Business transition work

3.7.1- Mission, corporate objectives and strategy

1. What is a mission statement? Explain the factors that influence the mission
statement.

A mission statement sets out the purpose of an organisation. This will be influenced
by the values of the founders of the business, the values of the businesses
employees etc.

2. Write a definition for corporate objectives and strategic decisions.

Corporate objectives are medium-long term goals established to coordinate the

business. Strategic decisions are judgements made by senior managers that are long
term, involve a major commitment of resources and are difficult to reverse.

3. Look at figure 1.4 on page 7. Explain how each of the internal and external factors
influence corporate objectives and strategic decisions.

Internal factors:

- A period of poor performance, indicated by declining sales and revenue and a

loss of market share, may provoke a change in a business strategy and the
corporate objectives it pursues.
- A new leader in a business or the culture of a workforce may have a major
influence on the objectives and the strategic decisions that are in pursuit of
those objectives.

External factors:

- The ability of consumers to spend money is curtailed as they now seek value
for money and competitive prices, so businesses have had to adjust their
corporate objectives to reflect this.
- The prices of commodities which are traded globally have received a lot of
attention as changing global prices impact heavily on objective setting and
strategic decision making in many industries.
- Changes in technology encourages firms to adopt objectives based on capital
intensive production and to use robots and other forms of technology to
replace labour in production.
- There has been a high positive level of net migration meaning more people
have entered the UK than left. This impacts the objectives and strategic
decisions of businesses in the UK as immigration affects the workforce that is
available as well as providing additional consumers for the products of many
firms.

4. What is the difference between strategy and tactics?

 A corporate strategy is a long-term plan to achieve the business’s vision through
attaining its corporate objectives. Strategies tend to involve a major commitment of
resources and are difficult to reverse. Strategic decisions also tend to involve a high-
level of uncertainty.

Tactical decisions are decisions made about how to implement a business strategy.
They tend to be short term, involve fewer resources, and less uncertainty. These
type of decisions, such as, temporary increases in production or a change of supplier,
are made regularly by relatively junior managers who may only be responsible for a
small element of the business activities.

5. Explain the links between mission, corporate objectives and strategy.

6. What is SWOT analysis? Why is it valuable? What are its drawbacks?

SWOT analysis is a method of strategic analysis which considers the internal and
external environments for businesses and identifies a business’s strengths,
weaknesses, opportunities and threats.

Benefits of SWOT analysis:

 It is a low cost and straightforward technique that can be used by managers in all
types of businesses
 It can assist managers to think in a structured way and focus on internal and external
environment

Limitations of SWOT analysis:

 Only covers issues that can be classified as a strength, weakness, opportunity or

threat. It can be difficult to address uncertain or two-sided factors.

3.7.4- Political and legal change

The Law Relating to Competition

1. What is the purpose of competition law and why is competition important to the
economy?

The purpose of competition law is to protect businesses and consumers from the
effects of anti-competitive practises. The UK government believes that free and fair
competition brings benefits to the economy.

2. What are the 3 main areas in which UK competition law operates? Briefly explain
each of them.

Cartel activity- cartels involve two or more businesses working together to limit the
extent of competition that exists in a market and is a form of anti-competitive
practise.
 Abuse of a dominant market position can take the form of imposing unfair purchase,
selling prices or trading conditions, limiting production, markets or technical
developments to the prejudice of consumers and imposing unfair and inconsistent
terms on different trading patterns.

Other anti-competitive practises include agreements with suppliers to not sell below
certain prices, limiting production to drive up prices and agreeing not to sell to a
competitors customers.

3. Why would the government want to stop a merger/takeover? Which

mergers/takeovers will be assessed by the Competition and Markets Authority
(CMA).

Governments would want to stop a merger/takeover because it may lead to a

substantial lessening of competition in a market. Mergers will be assessed by the
CMA if the business being taken over exceeds a given size or the newly merged
business would control 25% or more of its market.

4. Outline the following:

The Competition Act, 1998- This act prohibits cartels and abuses of dominant market
position. It outlaws concerted practise, for example, when businesses agree to divide
up a market and not compete in each other’s part of the market.

