Business Flashcards
What is mass customisation?
The use of computer aided manufacturing (CAM) to produce individually tailored output to customers on a large scale
What are the benefits of mass customisation?
Operational flexibility, brand loyalty, eliminates intermediaries increasing profit margins, less waste as stock is customised to order, stimulating work environment with varied tasks
What are the drawbacks of mass customisation?
CAD/CAM training costs, less scope for economies of scale, slower response speed, can’t resell products
How can a business add value through its production process?
Improve product quality, adding a USP
How can a business add value through its distribution process?
Increased convenience for customers
How can a business add value through its marketing process?
Creating a brand image
What are the benefits of a brand increasing its added value?
Stand out from rivals, charge higher prices, increased profit per unit, increased market share
What is meant by a direct distribution channel?
Product is sold directly from the producer to the consumer
What are the benefits of a direct distribution channel?
No wholesaler or retailer to take a cut - can either reduce prices to stimulate demand or have increased profit margins per unit sold
What are the drawbacks of a direct distribution channel?
No bulk sales from wholesaler or retailer, increased distribution costs for producers, increased marketing costs
What are the benefits of a producer selling to a retailer before the product is sold to a consumer?
No marketing costs for producer, retailer is better known so will have more reach and in multiple locations therefore increased sales
What are the drawbacks of a producer selling to a retailer before the product is sold to a consumer?
Retailer takes margin from producer, high logistical costs if selling to many retailers
What are the benefits of a producer selling to a wholesaler which then sells to a retailer and then the consumer?
Wholesaler buys in bulk guaranteeing sales, low distribution costs as all sales are to wholesaler, marketing costs low due to retailer
What are the drawbacks of a producer selling to a wholesaler which then sells to a retailer and then the consumer?
Wholesaler and retailer seek margin, less able to provide effective customer service to consumer
What may impact on which distribution channel is chosen by a business?
How effectively the business can produce, distribute and market the product
What is the function of a wholesaler?
Buys products in bulk from producers and distributes them to retailers
What is strategic implementation?
The phase where a strategic plan is put into action
What are the main factors behind successful strategic implementation?
Effective communication, effective leadership (overcoming resistance to change), organisational structure aligning with strategic plan, critical path analysis raises awareness of timescales and sets priorities
What are the features of convenience products?
Purchased frequently, price is low % of income, mass marketed, sold in many locations, little thought put in by consumer
What products will tend to be classed as convenience products?
Essentials (e.g. food, drink)
What are the features of shopping products?
Purchased infrequently, higher % of income, more focus on segmentation in markets, sold in less places in comparison to convenience products, some thought put in by consumer
What is an example of a shopping product?
Clothes, smart watch
What are some features of a specialty product?
Purchased rarely, price is large % of income, promotion is very targeted, sold in few retailers, lots of thought put in by consumer
What is an example of a specialty product?
New car
What are industrial products?
Goods and services bought and sold between businesses
How will a business need to adapt its marketing mix if it is selling to other businesses rather than consumers?
Bulk sales, negotiation, different methods of promotion (e.g. cold calling, trade shows), fewer buyers so need to keep them satisfied
What is organisational culture defined as?
The collection of values, expectations and practices that guide and inform the actions, behaviours and decision making of employees
What are some examples of reasons a business may change its organisational culture?
Merger/takeover, rapid growth, new strategy
What are some problems that could occur due to a business changing its organisational culture?
Resistance to change, requires money and time, difficult to change in a large organisation
What is inflation?
A sustained increase in prices in an economy
What are the financial impacts of inflation?
Assets appreciate in value, erodes value of fixed repayments
What are the operational impacts of inflation?
Costs of materials and supplier costs increase, lowers profit margins
What are the marketing impacts of inflation?
Business may need to increase prices, consumers have lower real income so more likely to choose a cheaper alternative
What are the HR impacts of inflation?
Workers real wages fall, therefore will request pay rises to match this - either increased costs for business or negative industrial relations if pay rise not given
What are the likely impacts if government policy successfully promotes entrepreneurship?
Profits and tax revenue increase, increased job opportunities, increased competition leads to better efficiency, lower prices and higher quality
What is the role of a regulator in a market?
Prevent collusion, prevent abusive behaviour (predatory pricing), oversee mergers and takeovers
What role does governmental infrastructure play for businesses?
Creates jobs, increases productivity, ease of collaboration and trade if road, rail and airport links are improved
What impact does governmental environmental policy have on businesses?
Increased costs to adapt, greener reputation
What impact does international trade policy have on businesses?
Supporting imports and exports
What are some examples of employment law?
Equal Pay, ban of discrimination in terms of sex, race, sexuality or disability, employment relations (unions)
What are the impacts of employment law to businesses?
Ruined reputation and increased costs in fines if not complying, increased costs to ensure laws are followed, more motivated workforce
What are the impacts of environmental law to businesses?
Increased costs to make sure laws are followed, improved reputation if laws followed, fines if not complying
What are the benefits of e-commerce?
