crazam 18

Question 1

short term implications for a business of business expands

Answer 1

•employment- may lead to job losses as some roles are eliminated due to duplication eg only one marketing manager instead of two
•profitability- increased expenditure on assets decrease profits eg buildings
•organizational structure- may retain but needs clear line of authority & definite chain of command to manage changes
•product mix- increased product mix as business grows

Question 2

franchising evaluation

Answer 2

•business arrangement, franchiser grants permission to franchisee to use name, logo & bus idea for fee and percentage of profits
•franchiser can expand w/o having to invest further capital/take additional risks as these are passed onto franchisee
•cost effective for franchiser. can be risky for franchise if standards not maintained by franchisee, image can be affected
•eg mcdonald’s, dominos
•own judgement

Question 3

merger evaluation

Answer 3

•friendly or voluntary joining of two or more firms for mutual benefit, trading under a common name
•single new legal entity formed once approved by shareholders
•defensive strategy as merger may involve diversification into new product areas, reducing risk of firm ‘having all its eggs in the one basket’
•costs lower as EOS and sharing costs & resources
•eg. Air France and KLM formed Air france KLM
•own judgement

Question 4

strategic alliance evaluation

Answer 4

•two or more indépendant firms agree to co-operate and share resources & expertise for mutual benefit
•firms remain completely indépendant legally & maintain own dépendante trading identity
•firms benefit from sharing resources & talent that otherwise wouldn’t have access to. can end arrangement easily
•eg Google with Kia Motors and Hyundai in jan 2013, integrate Google Maps and Places into new car models
•own judgement

Question 5

takeover evaluation

Answer 5

•when one company purchases 51% or more of shares in other company is hostile or friendly manner
•absorbs other company, which loses its identity after the acquisition s& becomes part of acquiring company
•cost can be expensive
•eg Eircom takeover Meteor mobile phone company for €420 million
•own judgement