Growth Flashcards
What does Ansoff’s Matrix link to organic or external growth?
Organic
What is market penetration?
Existing products in existing markets
What is product development?
New products in existing markets
What is market development?
Existing products in new markets
What is diversification?
New products in new markets
What is a joint venture?
A business arrangement where 2 or more parties share their resources to complete a specific task
Do the businesses merge or remain separate in a joint venture?
Remain separate
What are economies of scale?
Cost advantages associated with the increased scale of a business
Name 3 economies of scale?
Internationalisation
Becoming more capital intensive
Reducing labour costs
What are technical economies?
More money to invest in machinery
What are specialisation economies?
Ability to hire staff and training
What are purchasing economies?
Buying in bulk
Bargaining price with suppliers
What are R&D economies?
Can devote more money to R&D
What are marketing economies?
Better techniques to get economies of scale
What are financial economies?
Raise more money, better payment terms
What are social and welfare economies?
Can invest in things that will make staff happier
What are managerial economies?
Can employ the best managers and adopt a more cost-effective administration procedure
What are economies of scope?
Cost advantages when producing a range of products together in one company than separate
How is economies of scope different to scale?
Focuses on saving costs by sharing resources compared to making each product separately
What is an example of a business that specifically benefits from economies of scope?
Unilever
What does the synergy in external growth relate to?
The added value created when businesses combine through mergers or partnerships
What is a franchise?
A business where an established owner sells the rights to use company name, model and trademarks to independent operators
What is a franchisor?
An individual that sells or grants the right to open stores and sell products or services using its brand or expertise
What is a franchisee?
A business owner who is licensed to operate a branded outlet of a retail chain - independent
What are 3 advantages of franchising?
Customer brand
Established business
Low risk of failure
What is a disadvantage of franchising?
Cost-high investment
What are 2 key financial costs of franchising?
Equipment
Franchisee must pay a fee to franchisor
Why can franchising be attractive to entrepreneurs?
Provides support and resources
