Theme 2 Flashcards
1
Q
What is internal growth and some examples of this?
A
Internal growth is when a business grows by expanding on its own without merges/takeovers from other businesses.
- new products (research, innovation)
- new markets (taking advantage of technology, changing marketing mix)
2
Q
What is external growth and some examples of this?
A
When a business combines with another to grow
- takeover (one business joins another)
- merger (two or more businesses join together)
3
Q
What are the advantages and disadvantages of a business going through organic growth?
A
Advantages:
- business that grows from within can retain their own company culture
- higher production -> business can benefit from economies of scale/ lower average costs
- more business allows more market share
Disadvantages:
- high risk strategy to be opening lots of stores/taking on new staff
- long period between investment and return of investment
- growth can be limited and dependant on reliability of sales forecasts
4
Q
Describe how economies of scale work
A
When costs decrease due to larger levels of production.
- more products produced -> more materials ordered regularly
- bulk orders reduce price
- variable cost per unit reduced
5
Q
What are the advantages and disadvantages of a business mergers?
A
Advantages:
- economies of scale, better deals
- increased revenue and market share
- buying technology
- international expansion, buying a business in another country helps with culture issues
Disadvantages:
- clash of cultures
- communication problems
- unreliable merger partners
- diseconomies of sale, costs will go up, problems with motivation and co-ordination
6
Q
What is an internal source of finance and what are some examples of this?
A
Capital gained within a business
- retained profit
- selling assets
- personal savings
7
Q
What is an external source of finance and what are some examples of this?
A
Capital gained outside a business
- loan capital
- share capital
- stock market floatation
8
Q
What are the pros and cons of loan capital?
A
Pros:
- improves cash flow
- financial advice
Cons:
- time for approval
- interest
- expensive
9
Q
What are the pros and cons of share capital?
A
Pros:
- large amounts of capital
- no interest
- doesn’t need to be repaid
Cons:
- loss of control
10
Q
What is a public limited company?
A
When a private limited company makes shares available to the public to purchase.
11
Q
What are the pros and cons of stock market floatation?
A
Pros:
- large amounts of capital
- no interest
- does not need to be repaid
Cons
- loss of control, shareholders vote on decisions
12
Q
What might business aims and objectives change in response to?
A
- market conditions
- technology
- legislation
- growth
- consumer taste
13
Q
As a business evolves, how would its focus on survival or growth alter?
A
Less focused on survival as it passes the break even point. When it starts to make profit, growth will be preferred choice.
14
Q
As a business evolves, how would its focus on entering or exiting markets alter?
A
Will change the market it’s in. Could enter new markets so the business is growing by venturing new ideas. Could exit markets if they aren’t making enough sales in that area.
15
Q
As a business evolves, would it be growing or reducing the workforce?
A
Could grow the workforce so the business has a higher production rate. Could reduce the workforce of business becomes reliant on technology.
16
Q
As a business evolves, would it be increasing or decreasing its product range?
A
May increase product range so business is growing by venturing new areas. Could decrease product range if they aren’t making enough sales in that area.
17
Q
How would market conditions effect business objectives?
A
Could be a lot of new competitors so the business would need to change its aims.
18
Q
How would growth effect business objectives?
A
Business could change their aims and objectives in response to its performance. If a business has a bad year they could reduce staff.
19
Q
How would legislation effect business objectives?
A
As there is a minimum wage law, business may have to change its aims and growth may be slower to pay higher wages.
20
Q
What is Globalisation?
A
Increasing integration of the worlds economies into one international market.
21
Q
What are the advantages and disadvantages of globalisation?
A
Advantages:
- impact of productivity and competition
- specialisation
- impact on growth rates/inflation and unemployment
- economies of scale
Disadvantages:
- impact on unemployment
- impact on balance of payments
22
Q
What are imports and exports?
A
- import is the purchase of a good/service from a foreign business which leads to a flow of money outside UK, will have to change pounds to sellers currency to make transaction
- export is the purchase of a good/service to a foreign business which leads to a flow of money inside UK, will have to change their currency to pounds
23
Q
What is a multinational company?
A
Companies that own production/service facilities outside the country they are based
24
Q
What are tariffs?
A
Tax placed on an import to increase its price and decrease its demand. Can persuade consumers to switch to buy UK made goods
25
Why are tariffs important for the UK’s economy in terms of exports and imports?
Encourage less imports so there’s more exports. Decrease in imports means UK will make more money.
26
What are the advantages and disadvantages of tariffs?
Advantages:
- UK produced goods don’t need to pay the tariff, price advantage
- can protect new businesses from being swamped by international competition
- raise tax revenue for government to be spent on infrastructure
Disadvantages:
- tariffs may increase prices for consumers
- High import prices won’t put many customers off
27
What are the Trade Blocs and some common examples?
