fine wines and spirits, high quality chocolates (e.g. Lindt) and luxury holidays overseas Consumer durables - audio visual equipment, 3G mobile phones and designer kitchens Sports and leisure facilities (including gym membership and sports clubs)

What is 5 on Bowman's clock?

Focused differentiation: Product at at the highest price levels because of high perceived value. This is the strategy used by luxury brands, who achieve premium prices by highly targeted segmentation, promotion and distribution. This strategy can lead to high profit margins, only the best products and brands can sustain the strategy long-term.

The scorecard produces a balance between

Four key business perspectives: financial, customer, internal processes and innovation. How the organisation sees itself and how others see it. The short run and the long run The situation at a moment in time and change over time

Greiner's Model of Growth

Greiner's Growth Model suggests that there are five crises that businesses may experience as they grow.

Key messages from greiner's model of growth (give two)

Growth is hard Growth poses many management and leadership challenges (crises) Leadership and organisational structure have to evolve to reflect the growth of a business Businesses that don't adjust as they grow will experience lower growth than those that do

Growth Phase: Alliances - Crisis of Growth (2 reasons)

Growth slowing as business runs out of ideas Alliances are sought (including new business owners)

Handy's model of organisational culture

Handy outlined four types of culture: power, role, task, and person

Main benefits of using the balanced scorecard

Helps companies focus on what has to be done in order to create a breakthrough performance Acts as an integrating device for a variety of corporate programmes Makes strategy operational by translating it into performance measures and targets Helps break down corporate level measures so that local managers and employees can see what they need to do well if they want to improve organisational effectiveness Provides a comprehensive view that overturns the traditional idea of the organisation as a collection of isolated, independent functions and departments

Elkington's Triple bottom line key points...

Highlights that business performance may be measured in numerous ways: in relation to its finances, its environmental impact and how socially responsible it is in relation to employees. If you measure all three areas employees are likely to pay attention to them and change their behaviour accordingly. It can be difficult to find or agree ways of measuring the impact of business on the planet and people.

Elkington's Triple Bottom Line

Highlights that businesses may have different objectives, not just for profit

Process (7P's)

How goods get to customers How smoothly things are delivered Important for service industries and online businesses

What is 3 on Bowman's clock?

Hybrid: Involves elements of a low price, with some product differentiation. Aim is to persuade consumers that there is good added value through the combination of a resonable price and acceptable product differntiation. If the added value is offered consistently this can be a very effective positioning strategy.

Hofstede's national cultures

Identifies different forms of national culture

Hackman and Oldham's Model of Job Design

Identifies factors that influence the motivating potential of a job

Kotter and Schlesinger's Reasons for resistance to change

Identifies four types of reason why people resist change.

Kotter and Schlesinger's Overcoming resistance to change: 6. Explicit and implicit coercion

If other methods are not successful or not possible then you may want to force change through. People may not agree with the change but may do it because they have to. Over time, having changed their behavior, they may come to agree with the change itself if it proves successful.

Kotter and Schlesinger's Overcoming resistance to change: 4. Negotiation and agreement

If people are resistant to change it may be possible to negotiate with them to win their agreement. This may mean a compromise is needed and the form of change is slightly different than originally intended.

Person Culture (Handy's Organisational Culture Types)

Individuals have considerable freedom to act independently. It may occur in organisations such as legal or medical practices where individuals have high levels of specialist technical expertise.

Growth Phase: Direction - Crisis of Leadership (2 reasons)

Informal communication starts to fail Business now too big for leader to get involved in everything

What are the five crises in Greiner's model?

Leadership, Autonomy, Control, Red tape, Growth

What is the second layer of the CSR pyramid? Give two examples.

Legal responsibilites: Obey the law - Law is society's codification of right and wrong. E.g. employment, competition, health and safety

What does planet performance indicate (Elkington's TBL)?

Measures the impact of business activity on the environment e.g. emissions, use of sustainable inputs

Criticisms of Greiner's Growth Model (give 2)

Like most models - it is simplistic Not every business will suffer crises as it grows - many adapt easily without suffering any obvious panics or crises The model doesn't really take account of the pace of growth, particularly in an increasingly dynamic external environment

What is 8 on Bowman's clock?

