Theme 3 AO1 Flashcards
What is a strong culture in a business?
Strong cultures have good communication and have a strong focus on their core values
What is a weak culture?
A weak culture demonstrates bad customer service, lack flexibility in demand and have a demotivated workforce.
Average rate of return formula (ARR)?
(Average annual profit/ Capital cost of investment) x100
Define synergy
When agents work together to produce something greater than the simple sum of its parts.
What is a vertical integration?
When a firm merges with another firm that is not part of the same stage of production
What is backwards vertical integration?
merging with a firm that is closer to the primary stage of production.
What is forwards vertical integration?
merging with a firm that is closer to the tertiary production stage
What is horizontal integration?
When a firm merges with another firm at the same stage of the production line.
What is a conglomerate merger?
A firm merging with a firm from a completely different industry.
What is the difference between a merger and a takeover?
Takeovers are more hostile
What does PESTLE stand for?
Political, Economic, Social, Technological, Legal, Environmental.
What are the objectives of growth?
Achieving EOS, Increase market power over suppliers, Increase market share and brand recognition, Increase profitability.
What are some problems that may arise with growth?
Diseconomies of scale, Worsened internal communication, Overtrading.
What are 5 reasons why a business would want to complete a merger or takeover?
Achieve synergy, Gain knowledge of the market, Access EOS, Aquire assets, Gain market share.
What is the difference between organic and inorganic growth?
Organic growth is when a business expands internally where as inorganic growth is when a business expands by using other businesses.
What is an example of organic growth?
Opening new locations and employing more staff.
What is an example of inorganic growth?
Mergers and takeovers.
What are three advantages of growing organically?
Businesses can use retained profit, they will grow at a sustainable rate, easier to avoid the principal-agent problem.
What is the principle agent problem?
When owners do not control what happens and the managers do instead.
What are three disadvantages of organic growth?
Rivals may opt for inorganic growth to grow faster, Hard to build market share if they are already leading, Takes more time.
What is HANDY’s Power culture?
There is a central figure that makes decisions. There is a competitive attitude amongst employees to gain power.
What is HANDY’s Role culture?
Decisions are made through rules and procedures and power comes from higher hierarchal status. It is bureaucratic and there is usually a lot of paperwork involved.
What is HANDY’s Task culture?
It focuses on completing project. Power comes from those with expertise and knowledge. It involves a lot of teamwork.
What is HANDY’s Person culture?
People of similar expertise are grouped together. These all work on a client to client basis rather than a project to project basis.
How is corporate culture formed?
Role models (founders), Mottos, Norms and values, Artefacts (uniforms).
What is the labour productivity calculation?
Total output/ Number of workers.
What does the labour productivity calculation measure.
How efficient each employee is on average.
What is the labour turnover calculation?
(Number of employees/ Average number of employees) x 100
What is the absenteeism calculation?
(Number of work days lost through absence/ Total possible days worked) x100
In regard to corporate culture, Define surface manifestation.
Visible, tangible elements of a corporate’s culture that can be noticed by an outsider.
What are the SMART factors that corporate objectives must be?
Specific, Measurable, Achievable, Realistic, Time-related.
What is a mission statement?
A way of a business expressing their intent.
What are 3 limitations of having a mission statement?
Can be unrealistic, sometimes a waste of time, May lead to conflicts.
What does SWOT stand for?
Strengths, Weaknesses, Opportunities, Threats.
What factors may cause business change?
PESTLE, Poor performance, New ownership, Transformational leadership, Changes in organisational size.
What do changes within a business have an effect on?
Competitiveness, Productivity, Financial performance, Stakeholders.
What are 3 advantages of using decision trees?
Forces the business to look at chance, Useful if similar to past experience, logical
What are 3 disadvantages of using probability trees?
May be unreliable data, Do not take qualitative data into account, Do not take environment into account.
In regards to PESTLE, what does the political factor include?
Change in government, Government policies, Tax rates, Tariffs.
In regards to PESTLE, what does the economic factor include?
Interest rates, Inflation, Unemployment, Recession, The business cycle
In regards to PESTLE, what does the Social factor include?
Demographics, Social trends.
In regards to PESTLE, what does the technological factor include?
Innovations, Trading online, R & D, Automation, New computing systems
In regards to PESTLE, what does the legal factor include?
Health and safety act, sex discrimination act, consumer protection act, data protection act.
In regards to PESTLE, what does the environmental factor include?
Weather, Climate change, Sustainable production, Wildlife.
What is Ansoff’s matrix?
A market planning tool that helps a business determine its product and market growth strategy.
What are the four categories in Ansoff’s matrix?
Market penetration, Product development, Market development, Diversification.
What is market penetration?
When a business sells an existing product in an existing market.
What is diversification?
When a business sells a new product in a new market.
What is market development?
When a business use an existing product but in a new market.
What is product development?
Selling a new product in an existing market.
What is Porter’s strategic matrix?
A tool that is used to find a sustainable competitive advantage.
What are the 4 categories in Porter’s strategic matrix?
Cost leadership, Cost focus, Differentiation leadership, Differentiation focus.
What is cost leadership?
When the business becomes the lowest cost producer in the market.
What is differentiation leadership?
Businesses differentiate their products when targeting a large market.
What is cost focus?
Trying to achieve a cost advantage in a small market.
What is differentiation focus?
When a business differentiates their products in a small market.
What is the Boston matrix?
A tool that categorises products based on market growth and market share.
In the boston matrix, what does the question mark represent?
The product has low market share but high market growth so it is a good investment.
In the boston matrix, what does the star represent?
A product with both high market share and growth and should be invested in.
In the boston matrix, what does the dog represent?
Products with low market share and growth which the business should stop selling.
In the boston matrix, what does the cash cow represent?
A product with high market share but low growth which may sustain the business for a certain time.
What are two advantages of the boston matrix?
Market share is a good indication of profitability, it helps the business decide what to invest in.
What is a drawback of the boston matrix?
It is only a snapshot of the product and has no predictive element.
