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A-Level Business > 9 - Assessing Change In Scale > Flashcards

9 - Assessing Change In Scale Flashcards

1
Q

What Is Change?
(2 Points)

A

~ Occurs when a business alters its structure, size or strategy to respond to internal or external influences.

~ Must be managed carefully to ensure a business maintains or increases its competitiveness.

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2
Q

What Does Change Create?
(2 Points)

A

~ Opportunities.

~ Threats.

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3
Q

What Are The Reasons For Change?
(3 Points)

A

~ Meet objectives.

~ Respond to internal forces.

~ Gain a competitive advantage.

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4
Q

One Reason For Change Is To Meet Objectives, What Can This Mean?
(6 Points)

A

~ Gain market share.

~ Increase shareholder value.

~ Respond to external forces.

~ Technological advancements.

~ Political and legal changes.

~ Consumer demand.

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5
Q

One Reason For Change Is To Respond To Internal Forces, What Can This Mean?
(2 Points)

A

~ Employee pressures.

~ Owners power.

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6
Q

One Reason For Change Is To Gain A Competitive Advantage, What Can This Mean?
(2 Points)

A

~ Economies of scale and scope.

~ Market development.

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7
Q

What Is Growth?

A

~ Increasing the size of the business operations.

~ E.g. New stores, new products, new markets and buying other businesses.

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8
Q

What Are The Possible Reasons As To Why Businesses Grow?
(5 Points)

A

~ Increase shareholder value.

~ Increase market share.

~ Reduce average costs.

~ Fulfil an objective of growth.

~ Stakeholders perception of success.

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9
Q

What Is Retrenchment?
(2 Points)

A

~ Downsizing the scale of the businesses operations.

~ E.g. Closing branches, selling off parts of the business and delayering.

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10
Q

What Are The Possible Reasons As To Why Businesses Retrench?
(4 Points)

A

~ Restructure to increase efficiency.

~ Turn around poor performance.

~ Focus on core business.

~ Sell off less profitable parts of the business to improve overall performance.

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11
Q

What Is Organic (Internal) Growth?
(2 Points)

A

~ Occurs when a business expands in size by opening new stores, branches, functions or plants.

~ May be achieved within the UK or on a multinational scale.

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12
Q

What Are The Benefits Of Organic Growth?
(2 Points)

A

~ Control is easier to maintain.

~ Relatively low risk strategy.

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13
Q

What Are The Drawbacks Of Organic Growth?

A

~ Time consuming.

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14
Q

What Is External Growth?
(2 Points)

A

~ Occurs when a business expands in size by either merging with or taking over another business.

~ This may be with other businesses within the UK or on a multinational scale.

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15
Q

What Are The Benefits Of External Growth?

A

~ Allows a business to expand more rapidly, as it is buying businesses that are already established.

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16
Q

What Are The Drawbacks Of External Growth?

A

~ Can be high risk if the two businesses are not compatible.

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17
Q

What Are The Types Of External Growth?
(3 Points)

A

~ Integration.

~ Merger.

~ Takeover.

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18
Q

One Type Of External Growth Is Integration, What Is This?

A

Bringing together of two or more businesses.

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19
Q

One Type Of External Growth Is Merger, What Is This?

A

When two or more businesses agree to become integrated to form one business under joint ownership.

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20
Q

One Type Of External Growth Is Takeover, What Is This?
(3 Points)

A

~ When one business gains control over another and becomes the owner.

~ Can be achieved by buying 51% of the shares.

~ Can be hostile.

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21
Q

What Are The Types Of Integration?
(3 Points + 2 Subpoints)

A

~ Horizontal.

~ Vertical.
-> Forward vertical.
-> Backwards vertical.

~ Conglomerate.

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22
Q

What Is Horizontal Integration?

A

When two businesses at the same stage within a process integrate.

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23
Q

What Is Vertical Integration?

A

When two businesses at different stages within a process integrate.

24
Q

What Is Forward Vertical Integration?
(2 Points)

A

~ Joins with another business at the next stage in the process

~ E.g. Manufacturer with a retailer.

25
Q

What Is Backward Vertical Integration?
(2 Points)

A

~ Joins with a business at an earlier stage in the process.

~ E.g. A manufacturer with a supplier of raw materials.

26
Q

What Is Conglomerate Integration?

A

When two unrelated businesses integrate.

27
Q

What Are Joint Ventures?

A

When two or more businesses agree to act collectively to set up a new business venture with all parties contributing equity to fund the set up and purchase of assets.

28
Q

What Are Advantages Of Joint Ventures?
(4 Points)

A

~ Risk sharing.

~ Improved relationships.

~ Shared resources and expertise.

~ Synergies.

29
Q

What Are Disadvantages Of Joint Ventures?
(4 Points)

A

~ Profit sharing.

~ Financial risks.

~ Slower decision making.

~ Potential for conflict between stakeholder objectives.

30
Q

What Is A Franchise?

A

The replication of a successful business formula.

31
Q

What Is Franchising?
(2 Points)

A

~ When the owner of a business licenses the use of trademarks and proven business ideas to another party.

~ Can be seen as a less risky option for growth but can mean additional costs and a loss of independence.

32
Q

Who Is The Franchisee?
(6 Points)

A

~ The business which is given permission from another business to trade using its name or goods and services in return for a fee and share of the profits.