Group of countries who make a trade agreement not to place tariffs on imports from each other
- EU
- NAFTA
- ASEAN
28
How many businesses compete internationally through the internet, e-commerce, and changing their marketing mix?
- place: selling online means business can reach more places internationally
- promotion: social media is a good way to promote as it is an international range and low costs
- price: lowering prices incase any tariffs are placed on them they still have competitive pricing
- product: more adaptable for foreign countries
29
What are the advantages and disadvantages of trade blocs?
Advantages:
- larger target market
- cheaper imports from EU countries
- economies of scale
- easier to recruit labour
Disadvantages:
- more competition for UK businesses
- imports can be more expensive from non-EU members
- tariffs on UK exports from non-EU members
30
What are the ethics in terms of business?
Understanding of morals and right and wrong, paying fair wage.
31
What is a trade-off?
A compromise between one thing and another. Has to be a trade-off between making a profit and being ethical so everyone is happy.
32
What is a pressure group and what actions do they take?
Organisations set up to influence what consumers think about a business
- write letters to MPS
- write letters to press
- organise marches
- run campaigns
33
Why is it important for a business to be ethical?
So they produce an ethical brand image. Unethical brand image will lead to bad publicity, boycotting and decrease in revenue.
34
How may businesses create sustainable products?
Manufacturing products in ways that don’t harm the environment, using renewable energy/ not wasting raw materials.
35
What is the design mix?
Three aspects that make up design of a product
- aesthetic
- function
- price
36
What is the first stage of the product life cycle?
Introduction:
- high costs in research and development
- products may have been test marketed before launching, negative profits
- low sales, customers aren’t aware of product
- no cash flow
37
What is the second stage of the product life cycle?
Growth:
- rapid growth in sales/ profits
- demand is high as customers are aware of product
- high cash flow
38
What is the third stage of the product life cycle?
Maturity:
- intense competition as all producers joined market
- sales high, falling profits
- discounts to keep sales high
- highest cash flow
39
What is the fourth stage of the product life cycle?
Decline:
- limit in production
- profit and sales fallen
- product withdrawn from sale
- low cash flow
40
What are examples of extension strategies and why may they be used?
To extend life of a product
- advertising
- new packaging
- explore new markets
- price reduction
- add new value
41
What are examples of differentiation and why is it important?
Unique brand image and promotes customer loyalty as it stands out
- branding
- USP
- location
- design
- customer service
- quality
- product mix
42
What is skimming pricing?
Product initially priced high as it has a desirability factor so customers will want it when new. Lowered later on.
43
What is penetration pricing?
Setting an initial low price to attract customers. Likely to be raised later as the product gains market share.
44
What is cost plus pricing?
Worked by calculating the total cost to produce a product and adding profit. Often used in food industry.
45
What is the difference between niche and mass marketing?
Niche:
Unique differentiated products, more likely to be sold for higher prices
Mass:
Similar products sold to mass markets, low prices to encourage sales
46
What is advertising used for?
- promote the brand
- raise awareness of a product
- remind customers how great product is
- persuade customers to switch
47
What are product trials and what strategies might be used alongside it?
Consumer buys a good for first time, assesses whether they want to purchase again
- public relations
- viral marketing
- free samples
- user testing
- penetration pricing
48
What are methods of viral marketing?
- advertising
- social media
- internet
- word of mouth
- interactive games
- video clips
49
What are e-tailers and ‘clicks and mortars’ stores?
- e-tailers are online e-commerce stores, amazon
| - clicks and mortars stores are online and physical, Argos
50
How is price affected by the rest of the marketing mix?
- products that are rare/higher in demand will increase in price
- places that have a further distance to travel will cost more to transport the product, increases price
- promotion ensures that it’s acceptable to charge high prices
51
How is product affected by the rest of the marketing mix?
- low price could be demanding, decreasing quality of product
- customers want products to be accessible from new places
- products adapted to fit promotion techniques
52
How is place affected by the rest of the marketing mix?
- products need to be tested before purchase and sold in retail stores
- high prices products would be sold in high-end areas to meet target market
- better promotion will increase range of where products are sold
53
How is promotion affected by the rest of the marketing mix?
- older products need more promotion to extend its life
- places would expect promotional sales
- higher priced products for a niche market will need niche promoting
54
What are 3 different types of promotion?
- job
- batch
- flow
55
What is stock?
Materials that a business holds
56
What is JIT strategy?
Just-in-time means a business doesn’t keep stocks of parts in a warehouse. They order parts and get them delivered on the same day from the supplier.
57
Why is essential that businesses using JIT have a good relationship with their suppliers?