The Enterprise Act, 2002 - This act amended the Competition Act and strengthened
the power of the UK authorities to deal with anti-competitive practises and market
dominance. It placed a clear focus on the impact of the business’s activities on the
degree of competition, imposed tougher penalties on those involved in cartels by
criminalising their activities, provided more opportunities for victims of anti-
competitive behaviour to gain redress, etc.

Enterprise and Regulatory Reform Act, 2013 - This act included the creation of the
green investment bank and simplified and strengthened laws relating to equality and
employment. It created the CMA, single organisation responsible for competition
policy.

5. When does EU competition policy apply?

EU competition policy applies if the impact of anti-competitive behaviour extends

across Europe.

Laws relating to the Labour Market

6. Individual labour law relates to the rights and obligations of individual employees.
Briefly outline the following:
 Working Time Regulations, 1998 - set a time limit on the hours that employees can
be required to work each week to 48 hours.

The National Minimum Wage Act, 1998- established that a general hourly minimum
wage rate must be paid to employees (£6.50 an hour and £5.13 for 15–18-year-olds).

Employment Equality (Age) Regulations, 2006- established that it is unlawful to

discriminate against workers under the age of 65 on the grounds of age, makes it
illegal to make someone redundant or barring workers from training or promotion
because they're too old.

Equalities Act, 2010- The act relates to 9 protected characteristics which cannot be
used as a reason to treat people differently or unlawfully.

Enterprise and Regulatory Reform Act, 2013- This law imposes additional charges on
employees wishing to take employers to industrial tribunals in disputes over
employment. It limited the maximum payment for unfair dismissal to £74,200 or
one-year’s gross pay.

7. Collective labour law covers the activities of trade unions and the conduct of
industrial relations. Briefly explain how the following Acts restricted the power of
trade unions.

Employment Act, 1980- Under this act, employees were no longer obliged to
negotiate with unions. It restricted picketing to employees own place of work
thereby outlawing secondary picketing- closed shops were only permitted if
supported by at least 80% of the workforce in a ballot.

Trade Union Act, 1984- This legislation made a secret ballot of employees a legal
requirement before industrial action was lawful.

Trade Union Reform and Employment Rights Act, 1993- Unions were required to give
employers a minimum of seven days’ notice before taking official industrial action. It
abolished wages councils and minimum pay rates.

Employment Relations Act, 1999- Under this act, a trade union with a membership
exceeding 50% of the employees in any particular business can demand union
recognition and the right to introduce collective bargaining.

8. Explain Unfair dismissal

Unfair dismissal is the termination of a worker's contract of employment without a

legal reason.

9. Explain Health & Safety legislation

 Health and safety legislation has been enacted to discourage dangerous practises by
businesses and to protect the workforce.

Environmental Legislation

10. Explain the difference between private/internal costs and external costs.

Private costs are the costs of production which a business has to pay such as expense
for raw materials and wages. External costs are the business’s cost that they create
for other groups in society such as noise, congestion and air and water pollution.

11. Briefly outline The Environmental Protection Act, 1991 and The Environment Act,
1995.

The Environmental Protection Act 1991 introduced the notion of integrated pollution
control, making it a requirement that businesses are to minimise pollution as a
whole. The Environment Act 1995 established the Environment Agency with a brief
of coordinating and overseeing Environmental Protection.

12. How does the EU impact on the activities of businesses with regard to environmental
laws?

The EU issues regulations and directives related to Environmental Protection that

must be implemented into national laws by the 28 member states. This includes
climate change, air water and land pollution, waste management, protection of
nature species and biodiversity and noise pollution.

The Legal Environment and Decision Making

13. Changes in the legal environment have the potential to affect both functional and
strategic decision making within a business. Using examples, explain how.

It would be expected that a business’s HR department would revise policies and

approaches in light of new legislation for example, The 2010 Equality Act. This would
provoke decision making at a functional level. Environmental legislation could be
expected to have the most significant impact on the operations function within a
business requiring it to develop new methods of production that reduce pollution
and incorporate the use of renewable resources that are sustainable.

Recent changes in UK competition legislation have placed greater emphasis on

whether or not business activities result in a substantial lessening of competition and
make it easier for those affected by anti-competitive practises to seek legal redress.
This may require businesses to make significant long-term changes to their business
models and requires strategic decisions to do so.