Strategic Methods : How to Pursue Strategies (3.9)

Question 1

Innovation is the development of…
- Likely to have a _________ which can guarantee future…
- Adds __________.

Answer 1

Is the development of an idea into a new product or process.
- Likely to have a patent which can guarantee future income for a business.
- Adds value.

Question 2

Product Innovation is changing a product that… or developing an….

Answer 2

Changing a product that already exists or developing an invention into a brand new product.
- - (Supermarkets have product and process innovation).

Question 3

Process Innovation is changing a process of… or putting into practice a…

Answer 3

Changing a process of production that already exists or putting into practice a brand new production process.
- (Supermarkets have product and process innovation).

Question 4

Innovation, ADVANTAGES & DISADVANTAGES (3) :

Answer 4

+ Prevent products from becoming obsolete.
+ Can increase efficiency/more cost effective.
+ Likely to be a premium product with high prices (USP).
- Expensive and time-consuming (especially during R&D).
- Can make substantial losses if fail.
- Legal implications can arise with other businesses questioning whether the PorP is really an innovation.

Question 5

Business Model Innovation :

Answer 5

Changes at least 2 of 4 things.
- How do you generate revenue?
- How do you add value
- Who is your target customer?
- What do you offer customers?
Initiation (analyse current business model), Ideation (confront model), Integregation (check consistency of business model), Implementation.

Question 6

Ways of becoming an innovative organisation? (4)

Answer 6

• Kaizen e.g. cheff cuts lemons in Pizza Express now (small, frequent improvement).
• Research and Development.
• Intrapreneurship.
• Benchmarking.

Question 7

Intrapreneurship :

Answer 7

Is when an when employees in a larger organisation act in the same way as entrepreneurs.
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Question 8

Benchmarking :

Answer 8

Process of identifying the best practice in your industry in relation to yours, identify areas and means of performance improvement.

Question 9

Kaizen :

Answer 9

Continuously improve all functions, all members of workforce involved.
e.g. Pizzas Express, initially waitresses sliced lemons but now chefs do it so W can lay tables.
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Question 10

Benchmarking Process (7) :

Answer 10

• Identify areas that can be benchmarked.
• Collect quantitative data on these areas.
• Identify best practice.
• Compare performance to identify areas of weakness.
• Set new targets.
• Implement procedures to achieve these targets.
• Review progress.

Question 11

Copyright :
Patent :

Answer 11

Copyright : A legal protection for anyone that has produced work in a range of areas, free.
Patent : A legal protection of a unique feature of a product or process, very costly to pay for, e.g. Trunkee still faces problems, as does M&S with Colin the Caterpillar.

Question 12

(Assessing Change)
Change occurs when a business alters its…
- May be necessary to meet aims and…

Answer 12

Occurs when a business alters its structure, size or strategy to respond to internal or external influences.
- May be necessary to meet aims and objectives but also creates opportunities and threats.

Question 13

(Assessing Change)
Business will either GROW or RETRENCH.
Grow because…
Retrench because…

Answer 13

Grow : e.g. to increase shareholder value, increase marker share or fulfil an objective growth.
Retrench : e.g. to increase efficiency, turn around poor performance, focus on core business, sell off less profitable parts of business to improve overall performance.

Question 14

(Assessing Change)
Retrenchment :

Answer 14

Downsizing scale of the business’ operations, e.g. closing branches and delayering.

Question 15

(Assessing Change)
Organic or Internal Growth :

Answer 15

When a business expands in size by opening new stores, branches or functions or new products.
- Can be very time consuming but is relatively low risk.
- Control is easier to maintain.

Question 16

(Assessing Change)
Inorganic or External Growth :

Answer 16

When a business expands in size by either merging or taking over another business.
- Allows a business to expand more rapidly as its buying pre-established businesses.
- Can be high risk if the two businesses are not compatible.

Question 17

Advantages (3) & Disadvantages (2) of ORGANIC :

Answer 17

+ Lower risk.
+ Easy to maintain control.
+ Less costly.
- Slower growth.
- Limited market capture

Question 18

Advantages (4) & Disadvantages (3) of INORGANIC :

Answer 18

+ Rapid growth.
+Takeover competitors.
+ Access to new expertise.
+ Economies of scale.
- Financial risk.
- Could lose company’s vision
- Employee dissatisfaction

Question 19

Economies of Scale :

Answer 19

Advantages enjoyed by a business as it increases the scale of its current operations leading to a fall in unit costs.
- Lower unit costs allow businesses to be competitive e.g. lower prices.

Question 20

Diseconomies of Scale :

Answer 20

The disadvantages suffered as a result of a business increasing the scale of its operations that lead to a rise in unit costs.
- Rising unit costs will make a business less competitive, may mean businesses have to increase prices.
- Includes communication, coordination and control.

