External Influences Flashcards
Competition
Rivalry amongst sellers
Market
Any situation where buyers and sellers are in contact in order to establish price
Non physical markets
Grown because of convenience that they offer
Physical markets
Still exist because of the personalisation that they offer
Mark up
Difference between the cost of making an item and the price at which it is sold
If market price rises, what happens to mark up?
Mark up rises
If market price falls, what does the business do?
The business must lower its costs or accept a lower mark up for the product therefore reducing profit
6 strategies to increase market share
1) Be aware of customer needs and meet them
2) Sell more to existing customers
3) Find out why old customers no longer use your products
4) Have a clear marketing plan
5) Use a variety of marketing techniques - pricing, advertising & promotion
6) Merge with a competitor
Market dominance
The measure of strength of a business and its product(s) relative to the competition
Barriers to entry
The factors that could prevent a firm from entering and competing in a market
5 barriers to entry
1) Large start up costs. These will mainly be capital costs such as premise and machinery
2) Having the marketing budget to break customer loyalties
3) The inability to gain economics of scale
4) The possibility that existing businesses will start a price soon
5) Legal restrictions such as patents
Price
The amount customers pay for a product
Cost
The amount spent by a business making the product
Merger
Where 2 companies join together to form a new longer business
Acquisition
Where control of another company is achieved by buying a majority of its shares (may also be known as a takeover)
4 sanctions of anti-competitive behaviour
1) Businesses involved can be fined 10% of their global turnover
2) Customers & competitors of the firm(s) involved can sue for damages as a result of being affected by the anti-competitive behaviour
3) Individuals can be disqualified from being a company director
4) The CMA can also fine an individual, such as a director, if that person fails to comply with the CMA’s requests for information provision during a ‘Competition Act Investigation’
Demand
The amount of a good/service that customers are willing and able to buy at any given price
Supply
The amount of a good/service that sellers are willing and able to sell at any given price
Equilibrium
The situation in a market where demand is equal to supply
8 demand factors
1) Price
2) Income
3) Wealth
4) Advertising, promotional offers & public relations
5) Taste and fashion
6) Demographic changes
7) Government action
8) Price of other products ( Substitutes & Complements)
2 supply factors
1) Price
2) Costs
Elasticity of demand
Measures how sensitive quantity demanded is to a change in price
Inelastic demand
Quantity in insensitive to a change in price
Elastic demand
Quantity is sensitive to a change in price
Globalisation (simplified)
When companies start manufacturing and selling in other countries around the world.
World trading in eachothers markets.
6 reasons why products are manufactured outside the UK
1) Cheaper cost of production
2) Cheaper labour
3) Reduced trade restrictions
4) Cheaper resources
5) Better infrastructure
6) Internet
4 factors that have facilitated globalisation
1) Technology
2) Easy movement of money
3) Increase in the movement of people
4) Rise of multinationals
Multinationals
A company that is based in one country but manufactures and sells products in a variety of other countries
4 reasons why companies are keen to become multinationals
1) Economies of scale can be obtained
2) Ability to take advantage of lack of legal constraints
3) New markets with less competition
4) Ability to take advantage of lower wages
4 positives of multinational companies
1) Employment opportunities for LEDC’s
2) Develop local skills
3) Investment in local areas (infrastructure)
4) Utilisation of resources
7 negatives of multinational companies
1) Future prospects of employees aren’t positive
2) Domestic country workers lefts without jobs
3) Low wages
4) Unsafe working conditions
5) Child labour stopped them from being in education
6) Local companies driven out through competition
7) Income goes back to domestic market e.g. USA
Human resource management (simplified)
How people are managed by a business in order to meet the strategic objectives of the business
6 human resource management duties
1) Workforce planning
2) Recruitment & selection
3) Training & development
4) Rewarding & motivating staff
5) Communication
6) Roles & responsibilities
Organisational charts
A diagram that shows the hierarchy in a business, usually from top to bottom
Span of control
The number of employees (subordinates) from whom a manager is responsible
Span of control effectiveness depends on.. (3)
1) The personality of the manager
2) The skills of the subordinates
3) The size of the business
Chain of command
The way in which responsibility for employees is organised within a business
Levels of hierarchy
The number of levels or layers in a business organisation
Delayering
A process of reducing the number of levels or layers in an organisation
Delegation
Where responsibility for carrying out a task or role is passed onto someone else in the business
Empowerment
Giving employees the power to do their job
Tall structure
Mechanistic
- narrow span of control
Flat structure
Organistic
- wide span of control
Organisation by system
Arranging the business according to what each department does
Organisation by product
Organising according to the different products made
Advantage of organisation by system
Specialists can concentrate on what they do best
3 Disadvantages of organisation by system
1) Each part may act as a separate entity, concerned with its own agenda
2) It can be difficult to accredit success and/or blame
3) Departments may not be able to clearly see their successes
Organisation by PRODUCT
Each product becomes a ‘mini company’ with its own finance, marketing, HR departments etc.