Increased sales as wider target market, open 24/7, cost efficient as rent doesn’t need to be paid
What are the drawbacks of e-commerce?
Increased competition, may not suit all products
What is enterprise resource planning (ERP)?
Use of computer systems to automate processes (e.g. customer orders, updating stock levels) and integrate core processes across functional areas (e.g. in HR can manage recruitment or training)
What are the benefits of ERP?
Increased efficiency, oversight of functional areas
What are the drawbacks of ERP?
Cost, may take time to integrate systems
What is ‘big data’?
Extremely large data sets that are stored to analyse existing patterns and trends
What are the benefits of big data?
Personalised marketing, tracking consumer behaviour, improving decision making
What is data mining?
Analysing large databases to generate new information such as patterns and trends
What are the benefits of data mining?
Market based analysis (if someone buys one product they’re more likely to buy a complimentary one)
What are the impacts of digital technology on a small business?
Easier to enter markets (lower barriers to entry), could find a niche more easily
What are the impacts of digital technology on a large business?
Can use big data and data mining more effectively as they have more finance, more able to obtain latest technology
What is meant by confidence interval?
The % chance that the actual value is within the estimated range
What are the impacts of a rise in interest rates on consumers?
Encourages saving, discourages borrowing - this means consumers have less disposable income and therefore less demand/sales for normal goods
What are the impacts of a rise in interest rates on businesses?
Increased cost of borrowing, more likely to turn to equity and shares for finance, redundancies due to drop in demand?
What are the impacts of a drop in interest rates on consumers?
Discourages saving and encourages borrowing, increased demand for normal goods
What are the impacts of a drop in interest rates on businesses?
Cheaper borrowing encourages investment, increased production, increased demand creates jobs
What contextual points are there to consider when discussing interest rates?
Industry business operates in (limited impact for firms which sell essentials), size of interest rate change
What are the impacts of social change (e.g. demographic and population change)?
Migration could lead to increased demand, more potential workers
What are some examples of changes in consumer lifestyles in recent years?
Environmental/ethical considerations, social media, takeaway and delivery food
What have the impacts of the growth of online businesses been?
Increased demand, digital marketing
What are the opportunities presented by technological change?
Ease of communication, long term efficiency through automation, new technology can increase product quality
What are the threats presented by technological change?
Lower barriers to entry can lead to increased competition, industries becoming obsolete, costs to keep up with tech
What is the definition of a mission statement?
Qualitative description about organisation
What are corporate objectives?
SMART objectives that define overall objectives of business, driven by mission statement and drive functional objectives
What are SMART objectives?
Objectives that are specific, measurable, agreed, realistic and timed
What are functional objectives?
Objectives of each department (e.g. HR, marketing), driven by corporate objectives however are more specific
What are the benefits of having mission statements, corporate objectives and functional objectives?
Measure of success, co-ordination between management and employees, gives focus to decision making
What are the benefits of scientific decision making?
Based on data, reduces risk of waste, reviews against original objectives
What are the drawbacks of scientific decision making?
Slower, more expensive, is data reliable?
What are the benefits of using intuitive decision making?
Quicker process, experienced manager may be able to make effective intuitive decisions
What are the drawbacks of using intuitive decision making?
Increased risk, difficult to justify
What are the main considerations when choosing between scientific and intuitive decision making?
How quickly decision needs to be made, reliability of data
What are the advantages of being a flexible organisation?
Adaptability, innovation, efficiency
What are the drawbacks of becoming a flexible organisation?
Resistance to change, cost of restructuring, risk of employee burnout through poor role definition
What is restructuring through delayering?
Removing layers of management
What are the benefits of restructuring through delayering?
Faster communication, more autonomy/delegation, faster decision making
What is restructuring through flexible employment contracts?
Increased usage of 0 hr contracts, part time contracts and temporary employment contracts
What are the benefits of restructuring through flexible employment contracts?
Ability to adjust staff levels quickly therefore flexibility
What is restructuring through organic structures?
Moving away from centralised, “mechanistic” structures to decentralised, “organic” structures
What are the benefits of restructuring through organic structures?
Increased agility and adaptability, cross functional collaboration
What is restructuring through knowledge and information management?
Ensuring data is easy to access for decision making
What are the benefits of increased use of knowledge and information management?
Increased efficiency, informed and faster decision making
What are some factors that reduced barriers to globalisation?
Free trade areas reduce barriers to trade, improved transport links between countries
What is the importance of globalisation?
Rise of MNCs, interconnection of economies
What are the three methods of improving efficiency?
Labour efficiency (training), capital efficiency (investment in tech), enterprise efficiency (increasing output to achieve economies of scale)
What are the drawbacks of attempting to improve efficiency through labour methods?
Costs of training, increased productivity could lead to higher wage demands
What are the drawbacks of attempting to improve efficiency through capital methods?
Investment costs will initially be high
What are the drawbacks of attempting to improve efficiency through enterprise?