Loss of market share: This position is a recipe for disaster in any competitive market. Setting a middle-range or standard price for a product with low perceived value is unlikely to win over many consumers who will have much better options (e.g. higher value for the same price from other competitors).

international strategy (bartlett)

Low local responsiveness Low global integration Aims to achieve efficiency by focusing on domestic activities international operations are largely managed centrally relatively little adaptation of product to local needs

Global strategy (bartlett)

Low local responsiveness High pressure for global integration They are: highly centralised focus on efficiency little sharing of expertise locally standardised products

What is 1 on Bowman's clock?

Low price, low added value: Not a competitive position. Non differentiated product, low perceived value by the customer, despite the price. A bargain basement strategy. Remaining cheap is the only way to stay competitive and hope competitors do not undercut you.

What is 2 on Bowman's clock?

Low price: Look to being the low-cost leaders in the market. Cost minimization is required for this to be a success i.e. using economies of scale. Profit margins per product are low, but the volume of output is high, so can still generate high profits. Competition with low price businesses is often intense and involves price wars.

Objectives of market penetration (ansoff)

Maintain or increase the market share of current products - this can be achieved by a combination of competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to personal selling Secure dominance of growth markets Restructure a mature market by driving out competitors; this would require a much more aggressive promotional campaign, supported by a pricing strategy designed to make the market unattractive for competitors Increase usage by existing customers - for example by introducing loyalty schemes

4 parts of ansoff's matrix

Market penetration, product development, diversification, market development

What are the five national cultures? (Hofstede's national cultures)

Masculinity/femeninity, Long-term orientation, Power distance, Uncertainty avoidance, Individualism and collectivism

What does people performance indicate (Elkington's TBL)?

Measures extent to which business is socially responsible Harder to calculate & report reliably & consistently

What is 7 on Bowman's clock?

Monopoly pricing: Where there is a monopoly in a market, there is only one business offering the product. The monopolist doesn't need to be too concerned about what value the customer perceives in the product - the only choice they have is to buy or not. There are no alternatives. In theory the monopolist can set whatever price they wish. Fortunately, in most countries, monopolies are tightly regulated to prevent them from setting prices as they wish.

Growth Phase: Coordination - Crisis of Control (2 reasons)

More formal management structures in place But new layers of hierarchy needed to keep control

Ways of achieving market development (ansoff)

New geographical markets; for example exporting the product to a new country New product dimensions or packaging: for example New distribution channels (e.g. moving from selling via retail to selling using e-commerce and mail order) Different pricing policies to attract different customers or create new market segments

Background to the balanced scorecard

No single measures can give a broad picture of the organisation's health. So instead of a single measure why not a use a composite scorecard involving a number of different measures. Kaplan and Norton devised a framework based on four perspectives - financial, customer, internal and learning and growth. The organisation should select critical measures for each of these perspectives.

Criticisms of the triple bottom line. Give two.

Not very useful as an overall measure of business performance Hard to reliably and consistently measure People & Planet bottom-lines No legal requirement to report it - so take-up has been poor

Kotter and Schlesinger's Model of overcoming resistance to change

Outlines some of the methods that might be used to overcome resistance to change.

Carroll's CSR Pyramid

Outlines the different possible aspects of social responsibility for a business

income elasticity of demand is low for...

Staple food products such as bread, vegetables and frozen foods Mass transport (bus and rail) Beer and takeaway pizza! Income elasticity of demand is negative (inferior) for cigarettes and urban bus services

Role Culture (Handy's Organisational Culture Types)

People have clearly delegated authorities within a highly defined structure. Hierachical bureaucracy Power derives from a person's position Little scope exists for expert power

Weaknesses of Carroll's CSR pyramid model?

Perhaps too simplistic? Should ethics be at the top? Businesses don't always do what they claim when it comes to CSR

What is the top layer of the CSR pyramid? Give one example.

Philanthropic responsibilities: Being a good corporate citizen. E.g. charitable donations, staff time on projects.

What are Handy's 4 cultural types

Power, role, task and person

What are the 4P's of marketing? With brief definitions of each.

Product: the good or service that the customer buys Price: how much the customer pays for the product Place: how the product is distributed to the customer Promotion: how the customer is found & persuaded to buy

A successful product development strategy places the marketing emphasis on:

Research & development and innovation Detailed insights into customer needs (and how they change) Being first to market

What is 6 on Bowman's clock?

Risky high margins: High risk strategy where businesses set high prices without offering anything extra in terms of perceived value. If customers do buy these products the profit margin is high. But, customers may find a better-positioned product with more value at a similar or lower price. High margins is a non-competitive strategy i.e. selling something for more than its worth.

