1.3
Business organisation and environment
emerging markets by 2015. In Europe, one of the most competitive car markets in the world, the target is to increase sales by 300 000 cars a year by the same date. Departmental operating targets have also been established. For example, the human resources department must prepare for up to 8000 job losses and operations must aim to cut fixed manufacturing costs by 30% and costs of purchasing car parts by 4–6% a year. Marketing must plan to launch 12 new models in the Chinese market. The chairman also announced his intention to take both car brands upmarket and establish them as premium car brands that increasing numbers of customers will want to own. Source: www.timesonline.co.uk
26 marks, 52 minutes 1. Analyse whether Peugeot Citroën’s objectives fit the SMART criteria.
[6]
2. Analyse the importance of the chairman not only setting an overall aim for the company but also establishing departmental objectives.
[10]
3. To what extent might the chairman’s new objectives meet with the needs of the company’s shareholders?
[10]
SWOT analysis SWOT analysis: a form of strategic analysis that identifies and analyses the main internal strengths and weaknesses and external opportunities and threats that will influence the future direction and success of a business
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A SWOT analysis provides information that can be helpful in matching the firm’s resources and strengths to the competitive environment in which it operates. It is, therefore, useful in strategy formulation and selection. It comprises: • S = strengths These are the internal factors about a business that can be looked upon as real advantages. These could be used as a basis for developing a competitive advantage. They might include experienced management, product patents, loyal workforce and good product range. These factors are identified by undertaking an internal audit of the firm. This is often undertaken by specialist management consultants who analyse the effectiveness of the business and the effectiveness of each of its departments and major product ranges. • W = weaknesses These are the internal factors about a business that can be seen as negative factors. In some cases, these can be the flip side of a strength. For example, whereas a large amount of spare manufacturing capacity might be a strength in times of a rapid economic upturn, if it continues to be unused it could add substantially to a firm’s average costs of production. Weaknesses might include: poorly trained workforce, limited production capacity and ageing equipment. This information would also have been obtained from an internal audit. • O = opportunities These are the potential areas for expansion of the business and future profits. These factors are identified by an external audit of the market the firm operates in and its major competitors. Examples include: new technologies, export markets expanding faster than domestic markets, and lower rates of interest increasing consumer demand. • T = threats These are also external factors, gained from an external audit. This audit analyses the business and economic environment, market conditions and the strength of competitors. Examples of threats are: new competitors entering the market, globalisation driving down prices, changes in the law regarding the sale of the firm’s products and changes in government economic policy.