Growth Definitions

Question 1

Market share

Answer 1

the value of a single company’s sales of revenues compared to the sales of all businesses in the market

Question 2

Economies of scale

Answer 2

the reduction in per-unit production cost as a business grows

Question 3

Cash flows

Answer 3

payments received by a business(inflows) and payments made by a business(outflows)

Question 4

Labour turnover

Answer 4

the percentage of workers leaving the business in a period of time

Question 5

Productivity

Answer 5

the ratio of output per unit of input(labour or capital over a period of time)

Question 6

Internal economies of scale

Answer 6

cost reductions experienced by a business when it expands its output

Question 7

External economies of scale

Answer 7

cost-savings that occur due to external factors in the region or industry that are not under the control of the business

Question 8

Purchasing economies of scale

Answer 8

lower costs of production that occur when a business is able to buy large quantities of inputs and negotiate lower prices for them

Question 9

Marketing economies of scale

Answer 9

lower costs of production that occur when the cost of a marketing campaign is spread over a larger quantity of output, thus lowering the average cost of the campaign

Question 10

Managerial economies of scale

Answer 10

lower costs of production that occur when the cost of hiring a manager is spread over a larger output

Question 11

Technical economies of scale

Answer 11

lower costs of production that occur when a business is able to purchase equipment that makes the business more efficient

Question 12

Financial economies of scale

Answer 12

lower costs of production that occur when a business takes out a larger loan, with a lower interest rate, for investment

Question 13

Diseconomies of scale

Answer 13

the increase in the per-unit production cost as a business grows

Question 14

Internal diseconomies of scale

Answer 14

an increase in the average unit cost(usually explained by the difficulty of managing internally large operations)

Question 15

External diseconomies of scale

Answer 15

the increased unit cost of production for a business(due to the expansion of the industry in which the business operates)

Question 16

Working capital

Answer 16

the difference between current assets and current liabilities

Question 17

Monopsony

Answer 17

a situation in which the market has only one buyer

Question 18

Internal growth

Answer 18

expansion of a business with its own resources

Question 19

Target market

Answer 19

a market segment at which a company/product is aimed

Question 20

Asset

Answer 20

the resources owned by a business, which have monetary value

Question 21

External growth

Answer 21

expansion of a business by relying on external resources, typically with another organisation

Question 22

Merger

Answer 22

the voluntary combination of two businesses to form a new business

Question 23

Acquisition

Answer 23

the process in which a business takes complete control over another business by acquiring more than 50% of its share capital

Question 24

Parent company

Answer 24

a company that controls the interests of another company

Question 25

Subsidiary

Answer 25

a business that is fully owned or partially controlled by another company(i.e. parent company)

Question 26

Takeover

Answer 26

the purchase of a company by another company(can be either friendly or hostile)

Question 27

Proxy fight

Answer 27

a competitive struggle between two businesses for the proxy votes from stakeholders needed to control a corporation

Question 28

Joint venture

Answer 28

a new enterprise undertaken jointly by two or more businesses(which otherwise hold onto their distinct identities)

Question 29

Strategic alliance

Answer 29

an arrangement between two or more businesses in which they work together to achieve common objectives but do not create a new enterprise

Question 30

Franchise/Franchising

Answer 30

an arrangement where a franchisee buys the rights to use the name and business model of a franchisor

Question 31

Franchisee

Answer 31

an individual or business who purchases the right to use an existing buiness’s trademarks, brands and proprietary knowledge

Question 32

Franchisor

Answer 32

a business which sells the right to open stores and sell products or services using its brand, expertise and intellectual property

Question 33

Royalties

Answer 33

the payment that is made to an individual or a company for the use of an asset

Question 34

Satisficing

Answer 34

aiming to achieve enough profit to keep the owner happy(profit is optimised rather than maximised)

Question 35

NIche market

Answer 35

a small part of a larger market where customers have very specialised needs

Question 36

Market penetration

Answer 36

a low-risk growth strategy that involves selling more of the same products and services to the same customers(or same customers, through changes to price, promotion or distribution

Question 37

Product development

Answer 37

a medium-risk growth strategy that involves selling new products to the same customers

Question 38

Market development

Answer 38

a medium-risk growth strategy that involves selling existing products in new markets

Question 39

Diversification

Answer 39

a high-risk grwoth strategy that involves selling new products in a new market

Question 40

Related diversification

Answer 40

a situation where a business enters a new industry that has similarities with the company’s existing industry

Question 41

Unrelated diversification

Answer 41

a situation where a business enters a new industry that has no similarities with the company’s existing industry

Question 42

Driving forces

Answer 42

factors that support or promote change

Question 43

Restraining forces

Answer 43

factors that resist change