theme 3 Flashcards

Question

increased market power

Answer 1

more dominant, rivals left w smaller market. if a business is large enough it may be able to dominate 2 particular stakeholders: - customers: charge higher prices - suppliers: force costs of materials down in market if it buys large quantities from small suppliers

Answer 2

- charge higher prices - differentiate products from rivals - create customer loyalty - develop an image - launch new products more easily

Answer 3

more profit for investment and innovation, allows business to develop and launch new products and make acquisitions, if these investments are successful, the business is likely to grow further

Answer 4

- diseconomies of scale: if a business expands the scale of its operations beyond the min efficient scale, deos may result. this is where average costs rise as output rise - internal deos: communication becomes more complex due to departments, added responsibility, more supervision, motivation may suffer - external deos: may occur from overcrowding in industrial areas, price of land, labour, services and materials may rise as firms compete for a limited amount

Answer 5

occurs when a business expands too quickly without the resources to support that growth. most likely to occur if: - does not have enough capital - offers too much trade credit to customers - operating w slim profit margins

Answer 6

exploit synergies like monopoly power and being more efficient, quick and easy, cheaper than growing internally

Answer 7

A merger involves the mutual decision of two companies to combine and become one entity. Whereas a takeover is the purchase of a smaller company by a larger one. It doesn't have to be a mutual decision.

Answer 8

- regulatory intervention - could result in job losses which may - demotivate employees or cause strikes - integration costs - bidding wars for takeover

Answer 9

employees may get higher salaries as part of bigger business, speedy growth, increased profitability

Answer 10

can be costly to aquire and stretch resources, could be culture clash, loss of control

Answer 11

vertical: joining of 2 businesses at diff stages of production horizontal: joining of businesses that are in exactly the same line of business

Answer 12

forward: joining w a business in the next stage of production backward: joining w a business in the previous stage of production

Answer 13

integration: joining together of 2 businesses as a result of a merger or takeover merger: occurs when 2 or more businesses join together and operate as one synergy: when the value of two businesses brought together is higher than the sum of the value of the two individual businesses takeover: process of one business buying another

Answer 14

organic: a business growth strategy that involves a business growing gradually using its own resources e.g., franchising inorganic: a business growth strategy that involves 2 or more businesses joining together to form one much larger one

Answer 15

- new customers - new products - new markets - new business model - developments in tech or social change - franchising

Answer 16

they can go at a slower pace than external so its less risky and less likely to make errors so less diseconomies of scale can be cheaper if they use retained profits business retains more control

Answer 17

- This is a long term strategy, and it is significantly slower than growing inorganically. This could mean competitors gain more market power by expanding in the meantime, It could also make shareholders unhappy if they want faster growth. - prevents firms from tapping into resources from other businesses - might take time to exploit economies of scale hence long periods of higher average costs - if its dynamic market organic growth wont be suitable because they need to grow rapidly

Answer 18

- add personalised customer experience owners preference doesnt want additional stress - more flexible and can react quicker to changes in market and tech, management can make decisions quickly without hving it take long to reach everyone - lower costs - low barriers to entry - small firms can be monopolies

Answer 19

having a usp or differentiating product/service flexibility to customer needs - can adapt orders for customers even if production started, adapt to special requests offering high quality customer service - know customers better, personal touch, build relations e-commerce - makes it harder for customers to distinguish between small and large businesses

Answer 20

- smaller businesses can often make changes to customer orders even though a start has been made on production - small business can often respond to changes in external factors e.g., shift in customer needs, exchange rates, legislation. - customers may have special requests

Answer 21

- provides comp edge - smaller retailers have geo adv over larger rivals - communication is more efficient in small businesses - easier to build rs

Answer 22

cyclical fluctuations seasonal fluctuations random fluctuations trend

Answer 23

past may not mean this is going to happen in the future only useful when : - forecast is for a short period of time - revised frequently - market is slow changing - those preparing forecast have good understanding of how to use data and what market is like

Answer 24

The prediction of future sales from past data Extrapolation can often be done simply by extending a line of best fit

Answer 25

Where there is a link between two variables there is a correlation Correlations may be positive or negative

Answer 26

A series of averages calculated from successive segments of a series of data These averages smooth data so that trends may be more easily identified

Answer 27

1. moving total = adding together sales figures for a specified number of periods e.g., A three-month moving total is calculated by adding the first three months 2. centred average = dividing the moving total by the specified number of periods e.g., A three-month centred average is calculated by dividing the three month moving total by three

Answer 28

tries to find a link between data sets

Answer 29

sum of xy / sqrt (sum of x^2)(sum of y^2) plus one means there is positive correlation, -1 means neg and 0 means none measure of extent of the rs between 2 sets of variables

Answer 30

graph showing the performance of one variable against another independent variable on a variety of occasions, used to show whether a correlation exists between the variables

Answer 31

investment: purchase of capital goods investment appraisal: Evaluating the profitability or desirability of an investment project

Answer 32

amount of money spent when setting up a new venture

Answer 33

The length of time that it takes for a project to fully recover its initial cost out of the net cash inflows that it generates.

