Mock Revision (Theme 2&3) Flashcards
what are 5 problems with growth?
- coordination and control
- communication
- motivation
- internal politics
- overtrading
what are 5 things that can be done to prevent overtrading?
- invest in capital intensive systems
- fully assess financial health (Gearing, ROCE, acid tests)
- lease rather than buying equipment or use hire purchase
- manage growth strategy carefully
- manipulate receivables/ payables
what is the definition of overtrading?
when a business grows too quickly they may experience cash flow problems
what is the formula for productivity?
total output/ no. of employees
what is organic growth?
internal growth
what is inorganic growth?
external growth (using takeovers/ mergers)
what are some examples of growing using organic growth? (3)
- open more stores
- employee more staff
- franchising
what are some examples of growing using inorganic growth? (3)
- takeover
- merger
- acquisition
what is a takeover?
1 business purchases a controlling interest in another 50% + 1 share
what is a merger?
2 businesses agree to join to form a larger business
what is an acquisition?
a company buys most, if not all, of another firm’s ownership stakes to assume control of it
what are 3 advantages of organic growth?
- can control growth (so lowers the risk of overtrading)
- easier to sustain culture
- maintain quality
what are 3 disadvantages of organic growth?
- can be slow - if competitors are growing fast you can lose market share
- don’t have financial buying power
- could become introspective (can’t see whats wrong with the business)
give 2 positives of takeovers?
- quick and can have positive impact quickly
2. eliminate a competitor
give 2 negatives of takeovers?
- conflicts can occur - hard to get cultural cohesion
2. resistance from staff
give 2 positives of mergers?
- less resistance (synergies and expertise)
2. agree how control will work
give 2 negatives of mergers?
- can cause confusion
2. duplicate roles - may have to reapply for job
what is the definition of growth?
increase in size/ status of a business
what are 4 benefits of growth?
- increases profitability
- gain market share
- increase brand recognition
- achieve economies of scale
what is economies of scale?
factors which cause the acpu to decrease as output increases
what is the definition of capacity utilisation?
outline to the extent to which assets and resources are being used in relation to the maximum possible output
capacity utilisation formula:
current capacity level/ total capacity x100
what are 3 issues with high capacity utilisation?
- no spare capacity for repair/ maintenance
- impact on staff - overworked/ stressed (could lead to high labour turnover)
- may need to outsource
what are three issues with low capacity utilisation?
- if demand increases there may not be enough stock
- high waste
- unit costs increase
what is the best thing about a merger?
synergies
what are three reasons business objectives are useful?
- provides direction/ purpose
- efficient allocation of resources
- measure performance
what are corporate objectives?
objectives for the whole business
what are functional objectives?
objectives for each department/ function
what are the 8 categories of objectives? *
- social objectives
- employee welfare
- survival
- market share
- cost efficiency
- profit maximisation
- sales maximisation
- customer satisfaction
what are social objectives:
the business focuses on social/ environmental objectives
what is employee welfare objectives/?
considering impact of business activity on staff wellbeing - motivation, high retention, low absenteeism
what are survival objectives?
business sets a target to maximise resources to ensure survival
what are market share objectives?
increase the proportion of sales one business has in a market
what is cost efficiency objectives?
minimise costs is the sole focus
what is profit maximisation objectives?
many profits as quickly as possible
what is sales maximisation objectives?
many sales as quickly as possible
what are customer satisfaction objectives?
ensuring customers stay loyal
give 4 internal factors which influence whether or not objectives are fulfilled?
- leadership
- stage of lifecycle
- leadership change
- finances available
give 4 external factors which influence whether or not objectives are fulfilled?
- competition
- tastes/ trends
- unforeseen events
- economic climate
what is profit satisficing?
lifestyle business/ social enterprise
what is a stakeholder?
any individual/ organisation who has vested interest in the activities/ decision making of the business
what are the two types of stakeholders? and then give brief description:
- internal. employed within the organisation/ invested in it
- external. organisation outside the business
are shareholders long termist or short termist?
short termist
are stakeholders long termist or short termist?
long termist
what are often shareholders objectives? (3)
- return on investments
- share value increases
- profit maximisation
what is the stakeholder approach to business?
where a business tries to satisfy as many different stakeholders as possible
what are 2 advantages to the shareholder approach to business?
- quick return on investment
2. can secure additional investment in the form of share capital to fund expansion to get profit maximisation
what are 2 disadvantages to the shareholder approach to business?
- hard to develop a customer base/ staff recruitment
2. short termist and could sell their shares rapidly
what are 2 advantages of a stakeholder approach to business?
- more motivated workforce - staff welfare massively improves
- customer loyalty
what are 2 disadvantages of a stakeholder approach to business?
- long termist approach takes much longer
2. very costly
what 3 things do leaders do?
- inspire staff
- build relationships
- take risks
what 3 things do managers do?
- manage resources
- official position of responsibility
- delegate the work out
what are the four leadership styles?
- authoritarian
- paternalistic
- democratic
- laissez-faire
what leadership styles regard staff as a cost?
authoritarian
what leadership styles regard staff as an asset?
paternalistic
democratic
laissez-faire
What are 3 internal causes of change?
- change in structure
- change in leadership
- moral/ change in staff wellbeing
what are 3 external causes of change?
- economy changes
- competitors actions
- changes in tastes/ trends
what is a transformational leadership?
a leader who transforms the business which they work for
what are 5 features of strong cultures?
- high morale
- vision
- communication effective
- consistency
- culture usually based around history/ tradition
what are 4 features of weak cultures?
- poor HR performance
- diseconomies of scale
- confusion from staff - demotivation
- very bureaucratic and lack flexibility
what are hands four classes of culture?
power
role
person
task
what are 4 factors which influence a culture?
- CEOs
- normal routines
- type of business
- working practice/environment
what is a power culture? (4)
- central figure who makes decisions
- power is concentrated among a few
- quick decisions are possible
- few rules and procedures
what is the leadership style in a power culture?
autocratic leadership style
what is a role culture? (3)
- decisions are made through established roles and procedures
- power to make decisions comes from job title
- clearly delegated authorities
what is the leadership style in a role culture?
bureaucratic leadership
what is task culture? (4)
- the focus is a project which needs to be completed
- power comes from those who can accomplish the tasks and have the expertise
- involves teamwork on a project, team of experts working together
- no single power source
what is person culture? (4)
- grouping of similarly skilled people to share expertise and knowledge
- work on a client by client basis - not project by project
- people believe themselves superior to the business
- power lies in each group of individuals
