7 A N A LY S I N G Recap Year 1:

THE
S T R AT E G I C How would you measure a business’ performance in each of the
POSITION OF A functional areas shown in the table below?
BUSINESS

Marketing Operations Human resources

7.3 A NALYSING THE EXISTING INTERNAL

POSITION OF A BUSINESS TO ASSESS STRENGTHS
AND WEAKNESSES : OVERALL PERFORMANCE
 7.3 A NALYSING THE EXISTING INTERNAL POSITION
OF A BUSINESS TO ASSESS STRENGTHS AND
WEAKNESSES : OVERALL PERFORMANCE

 In this topic you will learn about

 How to analyse data other than financial statements to assess the

strengths and weaknesses of a business
 Data other than financial statements should include operations,
human resource and marketing data
 Data may be analysed over time or in comparison with other
businesses

 The importance of core competences

 Assessing short- and long-term performance

 The value of different measures of assessing business performance

 Methods of assessing overall business performance to include:
 Kaplan and Norton’s
 Elkington’s Triple Bottom Line
 A NALYSING DATA

Can you describe  Operations data:

each of these
measures of
operations  Capacity
performance?
 Capacity utilisation

 Labour productivity

 Unit costs (average costs)

 Quality e.g. number of faults or complaints

 In pairs complete A NALYSING DATA
the table below.

Measure Company A Industry Calculation Possible interpretation

average
Capacity (tons) 150 000 85 000 Company A is 76% • May be a dominant
bigger than the business
industry average. • Will benefit from
economies of scale
Capacity 80% 70%
utilisation
Labour 1000 1200
productivity
Unit costs £10.50 £15.75

Quality
(faulty goods) 2% 5%
 A NALYSING DATA

Remember data can

be internal to the  In comparison
organisation e.g. sales  Over time
volume or external
e.g. market size.  Year on year  Benchmark within
business or against
 Year to date competitors

 Trends over a longer  Industry average

period of time
 Between branches or
 Monthly product lines

 Geographically

How would analysing data over time and in comparison with

other businesses help a car manufacturer? Try to use examples of
operations, marketing and HR data.
 C ORE COMPETENCES

What are the core

competences of
 Combined expertise, knowledge and experience of
Apple? the leaders and founders of a business
In pairs write a list.
 Collective learning and technical expertise
Read the article
below.  Leads to a competitive advantage
How many of these
core competences did
you identify?  Unique characteristics to a business

 Difficult to imitate by others

Core competences are tested using 3 questions:

• Do they allow for market development?
• Do they provide noticeable benefits to the end user?
• Are they difficult to imitate?
 A SSESSING SHORT - AND LONG - TERM
PERFORMANCE

 A business’ performance can be assessed in the short-term and

How has your short-
term decision to the long-term
study A-levels
affected your  Decisions made in the short-term may allow a business to
financial position?
improve performance in the long-term but have a negative
How will it affect impact in the short-term
your financial
position in the long- Example Short-term Long-term
term?
Investment in R&D High expenditure resulting in New product development.
lower profit margins. Highly differentiated charging a
No guarantee of success. premium price leading to
increased profit margins.
Increased capacity Lower capacity utilisation. Increased market share.
Higher unit costs. Achieve an objective of growth.
Training employees Time away from the workplace. Greater employee engagement.
Additional costs. Lower labour turnover.
 K APLAN AND N ORTON ’ S B ALANCED
S CORECARD

 A strategic system used to plan and manage a business’ activities in relation to

What is meant its vision statement
by a vision
statement?  It aims to link the vision for the future to the day to day running of the business

 This should result in a measurable (SMART) improvement in the performance of

the business in a number of areas

 The underlying premise is that financial data alone is insufficient to fully assess
a business’ performance

 It measures the performance of different areas of the business to see where

improvements can be made

 The Balanced Scorecard is used as a starting point to implement these changes

 Each scorecard will be individual to the business and designed internally to

focus on the business’ own unique characteristics and visions
 K APLAN AND N ORTON ’ S B ALANCED
S CORECARD

Name 9 financial
 The main areas that the business looks at are:
ratios.
 Finance: Measuring financial capability e.g. financial
ratio analysis

 Internal business processes: Efficiency in the

organisation e.g. JIT and capacity utilisation

 Learning and growth: HR requirements e.g. training,

labour turnover/productivity and communication

 Customer: Expectations being met e.g. customer

Balanced Scorecard. service, satisfaction and retention
 K APLAN AND N ORTON ’ S B ALANCED
S CORECARD

Balanced score card

at Barclays.
 E LKINGTON ’ S T RIPLE B OTTOM L INE

 A model designed to encourage sustainability

 Focus is on 3 key components to measure

performance
 Profit
John Elkington
explains his concept  People
of the triple bottom
line.  Planet

 Forces a business to consider its social responsibility

 E LKINGTON ’ S T RIPLE B OTTOM L INE

In pairs complete
the final row in the Profit People Planet
table to show how
a business can Economic Social Environmental
achieve each area responsibility responsibility responsibility
of responsibility.
Shareholders Employees Society
For example meet Employees Suppliers
health and safety
standards for
Suppliers Customers
employees
(people) whilst
paying a fair wage
(profit).

How to make a
profit while making
a difference.
 D ISCUSSIONS

 To what extent should big businesses put the

interest of shareholders above other stakeholders?

 Are models such as Kaplan and Norton’s Balanced

Scorecard and Elkington’s Triple Bottom Line of
genuine use to a business in strategic decision
making or a modern day PR exercise?
 7.3 A NALYSING THE EXISTING INTERNAL POSITION
OF A BUSINESS TO ASSESS STRENGTHS AND
WEAKNESSES : OVERALL PERFORMANCE

 In this topic you have learnt about

 How to analyse data other than financial statements to assess

the strengths and weaknesses of a business
 Data other than financial statements should include
operations, human resource and marketing data
 Data may be analysed over time or in comparison with
other businesses.

 The importance of core competences

 Assessing short- and long-term performance

 The value of different measures of assessing business

performance
 Methods of assessing overall business performance to
include:
 Kaplan and Norton’s
 Elkington’s Triple Bottom Line