2nd test Blackwell Gibbins Flashcards
percentage change equation
difference
————- X 100
original
market power definition
the abliity of a firm to influence or contorl the terms and contitions on which goods are brought and sold
markte dominance definiton
a mesure of market share compared to competitiors
barriers to entry
Examples of barriers to entry
the facto that could prevent a firm from entering and competitng in a market
Large start up costs mainly capital costs
having the marketing budget to break customer loyalty
the inability to gain economies of scale
the possibility that existing businesses will star a price war
legal restrictions such as patents
Low barriers/high barriers entry in market styles.
low barriers: monopolistic competition, competitive
High barriers: Oligopoly, monopoly
barriers to exit
Examples Barriers to exit
the factors that could prevent a firm from leaving a market even if it wanted to
the difficulty of selling capital
high redundancy costs
contracts with suppliers (company will face legal challenge if these are not honoured
leases with landlords
Merger
This is where two companies join together to form a new larger business
Acquisition
this is where control of another company is achieved by buying a majority of its shares
+ external growth
may gain new management with different skills
will result in an increase in market share (and market power/dominance)
may be able to meet customer needs more effectively with combination of resources
may experience economies of scale
- external growth
may suffer from diseconomies of scale due to size I.E. communication problems (business, shareholders)
may take on extra debt that the business could struggle to repay if the strategy isn’t successful
could result in redundancy
could result in higher prices
could result in a dominate business dictator terms and conditions
organic/internal growth definitnion
examples:
involves expansion from within a business
opening more stores - new and existing
launching new products - increased demographic
employing more workers - less shortages
increasing productive capacity
investing in new technology -speed of sales
launching existing products into new markets- more3 customers & innovation
+ organic growth
less risky than external growth - not as severe
could be finance by retained profits
its’s a sensible/steady way of growing a business
- organic growth
growth rate could be too slow to satisfy share holders
will be difficult to achieve if market is shrinking
hard to increase market share if the business is already a market leader
what is the CMA
Competition Markets Authority
they ‘work to promote (actively encourage) coemption ‘
CMA Investigate mergers which could restrict competition and block them i.e. Sainsburys and Asda
investigates where there may be abuses of dominant positions
brings criminal proceedings against individuals who commit the cartel offence
enforces legislation to tackle practices that make it difficult for consumers to exercise choice
what sanctions can CMA put in place
The business(es) involved can be finned up to 10% of their global turnover
Customer and competitive of firm(s) involved can be sued for damages as a result of being affected by ant-competitive behaviour
individuals can be disqualified form being a company directly
how does CMA’s sanctions benefit the consumers
results in more choice ,better value for customers ,more business competition within a given market ,better terms for suppliers ,less abuse of dominant positions
what is the economy
the total value of output produced in a economy per year
adding up the value of all goods and services produces in a year
what happens when the gdp goes up
what happens when the gdp goes down
GDP goes up - economy is growing/expanding
more wealth -house prices goes up
more jobs
GDP goes down- The economy is shrinking
job cuts
fall in house prices
growing at a slower/faster rate
shrinking at a slower/faster rate
‘purchasing power’ ‘standard of living’
what is the limitation of GDP
can only see What’s ahead cant see what in the future
‘rear view mirror.’
government strategies to encourage economic growth
encourage investment in physical capital by offering subsides or lowering taxation
improve infrastructure- better transport like roads and trains and air ports increase the speed which raw materials and finished products can be delivered and help employees get to work
invest in education to improve human capital
inflation definition
persistent general tendency of prices in the economy to rise.
how to measurer inflation
customer price index CPX - a measure that examines the weighted average price of a basket of consumer
what causes inflation
high demand
shortage of supply
rapid demand - extra staff / overtime / raw materials increasing prices to cover costs
price rise cycle
high inflation makes UK exports un-competitive why
identical products higher inflation price of exports rise unattractive to consumers abroad
high inflation can reduce multinational investment why
multinationals look to produce in a the cheapest possible location they choose a country with the lowest rates of inflation not where price of labour and raw materials is rising sharply - this would make their products un-competitive
high inflation creates uncertainty around profits
managers dislike uncertainty about the return on their investments if you invest 500,000 in a country with high inflation in 2-3 years how much is this really worth, low inflation allows manager & businesses to estimate their investments with some degree of accuracy
Exchange Rate definition
the value of one currency in terms of another
What is a strengthening and weakening pound mean
If the pound increases in value it is strengthening
£ 1.00 = $ 1.50
if the pound decreases in value it is weakening
£ 1.00 = $ 1.10
what is a import
sale leads to money going OUT of the UK
what is a export
sale leads to money going IN TO the UK
Pound is strong
SPICED
Pound is weak
WPIDEC
Strong Pound Imports Cheap Exports Dear - (expensive)
Weak Pound Imports Dear - (expensive) Exports Cheap
Does the Bank of England set the Exchange rate
No. Supply and demand does
Interest rate definition
An interest rate is the reward for saving and the cost of borrowing expressed as a percentage of the money saved or borrowed
Who sets Intrest rates in England
Bank of England set base interest rate or
|–> Monetary Policy Committee (MPC)
Changed in 1997 from government
what is operations management
management which designes and controlls the process of productions
added value
the difference between the price of finished product/service and the cost of the inputs involved in making it
how do you add value
function / cost / aesthetic
added value +
charge higher price
creating a point of differnec form the competition
protecting from competitors trying to steal customers by charging lower price
focusing a business more closely on its target market segment
added value -
not guaranteed that the cost of adding value can be recouped
the increase in price may restrict sales
