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business > topic 9 > Flashcards

topic 9 Flashcards

1
Q

what are the 4 strategic methods involved in unit 9 ?

A
  • change in scale
  • innovation
  • internalisation
  • greater use of digital technology
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2
Q

what are the 2 different types of growth ?

A
  • inorganic
  • organic
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3
Q

what is organic growth ?

A

involves expansion from within a business

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4
Q

what is the other name for organic growth ?

A

internal growth

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5
Q

what is inorganic growth ?

A

joining with another business through 3 methods

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6
Q

what are the 3 methods of inorganic growth ?

A
  • mergers
  • takeovers
  • acquisition
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7
Q

what is the other name for inorganic growth ?

A

external growth

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8
Q

what are 4 advantages to organic growth ?

A
  • less risk than inorganic
  • can be financed through internal funds
  • builds on the business strengths
  • allows a business to grow at a more sensible and controlled rate
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9
Q

what are 4 drawbacks to organic growth ?

A
  • growth achieved may be dependent on the growth of the overall market
  • hard to build market share if a business is already a leader
  • slow growth and shareholders prefer rapid growth
  • if a franchise is used it can be hard to manage
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10
Q

what is the experience curve ?

A

more experience a business has in producing a particular product, the lowers its costs

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11
Q

what happens to experience as a business grows ?

A

it gains experience

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12
Q

what can experience provide as an advantage ?

A

an advantage over competition

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13
Q

who is the ‘experience curve’ particularly strong for ?

A

for large successful business
( market leader )

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14
Q

what are the 2 implications of the experience curve ?

A
  • businesses with significant experience will have a significant cost advantage
  • businesses with the highest market share likely to have the most? best experience
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15
Q

what is the therefore of the implications of the experience curve ?

A
  • experience is a key barrier of entry
  • firms should try to maximise their market share
  • external growth might work if a business can acquire firms with strong experience
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16
Q

what are the 3 criticism of the curve ?

A
  • market leaders are often complacent and perhaps cause of their experience
  • experience may cause resistance to change and innovation
  • it is relatively old theory which is less relevant in an environment that changes so rapidly
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17
Q

what is franchising ?

A

it arises when a franchiser grants a licence to another business to allow it to trade using their brand/business format

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18
Q

who is franchising a growth strategy for ?

A

the franchisor rather than a franchisee

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19
Q

what are the 4 advantages of franchising ?

A
  • set ways and standards set by the franchisor
  • franchisee likely to be very motivated and entreprenual
  • low risk as franchisee is taking most of the risk
  • quick growth as funds provided by franchisee
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20
Q

what are the 4 disadvantages of franchising ?

A
  • lose control of the franchise
  • difficult to control
  • not maximising profits for the franchise
  • impact on reputation if franchisee does something wrong
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21
Q

what are the 4 reasons franchising works for the franchisor ?

A
  • classic growth strategy for a proven business format
  • enables much quicker geographical growth for a relatively low investment
  • still have the option to open locations that are operated by the franchise
  • capital investment by franchises is an important source of growth
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22
Q

what is joint venture ?

A

a separate business entity created by 2 or more parties
- involves shared ownership and returns and risks

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23
Q

what are 5 benefits to joint venture ?

A
  • learn from each others expertise
  • more cost effective for R and D
  • increase competitiveness within the market
  • reduces risk of a growth strategy
  • may be able to acquire in the future with that business
24
Q

what are the 4 drawbacks of joint venture ?

A
  • imbalance between partners
  • vague objectives
  • unreliable partners
  • may be difficult to leave due to contract
25
Q

what is a takeover ?

A

business acquiring control of another business

26
Q

what are 7 possible reasons for a takeover ?

A
  • increase market share
  • acquire new skills
  • access economies of scale
  • secure better distribution
  • acquire intangible assets
  • spread risk by diversifying
  • eliminate competition
27
Q

what is MCC ?

A

motivation
communication
coordination

28
Q

what are the 4 preferences of takeovers ?

