Growth Details Flashcards

1
Q

Reasons why most businesses want to grow

A

-Sales revenue
-Profit
-Market share
-Impact(environmental or social)
-Resiliency of business ecosystem(i.e. generating opportunities for other businesses to grow and distributing more value to a wide range of stakeholders)

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2
Q

Advantages of growth for a business

A

-Can achieve economies of scale
-Potential increase in market share, sales revenue and profit
-Greater influence on prices of products and services
-Greater resiliency and stability
-More attractive to talented employees(due to better salaries, benefits, etc.)

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3
Q

Disadvantages of growth for a business

A

-Potential problems with cashflow
-Potential problems with quality(due to higher output)
-Loss of control of the business
-Potentially higher labour turnover(if human resources is not managed well)

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3
Q

Advantages of growth nationally and globally

A

-More tax revenue(due to higher levels of output)
-Reduced rate of unemployment
-Increased incomes
-Increased consumption/Improved living standards

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4
Q

Disadvantages of growth nationally and globally

A

-Increased pollution
-Increased use of natural resources
-Potential exploitation of human labour(due to less control)
-Less growth in employment(due to increased automation)

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5
Q

Types of economies of scale

A

-Internal economies of scale
-External economies of scale

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6
Q

Types of internal economies of scale

A

-Purchasing economies of scale
-Marketing economies of scale
-Managerial economies of scale
-Technical economies of scale
-Financial economies of scale

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7
Q

Causes of external economies of scale

A

-Innovation(i.e. when an industry becomes significant for society)
-Improved infrastructure(e.g. better transport networks for employees)
-Specialisation(i.e. when companies, suppliers and workers focus on a particular industry due to its size)

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8
Q

Types of diseconomies of scale

A

-Internal diseconomies of scale
-External diseconomies of scale

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9
Q

Causes of internal diseconomies of scale

A

-Managerial issues
-Increased size of workers
-Difficulties with communication

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10
Q

Causes of external diseconomies of scale

A

-Limited natural resources
-Limited infrastructure
-Increased regulation
-Pollution

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11
Q

Types of growth

A

-Internal growth(or organic growth)
-External growth

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12
Q

Benefits of internal growth

A

-Less expensive than external growth
-Less risky than external growth(since there’s no third party)
-Maintains more control of the business
-Allows for more respect for the company’s values

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13
Q

Limitations of internal growth

A

-Slower than external growth
-Potential problems with cashflow
-Growth can be limited

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14
Q

Strategies for internal growth

A

-Increasing production and gaining market share
-Developing new products
-Finding new markets

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15
Q

Forms of external growth

A

-Mergers
-Acquisitions
-Takeovers
-Joint ventures
-Strategic alliances
-Franchising

16
Q

Features of mergers

A

-Businesses involved may not be equal in power
-One business may domminate and force the other one to change more substantially

17
Q

Features of acquisitions

A

-Happen with permission from the target company’s board of directors
-Both companies continue to exist as separate entities, but company A controls company B due to its ownership interest

18
Q

Features of takeovers

A

-Happen without permission from the target company’s board of directors
-More difficult and risky than acquisitions

19
Q

Features of joint ventures

A

-Businesses hold onto separate identities
-More flexible and less risky than mergers, acquisitions and takeovers
-Separate business can be dissolved after a project without compromising the businesses of the parent company
-Companies involved split costs, risks, control and profit

20
Q

Features of strategic alliances

A

-Loosest and least risky form of external growth
-Costs of products/services are split
-Can be the beginnning of cooperation between two companies, which could develop into something more(e.g. joint venture, merger, etc.)

21
Q

Advantages of external growth

A

-Generally faster than internal growth
-Greater potential for economies of scale
-Competitors may be eliminated(in the case of mergers, acquisitions or takeovers)
-Can create synergies, increase employee talent pool, widen range of expertise, etc.

22
Q

Disadvantages of external growth

A

-Generally riskier than internal growth
-Risk of culture clash between organisations
-Difficult to realise cost reductions(if firms are too different)
-Proprietary information and technology could be last(in the case of joint ventures and strategic alliances)

23
Q

Characteristics of franchising

A

-Franchisors give franchises the right to open, own and run outlets of the franchisor’s brand
-Franchisees pay fees and royalties to the franchisor

24
Benefits of franchising(for franchisees)
-Receive support(e.g. legal advice, access to managerial software, expertise, etc.) -Receive training and access to a proven business model and recognized brand -May benefit to economies of scale(compared to individuals running smaller businesses)
25
Benefits of franchising(for franchisors)
-Need for financing is reduced(since franchisees usually finance the new outlets themselves) -Franchisees may be better/more motivated managers than regular employees(since they keep the profits from their outlets) -Franchisees provide local knowledge in operating their business(particularly helpful for international expansion)
26
Drawbacks of the franchise model
-Franchisor loses direct control over individual outlets -A single mistake at a single outlet can damage the entire company's reputation
27
Advantages of smaller businesses
-Avoiding risk/maintaining control -Small market size(owners may not want to expand) -Greater sustainability -Stronger social networks
28
Disadvantages of smaller businesses
-Higher costs of production(due to less economies of scale) -Generally lower profits -DIfficulty getting sources of finance -Difficulty recruiting and retaining skilled workers(due to generally low salaries)
29
Characteristics of generative(regenerative) businesses
-Share their expertise with other businesses(to allow them to learn from their experience) -Nurture a network of relationships between stakeholders(to support widespread thriving) -Deliver value in many forms to their stakeholders -Actively seek to restore the health of individuals, communities and the planet(not simply doing less harm)
30
Potential revenue growth strategies(in the Ansoff matrix)
-Market penetration -Market development -Product development -Diversification
31
Features of market penetration
-Least risky growth strategy -Usually results in slower growth
32
Features of product development
-Riskier than market penetration -Efforts put into new products may distract the owner from the core business
33
Types of market development strategies
-Conducting business in a new geographic market -Selling the product to a new target market -Moving from selling to businesses to selling directly to individual customers
34
The riskiest growth strategy is...
diversification
35
Types of diversification
-Related diversification -Unrelated diversification