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1 Introduction to Business Managment > 1.5 Growth & Evolution > Flashcards

1.5 Growth & Evolution Flashcards

1
Q

What are the external factors that impact a business?

A

-Social
-Technological
-Economical
-Ethical
-Political
-Legal
-Ecological

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2
Q

What does economies of scale refer to?

A

Economies of scale refers to businesses becomes more efficient (decrease in average unit cost) as they increase the size of operations

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3
Q

What does diseconomies of scale refer to?

A

Diseconomies of scale refers to when a business becomes inefficient (increase in average unit cost) as they increase their operations.

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4
Q

How is efficiency measured?

A

Efficiency is measured in cost per unit

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5
Q

Total costs formula….

A

TC=FC+VC

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6
Q

What are fixed costs?

A

Fixed costs are costs that do not change as production changes. Example: rent, wages

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7
Q

What are variable costs?

A

Variable costs are costs that change as production changes. Example: raw materials

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8
Q

AC formula…

A

AC= TC/Q
AC=FC+VC/Q

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9
Q

What does internal economies of scale refer to?

A

Internal economies of scale refers to efficiencies that a business itself can make

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10
Q

What are the main internal economies of scale?

A

-Technical, bigger machines means more output
-Managerial, more managers more specialisation
-Financial, bigger businesses are more stable
-Marketing, bigger businesses result in better marketing
-Purchasing, bulk buying

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11
Q

What does external diseconomies of scale refer to?

A

External diseconomies of scale refers to disefficiencies in a business thanks to someone else expanding

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12
Q

What are the main external economies of scale?

A

-Customers, an airport
-Employees, high concentration of employees in an area

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13
Q

What does internal diseconomies of scale refer to?

A

Internal diseconomies of scale refers to inefficiencies a business itself can make

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14
Q

What are the main internal diseconomies of scale?

A

-Technical, bigger units mean less space
-Managerial, managers could be over specialised
-Financial, large amount of surplus can lead to bad decision making
-Marketing, bad marketing could lead to bad reputation
-Purchasing, over buying stock

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15
Q

What does external diseconomies of scale refer to?

A

External diseconomies of scale refers to inefficiencies in a business due to someone else expanding

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16
Q

What are the main external diseconomies of scale?

A

-Employees, too much concentration of one economic activity could lead to lack of skilled workers

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17
Q

What are some reasons for businesses to grow?

A

-Survival, more likely for a business to survive
-Economies of scale, leads to higher profits
-Higher status, leads to better brand reputation
-Market leader status, shape market habits
-Increased market share, business can set prices

18
Q

What are some reasons for a business to stay small?

A

-Focus their investments more
-Prestige, able to charge more
-Motivation
-Less competition

19
Q

What is internal growth?

A

Internal growth is when a business grows from its own operations

20
Q

Characteristics of internal growth…

A

-Slow process
-Less risky than external growth since you are either selling more or more variety
-Usually self-financed

21
Q

What is external growth?

A

External growth is when a business expands by entering an arrangement to work with another business

22
Q

What are the different types of external growth strategies?

A

-Mergers
-Acquisitions
-Takeovers
-Joint Ventures
-Strategic alliance
-Franchises

23
Q

What is a merger?

A

A merger is when two “equal” businesses become one company

24
Q

What is an aquisition?

A

An acquisition is when a business buys majority or all of the shares of another business

25
Q

What is a takeover?

A

A takeover is when a business buys majority or all of the shares of another business and the business being bought does not want this

26
Q

What type of companies can only be taken over?

A

Publicly limited companies are the only type of businesses that can be takeovered

27
Q

What is horizontal intergration?

A

Horizontal integration is when two businesses in the same line of business join, this results in a larger market share

28
Q

What is vertical integration?

A

Vertical integration is when two businesses that are in different stages of the supply chain join

29
Q

What is backwards vertical intergeation?

A

Backwards vertical integration is when a business joins another business that is in an earlier stage of the supply chain

30
Q

What is forwards vertical intergration?

A

Forwards vertical integration is when a business joins another business that is in a later stage of the supply chain

31
Q

What is conglameration?

A

Conglomeration is when two businesses in different industries integrate

32
Q

What are advantages of integration?

A

-Economies of scale
-Control up or down of chain of production

33
Q

What are disadvantages for Mergers and Acquisitions?

A

-Costly
-High legal consulting fees
-Risk of culture clash

34
Q

What are joint ventures?

A

Joint ventures is when two businesses decide to combine resources and make a new separate business for a certain period of time. Once this period of time has passed they can either extend it, dissolve then business or incorporate it into one of the businesses

35
Q

What is a strategic alliance?

A

A strategic alliance is when two or more businesses decide to work together. No new business is created and businesses stay seperate

36
Q

What is a franchise?

A

A franchise is when a franchisee buys the right to offer and sell a franchisors product

37
Q

What does the franchisor provide?

A

-Stock
-Uniforms
-Worldwide advertisement
-Staff training

38
Q

What does the franchisee provide?

A

-Staff
-Wages
-Prices
-Local advertising

39
Q

What are advantages to the franchisee?

A

-Product exists and usually well known
-Format of selling is established
-Secure supply of stock

40
Q

What are disadvantages to the franchisee?

A

-Unlimited liability
-No control over what to sell
-No control over supplies

41
Q

What are advantages to the franchisor?

A

-Makes all global decisions
-Does not have liability

42
Q

What are disadvantages to the franchisor?

A

-Image can suffer
-loses control on day-to-day running of the business

1 Introduction to Business Managment (6 decks)

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