Theme 2 Flashcards
What is external (inorganic) growth
Joining forces for a business to grow
What is internal (organic) growth
Selling more output over a period of time and growing
What is a merger
Two or more businesses voluntarily agreeing to join up and work as one business
What is a takeover
Where one business buys another
Name two benefits of internal (organic) growth
Helps to increase market share
Less risk than external growth
Give two benefits for external (inorganic) growth
Competition can be reduced
Market share can increase overnight
Give two drawbacks of internal (organic) growth
Slow growth
Growth is dependent on the overall market
Give two drawbacks if external (inorganic) growth
Can be expensive to merge/ takeover
Managers may lack experience to deal with the other businesses
Give three methods of internal (organic) growth
New markets
New products
New technology
Give a benefit and drawback of retained profit (internal)
+ involves no risk or debt
- profit is not guaranteed
Give a benefit and a drawback of selling assets (internal)
+ Quick way of raising capital
- looses the benefit of owning the assests sold
Give a benefit and drawback of loan capital (external)
+ once applied for the process is quicker
- interest & fixed repayments can affect cash flow
Give a benefit and drawback of share capital (external)
+ can raise considerable capital
- risk control of the business & dividends
Give a benefit and drawback of stock market flotation
+ quick way to receive capital
- risk control & shareholders may lack experience
Give two reasons why business aims & objectives change (externally)
New competitors
New legislation
Give two reasons why business aims & objectives change (internally)
Change in working culture
Change in business’ leaders
What is the definition of globalisation
Where businesses operate internationally and gain a lot of influence or power
State three ways globalisation can impact a business
Imports (cheaper raw materials & competition)
Exports (growth opportunities & problems)
Location ( opportunity to relocate closer to important factors)
What is the definition of a tariff
A tax added to the price of an import
What is the definition of trade blocs
A group of countries that work together to provide special deals for trading
Give two ways in which businesses can compete internationally
E- commerce (24/7 & no need for foreign retailers)
Globalisation ( adapting product to culture)
What is the definition of ethics
Weighing up decisions or actions on the basis of morality not personal gain
What is the definition of trade-off
How having one thing may force a business to have less of another
What is the definition of a pressure group
A group of people who join together to try to influence government or business policy for a particular cause
Give three elements of the design mix
Aesthetics
Function
Cost
What is the definition of a product life cycle
A business model that represents the sales of a product through different stages
What is a definition of extension strategies
Slightly changing the product so that is has a fresh appeal to the target market
What are the four stages in a product life cycle
Introduction
Growth
Maturity
Decline
Give two ways differentiating helps businesses
Helps to position their products and target different market segments
Helps to gain competitive advantage when facing competition
Give three influences on pricing stategies
Competition
Branding
Product life cycle
What are three reasons why business use promotion
Inform consumers of a new product / service
Persuade consumers to purchase
Remind consumers of the benefits of that product
Give three promotional strategies
Advertising
Sponsorship
Special offers
Give three ways technology can be used in promotion
Email
Social media
Apps
What is the purpose of business operations
To organise, produce and deliver the goods and services provided by a business
What is Job production
Production of one-off or bespoke products
What is a benefit and drawback of job production
+ high profit
- longer production process
What is batch production
Production of a larger volume of products
What is a benefit and drawback of batch production
+ some levels of flexibility and automation
- productivity reduced when switching between batches
What is flow production
Production of high volumes of products
What is a benefit and drawback of flow production
+ high productivity
- setting up expensive machinery increased costs
Give three ways technology impacts production
Speeds up the production process
Lowers production costs
Ensures fewer mistakes and defects
What is the definition of just in time (JIT)
A stock management system where stock is delivered only when it is needed by the production system so no stock is kept
What is the definition of procurement
The whole process of managing the ordering and receipt of the goods/services in the business
Give three factors that lead to the efficient procurement of raw materials
Flexibility
Availability
Cost & Quality
Give three three impacts in logistics and supply decisions
Flexible suppliers can help a business meet customer needs easier
Late deliveries hold up production
Poor quality can lead to dissatisfaction and products returned
What is quality control
Testing for quality once a product has been made
What is quality assurance
Focusing on quality at every stage of the production process
Why is quality important to a business
Can charge a premium price
Builds a string brand image
What are the five stages of the sales process
Customer interest Speed & efficiency of service Customer engagement Post- sales service Customer loyalty
What is gross profit
The profit that a business makes before any indirect costs have been deducted
What is net profit
The actual profit after indirect costs that are not included in gross profit have been paid
Calculation for gross profit
Sales revenue - cost of sales
Calculation of Gross profit margin
Gross profit / sales revenue (x100)
Calculation of net profit
Gross profit - any other expenses and interest
Calculation of net profit margin
Net profit / sales revenue (x100)
Calculation of average rate of return
Average annual profit / cost of investment (x100)
Give a use and limitation of financial information
+ monitor performance of business
- business performance isn’t solely judged on financial performance
What are the differences between hierarchical & flat structure
H: long chain of command & shorter span of control
F: shorter chain of command & wide span of control
Give a benefit and drawback of a hierarchical structure
+ easier to control & promotional opportunities
- costly & slow communication
Give a benefit and drawback of a flat structure
+ clear communication
- no promotion opportunities (= low motivation & retention)
What is the difference between a centralised and decentralised structure
Centralised: decisions made by head director
Decentralised: decisions delegated to regional branch directors
Give a benefit and drawback for a centralised structure
+ increased control
- decisions can be slow
Give a benefit and drawback for a decentralised structure
+ decisions suited to local customers
- loss of control
Give three impacts of bad communication
Bad employee motivation
Bad customer service
Increased mistakes made
Give three reasons why motivation is important in the workplace
Can create a hard working & flexible workforce
Attracts & retains hood employees
Improved customer service
Give three financial methods of motivation
Fringe benefits
Bonuses
Promotions
Give three non- financial methods of motivation
Job rotation
Job enrichment
Employee reward scheme
Calculation of revenue
Price x quantity
Calculation of variable costs
Cost of one unit x quantity
