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MS REZEL BUSINESS > 3.2 Business Growth > Flashcards

3.2 Business Growth Flashcards

1
Q

how does EOS create a competitive advantage?

A
  • having more funds to buy stock
  • more power over suppliers
  • funds to pay for specialist staff
  • better rep so banks are more willing to lend
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2
Q

what is EOS?

A

unit costs/avrg costs decrease as a result of an increase in the level of output of the business

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3
Q

What is purchasing EOS?

A
  • bulk buying
  • growing larger requires more stock
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4
Q

What is technical EOS?

A
  • larger businesses can afford higher cost machinery
  • improves efficiency
  • mass production techniques
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5
Q

What is managerial/specialization EOS?

A
  • managers can specialize in particular tasks
  • quality of decision making can be better in a larger firm
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6
Q

What is financial EOS?

A
  • larger firms are less risky to invest into/ gain finance more easily
  • small firms have a higher cost of finance
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7
Q

What is marketing EOS?

A
  • larger businesses can spread fc over a wider range of products
  • decrease in avrg cost per unit
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8
Q

what is risk bearing?

A

larger firms can spread risk by investing in more product and more markets. this is called diversification

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9
Q

What is internal EOS?

A

arises from the increased output of the business itself

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10
Q

what is external EOS?

A

occurs within an industry so all competitors benefit

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11
Q

what are the objectives of growth?

A
  • EOS
  • increased market power over suppliers and customers
  • increased market share and brand recognition
  • increased profitability
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12
Q

What are the problems with growth?

A
  • Diseconomies of scale
  • internal communication
  • over trading
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13
Q

What are the internal DEOS ?

A
  • communication
  • coordination
  • motivation
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14
Q

What are the external DEOS ?

A
  • Overcrowding in industrial areas
  • traffic congestion
  • price of land e labour rises
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15
Q

What happens when there is a lack of motivation?

A
  • Little decision making
  • powerlessness and alienation
  • increased lateness
  • low productivity
  • low output per worker
  • higher unit costs
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16
Q

What happens when there is a lack of coordination ?

A
  • monitoring of workers required
  • More managers needed
  • increased costs
  • control of resources needed
17
Q

Why is internal communication a problem of growth?

A
  • Less face to face com
  • decision making takes longer
  • more mistakes
  • more wastage
  • AC increases
18
Q

Why is overtrading a problem of growth?

A
  • Where a business accepts more orders than it can cope with
  • results in cash flow problems
19
Q

Why should businesses merge?

A

Tactical:
- ensure an increase in market share
- access to tech
- access to staff
- access to intellectual property such as patents

Strategic:
- access to new markets
- improved distribution networks
- improved brands

20
Q

What is a takeover/acquisition?

A

Involves one business acquiring control of another business; PLCs are at risk of a hostile takeover

21
Q

Reasons for takeovers?

A
  • increases market share
  • acquire new skills
  • EOS
  • secure better distribution
  • acquire intangible assets
  • spread risk by diversifying
  • overcome barriers to entry to target new markets
  • defend itself over takeover threat
  • eliminate competition
22
Q

Why may takeovers be preferred?

A
  • speed of growth is a high priority
  • business lacks knowledge or resources to develop organically
23
Q

Drawbacks of takeovers?

A
  • high cost involved
  • upset customers and suppliers
  • problems of integration
  • resistance from staff
  • questionable motives
  • high failure rate
24
Q

Reasons why takeovers fail?

A
  • poor communication
  • cultural incompatibility
  • loss of key personnel
  • lack of decision making
25
Q

What is conglomerate integration?

A

Acquisition of business has no clear connection to the business buying it

26
Q

What is forward vertical integration?

A

Acquisition of business further up the supply chain

27
Q

What is backward vertical integration?

A

Acquisition of business earlier in the supply chain

28
Q

What is horizontal integration?

A

Acquisition of business on the same level of the supply chain

29
Q

Benefits of horizontal integration?

A
  • EOS
  • cost saving from rationalisation of business
  • revenue synergies
  • wider product range
  • reduces competition : increases market share and price setting power
  • purchasing a well known brand can be cheaper and quicker that growing organically
30
Q

Benefits of vertical integration?

A
  • enabl business o captu increased sha of profit on ach sale
  • secures greater insights into consumer needs and wants at each stage of the supply chain
  • creates barriers to entry
  • secures important sources of supply
31
Q

What’s is a merger?

A

Combination of 2 business which is achieved through the formation of a completely new firm into which the 2 og firms are integrated

32
Q

Problems with mergers?

A
  • clash of cultures
  • possible communication problems
  • move away from core competencies of one business which may cause control issues
  • DEOS
  • high fail rate
  • overtrading
  • lack of understanding local markets
33
Q

Benefits of mergers?

A
  • synergy
  • EOS
  • Increased rev and market share
  • diversification
  • international expansion
  • acquiring unique capabilities
  • cross selling
  • access to trade blocs when trading internationally
  • easy way to scope and size of market
34
Q

Problems with rapid growth?

A
  • staff turnover
  • outgrow premises in the short term
  • morels may fall due to more work
  • pressure on management
  • quality may fall
  • shortage of cash to meet expansion costs
  • business may lose track of comp activity
35
Q

What are the 4 reasons for staying small?

A
  • product differentiation and USP
  • flexibility and meeting customer needs
  • high standard of customer service
  • exploit e-commerce

MS REZEL BUSINESS (8 decks)

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