9 Strategic methods: how to pursue strategies (A-level only) Flashcards
what is growth
growth is the expansion of business operations
what is retrenchment
retrenchment is when a business cuts back on business operations
why do businesses grow (6)
- to achieve higher profits, sales, revenue
- to increase market share
- to achieve objectives
- to increase efficiency (economies of scale)
- to increase brand recognition
- mitigate risk
why do businesses retrench (6)
- to avoid cash flow problems
- to avoid liquidation
- to avoid losses at the end of a products life cycle
- delayering improves competitiveness
- external changes (like covid, political/legislation)
- to avoid losses during recession
two types of growth and the differences between them
organic - internal
inorganic - external
what is economies of scale, naming the three types and what they are in detail
economies of scale - as output increases, unit costs decrease
- managerial
by having more output, you are able to get specialised managers and employees in the field - technical
you are able to get the best technology by having more output - purchasing
you are able to benefit from discounts in bulk buying
what is economies of scope
economies of scope is the more variety a business offers, the lower unit costs become
what is diseconomies of scale and the three types
when a business grows too fast, unit costs may start to increase
types
1. poor with communication
2. poor co-ordination
3. poor employee motivation
what is the experience curve and what parts of the business will help with experience curve
as the business has more experience in making a product, the efficiency increases, decreasing unit costs
- labour efficiency - labour is more experienced so less likely to make mistakes, reducing raw material waste
- labour specialisation - as labour is more experienced, they begin to specialise in specific parts of the production process, increasing efficiency
- advances in tech
what is a synergy
when two business form a synergy they can benefit from…
the whole is greater than the individual parts
when two business join they can benefit from…
cost saving synergies:
- eliminating duplicated functions
- better supplier negotiating powers
- better efficiency in production
- economies of scale
revenue synergy
- customers from both businesses
- greater location choice
what is overtrading
and ways to overcome overtrading
when a business grows too fast, the business uses all of its working capital and has no funding for the long term
ways to overcome involve:
1. creating a cash flow forecast
2. decreasing payable and receivable days
3. leasing instead of buying assets
what are the six phases of Greiners growth model
- creativity
- direction
- delegation
- co-ordiantion
- collaboration
- external growth
what are the 5 crisis of Greiners growth model
- leadership crisis
- autonomy crisis
- control crisis
- red tape crisis
- internal growth
methods of organic growth (2)
-franchising
- opening up new stores
methods of inorganic growth
- mergers and acquisitions
- takeovers (can be hostile)
- integration (vertical, horizontal and conglomerate)
what is innovation
innovation is the process of improving or generating new ideas
pressures for innovation (4)
-competition
- CSR
- stakeholders
- shareholders
two types of innovation and the differences between them
product - improving existing product/ new product idea
process- more efficient ways of producing a product or delivering services
the value of innovation for a business (6)
- lower costs
- brand reputation and value
- usp
- first mover advantage
- competitiveness
- monopoly
ways of becoming an innovative business
- research and development
- kaizen
- benchmarking
- intrapreneurship
what is intrapenreuship
when employees are encouraged to think of ideas and innovations
what is benchmarking
when businesses take better practices and employ them into their own business
what is research and development
yeah….
what is kaizen
continuous, incremental changes through employees
two ways of protecting intellectual property
copyright and patent
what is intellectual property
intangible asset to the business
what is a patent and copyright and the differences between them
patent is protection over a new innovative idea
copyright is protection over creative work
what are the reasons for targeting, operating in and trading with international markets (7)
- profits
- increase market share
- mitigate risk
- growth
- extend product life cycle
- first mover advantage
- synergies
what is internationalisation
when a business develops operations outside of its headquarters are
what are the factors that influence the attractiveness of international markets (8)
- political
- legal
- economic
- tax laws
- cultural differences
- amount of competition
- infrastructure
- location
what are the four methods of entering international markets
- exporting
- direct investment
- alliances
- licensing
advantages and disadvantages of exporting
advantages:
- cheap
- better control over products being sold
- better communication with customers
disadvantages:
- trade costs
- taxes
advantages and disadvantages of direct investment
advantages
- better control
disadvantages:
-expensive
advantages and disadvantages of alliances
advantages
- expertise of who your alliance with
disadvantages:
- takeovers
- need to share profits
advantages and disadvantages of
licensing
advantages of licensing
- expertise of licenser
-cheaper than other ones
disadvantages
- may damage business
-loss of control
what are the reasons for producing sourcing more resources abroad
- cheaper
- more skilled labour
- closer to target market
- raw materials are there
what is offshoring and why would businesses off shore
business sends its operations abroad
- cheaper
- more skilled labour
- closer to target market
- raw materials are there
- tax laws
what is re-shoring and why would businesses re-shore
business brings back its operations from abroad
- retrenchment
- gain more control
- prevent liquidification
what are the influences on buying, selling and producing abroad
- exchange rates
- trade laws
- legal barriers
- culture
-langauge and time zones
what does Bartlett and Ghoshal’s business strategy do
a model for outlining possible strategies for MNC’s based on pressure for local responsiveness and pressure for managing costs (global integration)
what are the pressures to adopt digital technology
- competition
- customers
- suppliers
-shareholders
-improve
financial performance
communication
productivity
brand image
advantages of e-commerce
- increased size of target market (geographic locations)
- collect data for better targeted marketing
- 24/7 shopfront
- low barriers to entry (cheap to set up)
- reduced average costs= economies of scale
- efficient advertising spend
in Bartlett and Ghoshal, pressure for local responsiveness is
the extent a business must customise their products to meet local tastes
in Bartlett and Ghoshal, pressure for managing costs (global intergration) is
the extent a business needs to exploit their economies of scale to gain a competitive advantage
do you need to set a lower price to be competitive
in Bartlett and Ghoshal, pressure for managing costs depends on
- if the products are not differentiated meaning price is the USP
- how cheaply competitors are able to produce similar products
- is the market competitive
Bartlett and ghoshals four sections
high need to local responsiveness, high need for global integration: transnational strategy
high need for local responsiveness, low need for global integration: multidomestic strategy
low need for global integration,
low need to local responsiveness:
International strategy
high need for global integration,
low need to local responsiveness:
global strategy
big data is
vast quantities of data that is generated, stored and used by business
big data is measured by
the three v’s
volume
velocity
variety
data mining is
the use of software to analyse data to look for patterns and gain organisational learning
erp ıs the use of
software to integrate key business processes for coordination
erp in the different functional areas can be useful. how?
finance; ensures all invoices are paid
marketing; ensures customers can personalise products
hr; track employee profiles
operations; used to order supplies, monitor quality
