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Define these terms and provide an example for each term to demonstrate your understanding - VCE - SSCE Business Management - Question 1 - 2003 - Paper 1
Question 1
Define these terms and provide an example for each term to demonstrate your understanding. a. profitability b. strategic direction
Worked Solution & Example Answer:Define these terms and provide an example for each term to demonstrate your understanding - VCE - SSCE Business Management - Question 1 - 2003 - Paper 1
Step 1
profitability
Answer
Profitability refers to an indicator of a firm’s success or a measure of business performance. It is typically expressed as a percentage figure over a specific period. For example, if a company improved its profitability by 10% during the financial year, this indicates a successful operation. An example of profitability can be illustrated through a company that increased its revenue from 1,100,000 while keeping expenses steady at $800,000. This results in a profitability of:
In percentage terms, this would be:
Step 2
strategic direction
Answer
Strategic direction involves long-term planning by a business that spans approximately 3-5 years and is typically established by senior management. This planning defines the path the business intends to take to achieve its goals and objectives. For example, a company might outline its evolution towards becoming a leader in sustainable products, guiding every decision from product development to marketing strategies. This long-term approach contrasts sharply with short-term planning, which often focuses on immediate operational issues without considering future growth.