3 advantages of organisation by product
- can see successes and identify problems
- managers can focus energy on one product
- each centre has a lot of autonomy (independence) this increases motivation
3 disadvantages of organisation by system
- different products compete for resources this can cause conflict
- duplication of departments can waste resources
Matrix structure
Individuals work across teams and projects as well as within their own departments or function
Centralised structure
Decision making firmly at the top of the hierarchy (senior management)
2 benefits of centralisation
- easier to implement common policies and practises for the whole business
- prevents other parts of the business from becoming too independent
4 drawbacks of centralisation
- more bureaucratic - often extra layers in the hierarchy
- local or junior managers are likely to be much closer to customer needs
- lack of authority down the hierarchy may reduce manager motivation
- customer service, lost flexibility and speed of local decision making
Decentralised structure
Decision making spread out to include more junior managers in the hierarchy, as well as individual business units or trading locations
7 benefits of decentralisation
- decisions are made closer to the customers
- better able to respond to local circumstances
- improved level of customer service
- can enable a flatter hierarchy
- good way of training and developing
- junior management
- facilitates empowerment
5 drawbacks of decentralisation
- decision making not necessarily “strategic”
- harder to ensure consistent practises and policies at each location
- may be some diseconomies of scale
- who provides strong leadership when needed
- harder to achieve tight financial control
Job description
a summary of the main duties and responsibilities of a job
Person specification
the skills and experience required to succeed in a specific job application
Internal recruitment
where candidates for a job vacancy come from within the organisation
External recruitment
where candidates for a job come from outside of the organisation
4 advantages of internal recruitment
- cheaper & quicker to recruit
- people already familiar with the business and how it operates
- provides opportunities for promotion within the business
- business already knows the strengths and weaknesses of candidates
4 disadvantages of internal recruitment
- limits number of potential applicants
- no new ideas can be introduced from outside
- may cause resentment among the candidates not appointed
- creates another vacancy to be filled
3 advantages of external recruitment
- outside people bring in new ideas
- larger pool of workers from which to find the best candidate
- people have a wider range of experience
3 disadvantages of external recruitment
- longer process
- more expensive process due to advertising and interviews required
- selection process may not be effective enough to reveal the best candidate
CV
curriculum vitae
- personalised document that provides qualifications and achievements through life
Covering letter
a document sent with your resume to provide additional information on your skills & experience
Advantage of CV’s & covering letters
shows work experience, qualifications,
organises information well
2 disadvantages of CV;s & covering letters
- doesn’t give exact info that employer needs
- doesn’t show commitment to the business
3 advantages of application forms
- easy to shortlist & rank candidates
- personalised questions to the business
- saves business time
Disadvantage of application forms
- annoying for candidates to fill out
Psychometric testing
- help to identify a candidates skills, knowledge and personality
2 main types of psychometric testing are..
- personality
- aptitude
Personality tests
- explore interests, values & motivations, analysing how your character fits with the tole & organisation
Aptitude tests
- assess reasoning or cognitive ability, determining where you’ve got the right skill set for a role
Interview
a method of selection where the candidates meet representatives from the business and answer a series of questions
Training
The prices of increasing the knowledge and skills of the workforce to enable them to perform their jobs effectively
4 benefits of training
- improve productivity
- improve efficiency
- reduce customer dissatisfaction
- improve employee motivation
