2.1 Flashcards
what is progressive tax
the more you earn the more your taxed
what is regressive tax
the more you earn the less your taxed
proportional tax
marginal rate of tax is constant leading to constant average rate of tax
what is organic growth
growth happens naturally over time and its within the business means
what is external growth
growth happens very quickly and outside a business’s means
how do firms grow
mergers
takeover (acquisition)
why might a firm want to grow
maximise profit
meet demands
opportunity to cists cost
increase market share
economies of scale
what is internal economies of scale
an increase in scale of production
what is external economies of scale
increase in scale of production within the industry the firms operates in
what are the 6 internal economies of scale and what does each one mean
technical - benefit of containerization
purchasing - buy in bulk
managerial - specialised staff
financial- lower interest rates on loans
risk bearing - diversification
network - build network of suppliers/consumers
what is diseconomies of scale
occur when there is an increase in average total cost as the scale of production increases
how can diseconomies happen
Internal communication
Coordination
what is market power
the extent to which a firm can control price and costs in a market.
what is benefit of having high market power
able to charge high prices force
suppliers to lower prices by threatening to cancel contracts
lack of competition
economies of scale
ability to use high levels of finance
what are the 2 types of branding and what do they mean
personal - when a person brands themselves e.g celebrities
geographical - when a city ,country, region or county creates a brand that is the perfect example of the people there e.g tourism
what is brand recognition
a brand is known for their logo, shape or colour e.g nike tick
what are the benefits of a strong brand
high brand loyalty
added value
reduce PED
charge premium prices
distinguish competition
what are the drawbacks of a strong brand
skilled labour shortage
geographical immobility
occupational immobility
what is geographical immobility
workers in an economy find it difficult to move regions
what is occupational immobility
workers don’t possess skills to do other jobs
what is integration
the bringing of 2 or more firms together
what is vertical integration
occurs when 2 firms in different stages of production integrate e.g car manufacturer buys a dealership
what is horizontal integration
2 firms at the same stage of production integrate e.g mercedes buying out bmw
what is conglomerate integration
occurs when 2 firms who ate unrelated integration e.g car manufacturer buys a book store
what are the reasons for inorganic growth
Synergy
secure supplier
secure outlet
brand recognition
expertise
What is innovation
the development of an idea into a new product or process
what is he purpose of innovation
Firms cannot afford to stand still in competitive market so they must find new ways to be ahead of rivals
what are the risks of innovation
Firms can make substantial losses if innovation fails and other companies are likely to react with their own innovations
benefits of innovation
Creates a USP
patent reduces competition
More efficient and cost effective production process
Likely to be a premium product with high prices
Drawbacks of innovation
Can be very costly
drain on resources
opportunity cost arise
Few innovations succeed effectively financing waste
what is differentiation
being able to offer a product or service that stands out from the competition
how can a firm differentiate
promotion
innovation
product
what is product innovation
changing a product that already exists or developing an invention into a brand new product
what is process innovation
changing a process of production that already exists or putting into practise a brand new production process
what is the role of state funding
States provide finance to firms which innovate to invest in R&D in hopes to differentiate industries in the UK
What are the stages in the product life cycle
Research and development
introduction
growth
maturity
decline
Extension strategies
What is the digital economy
the use of any form of digital technology
what is the 3 things in market side of the digital economy
price comparison websites - consumers compare prices increasing competition
viral marketing - Use of social media to encourage the spread of promotional activities and increase brand awareness
social media -The use of virtual communities to communicate with actual and potential customers
