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buisness > topic 9 > Flashcards

topic 9 Flashcards

1
Q

reasons for growth

A

to increase profits/revenue
-increase market share
-reduce average costs

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2
Q

what is retrenchment

A

-downsizing the scale of the business operations e.g delayering, closing branches

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3
Q

possible reasons for retrenchment

A
  • restructuring to increase efficiency
    -turn around poor performance
    -focus on core business
  • sell off less profitable parts of the business
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4
Q

what is organic growth

A

when a firm grows with its existing businesses

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5
Q

what is external growth

A

growth that is dependent on other businesses and maybe via mergers, takeovers or joint ventures

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6
Q

what are economies of scale

A

arise when unit costs fall as output increases

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7
Q

how to calculate unit costs

A

total production costs in period/total output in period

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8
Q

diseconomies of scale

A

average costs start rising

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9
Q

internal economies of scale

A

arise from the increased output of the business itself

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10
Q

what is external economies of scale

A

occur within an industry- all competitors benefit

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11
Q

what is purchasing economies of scale

A

supermarket chains- much lower prices from key suppliers, than smaller retailers

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12
Q

technical economies of scale

A

can buy more machinery, ad use capital intensive and automated production

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13
Q

what is managerial economies of scale

A

can afford specialist managers with expertise

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14
Q

what is marketing economies of scale

A

spreading a fixed marketing spend over a larger range of products, markets and customers

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15
Q

what is network economies of scale

A

adding extra customers or users to a network that is already established

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16
Q

external economies of scale

A

occur when a whole industry grows larger and firms benefit from lower long- run average costs
e.g having ,any specialist suppliers close by, access to research and development facilities

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17
Q

economies of scope

A

where it is cheaper to produce a range of products rather than specialise in a very limited number

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18
Q

Diseconomies of scale

A

lead to a rise in unit costs

-control- problems n monitoring productivity and work quality, increasing wastage of resources.

-negative effects of internal politics

-co-operation- workers in large firms may develop sense of alienation

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19
Q

what is overtrading

A

happens when a business expands too quickly without having the financial resources to support such a quick expansion.

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20
Q

why might overtrading happen

A

sales are made on credit and customers take too long
significant growth in inventories

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21
Q

symptoms of overtrading

A

-high revenue growth but low gross and operating profiting profit margins
-persistent use of a bank overdraft facility
-significant increases in the payables days and receivables days ratios.
-significant decrease in the current ratio
-very low inventory turnover
-low levels of capacity utilisation

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22
Q

how could you manage the risk of overtrading

A

-reducing inventory levels
-scaling back the pace of growth until profit margins and cash reserves have improved
-Leasing rather than buying capital equipment
-obtaining better payment terms from suppliers
-enforcing better payment terms with customers

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23
Q

synergy

A

when two businesses come together and the value of them together is higher than the individual businesses.

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24
Q

sources of synergy

A

Cost savings: eliminate duplicated functions and services
-better deals for suppliers
-higher productivity and efficiency from shared assets.

Revenues: cross selling to customers of both businesses
-access to new distribution
-brand extensions
-new geographic markets opened up

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25
Q

retrenchment

A

‘to cut down or reduce something’, ‘use resources more carefully’

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26
Q

examples of retrenchment

A

tesco exits its US chain in 199 fresh and easy shops, made it make a profit of 1.2 bn

microsoft- simplifying the way they work

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27
Q

what is organic growth

A

involves expansion within a business

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28
Q

examples of organic growth

A

dominos, costa coffee

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29
Q

advantages of organic growth

A

less risk than external growth
-can be financed through internal funds
-can be financed through internal funds
-builds on a business’ strengths

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30
Q

disadvantages of organic growth

A

-growth achieved may be dependent on the growth of the overall
-hard to build market share
-franchises can be had to manage effectively

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31
Q

what is franchising

A
32
Q

benefits of franchising

A

running your own business
-tried and tested brand
-advice, support, training
easier to raise finance
buying power of franchisor
lower the risk of market entry

33
Q

drawbacks of franchising

A

-not cheap
-restrictions on actions
-franchisor owns the brand
-franchisor may fail.

34
Q

why franchising works for the franchisor

A

a classic growth strategy for a proven business format

-enables much quicker geographical growth for a relatively low investment

35
Q

what is a joint venture

A

a separate business entity created by two or more parties, involving shared ownership, returns and risks.

