Measuring a change in scale Flashcards
List 3 reasons why businesses grow?
Greater chance of survival
Increase in economies of scale
Gain a competitive advantage
What is Ansoff’s Matrix?
a strategic tool for businesses to plan their growth strategies
How has Novo Nordisk been forced to grow?
Due to an increase in demand and they have had to respond to this which can cause issues
What is retrenchment?
A strategic reduction in size
What is an example of a business that retrenched in COVID?
Renault - cut 15k jobs as part of a 2bn cost-cutting plan after seeing sales plunge
Why are Whsmith thinking about downsizing and selling high street stores? Retrenchment
Because they are facing issues of not being relevant specifically in high streets and 85% of their profit comes from travel retail
What are 2 reasons for retrenchment?
Poor performance or weaker economies may cause a business to retrench
May also be driven by strong competition from rivals - resulting in a loss of market-share
How can businesses grow? 3 ways
Investment
Online
Selling abroad - internationalisation
Why is organic growth often pursued?
Because a firm wishes to grow in a steady and managed way
What is an example of a theory which links to organic growth?
Ansoff’s Matrix
How can organic growth be driven?
When there is significant growth available
What is external growth?
Tends to be via the integration of 2 or more companies and can occur by merger and takeover
When do mergers occur?
When 2 businesses believe and jointly agree that they can increase their combined profit or achieve other objectives by merging
How are takeovers accomplished?
By the acquiring firm offering cash or shares or both to the shareholders of the firm which is being taken over. Brand identities are kept
Which is the fastest way to achieve growth?
Takeovers - high risk