Doesn’t work when there are delivery/quality issues. No buffer stock are held in a JIT system, if delivery doesn’t arrive product can’t be made.
58
What 4 things are necessary to consider when choosing a supplier?
- quality
- delivery
- availability
- trust
59
What is quality?
Achieving a minimum standard for product/service/production process that meets customers needs.
60
What is quality control?
Taking a small sample of finished products, testing if they meet required standards.
61
What is quality assurance?
Quality is produced and delivered at every state of production process.
62
What is the difference between quality control and assurance?
Quality control is checking products at the end and assurance is throughout.
63
Why does a higher quality give a business competitive advantage?
- differentiated products
- meeting customers needs
- building a strong brand
- premium prices can be charged
64
What is the sales process?
- product knowledge
- speed/efficiency of service
- customer engagement
- responses to customer feedback
- post-sales service
65
What is the importance of product knowledge in the sales process?
Allows the sales person to present their benefits accurately/persuasively. Customers respond to sales staff who are passionate about their products.
66
What is customer engagement?
Reaction/response of customers with a company/brand. On or offline.
67
What is the importance in responding to customer feedback in the sales process?
Helps them provide a better product or service in the future.
68
What is post-sales service?
Processes that make sure customers are satisfied with products/ services of a business.
69
What is gross profit?
Measure of profit a business makes excluding fixed costs
70
What is the formula for gross profit margin?
Sales revenue - cost of sales
71
What is net profit?
Measure of how well the business is doing by seeing how much of their sales revenue ir profit.
72
What is an average rate of return?
How quickly the investment costs will be paid off and how much profit is made per year
73
How do you calculate average rate of return?
Average annual profit / initial capital outlay x 100
Add profits together and divide by number of them, money spent on investment
74
What is quantitative data?
Numbers, can be displayed in charts/graphs/stats/percentages
75
What is market data?
The electronic streaming of prices, info used for trading of shares on the stock markets around the world.
76
What are the uses of financial information when making business decisions?
Banks will use it to see if they will lend more money in future. Government would use it to see if correct amount of tax has been paid.
77
What are the limitations of financial data?
- only shows a snapshot of a short period of time
- can quickly become out of date
- inaccurate
- interpreted in different ways
78
What is an organisational chart?
Diagram which shows internal structure of an organisation
79
What is a span of control?
Number of people who report directly to another worker in an organisation
80
What is a chain of command?
Path which orders are passed.
81
What is it beneficial to have a structure in a business?
Easier to see which part of a business does what. Easier communication and employees will find it easier to be aware of their roles/responsibilities.
82
What is delegation?
Task given to a lower employee in hierarchy. May have a deadline so manager can see if it’s done on time.
83
What is a hierarchical structure?
- tall/thin structure
- small span of control and long chain of command
- lots of layers with few people
84
What is a flat structure?
- short/fat
- wide span of control and short chain of command
- few layers with lots of people
85
Through what means can people in a business communicate?
- e-mail
- telephone
- fax
- text
- messenger
- twitter
- written document
86
Why is communication important for a business?
- motivates employees
- easier to control as coordinate business activity
- successful decisions easier
87
What are the problems with insufficient communication?
- employees lack enthusiasm in doing their work
- demotivate employees
- unclear instructions
88
What are the problems with excessive communication?
- workers not getting to important information
- confusing which demotivates
- put off potential employees
89
What are 3 ways you could work? (Terms of time)
- full time
- part time
- flexi-hours
90
What are 3 ways to work? (Terms of contracts)
- permanent
- temporary
- freelance
91
How has technology affected ways of working?
Better efficiency in working and communication, can work from home
92
What are the senior managers of a business?
Top level of business. Deal with tactical day to dat decisions and often appointed by board of directors to meet business objectives.
93
What are the operational staff of a business?
Take care of day to day tasks of running the business. Not involved in strategy/management of the business
94
What are the support staff of a business?
Carry out a specific role to help business run or the organisation to function.
95
What documents are involved in recruitment?
- personal specification
- job specification
- job description
- application form
- CV
96
What is a person specification?
List of qualities a business would want staff to have
- personal qualities
- qualifications
- work
- experience
- skills
97
What is the difference between internal and external recruitment?
Internal is taking someone who is already working in the business to a new position. External is hiring a completely new employee.
98
What is the link between training, motivation and retention?
Employees being trained makes them feel more valued. More motivated and likely to continue working for business.
99
Why is motivation important in the workplace?
- attracts employees
- retains employees
- increases productivity
100
What are financial methods of motivating employees?
- remuneration
- bonus
- commission
- promotion
- fringe benefits
101
What are non-financial methods of motivation?
- job rotation
- job enrichment
- autonomy
102
What is a bonus?
Extra money on top of a salary for different situational reasons