36
Q

benefits of a joint venture

A

benefit from each others expertise and resources

-might have the option to acquire in the future the joint venture business based on agreed terms

-reduces the risk of a growth strategy

37
Q

examples of joint ventures

A

Microsoft and general electric
NBC and disney

38
Q

what is a takeover

A

involves one business acquiring control of another business

39
Q

reasons for takeover

A

increase market share
access economies of scale
secure better distribution

40
Q

directions of integration

A

forward and vertical- acquiring a business further up in the supply chain

backward and vertical- acquiring a business operating earlier in the supply chain- e.g a retailer buys wholesaler

horizontal- acquiring a business at the same stage of the supply chain- e.g a manufacturer buys a copmpetitor.

conglomerate- where the acquisition has no clear connection to the business buying it

41
Q

what is invention

A

formulation of new ideas for products or processes

42
Q

what is innovation

A

practical application of new inventions into marketable products or services

43
Q

what are the two types of innovation

A

product innovation
process innovation

44
Q

advantages of product innovation

A

higher prices and profitability
opportunity to build early customer loyalty
enhanced reputation as an innovative company
pr coverage
increased market share

45
Q

examples of businesses with product innovation

A

dyson
apple

46
Q

advantages of process innovation

A

reduced costs
improved quality
more responsive customer service
greater flexibility
higher profits

47
Q

what is kaizen

A

a culture where you continuously improve the business, through developing an innovative culture

48
Q

what is globalisation

A

a process I n which national economies have become increasingly integrated and inter-dependent

49
Q

benefits of globalisation

A

access to new markets
economies for scale
cheaper due to containerisation
reduced tariffs

50
Q

negatives of globalisation

A

greater global competition
exchange rates
cultural consideration
geopolitical development
less coordination

51
Q

what is protectionism

A

when a country seeks to product domestic industries from foreign competition.

52
Q

what are emerging economies

A

an emerging market economy is transitioning from a low-income, less developed, often pre-industrial economy toward na modern, industrial eco noms with a higher standard of living

53
Q

positives of emerging markets

A

high economic growth
-large populations
-rising middle incomes
-greater openness to trade
developing regulatory systems

54
Q

potential limitations of emerging markets

A

political volatility
-economic volatility- inflation
-poor infrastructure

55
Q

what makes emerging markets attractive

A

high economic growth
-little competition
-first mover advantage
-own domestic markets may be saturated
-scope economies of scale

56
Q

key reasons why international markets are targeted

A

-reducing dependence on domestic market
-accessing faster-growing market and demand
-achieving economies of scale
-better serving customers located overseas
-building brand value, particularly global brands.

57
Q

key factors that influence the relative attractiveness if an international market

A

size and growth of target customer base
-ease of entry to an international market
-extent to which product will need to be adapted.
-economic conditions in the target economy

58
Q

four key methods of entering an international market

A

exporting direct to international customers
-selling via International agents and distributors
opening an operation overseas
-joint venture or takeover

59
Q

benefits of exporting directly

A

uses existing systems
online promotion makes this cost effective
can choose which orders to accept
Direct customer relationship established

60
Q

drawbacks of exporting directly

A

potentially bureaucratic
No direct physical contact with customer
risk of non-payment
-customer service process may need to be extended.

61
Q

what is barlett and ghoshalmodel

A

indicates the strategic options for businesses wanting to manage their international operations based on two pressures: local responsiveness and global integration.

62
Q

force for local responsiveness

A

-of customers in each country expect the product to be adapted to meet local requirements
-do local competitors have an example due to the higher responsiveness.

63
Q

force for global integration

A
64
Q

what Is a multi domestic strategy

A

aims to maximise benefits of meeting local needs through extensive customisation.
decision making is decentralised. local businesses treated as separate businesses strategies for each country.

high pressure for local responsiveness, low pressure for global integration. e.g nestle

65
Q

what is global strategy

A

low pressure on local responsiveness, high pressure for global integration.

key features: highly centralised, focus on efficiency, standardised products. e.g CAT and Pfizer

66
Q

what is offshoring

A

offshoring involves the relocation of business activities from the home country to a different international locations.

67
Q

difference between offshoring and outsourcing

A

offshoring: the work is done overseas

outsourcing: someone else does the work

68
Q

why do businesses move production overseas

A

manufacturing costs lower
-potentially better skilled and higher quality
-makes use of existing capacity overseas
-take advantage of free trade areas.

69
Q

drawbacks with offshoring

A

longer lead times for supply
-implications for CSR
-additional management costs
-impact of exchange rates
-communication of language and time zones.

70
Q

what is reshoring

A

movement of business activities from overseas back to the home country.

71
Q

key pressures on businesses to adopt digital technology

A

serve existing customers better via data analysis
-reach new customers in new segments and locations
-offer new ways of delivering products and services using digital technology

72
Q

what is e-commerce

A

involves digitally enabled commercial transactions between and among organisations and individuals.

73
Q

how does e-commerce impact porters five forces

A

rescued barrier to entry

74
Q

what is creative destruction

A

where innovation challenges the existing model.

75
Q
A

buisness (14 decks)

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