2.1 business growth and competitive advantage Flashcards
growth
increase in productive capacity for a business
objectives of growth
- economies of scale
- increased market share and brand recognition
- increased market power
- increased profitability
economy of scale
decrease in average costs caused by an increase in size of a business
internal eos
gained from one business growing in size
external eos
gained from a whole industry increasing in size
diseconomies of scale
increases in average cost experiences when a business grows beyond it’s optimum size
methods of growth
internal (organic)
external (inorganic)
internal growth
- increasing production capacity
- new products
- new markets
- growing customer base (marketing and brand recognition)
external growth
- merger
- takeover
stages of production
primary sector - extracting raw materials
secondary sector - manufacturing
tertiary sector - selling items or providing services
integration
horizontal - merging or taking over a business at the same stage of production (often direct competitors)
vertical - merging or taking over a business at a different stage of production
conglomerate - when businesses merge or takeover unrelated businesses
problems arising from growth
- diseconomies of scale
- internal communication
- potential skills shortages
innovation
putting a new idea or approach into action as a saleable action
- improving existing products or services
- generating new ideas (product innovation)
stages of generating new products
- marketing research
- product development and testing
- distribution of products to outlet
- promotional launch
R&D
research and development
-refers to the activities companies undertake to innovate and introduce new products and services
state funding
governments may encourage businesses to invest more into R&D through the provision of grants and subsidies
product life cycle
- research and development
- introduction
- growth
- maturity
- decline
- extension strategies
extension strategies
- advertising
- price reduction
- adding value
- explore new markets
- new packaging
reasons for undertaking innovation and R&D
- competitive advantage
- market power
digital economy
economic activities that emerge from connecting individuals, businesses, devices, data and operations through digital technology
market information in the digital economy
- price comparison sites
- viral marketing
- social media
micromarketing
a marketing strategy that is used over a targeted group of customers in a niche market
how digital economy affects the supply side
- micromarketing
- online retailing and distribution
- recruiting and training staff with digital skills
how digital economy affects the demand side
- satisfying consumers with the long tail (niche markets)
- wider geographical markets
digital economy impacts
- costs
- prices
- profit
- loss
- firm creation and destruction
ways of small firms surviving in a competitive market
- niche market
- product differentiation and USP
- flexibility in meeting customer needs
- relationships with stakeholders
- customer service