A
  • existing products are in the later stages of their life cycle
  • businesses lacks knowledge or resources to develop organically
  • speed of growth is a high prioty
  • competitors enjoy significant advantages that are hard to overcome
29
Q

what are 6 drawbacks to takeovers ?

A
  • high costs
  • upset customers and suppliers
  • problems of integration
  • resistance from employees
  • may not be approved by CMA especially if in different markets
  • incompatibility if management styles, structures and culture
30
Q

what is synergy ?

A

the concept where the combined effect of a group or system is greater than the sum of its individual parts

31
Q

what is the economies of scope ?

A

the cost advantage that a business experiences when it produces multiple products or services together rather than separately

32
Q

what are the 3 different types of direction of integration ?

A
  • forward + vertical
  • backward + vertical
  • horizontal
33
Q

what is forward + vertical integration ?

A

acquiring a business further up in the supply chain
- further towards the market

34
Q

what is backward + vertical integration ?

A

acquiring a business operating earlier in the supply chain
- towards the supply chain

35
Q

what is horizontal integration ?

A

acquiring a business at the same stage of the supply chain
- same stage + same type of firm

36
Q

what does conglomerate mean ?

A

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

37
Q

what are 5 potential benefits of horizontal integration ?

A
  • achieve economies of scale
  • cost synergies from the rationalisation of the business
  • wider range of products
  • reduces competition
  • buying an existing and well-known brand can be cheaper than organically growing a brand
38
Q

what are the 4 potential benefits of vertical integration ?

A
  • enables the business to capture a greater share of the profit on each sale
  • secures important sources of supply or distribution
  • create a barrier to entry to potential new competitors
  • gain greater insights into customers needs and wants at each stage of the supply chain
39
Q

what is retrenchment ?

A

to cut down or reduce something to use resources more carefully

40
Q

what are 5 examples of retrenchment ?

A
  • reduce output/ capacity
  • job loses
  • product/ market withdrawn
  • disposal of business units
  • scaling back investments
41
Q

what is an invention ?

A

making something entirely new, something that didn’t exist before

42
Q

what is innovation ?

A

it improves or makes significant contribution to something that has already been invented thereby turning the results of invention into a product

43
Q

what are the 2 main types of innovation ?

A
  • product innovation
  • process innovation
44
Q

what is product innovation ?

A

launching new or improved products or services on to the market

45
Q

what is process innovation ?

A

finding better or more efficient ways of producing existing products or deriving existing services

46
Q

what are the 6 advantages of product innovation ?

A
  • higher prices
  • added value
  • opportunity to build early customer loyalty
  • enhanced reputation as an innovation company
  • pr coverage
  • increased market share
47
Q

what are the 5 advantages of process innovation ?

A
  • reduces costs
  • improved quality
  • more responsive customer loyalty
  • greater flexibility
  • higher profits
48
Q

what are the 5 innovation benefits ?

A
  • improved productivity and reduced costs
  • building a brand
  • establishing an advantage over competitors
  • higher sales and profits
  • builds a strong organisational culture which should attract more talent
48
Q

what are the 6 factors for the environment to fail ?

A
  • its acceptable to fail
  • funding available for experimentation
  • innovative organisations need to attract and retain talented people
  • opportunities for teamwork’s and sharing ideas across departments
  • leadership values innovation
  • listening culture in organisations
49
Q

what is intrapreneurship ?

A

where larger business enable employees and managers to demonstrate entreprenual behaviours in their work to benefit of their employer

50
Q

who carries out intrapreneurship ?

A

employees and managers

51
Q

who carries out entrepreneurship ?

A

entrepreneurs

52
Q

who takes the risk in intrapreneurship ?

A

the business

53
Q

who takes the risk in entrepreneurship ?

A

the entrepreneur

54
Q

who takes the reward in intrapreneurship ?

A

the business mostly

55
Q

who takes the reward in entrepreneurship ?

A

all goes to the entrepreneur

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