Increased output may not be met by demand, leading to waste and inefficiency - diseconomies of scale
What is sampling?
Obtaining data from a group of people that are representative of your target market
What are the pros of sampling?
Insight into views of target market which aids decision making
What is needed to ensure accurate sampling?
Adequate sample size, accurate representation of target market
What are the pros of digital marketing?
Cheaper than traditional methods, more targeted, analytics, global reach
What are the cons of digital marketing?
Privacy concerns, new costs (e.g. cloud), can’t try before buy
What are the advantages of capital intensive production?
More reliable than workers, more cost effective in the long term
What are the disadvantages of capital intensive production?
High upfront costs, machinery inflexible
When would it make sense for a business to use capital intensive production?
Business has enough disposable income to invest, produces in country with high wages, standardised product
What are the advantages of using labour intensive production?
Cheaper on small scales, some jobs can’t be done by machines
What are the disadvantages of using labour intensive production?
Recruitment costs, people can’t run 24/7 like machines can
When does it make sense to use labour intensive production?
Small scale business, low wage costs, product is bespoke/luxury
How can a business increase its supply?
Hire employees on flexible employment contracts, outsourcing, purchase to order (production only starts when order received)
When is a high gearing ratio more appropriate?
Times of low interest rates, want to avoid selling shares in business
When is a low gearing ratio more appropriate?
High interest rates, happy to sell more shares
What methods can be used to reduce a business’s gearing ratio?
Reducing non-current liabilities, increased share capital investment
What are core competences?
A set of activities or skills that an organisation performs better than other functions
What is the difference between tactics and strategies?
Tactics are carefully planned actions created to achieved a short term obj, while strategies are long term plans
What is disruptive change?
An extreme type of change to products or processes that irreversibly alters an industry or market
What is horizontal integration?
One firm joins another at the same stage of the supply chain, in the same industry
What are the motivations for horizontal integration?
Economies of scale achieved through combining operations, lowering competition
What is forward vertical integration?
One firm joins another firm that is closer to the consumer/further up the supply chain, in the same industry
What are the motivations behind forward vertical integration?
Guarantee point of sale, can deny rivals selling at outlet
What is backwards vertical integration?
Where a business joins with another firm that is further from the consumer/further down the supply chain, in the same industry
What are the motivations behind backwards vertical integration?
Guaranteed source of raw materials, can block rivals from accessing raw materials, produce and components
What is conglomerate integration?
Where a business joins with another firm in a different industry
What are the motivations behind conglomerate integration?
Reduction of risk (diversification), wider ideas and innovation
What is product innovation?
Increasing revenue by finding new or better products
What is process innovation?
Reducing unit costs by finding new or better methods of production
What are some benefits of operating in international markets?
Increased potential for sales as selling to more customers, reduces risk, increased economies of scale
What are the advantages of exporting?
Increases size of target market, manufacturing stays in home country aiding quality control, less expenditure to set up abroad
What are the disadvantages of exporting?
May have limited knowledge of international markets, products may need to be customised/specialised, tariffs and quotas in country exporting to
What is meant by direct investment?
A business with HQ in its home country sets up additional operations in another country
What is meant by exporting?
Business produces in home country and sells to other countries
What are the pros of direct investment?
Business retains control over foreign investment, allows vertical integration to secure supplies
What are the cons of direct investment?
High upfront investment, different org culture (Hofstede)
What is meant by alliances?
Business agrees with another (usually intl) business to pool resources to undertake a specific project
What are the pros of alliances?
May have local/cultural knowledge, cost synergies
What are the cons of alliances?
Profits shared, objectives may differ, trade secrets may be revealed
What is meant by licensing?
Business makes a legal agreement to authorise another company to produce/sell their goods/services in return for a fee
What are the pros of licensing?
Gain access to existing distribution network, low risk as licensing fees agreed, avoid quotas and tariffs
What are the cons of licensing?
Risk of brand being damaged, only receiving small proportion of profits, can only offer licensing to one business
What issues could arise from divorce of ownership and control?
Risk of misalignment between managers and owners
How can a business effectively manage the divorce of ownership and control?
Robust corporate governance - chairman and CEO are different people, transparent info (e.g. financial statements) financial incentives used to align management strategy
What are the pros of becoming a multi national corporation (MNC)?
Increased potential customer base, cheaper suppliers/labour
What positives for countries can be created by MNCs?
Jobs creates, increased tax revenue, infrastructure improvements, business could become suppliers and increase sales
What negatives for countries can be created by MNCs?
Workers may have poor wages/conditions, tax avoidance, air/noise pollution, could drive out local businesses
What may be some differences in policy between PLCs and LTDs?
Short termism of PLCs as shareholders want quick profit
How can a business ensure its employees are aligned with its intended culture?
Ensuring recruitment attracts people with right values, rewarding those who show culture, training can reinforce culture
What factors impact how a business is impacted by exchange rate fluctuations?
Whether they primarily import/export, nature of exchange rate changes, whether change is predictable
