Econ

Question 1

Porters 5 forces

Answer 1

These are used to explain why different companies get different profits

1. Competition in the industry;
2. Potential of new entrants into the industry;
3. Power of suppliers;
4. Power of customers;
5. Threat of substitute products.

Question 2

Economies of scale

Answer 2

Bulk buying
Can get specialist talent/specialist equipment
Easy to raise revenue for new ventures
Spread of risk

Question 3

Diseconomies of scale

Answer 3

Communication: harder to get messages to right people at right time. difficult for alll staff to know what going on

Coordination: control of activities harder. Problems with monitoring

Motivations:large business = harder to make everyone feel as if they belong, los of team env.

Question 4

KPIs

Answer 4

Key performance indicator

demonstrates how effectively key business objective achieved

E.G. Revenue growth, inventory turnover, Cash flow, gross profit margin (as % of sales), Relative market share

Question 5

Fixed costs Vs Variable costs

Answer 5

Fixed cost e.g. operating costs, labour, rent

Variable: raw materials, delivery/freight costs