3.9 - PURSUING STRAEGIES Flashcards
1
Q
Organic growth
A
- occurs when a business expands its own product portfolio or number of retail stores
- basically internal growth
2
Q
External growth
A
- occurs when a business expands by purchasing/taking over other businesses
- eg Morrisons purchasing Safeway
3
Q
Impact of growth on a business
A
- increased demand for goods/services
- increased motivation for management
- increased market share, sales revenue & profit
- investment increases the need for secure capital (need for labour may increase)
- can be an increased focus on marketing & promotion to ensure the generation of increased demands
4
Q
Retrenchment
A
- occurs when a business reduces the scale of a specific business area/element within the business operation
- can allow a business to re-focus on growing a core activity within its operation
5
Q
Retrenchment - HR impact
A
- affects HR as workforce planning, redundancy & redeployment will need to be considered
6
Q
Retrenchment - operations impact
A
- affects operations as it can offer economies of scale through addressing diseconomies of scale which may have arisen, and this reduced unit costs
7
Q
Retrenchment - marketing impact
A
- affects marketing as promotional campaigns are likely to be refocused on the refined business offer which may include selling from a smaller business
8
Q
Retrenchment - finance impact
A
- affects finance as the business will need to ensure it is able to fund the short-term increase in the cost of redundancy payments
9
Q
Technical economies of scale
A
- occur when a business is able to adopt advance technological approaches to production because of their size
- eg - coca colas unit cost will be reduced because of the scale of production
10
Q
Purchasing economies of scale
A
- occur when a business is able to take advantage of bulk ordering discounts
11
Q
Managerial economies of scale
A
- occur when a business is large enough & able enough to introduce specialist staff for each of its functions
- eg - Tesco is big enough to have a HR direct where a small business will not be
12
Q
Economies of scope
A
- occur when a business is able to spread its costs over several markets/products
- eg - maccies advertisements can be spread across its portfolio which reduces the cost of advertisement attributed to each product
13
Q
Diseconomies of scale
A
- as a business grows, commutation is more difficult & decision making becomes slower, increasing costs
- as businesses grow motivating staff becomes harder & staff relations are harder to manage & it becomes harder to control & coordinate
14
Q
The experience curve
A
- suggest that business with better knowledge, resulting from experience can inform a better decision which offers a cost advantage
15
Q
Synergies
A
- occur when two or more businesses combine and are worth greater value than the individual sum of each
16
Q
Synergies
A
- occur when two or more businesses combine & are worth greater then the individuals sum of each
17
Q
Overtrading
A
- occurs when a business experiences problems associated with the cost of growth
18
Q
innovation
A
- the development of a new idea which leads to the production of a new product/service which can be dolf
- eg - dyson - world’s first bagless vacuum
19
Q
pressure for innovation
A
- social changes may increase demand for more innovative & advanced products to replace current products
- competition may increase a businesses focus on innovation to attract customers
20
Q
product innovation
A
- involves the development of new products which will be offered for sale to customers
- eg - new camera technology development improving the iphone
21
Q
process innovation
A
- involves improving the process of manufacturing or offering a product or service for sale to customers to add value, decrease costs or improve efficiency
- eg - development of a new factory production line improving the production of cars
22
Q
advantages of innovation
A
- allows businesses to improve products in portfolio which can increase market share & sales
- allows a business to improve its processes which can increase efficiency & therefore competitiveness
- allows businesses to develop a USP which can improve competitiveness & customer loyalty
23
Q
kaizen
A
- an approach to innovation & consists of continuous improvement being made to a process overtimes
- requires support from employees
24
Q
intrapreneurship
A
- refers to individuals who have the characteristics of entrepreneurs but work within & contribute their entrepreneurial ideas to their employer instead of pursuing these on their own
25
benchmarking
- the process of identifying an area of expertise/specialism within the industry & using this as a foundation to inform & improve the business' own process
26
research & development
- the process of researching new approaches & products & developing these to satisfy customer needs
- allows business to update & introduce products & services that are reactive to changes
27
advantages of internationalisation
- gives businesses access to larger markets, which can increase sales, revenue & profit
- can reduce a business' risk in case demand in the home market declines rapidly following a change in tastes & fashions
28
exporting
- allows a business to access international markets by selling product abroad
29
licensing
- allows a business to access international markets by providing overseas business with a license to sell & produce its products in that country
30
alliances
- allow a business to access international markets through working in partnership together to share risk
31
direct investment
- allows businesses to access international markets through investing in facilities such as a production centre, abroad
32
attractiveness of internationalisation - size of local market
- the markets growth rate & size must be considered as large/growing to be attractive
33
attractiveness of internationalisation - political stability & culture
- must be considered as this can affect the complexity of entering the market
34
attractiveness of internationalisation - local competition
- must be considered as it will affect the likelihood of a foreign business being able to access the market with success
35
offshoring
- involves a business moving part of its production process to an overseas manufacturer
36
advantage of offshoring
- can reduce costs which allows a business to lower its selling price or increase profit
37
disadvantage of offshoring
- can lead to quality problems if overseas producers don't uphold the same quality standards as the business which outsources
38
reshoring