Answer 34

simple to use, Focuses on cash flows - good for use by businesses where cash is a scarce resource Emphasises speed of return; may be appropriate for businesses subject to significant market change

Answer 35

May encourage short-term thinking Ignores cash flows which arise after the payback has been reached - i.e. does not look at the overall project return

Answer 36

Average annual net return / Investment x100

Answer 37

adv - allows for range of products to be compared, Focuses on profitability - a key issue for shareholders dis - Does not take into account cash flows - only profits, Takes no account of the time value of money

Answer 38

takes account of the time value of money to estimate the present value of future cash flows associated with an investment project with use of interest rates idea is that money in the future is worth less than having that money now

Answer 39

accounts for value of future earnings, can be changed as risks and conditions in financial markets change however, more complex than others

Answer 40

method tracing alternative outcomes of any decision

Answer 41

Allow managers to set out problems in a clear and logical manner All potential options can be seen at the same time uses numerical values so more likely to be accurate

Answer 42

- other factors to consider which cannot be shown through numerical value - time lags often occur - process can be time consuming

Answer 43

a process that helps determine a project schedule

Answer 44

shows what tasks can be run at the same time so more efficient, can help decision making, organise time based management, identifies when resources are required

Answer 45

shows the tasks which if delayed could lead to a delay in project can be shown by drawing // on the line

Answer 46

info to estimate times may be incorrect unforeseen events can occur with large projects, the analysis can become complex

Answer 47

This is the total time an activity can be delayed without delaying project completion.

Answer 48

The time by which a task can be delayed without affecting the following task

Answer 49

if a business is open to innovation and flexibility, it is more likely to make decisions involving change. if the culture is more resistant, decisions are likely to be more cautious and have less risk

Answer 50

shareholder approach is when views of shareholders influence decision making more while others are slightly disregarded. whereas stakeholder approach looks at wider range of stakeholders

Answer 51

ethical businesses will look at helping local communities and environment. but even those with little care for it will still be influenced by these issues or risk of bad publicity

Answer 52

designed to achieve goals in a year e.g. maximise short term profits, invest less in r&d and training, return cash to shareholders instead of investing

Answer 53

long term profitability might be threatened, may lose competitive edge if dont invest in tech etc, time cost for making quarterly financial reports which are needed

Answer 54

looking at aim and vision of future business e.g investing in r&d, new product development and innovation

Answer 55

evidence based is when they gather and analyse info to make decisions but subjective is based on opinion and can be more risky

Answer 56

identify objective business wants to achieve collecting info and ideas analyse info and ideas make decision communicate decision wait for outcome evaluate results

Answer 57

when there is lack of information to make a decision, if the leader has experience and the business has a culture of trust, might be the industry norm, decisions may need to be made quickly but it has more risk

Answer 58

the norms, values, attitude and beliefs shared by people in an organisation

Answer 59

one that is deeply embedded into the way a business does things

Answer 60

- provides a sense of identity for employees - increases employees commitment to the business - motivates employees -acts as a control device for management

Answer 61

surface manifestations - physical layout, mottoes, language core organisational values - words and policies basic assumptions - form general attitude

Answer 62

Power and decision making authority is centered on an individual, creates competitive atmosphere amongst employees

Answer 63

decisions are made through rules and procedures and power is associated with a role, more flat structure

Answer 64

- power is given to those with expertise - Teams are created for specific tasks - This culture works well in dynamic markets as it is flexible

Answer 65

number of individuals with expertise but dont work together

Answer 66

- Motivation on employees - competitive culture creates motivation or successful culture has knock on effect - Organisational structures - New Management - Mergers and takeovers

Answer 67

leaders attitude, history or heritage of a business, type of product

Answer 68

difficult to identify factors and their significance difficult to manipulate peoples attitude and beliefs

Answer 69

any group or individual who can affect or is affected by the decisions of the organisation

Answer 70

people with a direct interest in its survival e.g business owners, employees, managers and directors

Answer 71

groups that have an interest in a businesses activities

Answer 72

shareholders - purely financial interest customers creditors - financial interest suppliers -want prompt payment and regular orders local community government - taxes and monopoly power representatives of the environment

Answer 73

shareholders - high dividends and share price employees - good pay and working conditions, job security managers - benefits, bonuses and same as employees customer - cheap prices, good quality supplier - long term contract, regular orders, paid on time government - high tax revenue, control monopoly power environmental - want to avoid negative impact on environment local community - create employment, develop infrastructure