What the the four types of reason why people resist change? (Kotter) Give two.

Self interest, misunderstanding and fear, differing views and prefer the status quo

What does Bowman's strategic clock show?

Shows that different strategies can be competitive i.e. a business can charge a high price if it offers a high level of benefits and be competitive. If it offers relatively low benefits it needs a low price to compete. Some combinations of benefit and price are not competitive.

Kotter and Schlesinger's Overcoming resistance to change: 3. Facilitation and support

Some people resist change because they are afraid of it. If you can help the process of change ans support people so they have the skills and resources they need to cope with it, this can help it to be accepted.

What are the four aspects of a job that can influence how motivating it is? (Hackman)i.e. what questions do they pose.

Task identity - Does the job holder have a clear task to identify with? Task significance - Does the job holder understand why their job matters? Task variety - Is there variety in what the job holder does or is it monotonous? Autonomy - Does the job holder have some ability to act independently/

Strengths of Carroll's CSR pyramid model?

The model is easy to understand Simple message - CSR has more than one element Emphasises importance of profit

People (7P's)

The people who serve you, and factors such as how trained they are and how knowledgeable they are about the products, can be important considerations.

What is income elasticity of demand?

The responsiveness of demand to a change in income

Masculinity vs. Femininity (hofstede)

Theory of the relationship between gender and work roles. In masculine cultures, sex roles are sharply differentiated and traditional "masculine values" such as achievement and the effective exercise of power determine cultural ideals; in feminine cultures, sex roles are less sharply distinguished, and little differentiation is made between men and women in the same job.

Kotter Reasons for resistance to change: 4. Prefer the status quo

They do not like change/ prefer things as they are

Kotter Reasons for resistance to change: 2. Fear and misunderstanding

They do not trust the managers' motives

Kotter Reasons for resistance to change: 3. Differing views

They understand the reasons for change, but disagree with the changes; they may think that they have a better plan.

Kotter Reasons for resistance to change: 1. Self-interest

They would be worse off if the change occurred (eg lose their job)

Kotter and Schlesinger's Overcoming resistance to change: 2. Participation and involvement...

This can help overcome change by getting people involved in the process. This means that people have a sense of ownership and so may be more willing to get involved and make it work.

Force for local responsiveness (barlett)

This considers questions such as: Do customers in each country expect the product to be adapted to meet local requirements? Do local (domestic competitors) have an advantage based on their ability to be more responsive?

Force for global integration (barlett)

This considers questions such as: How important is standardisation of the product in order to operate efficiently (e.g. economies of scale)? Is consistent global branding required in order to achieve international success?

Kotter and Schlesinger's Overcoming resistance to change: 5. Manipulation and co-option

This may involve offering rewards to win over key influential people who will then get others to agree to change.

Bowman's strategic clock is overview

This outlines different strategies in terms of the perceived benefits (added value) and price. It highlights different combinations of benefits and price that are competitive and those that are not.

What are core competencies?

Unique strengths Embedded deep within a firm Allow a firm to differentiate its products and services from those of its rivals Results in: -Creating higher value for the customer or -Offering products and services at lower cost

Ansoff's matrix

a marketing planning model that helps a business determine its product and market growth strategy.

Ansoff's matrix

a model used to show the degree of risk associated with the four growth strategies of market penetration, market development, product development and diversification

Bartlett and Ghoshal

a model which outlines the potential strategic options for a business seeking to expand overseas

long-term orientation (hofstede)

a national culture attribute that emphasizes the future, thrift, and persistence

Individualism vs. Collectivism (hofstede)

describes whether a person functions primarily as an individual or as part of a group

Multi-domestic strategy (bartlett)

high local responsiveness low global integration aims to maximise benefits of meeting local market needs through extensive customisation decision-making decentralised local businesses treated as separate businesses strategies for each country

Power Distance Index (hofstede)

measures power inequality between superiors and subordinates within a social system

Uncertainty Avoidance Index (hofstede)

measures the tolerance of uncertainty and ambiguity among members of a society

What is the equation for income elasticity of demand?

percentage change in quantity demanded/percentage change in income

Extended marketing mix

the combination of seven elements of marketing that aim to work together to achieve the objectives of a marketing strategy.

Blake and Mouton's Managerial Grid

tool for training managers in leadership styles that would enhance organizational efficiency and effectiveness and stimulate the satisfaction and creativity of individual workers

What does a businesses attempt to grow depend on? (ansoff)

whether it markets new or existing products in new or existing markets