Strategy and implementation - business growth

Question 1

What is the ansoff matrix

Answer 1

it is a strategic tool used by a business to achieve growth

Question 2

How does the ansoff matrix help a business to achieve growth

Answer 2

1 It focuses of profitability and sales
2 outlines the options open if the business wants to grow by increasing profitability and sales
3 it helps to determine its strategy

Question 3

What is the main consideration of the ansoff matrix

Answer 3

Whether the marketing strategy is targeted at existing or new customers and if existing products should be used or an alternative new product

Question 4

What does the matrix look like

Question 5

What are the 4 strategies or options according to the product range

Answer 5

1 market penetration - concentrating on sales of existing products to existing markets
2 market development finding and developing new markets for existing products
3 developing new products for existing markets
4 diversification— developing new products and new markets

Question 6

Identify 3 market penetration strategies

Answer 6

1 attracting customers who have not yet become regular users by increasing brand loyalty
2 attacking competitor sales - often in a mature market where increased sales for a market come from competitors - adjusting the marketing mix
3 increasing consumption amongst existing users maybe reducing the price

Question 7

State 2 ways market development - develop markets for existing products can be achieved

Answer 7

1 identifying users in different markets with similar needs to existing customers eg a different geographical location
2 identifying new customers who would use products in a different way

Question 8

State ways in which product development (new product for existing markets) help with market penetration

Answer 8

1 budsiness tries to increase profits by introducing new products to existing customers
2 have to create a new product
3 can develop existing products to extend their lif

Question 9

State 2 ways a business growth can be categorised

Answer 9

1 organic
2 external

Question 10

What is organic growth

Answer 10

1 sometimes called internal growth
2 expansion of the business by selling more products
3 a less risky strategy as doesn’t involve any other business and uses existing resources but takes longer

Question 11

What are the strategies for organic growth

Answer 11

1 most common opening up new factories or retail outlets to increase capacity
2 expanding product range
3targeting new markets
4 expanding distribution network making product available in more places eg internet
5 benefit from economies of scale which reduce costs so prices of product can be reduced and attract more customers

Question 12

What does success of organic growth an indication of

Answer 12

Managers have used internal resources to grow profits
Managers have used their skills to improve business

Question 13

How can inorganic or external growth be achieved

Answer 13

1 takeover (acquisitions)
2 merger

Question 14

What is a takeover

Answer 14

1The acquisition of one business by another
agree or can be hostile
2 can be agreed of hostile
3 happens when a business sells more than 50% of its shares

Question 15

What is a merger

Answer 15

Process by which 2 companies become 1
Usually companies of equal size and agree on shared ownership of the new business

Question 16

Why are public limited companies vulnerable in takeover than private limited

Answer 16

Their shares are bought and sold on the stock market private limited are less open to take over as shareholders have to invite and agree the selling of their share

Question 17

State the ways in which companies can merge or be taken over

Answer 17

1 backwards vertical
2 horizontal integration
3 forward vertical
4 conglomerate integration

Question 18

What is horizontal integration

Answer 18

When a business merges or takes over another in the same industry at the same stage in production process

Question 19

What is the objective of horizontal integration

Answer 19

To benefit from economies of scale, reduce costs and increase profits

Question 20

The word synergy is often used to describe this type of growth what does synergy imply

Answer 20

That 2 merged businesses will be more profitable together than apart

Question 21

Who are CMA and what do they do

Answer 21

1Competition and Markets authority
2 investigate mergers and anti competitive practices in markets that could give rise to a huge lessening of competition.
3They have the power to stop mergers or impose conditions

Question 22

Describe backward vertical integration

Answer 22

When a business merges or takes over a business at the previous stage in the production process in the same industry eg business takes over a supplier

Question 23

What is the objective of backward vertical integration

Answer 23

To reduce costs or secure a supplier

Question 24

What is forward vertical integration

Answer 24

When a business merges or is taken over by a business in the next stage of the production process (THEY TAKE OVER THE CUTOMER) EG oil company buying petrol station

Question 25

What is the objective of forward. Vertical integration

Answer 25

Allows a business to be closer to the consumer giving greater control of the market place

Question 26

What is a conglomerate

Answer 26

When a business merges or takes over another business with no connection to the product or the market

Question 27

What is the objective of a conglomerate

Answer 27

When a company wants to diversify

Question 28

What are the wider effects of mergers and take overs

Answer 28

Senior managers may see the take over as a threat if it is a hostile take over and it can result in their redundancies
2 workforce may suffer job loses

Question 29

What are the reasons for mergers and take overs

Answer 29

1 access to new markets - especially overseas
2 increased market share leading to increased market power in the market
3 diversification
4 acquiring new products and technology that may be protected by patent, or may be expensive or time consuming to develop internally
5 economies of scale are derived from becoming larger
6 synergy - by combining 2 businesses, total profits can be increased by reducing duplicated services such as head office costs
7 cost saving - takeovers are often followed by significant numbers of redundancies. To convince shareholders the takeover is in their interest
8 underperforming management teams can be removed giving a boost to performance
9 higher returns for shareholders

Question 30

What is franchising

Answer 30

A strategy for growth
2 it is the legal right to use a brand name, product and business style of an existing business eg McDonalds
3 the business model is duplicate by selling the rights to other people to run the business rather than the owner

Question 31

What are the problems of a franchise model

Answer 31

1 loss of control
2 not all profits return to franchisor
3 potential for loss of reputation
4 growth may occur to quickly with possibility of diseconomies of scale

Question 32

What are the advantages for the franchisor (person selling franchise)

Answer 32

1 fast growth with low risk
2 economies of scale can happen quickly
3 increased income from franchise fees
4 the franchisee who are committed to the success of the business and are lively to be hard working

Question 33

What is outsourcing

Answer 33

When outside suppliers are involved on things that could happen internally in a business,
Supp;ire’s are not employed by the business

Question 34

What is the aim of outsourcing

Answer 34

Can lead to increased efficiency and lower costs

Question 35

What is offshoring

Answer 35

When jobs are moved outside the business - sometimes abroad

Question 36

Why has offshoring grow In the last 10- 15 years

Answer 36

China has entered fully into the world trading economy
More businesses taking advantage of manufacturing in low cost efficient markets like Romania

Question 37

What are the advantages of outsourcing

Answer 37

1 greatly reduces staffing costs
2 well trained staff form outsourced companies reduce
HRM costs
3 existing workload and stress levels reduced
4 less investment risk
5 capital needs are reduced
6 lower costs increase profits giving more capital for research and development

Question 38

What are the disadvantages of outsourcing

Answer 38

1 potential of poor customer service
2 existing employee may feel demotivated if they believe their job is at risk
3 quality of production can not be guaranteed
4 more difficult to implement JIT systems
5 can be breakdown of communication in the production chain
6 loss of security of data
7 loss of tax revenue to home government