Theme 3

Question 1

Why would a business want to grow

Answer 1

Economies of scale Easier to gain finances from the bank Develop relationship with suppliers Meet shareholder objectives

Question 2

What issues may a business face when the grow

Answer 2

Liquidity issues Diseconomies of scale Clash of objectives

Question 3

What causes diseconomies of scale

Answer 3

Poor management Demotivated workforce Poor communication To many layers in hierarchy

Question 4

What is overtrading

Answer 4

When you take on more demand than your able to cope

Question 5

What is a mission statement

Answer 5

A summary of why the business exists

Question 6

Whats a corporate objective E.G Tesla’s objective is to accelerate the world’s transition to sustainable energy.

Answer 6

Targets set for the whole firm to reach in a given time period

Question 7

What it is a corporate strategy E.G. Tesla introduced Model 3, a low-priced, high-volume electric vehicle that began production in 2017.

Answer 7

A medium to long term plan to achieve the corporate objective

Question 8

Observe the hierarchy of objectives, try to draw again without looking

Answer 8

…

Question 9

Draw an ansoffs matrix

Answer 9

Question 10

Advanatages of market penetration in the ansoffs matrix

Answer 10

1. Low cost/ risk
2. Market/ competitors familair to business
3. Limited investment required

Question 11

Disadvantages of market penetration in the ansoffs matrix

Answer 11

1. Limited growth potential, market at maturity
2. Business may be vunerable if it doesnt innovate. example of nokia

Question 12

Advanatages of market penetration, in the ansoffs model

Answer 12

1. Access to new markets, potential for considerable growth
2. No expensive product development costs

Question 13

Disadvantages of market development, in ansoffs matrix

Answer 13

1. Limited understanding of new market-> expensive to do research to understand market
2. Barriers to entry ( Culture/ language/ legisaltion)
3. Competing against established firms ( Coke and Thumbs up)
4. High marketing costs

Question 14

Advantages of product development in ansoffs matrix

Answer 14

1. Familiar with customers
2. Responds to customer needs, meet demand
3. First mover advantage

Question 15

Disadvantages of product development

Answer 15

1. Product development takes time and money
2. Product canibalisation

Question 16

Advantages of diversification in ansoffs matrix

Answer 16

1. Spreads risk by entering different markets

Less significant due to the homogenisation of tastes and fashions

1. Can cross subsidise
2. Staff can motivated by success of the business (expansion)

Less motivating if there jobs are being outsourced

Question 17

Disadvantages of diversification, in ansoffs matrix

Answer 17

1. can be extremely high risk, dont know the market, or if there is demand for the product etc

Risk reduced if you do a merger

1. Havent got a brand image/ reputation in the market

Less significant if there a conglomerate

Question 18

Draw a Boston Matrix

Answer 18

Question 19

Describe the parts of the boston matrix

1. Star
2. Cow
3. ?
4. Dog

Answer 19

1. Star
   * Leading brand in the market
2. Cow

• Successful product in mature market
• Used to subside ?

3. ?

• Fast growing market but not yet established product
• Needs heavy investment (marketing)
• Lots of competition

4.

• Either reinvest to revitalize or discontinue

Question 20

What is porters 5 forces

Answer 20

Model to illustrate attractiveness of a competitive environment

Question 21

Draw porters 5 forces

Answer 21

Question 22

Describe competitve rivalry in porters 5 forces

Answer 22

Competitve Rivalry

Looks at the number and strength of your competitors. How many rivals do you have? Who are they, and do they compare?

Where rivalry is intense, companies can attract customers with aggressive price cuts and non price strategys

Where competitive rivalry is minimal, then you’ll likely have tremendous strength and healthy profits.

Question 23

Describe bargaining power of suppliers, in porter 5 forces

Answer 23

How easy it is for your suppliers to increase their prices,can you switch.

The more you have to choose from, the easier it will be to switch to a cheaper alternative. But the fewer suppliers there are, and the more you need their help, the stronger their position and their ability to charge you more. That can impact your profit.

Question 24

Describe bargaining power of buyers, in porter 5 forces

Answer 24

How easy it is for buyers to drive your prices down. How many buyers are there, and how big are their orders?

When you deal with only a few savvy customers, they have more power, but your power increases if you have many customers.

Question 25

Describe the threat of substitutes, in porters 5 forces

Answer 25

Likelihood of your customers finding a different way of doing what you do.

If there are substittues you need non price promotion to compete

Question 26

Describe the threat of new entrants, in porters 5 forces

Answer 26

If it takes little money and effort to enter your market and compete effectively, or if you have little protection for your key technologies, then rivals can quickly enter your market and weaken your position.

If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it.

Question 27

Describe porters strategic matrix