Question 21

5 main types of Economies of Scale :
- F
- R-B
- Ma
- Ma
- I D

Answer 21

• Financial ES : Banks may feel more secure lending to large businesses as its less risky, may give cheaper interest.
• Risk-bearing ES : business spreads risks on different products that a company can fall back on.
• Marketing ES : spread the cost of advertising over a large number of goods.
• Managerial ES : when a firm can afford to hire specialist, high-skilled people.
• Increased Dimensions ES : theory that increasing output gains you extra benefits, synergy.

Question 22

Synergy :

Answer 22

Two businesses joined together will be able to achieve more than the sum of the two businesses operating separately.
- Shared resources, increasing expertise and joint marketing.

Question 23

Mergers vs Takeovers :

Answer 23

Mergers : Equal joining, e.g. Lloyds TBC and Curry’s PC world.
Takeover : 51% of shares of more, e.g. Kraft Foods and Cadbury.
(EXTERNAL/INORGANIC GROWTH)

Question 24

(Growth through M&T)
Vertical Integration :
- Forward VI :
- Backward VI :

Answer 24

Involves acquiring a business in the same industry but a different stage of the supply train.
- Forward VI : Integration of a business that is closer to final consumers e.g. a manufacturer buying a retailer, e.g. TUI takes over travel agents.
- Backward VI : Acquisition operates earlier in the supply chain e.g. a manufacturer buying a raw material or component, e.g. takeover suppliers.

Question 25

(Growth through M&T)
Conglomerate diversification :

Answer 25

Where a company expands its business by adding new products or services that are unrelated to its existing ones.
- Links to Ansoff’s Matrix.
- e.g. Tesco & Matrix

Question 26

(Growth through M&T)
Horizontal Integration :
- 3 Advantages :
- 3 Disadvantages :

Answer 26

Involves the combination of two businesses operating in the same industry and at the same stage of the supply chain.
+ Exploit internal economies of scale
+ Potential to secure revenue synergies.
+ Reduces competition.
- Risk of diseconomies of scale.
- Reduced flexibility.
- Threatens competition (mergers and acquisitions can lead to monopolies which can be detrimental to consumers).

Question 27

Economies of Scope :

Answer 27

The advantages enjoyed by a business as it increases the scale of its operations by expanding the range (scope) of activities it undertakes (leading to a fall in unit costs).
- Economies of Scale is 1 product.
- Economies of Scope is multiple.

Question 28

Economies of Scope includes :
- Entering…
- Introducing…
- D__________.
- Market ______________ rather than…
Benefits include :
- Share…
- Maximise…
- Increase…

Answer 28

• Entering new markets.
• Introducing new products.
• Diversification (Ansoff’s Matrix).
• Market brand rather than individual products.
• Can share expertise.
• Maximise use of resources.
• Increase brand loyalty.

Question 29

(Franchise) Franchisor grants a…
- The owner gets paid…

Answer 29

Franchisor grants a licence (franchise) to another business (franchisee) to allow it to trade using the brand/business format.
- Owner gets paid royalty payments.
- The franchisor must support the franchisee in a range of areas, e.g. advertising and recruitment.

Question 30

Franchise, Advantages (4) & Disadvantages (3) :

Answer 30

+ Rapid expansion (maximise profits).
+ Enables quick geographical growth.
+ Investment from franchisees is an important source of growth finance.
+ Economies of scale (buying power and mass advertising).
- Loss of control, can damage reputation.
- Managing growth can be difficult (have to have enough staff & resources).
- Litigation, a failed franchise is a court case waiting to happen.

Question 31

Joint Ventures :

Answer 31

Two or more businesses agree to act collectively to set up a new business venture with all parties contributing equity to fund the set up and purchase of assets.
e.g. Primark and Greggs, Tesco and Entertainer (E outlets in Big Tesco’s).

Question 32

Research and Development examples :
- Amazon :
- Volkswagen :

Answer 32

• Amazon : Uses AI to enhance its services e.g. Alexa, Intraprenurship, the ‘two-pizza team rule’.
• Volkswagen picked up a lot of other business, e.g. Bugatti, Porsche and Skoda, and has invested hundreds of billions into R&D, however, due to this, they have a high recall rate.

Question 33

How can technology be used in operations management :

Answer 33

• Production line, robotics.
• Measure stock levels.
• CAD, CAM : Computer Aided Design and Computer Aided Manufacture.

Question 34

Digital Technology :
- It includes…

Answer 34

The use of computers to find, store, analyse, manipulate and communicate digital information.
- E-commece, big data, data mining and Enterprise Resource Planning.

Question 35

(Digital Technology, E-Commerce) :
— It’s growing because…

Answer 35

Commercial Transactions can be :
- B2B : business to business transactions.
- B2C : business to consumer transactions.
- C2C : consumer to consumer transactions.
— It’s growing because of improved internet speed, convenience, competitive advantage, safer payment and increased confidence.

Question 36

E-Commerce, Advantages + Disadvantages for customers & business :

Answer 36

Customers : + Convenience / - potential for slow delivery and can’t try stuff on.
Business.
Business : + Operates 24/7 / - can’t provide as good customer specific, have to set up a website, lots of competition.