3.9.1- Assessing a change in Scale

Question 1

Forms of growth

Answer 1

Organic
External

Question 2

differences between organic and external

Answer 2

organic=slower
external=immediate (higher risk)

Question 3

why is growth important?

Answer 3

shows progress
financial benefits
bargaining power
opportunities

Question 4

benefits of growth

Answer 4

eos
synergy
experience curve
economies of scope

Question 5

types of eos

Answer 5

purchasing
technological
managerial
financial
marketing

Question 6

main benefit of eos

Answer 6

more efficient lower unit costs

Question 7

problems of growth

Answer 7

diseconomies of scale
overtrading

Question 8

diseconomies of scale

Answer 8

communication
control/coordination problems
motivation issues

Question 9

what does overtrading lead to

Answer 9

cash flow problems of rapid growth

Question 10

4 methods of growth

Answer 10

merger
takeover
venture
franchise

Question 11

advantages of selling a franchise

Answer 11

• quick growth finance
• franchisee motivated

Question 12

disadvantages of selling a franchise

Answer 12

-lose complete control
-dont gain all profits

Question 13

advantages of buying a franchise

Answer 13

• no need for innovation
  -provides training/support

Question 14

disadvantages of buying a franchise

Answer 14

-not complete independence
-dont gain all profits

Question 15

4 types of integration

Answer 15

-forward vertical
-backward vertical
-horizontal
-conglomerate

Question 16

forward vertical integration

Answer 16

further up supply chain

Question 17

backward vertical integration

Answer 17

earlier in the supply chain

Question 18

horizontal

Answer 18

same stage of supply chain

Question 19

conglomerate

Answer 19

no connection

Question 20

retrenchment

Answer 20

reducing costs

Question 21

reasons of retrenchment

Answer 21

-out of touch w customer
-failed merger/takeover
-changing markets
-economic downturn
-urgent need to cut costs

Question 22

examples of retrenchment

Answer 22

-Tesco bought paperchase
-failed merger Asda +Sainsbury’s

Question 23

organic growth methods

Answer 23

-new product launch
-opening new stores
-expanding into foreign markets
-expansion of wporkforce

Question 24

external diseconomies of scale

Answer 24

price of land, labour rises, traffic congestion

Question 25

Joint venture

Answer 25

business sharing information and resources but remaining seperate identity

Question 26

advantages and disadvatages of JV

Answer 26

A: acess to resouces, shared risk, new opportunities
D: 40% fail, culture clash, high risk

Question 27

example of JV

Answer 27

Hotel Chocolat- in Japan JV with Tokyo firm after covid

Question 28

advantages of inorganic growth

Answer 28

-rapid expansion
-saves setting up costs
-spread risk
-acquire brand image
-fill gap in product portfolio
-compete

Question 29

disadvantages of inorganic growth

Answer 29

-corporate culture clashes
-lack of synergy
-expensive dis eso
-communication problems

Question 30

example of merger

Answer 30

orange +T mobile= EE

Question 31

example of takeover

Answer 31

-Kraft bought cadbury shares
-Morrisons takeover safeway