9 - Strategic Methods 🏃♀️ Flashcards
Why do business grow?
- to meet objectives
- external/internal factors
- competitive advantage
Why do businesses retrench?
- increase efficiency
- turn around poor performance
- focus on core of business
How will retrenchment affect cash flow?
Outflows will decrease
What are methods of growth?
- mergers/takeovers
- ventures
- franchises
- joint venture
What is a horizontal merger/takeover?
2 business at the same stage of production
What is a forward vertical merger/takeover?
Joining with a business at the next stage of production
What is a backward merger/takeover?
Joining with a business at an earlier stage of production
What is conglomeration?
2 unrelated business merge/takeover
What is economies of scale?
The benefits of increasing output so unit costs decrease
What is economies of scope?
The benefit of having a wide portfolio of products, so costs are spread across multiple producys, decreasing unit costs
What is diseconomies of scale?
The unit costs rise as more is produced past the optimum efficiency level as the business begins to work above optimum capacity
What is the experience curve?
How the costs per unit decrease over time as experience increases
What is the technical economies of scale?
The benefits when a business spends more on efficient machinery so decrease in average costs
Why is technical economies of scale important?
Increases competitiveness and efficiency and spreads FC over greater output
What is purchasing economies of scale?
The benefits when a business negotiates greater discounts for bulk buying
Why is purchasing economies of scale important?
Increase the buying power of the business
What is managerial economies of scale?
The benefits when a business employs specialist personnel leading to a fall in average costs
Why is managerial economies of scale important?
Can employ specialists rather than external organisations eg. Accountantss
Define overtrading?
When more money leaves the business than comes into it
What is synergy?
2 business combine resources and efforts to create a higher combined value and performance than by themselves
What are greiner’s model of growth’s phases?
Growth through…
Creativity
Direction
Delegation
Coordination + monitoring
Collaboration
Alliances
Which one of Greiner’s Model of Growth involves inorganic growth?
Growth through alliances
What are the crisis’ in Greiner’s Model of Growth?
- leadership crisis
- autonomy crisis
- control crisis
- red tape crisis
- growth crisis
What are the two types of innovation?
Product and process
Why do businesses want to innovate?
- provides competitive advantage
- customer perception
Pros to innovation
- competitive advantage
- increase efficiency
- attracts new customers
- increases market share - high prices
Cons to innovation
- costly
- time consuming
- legal implications
- opportunity cost
Define kaizen as a way to innovate
focus on small and frequent improvements to production process
What is intrapreneurship?
When employees act in the same way as entrepreneurs do to drive the large company forward
What is benchmarking?
The process of identifying the best practise within an industry
What are 4 methods of innovation?
- kaizen
- R&D
- intrapreneurship
- benchmarking
What do patents do?
Protects new inventions
How do you get a patent?
Granted by individual companies where you apply through the IPO
Do you have to pay for patents?
Yes
What does copyright protect?
Authors, composers, and artists’ logos computer programs and recordings
How long does copyright last?
For 70 years after the death of the inventor
How does technology help a business?
- boosts revenue
- reduces costs
What are some problems on introducing technology?
- substantial initial investment
- staff training
- investment appraisal
- changes to way business operates
What is big data?
describes the vast amount of data generated by the technology
What is data mining?
the process of sifting through the data to try and identify trends and relationships
Give an example of operational big data
- suppliers research
- distribution channels
- customer perception of quality
Give an example of marketing big data
- demographics
- promotion strategies
- pricing
Give an example of HR big data
- employee statistics
- social media accounts
Give an example of financial big data
- spending habits
- competitor facts and figures
What is Enterprise Resource Planning?
software used by businesses to collect, store, manage and interpret data from different business functions
Methods of entering international markets
What is licensing?
a business gives permission for a third party to sell their goods or services abroad
Methods of entering international markets
What are alliances?
forming partnerships with one or more businesses
Methods of entering international markets
What is direct investment?
capital expenditure to establish a physical presence in another country
Methods of entering international markets
Which is the most risky method?
direct investment
What factors influence where a business will locate?
- trade agreements
- political stability
- GDP
- cultural differences
- competition
- opportunities
Bartlett and Ghoshal’s Strategies
What is cost pressure also known as?
global integration
Bartlett and Ghoshal’s Strategies
What has high cost pressure and low local responsiveness?
global
Bartlett and Ghoshal’s Strategies
Name a global business
Pfizer = no need to change products based on area
Bartlett and Ghoshal’s Strategies
What is a low cost pressure and low local responsiveness?
International
Bartlett and Ghoshal’s Strategies
What is an example of an international strategy business?
eg Netflix
Bartlett and Ghoshal’s Strategies
What is a high cost pressure and high local responsiveness business?
Transnational
Bartlett and Ghoshal’s Strategies
Name a transnational business
Starbucks = have to change products to local area
Bartlett and Ghoshal’s Strategies
What is a low cost pressure and high local responsiveness?
Multi-domestic
Bartlett and Ghoshal’s Strategies
Name a multi-domestic business
Nestle = need to local business but don’t need to focus on costs
