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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
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

18
Q

who is franchising a growth strategy for ?

A

the franchisor rather than a franchisee

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
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
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
22
Q

what is joint venture ?

A

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

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

business (10 decks)

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