3.9-Strategic Methods Flashcards
Growth
Increasing the size of a businesses operations
State Reasons For Growth
-increase shareholder value
-increase market share
-reduce average costs
Retrenchment
Downscaling the size of a businesses operations
Reasons for retrenchment
-improve poor performance
-restructure to increase efficiency
Examples of internal growth (organic)
-employ more staff
-open new stores
-innovation/ new products/services
-increase marketing
Examples of external growth (inorganic)
(and explain what they are)
-working with other businesses
-mergers (50:50 shares)
-takeovers (x>50 shares)
- outsourcing (joint venture)
-franchising
Joint venture
where one business will use another business to produce products or components of their products but both businesses have separate identities
Integration of businesses
The bringing together of two or more businesses (eg. mergers, takeovers etc)
What is horizontal external growth?
When two businesses at the same stage within a process integrate (similar size of business)
What is vertical external growth?
when two businesses at different stages integrate (different size of business)
What is forward vertical external growth?
when a business integrates with a business ahead of them in the process ( a larger business)
What is backward vertical external growth?
when a business integrates with a business behind them in the process ( a smaller business)
a conglomerate
when two unrelated businesses integrate
Economies of scale
when a business can reduce their costs by producing or buying in bulk
Economies of scope
when a business is able l to make a range of products using the same facilities/skills/staff to reduce costs
What does the expertise curve suggest?
The more products a business makes the more experienced they become and the cost per un it goes down as experience increases
What are the 6 phases of Greiner’s Growth model?
growth through:
1. Creativity
2. Direction
3. Delegation
4. Coordination and monitoring
5. Collaboration
6. Alliances
Explain phase 1 of Greiner’s growth model
Growth through creativity
-beginning of business
-staff levels low
-likely to be small (soletrader)
-informal communication
when communication starts to fail it leads to a leadership crisis
Explain phase 2 of Greiner’s growth model
Growth through direction
-now being managed
-communication formalized
-regular meetings
-functional areas
-workload is excessive causing an autonomy crisis
Explain phase 3 of Greiner’s growth model
Growth through delegation
-middle managers appointed and empowered
-decisions may only benefit specific functions rather than the whole business (poor communication)
period of growth is ended by a control crisis
Explain phase 4 of Greiner’s growth model
Growth through coordination and monitoring
-business continues to expand
-departments are working together
-performance related pay may be introduced
growth is ended by a red tape crisis
-paper based monitoring leads to inefficient bureaucracy
-business slow to respond to external changes
Explain phase 5 of Greiner’s growth model
Growth through collaboration
-business must now switch from a functional management structure to a matrix style
-functional specialists from different areas will work together in project teams
When they can no longer grow internally they may suffer with a growth crisis
Explain phase 6 of Greiner’s growth model
Growth through alliances
-Greiner suggests that most businesses will stop growing due to running out of ideas
-to grow they need to form alliances (mergers, takeovers, joint ventures etc)
what are some critiques of Greiners model?
- not every business will face a crisis
-some will successfully anticipate change
-ignores pace of growth
Synergy
The concept that the value and performance of two companies combined will be greater than the sum of the separate individual parts
Overtrading
overtrading occurs when a business expands too quickly without having suitable sources of finance to support expansion
Innovation
The development of an idea into a new product or process
What are the two types of innovation?
-product innovation
-process innovation
Product innovation
changing a product that already exists or making a new product
Process innovation
Changing a process that already exists or introducing a new process
Intraprenurship
businesses encouraging employees to act like entrepreneurs for the business
Benchmarking
The process of identifying best practice within an industry
What is the benchmarking process?
- Identify areas that can be benchmarked
- collect quantitative data
- Identify good practice
- compare performances to identify areas of weakness
- set new targets
- implement procedure to achieve these targets
- review progress
Patent
Protects new inventions
Copyright
gives legal protection against copying for authors, composers and artists
Big Data
The vast amount of data generated by the technological devices that we use daily
Data Mining
The process of sifting through this data to try and identify trends and relationships
Enterprise Resource Planning (ERP)
this is software used by businesses to collect, store, manage and interpret data from different business functions
What are the axis on the Bartlett and Ghoshal’s model?
cost pressure and local responsiveness
What does the experience curve suggest?
The more products produced the lower the cost per unit due to experience of owner
What happens in the experience curve?
•⬆️experience
⬇️
•⬆️efficiency
⬇️
•⬇️cost per unit
⬇️
•cost advantage
•lower prices
•increase market share
Then becomes a monopoly and benefits from economies of scale
What are the 4 parts of Bartlett and ghoshal’s model?
•global
•transnational
•international
•multi domestic
What are some methods to entering international markets?
•exports
•licensing
•alliances
•direct investment
Exports
Selling goods and services produced in one country to another country
Licensing
A business gives permission to a third party to sell their goods or services abroad
Alliances
Forming partnerships with one or more businesses operating in another country
Direct investment
Capital expenditure to establish a physical presence in another country
On Bartlett and ghoshals model what is global?
•high pressure to reduce costs and benefit from economies of scale
•low pressure to localise
On Bartlett and ghoshals model what is transnational?
•high pressure to reduce costs and benefit from economies of scale
•high pressure to localise
On Bartlett and ghoshals model what is international ?
•low pressure to reduce costs and benefit from economies of scale
•low pressure to localise
Tend to be very large established businesses eg. Macdonalds
On Bartlett and ghoshals model what is multi-domestic?
•low pressure to reduce costs and benefit from economies of scale
•high pressure to localise
On greiners model of growth during the first phase(creativity) what crisis may they face?
Leadership crisis
On greiners model of growth during the second phase (direction) what crisis may they face?
Autonomy crisis
On greiners model of growth during the third phase (delegation) what crisis may they face?
Control crisis
On greiners model of growth during the fourth phase (coordination) what crisis may they face?
Red tape crisis
On greiners model of growth during the fifth phase (collaboration) what crisis may they face?
Growth crisis
(They run out of ideas so must grow externally)