~ Is given support by the franchisor but will have less autonomy in decision making.

~ Owns and operates each business outlet.

~ Pays the initial fee to the franchisor.

~ Pays an annual fee or royalty payments to the franchisor.

~ Often has to buy supplies from the franchisor.

33
Q

Who Is The Franchisor?
(4 Points)

A

~ The business that sells a licence giving permission to another business to trade using its name or goods and services.

~ Allows the franchisor to grow more rapidly but may damage its reputation if standards are not maintained.

~ Remains in control over the way in which goods and services are marketed and sold and also controls the quality standards of the business.

~ Must support the franchisee in a range of areas.

34
Q

What Are The Benefits Of Franchising For The Franchisor?
(4 Points)

A

~ Rapid expansion.

~ Investment from others.

~ Motivation.

~ Economies of scale.

35
Q

What Are The Drawbacks Of Franchising For The Franchisor?
(3 Points)

A

~ Loss of control.

~ Managing growth and resources.

~ Litigation.

36
Q

What Are The Benefits Of Franchising For The Franchisee?
(6 Points)

A

~ Lower risk.

~ Established product.

~ Experienced business.

~ Brand awareness.

~ Proven operation.

~ Assistance with entering a new markets, management, financial, marketing and training.

37
Q

What Are The Drawbacks Of Franchising For The Franchisee?
(2 Points)

A

~ Lack of control.

~ High costs.

38
Q

What Is Economies Of Scale?

A

The advantages enjoyed by a business as it increases the scale of its current operations leading to a fall in unit costs.

39
Q

What Do Lower Costs Do For A Business?
(2 Points)

A

~ Makes a business more competitive.

~ Reduces prices for consumers.

40
Q

What Are The Types Of Economies Of Scale?
(3 Points)

A

~ Purchasing.

~ Technical.

~ Managerial.

41
Q

Describe Technical Economies Of Scale
(5 Points)

A

~ The benefits enjoyed when a business is able to spend more on larger and more efficient machinery leading to a fall in average costs.

~ Fixed costs spread over a greater level of output.

~ Increased competitiveness.

~ Increased efficiency.

~ Able to spend more money on scientific research and technical development.

42
Q

Describe Purchasing Economies Of Scale
(2 Points)

A

~ The benefits enjoyed when a business is able to negotiate greater discounts with suppliers for bulk buying leading to a fall in average costs.

~ Increases the buying power of the business.

43
Q

Describe Managerial Economies Of Scale
(2 Points)

A

~ The benefits enjoyed when a business can employ specialist personnel leading to a fall in average costs.

~ The business can employ internal specialists such as an accountant or have its own HR department rather than use the services of external organisations.

44
Q

What Is Diseconomies Of Scale?
(2 Points)

A

~ The disadvantages suffered as a result of a business increasing the scale of its operations that lead to a rise in unit costs.

~ E.g. Poor employee motivation, poor communication and poor managerial co-ordination.

45
Q

What Does Growth Normally Create?

A

Creates both economies and diseconomies of scale.

46
Q

What Happens If Growth Creates More Economies Than Diseconomies Of Scale?

A

Unit costs will fall, vice versa.

47
Q

What Is Economies Of Scope?

A

The advantages enjoyed by a business as it increases the scale of its operations by expanding the range of activities it undertakes leading to a fall in unit costs.

48
Q

What Are Examples Of Economies Of Scope?
(6 Points)

A

~ Shared expertise.

~ Maximise use of resources.

~ Increase brand loyalty.

~ Entering new markets.

~ Introducing new products.

~Diversification.

49
Q

What Is Synergy?
(2 Points)

A

~ Two businesses joined together will be able to achieve more than the sum of two businesses operating separately.

~ 2+2=5.

50
Q

What Are Examples Of Synergy?
(5 Points)

A

~ Shared resources.

~ Increased expertise.

~ Joint marketing.

~ Complementary products.

~ Securing a supplier or customer.

51
Q

What Is Overtrading?

A

When a business has expanded too rapidly resulting in it operating at a level beyond its resources leading to potential liquidity problems.

52
Q

What Are Examples Of Overtrading?
(4 Points)

A

~ Cashflow issues.

~ The need to invest more to expand capacity.

~ New staff.

~ Added layers of management.

53
Q

What Are The Functional Areas Of A Business?
(4 Points)

A

~ Finance.

~ Marketing.

~ Operations.

~ Human resources.

54
Q

What Is The Impact Of Growth & Retrenchment On Finance?
(4 Points)

A

~ Financial ratios.

~ Cash flow.

~ Budgets.

~ Sources of finance.

55
Q

What Is The Impact Of Growth & Retrenchment On Marketing?
(3 Points)

A

~ Marketing mix.

~ Marketing strategy.

~ Brand.

56
Q

What Is The Impact Of Growth & Retrenchment On Operations?
(5 Points)

A

~ Technology.

~ Suppliers.

~ Location.

~ Lean production.

~ Quality.

57
Q

What Is The Impact Of Growth & Retrenchment On HR?
(6 Points)

A

~ Organisational.

~ Structure.

~ Leadership.

~ Motivation.

~ Employee:employer relations.

~ Pay and working conditions.

A-Level Business (49 decks)

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