3.9.1 - assessing change in scale Flashcards
why might businesses choose to grow?
- to get profits
- keep up with competition
- meet demand
what is retrenchment?
making strategic decisions to reduce size of business
what could cause retrenchment?
- poor performance
- recession
- strong competition
how can a business grow?
- expand to new markets
- create new products
- introduce loyalty cards
what is organic/internal growth?
growing in a steady and managed way by doing businessy things
what is external growth?
growth via the integration of two or more companies
what is a merger?
when two businesses believe they can produce more if they work together, combine profits and achieve new objectives
what is a takeover?
when someone comes in buys shares and takes over business value
why might you choose to do organic growth?
- to establish a new product in the market
- to allow an innovative product to have time to be developed in manufacturing and marketing
- if there are no opportunities for external growth available
why might you choose to do external growth?
- usually the fastest way to achieve growth
what is a franchise?
when a business licenses operations, products, branding and knowledge in exchange for a fee
what are some advantages of frachising?
- franchisee does not have to build a brand reputation
- support
- advice
- training
what are the disadvantages of franchising?
- high initial investment is costly
- lack of control for franchisee
what is horizontal integration?
when two companies merge together to earn greater economies of scale, efficiency and increase market power but, both companies have to be in the same industry doing the same business at the same stage of success
what is vertical integration?
when a company controls multiple stages within the supply chain
what is forward vertical integration?
taking control of downstream activities such as distribution or retail
what is backward vertical integration?
controlling upstream activities like raw material suppliers
what is economies of scope?
financial advantages that come with doing lots of different things
what is the difference between downward and upward vertical communication?
downward is when managers instruct or give feedback to employees
whereas
upward communication is when employees report to managers