- involves a business bringing its production processes back to the original country
39
disadvantage of reshoring
- can increase cost which means a business may need to increase its selling price or accept reduced profit
40
advantage of reshoring
- can increase quality as production can be monitored closer which is good for reputation
41
multinational organisations
- businesses can target overseas markets by becoming a multinational organisations
- multinational organisation - businesses with production facilities in more than one country
42
influence on decision to enter an international market
- importance of quality may affect a business's decision
- importance of costs will influence a businesses decision
43
managing international business - cultural differences
- often influence the management of international businesses as trading may involve dealing with different cultures
44
managing international business - legal differences
- often influence the management as trading may involve dealing with laws in different countries
45
managing international business - market & customer demands
- often influence management as trading may involve dealing with customers & markets which demand different products & services
46
local responsiveness
- if customer requirements differ significantly in different countries, local responsiveness pressure is high
47
cost reduction
- if the business competes based on its efficiency & therefore requires, for example economies of scale, to operate effectively, there is pressure for cost reduction
48
e-commerce
- an example of digital technology which uses online platforms to sells goods & services through the internet
49
data mining
- gathering data and using this to look for trends & patterns
50
big data
allows businesses to collect & combine data from many different sources
51
enterprise resource planning
- ERP is a digital technology which allows businesses to use certal software to control many different activities of the business including stock management, sales data & production systems
52
advantages of digital technology
- access to new opportunities such as selling products internationally through e-commerce
- gives businesses access to data which can be used to improve & target marketing activities
53
digital technology - HR impact
- can require training so that staff can use new systems & this affects HR
54
digital technology - finance impact
- can require significant investment affecting finance
55
digital technology - marketing impact
- can allow marketing to access & analyse new sources of data & research
56
digital technology - operations impact
- can provide increased quantities of data about production processes which can allow operations to improve their systems
57
advantage of ecommerce
- allows a business to access international consumers
58
disadvantage
- less suitable for businesses selling products that consumers usually like to see, try or feel
59
advantage of big data
- allows business to access large amounts of data about many aspects of their business & environment
60
disadvantage of big data
- provides many challenges for businesses in terms of the legal requirements around data storage, processing & transfer
61
advantages of data mining
- allows recommendations to be made to customers about items likely to be purchased & can therefore increase sales volume & revenue
62
disadvantage of data mining
- provides challenges for businesses in terms of the legal requirements around data storage, processing & transfer
63
advantage of enterprise resource planning
- supports the standardisation of information across the business which supports accurate decision making
64
disadvantage of enterprise resource planning
- can be expensive to implement the software
- may also require specialist skill & knowledge
65
Merger
- when two companies agree to join forces in order to make a third company
- eg - Exxon & Mobil - both oil giants, merged to form ExxonMobil, creating one of the world's largest publicly traded oil companies
66
takeover
- when a business buys more than 50% of another businesses' shares
- elon musk taking over twitter
67
tactical reasons for mergers/takeovers
- increased market share (reduces competition & increases market share)
- access to technology/staff (can takeover/merge to gain access to technology/staff)
- access to intellectual property (may happen to gain access to patents companies want to incorporate into their products)
68
strategic reasons for mergers/takeovers
- access to new markets
- improved distribution networks
- improved brands
69
horizontal integration
- when a business joins another business in the same stage of production as them
70
vertical forwards integration
- when a business joins another business that is a stage further forward in production than them
71
vertical backwards integration
- when a business joins another business that is a stage further back in production than them
72
financial risks of mergers/takeovers
- original purchase cost - cost to the business of taking over the other business
- cost of adjusting the new business, eg - redundancies
73
financial rewards of mergers/takeovers
- immediate increased revenue - due to sales of both business combined
- economies of scale leading to lower costs
74
franchising
- when a franchisor grants a licence (franchise) to another business (franchisee) to allow it to trade using the brand/business format
75
why is franchising a good way of setting up a business, for an individual?
- do not have to establish themselves the same way a sole trader would
- will have the support of a tried & tested business model
76
franchising - benefits to franchisor
- classic growth strategy for a proven business format
- much quicker geographical growth
- can still open location operated by the franchisor
77
franchising - benefits to the franchisee
- support from franchisor
- well known & established name
- less investment required at the start up stage
- franchise allows people to start & run business with less risk
78
franchising - drawbacks to franchisee
- cost to buy franchise
- have to give % of revenue to franchisor
- less flexible - have to follow franchise model (prices, advertising, type of staff)
79
patents
- designed to protect inventions
- provide a time period of many years in which the invention cannot be copied by anyone else
80
how to obtain patents?
- invention must be;
- new
- an innovative step
- capable of industrial application
81
copyright
- protection of writing, music, art
- given automatically to original work
- lasts for 70 years after author's' death