Answer 74

the employees want a higher pay and conditions which increases cost but shareholders want high profits and low cost to get high dividends

Answer 75

customers want cheap prices but shareholders want to maximise revenue so high prices and may want cheaper supplier which could mean reduced quality

Answer 76

managers may want to maximise perks and directors may want to reinvest profit rather than increase dividends

Answer 77

tax evasion/avoidance and power

Answer 78

considers moral 'right and wrongs' of a decision

Answer 79

environment, animal rights, workers in developing countries, corruption, new tech advancements, product availability (accessibility), trading issues

Answer 80

say how employees should respond in situations with ethical issues. they include environmental responsibility, dealing with customers and suppliers, competing fairly

Answer 81

employment indicator human rights indicator impact on communities business integrity and ethics product responsibility the environment

Answer 82

reward for work in form of pay, wages or salary

Answer 83

attract suitable employees, reward and motivate staff, maximise productivity level

Answer 84

a business assessing and taking responsibility for its effects on the environment and its impact on social welfare. it involves the idea that businesses bear a responsibility that stretches beyond their shareholders

Answer 85

being ethical: - raise costs (higher wages, other ways than animal experiments) - reduce revenues (business may lose contract if it refuses to give a bribe) benefits of ethical: - marketing - act as equivalent as insurance policy

Answer 86

includes revenue, cost of sales, gross profit, sales expenses, administrative expenses, operating profit, interest, net profit, net after tax

Answer 87

shareholders - interested in profit but also want to look at growth of business managers and directors - monitor progress employees - use it to argue increase in wages suppliers - want to check if business is credible for trade credit government - need to see how much tax is owed

Answer 88

A summary of the value of a firm's assets, liabilities and capital

Answer 89

assets - resources a business owns liabilities - debts of a business capital - money from owners non-current assets - assets that are long term resources not likely to be sold in a year current assets - liquid assets e.g inventory current liabilities - debts to be paid back in a year non current liabilities - long term debts net assets - value of assets - value of liabilities equity - money owed to shareholders

Answer 90

ideal - 25-50% highly geared - over 50% means they have loads of loans compared to capital so may be risky for creditors

Answer 91

the higher, the better but also have to look at industry average roce and also compare with if capital was invested elsewhere (opportunity cost) so for investment to be worthwile, roce should be much larger than capital invested

Answer 92

- only useful if compared over time and with competitors - only accurate if financial accounts are accurate, balance sheet - only shows snapshot at end of year but doesnt show circumstances throughout year - ignores qualitative factors - window dressing (businesses can manipulate accounts to present different financial picture)

Answer 93

rivals may increase productivity at a quicker rate, factors other than cost - rivals may bring out better products

Answer 94

(Number of employees remaining over a period of time/ average number of employees over a period of time) x 100

Answer 95

when an employee doesn't show up for work absenteeism rate = number of staff absent / total staff employed x 100

Answer 96

financial reward e.g. piece rate, employee share ownership, consultation strategies, training, feedback, responsibility and authority

Answer 97

pseudo-consultation - management makes decision and informs employees through reps classical - reps discuss and have influence integration consultation - management an d unions come to joint decision

Answer 98

training provide necessary resources hand over authority inspire confidence provide feedback

Answer 99

- competitiveness - productivity - financial performance - stakeholders

Answer 100

The values, attitudes and beliefs of the people working in an organisation that control the way they interact with each other and with external stakeholder groups e.g the leadership style

Answer 101

as a business grows, it becomes less flexible and adaptable they have to make changes with the way decisions are made

Answer 102

how quickly it adapts to new tech, new products and processes

Answer 103

employees may be scared they wont be able to carry out new tasks, owners might be scared entering an unknown market, customers many not feel comfortable with new processes

Answer 104

identifies alternative future scenarios and makes plans to deal with each

Answer 105

- Identify possible trends and issues - Build possible scenarios - Plan response - Identify the most likely scenarios - implement planned response when needed

Answer 106

examining what might cause harm to people and identifying precautions to protect them usually used to comply with health and safety law

Answer 107

natural disaster - multinationals more at risk than firms in uk it system failure - risk of cyber attack or system failure especially concern for larger businesses loss of key staff

Answer 108

Identify, assess and prioritise risks and plan responses to deal with the impact of these risks on the operation of the business

Answer 109

Shows how a business will operate after a serious incident and how it expects to return to normal in the quickest time possible

Answer 110

- carry out a business impact analysis - see what business's main functions and processes are - formulate recovery strategies - develop a detailed plan to ensure recovery strategies are carried out in an organised way - test strategy and train

Answer 111

identifying and developing current employees who have potential to occupy key roles in the future

Answer 112

- identify characteristics they should possess - decide if they want internal or external candidates - undertake a rigorous selection process - make decision - implement training or 'shadowing'