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