amount of completion may restrict price so cost are larger to recoup
the elasticity of product may involve price increase within the market difficult to accept
added value equation
selling price - cost of inputs
mission statement definition
overall goal of the business
objective definition
steps towards aim
Aim definition
long term plan
what is the difference between strategic and tactical
strategic is long term, tactical is short term
what is the difference between market orientated and product orientated
market orientated is market wants and needs for product/services, product orientated is concentrated on product improvements
what is quality assurance
and
what is quality control
quality assurance - checking the product during differnet stages of production
and
quality control - checking the product at the end using a sample
output per employees equation / productivity
= total output / no. employees
factor imacting operation objectives
size and legal status of business
state of economy
competition
government
legislation
external factors impacts operation stratergy
political economic social technology ethical legal environmental STEEPLE
what are the 4 types of production
Job
Batch
Flow
Cell
Job production
Productions of items that meet specific requirements of the customer, one off
Wedding cakes, wedding dresses
+/- job production
\+ charge higher price meets customer needs quality motivational for employees flexible added value
- no economies of scale higher costs skilled labour costing difficult
Batch
Production of many similar items that are produced together
Jumpers, bread
+/- Batch
+
making in batches reduces unit cost
can still address specific customer needs
faster than gob
some EOS
some flexibility
use of specialist making can increase output and production
- time lost switiching between batch need to be reset/downtime need to keep stocks of rawmaterials potentiallly demotivation for staff many tide up in storage
Flow production/mass
involves a continues movement of items turn in the production process of high volume
+/- flow
\+ Flow production is continues Large EOS standardise products increased productivity
- inflexible demotivating for employees high set up cost break down stock holding supply lead time
Cell production
workers are organised into multi skilled teams, each team is responsible for a particular part of the production process including quality control health and safety
+/- Cell
\+ Closeness of cell members should improve communication avoiding confusion arising from misunderstood or non-received messages quality improvements workers are multi skilled can lead to efficiency greater worker motivation, variety
-cell
the company has to encourage burs and participation or workers feel they are needed more from
the company have to invest in new raw materials
cell production may not allow a firm to use its machinery as intensivley as traditional flow
allocation of work to cells has to be efficent
employees and recruitment have to support
what is a USP
Unique Selling Point
factors that influence the selstion of the production method
nature cost of technology and machinery workforce finance customers competition stakeholder/objective
What is R and D
Research and development - the process that enables the creation of new and improved products to meet the needs of the customer
what are grantt charts
a graphical representation of the order and duration of tasks within a project
+/- grantt charts
+
easy to monitor
see what is happening shows time and resource
allocation
-
does not show critical activities
can’t see est and lft
cant calculate free and total float
estimated duration of a project
6
what is division of labor
the allocation of labour into specific tasks inserted to increase productivity
what is specilisation
where workers perform specific tasks
+/- division of labour
+
task should be able to be preformed qicker, increasing productivity
output will increase whilst lowering unit costs
consequently increasing profit margin
-
task become repetitive lowering moral and creating more errors and faults
heiracrchy of objectives
↓Aims ↓Mission ↓corporate objectives ↓functional objectives ↓business unit/individual targets
aims
overall target and are boarder than objectives
mission statement
simple statement starting the companies goals
corporate objectives
objectives that tend to focus on the desired performance and results of the business
functional objectives
relate to specific functions of a business such as marketing, operation, human resources and finace
business unit / individual targets
similar to functional but are more focused of individuals
+/- Sole trader
+
control - full control of the business
Profit retention- keep all profits
private data - information about sole traders are private, not all documents are public on companies house
-
Unlimited liability - sole traders are unicorporated, they aren’t a seperate legal identity, personal possesions can be taken to pay debts
Capital - hard to raise capital
diseconomies of scale - have to charge higher prices to cover costs
decision making - they are the only voice in the decision making process
+/- Partnership
+
capital - both partners funds for capital
flexibility - easy to start up and run, less strictly regulated
shared responsibility - allows partners to make the most of their abilities
decicion making - more brains in the decicion maiking process
-
disagreements - differnt opinios of how the business is run between partners
Unlimited liability - partnerships are unincorporated, they aren’t a separate legal identity, personal possessions can be taken to pay debts
profit sharing - partners have to split profits according to their terms (sighed in deed of partnership)
+/- Private Limited Company (LTD)
+
Shares - only sell shares to friends and family, no chance of hostile takeover
privacy - not all documents have to be posted on companys house
Limited Liability - LTD’s are incorpirated meaning that the owners are a seperate legal identity, debts are paid with the business investment
-
complicated to set up - first you need shares worth £50,000 and then you have to set up on companies house
complex accounts - hard to track all accounts that the business produces so a accountant is usually heird to not waste time
not fully private - This will mean that you provide information on company accounts, company records, company directors and company shareholders.
+/- Public Limited Company (PLC)
+
capital - easier to rase from share’s and investors. Shares can be bought easily on the stock exchange
prestigious profile - the company looks more proffesional as a plc
Limited Liability - LTD’s are incorpirated meaning that the owners are a seperate legal identity, debts are paid with the business investment
-
not private - all accounts have to be posted on companies house
take over - as shares are sold on the stock exchange the ability of a hostile takeover is present
what are the 3 business sectors
private sector
public
third
what are the 3 market secotrs
primary
secondary
tertiary
third sector
non-profit organisations like charities
