topic 9 (strategic methods) Flashcards
growth objectives are
- Maximizing the amount of profit earned by the organisation.
- Maximizing shareholder wealth – increasing share price
- Growth in the size of the business
- Spreading risk by diversification
- Increasing market share
- Focusing on core capabilities
organic growth is
is growing from the businesses core, the growth tends to be slow
external growth is when
A business will ‘acquire’ another business – either through takeover or merger, usually quicker than organic growth but more risky
retrenchment is
cutting back through the reduction in number of staff or a recruitment freeze, closing factories or devsisions
advantages of retrenchment by reduction in number of staff or a recruitment freeze
- a non-threating strategy that will not affect moral.
- can be seen as fair
disadvatges of retrenchment by reduction in number of staff or a recruitment freeze
- no opportunities to restructure the business.
- If the market changes then can limit business ability to respond
- Good people always leave and need to be replaced
advantages of rentrenchment by closing divisions or factories
- should not affect production lines
- may empower or enrich remain jobs
disadvanatges of retrechment by closing devisions or factories
- may intensify work of remaining managers
- could lose a generation of managers
- fewer promotional prospects for those who remain
Greiner’s growth model
fast growth can cause problems
as workload grows so does span of control, as well as stress levels for all
phase 2- leadership crisis
phase 3- autonomy crisis
phase 4 - control crisis
phase 5 - red tape crisis
phase 6 - growth crisis
economies of scope
a business’s unit cost to produce a product will decline as the variety of its products increases
synergy is
The concept that the value and performance of 2 companies combined will be greater than the sum of separate individual business (2+2=5)
a merger is
two or more businesses agree to come together under one board of directors
a takeover is
one firm buys the majority shareholding in another firm and takes full managerial control. This can be hostile.
innovation is
when business exploits new ideas which have been developed
businesses who innovate can
- Have access to new markets
- Create new products and demand
- Create new ways of doing business
product innovation is
The development and marketing of the introduction of a new or redesigned, goods or services
process innovation is
Implementing a new or improved production process, delivery method or communication method
advantages of innovation
- Improved quality
- The ability the enter new markets.
- Increase in product range to spread the risk
- Reduce costs and especially unit costs
disadvantages of innovation
- Uncertainty of the demand for new products – a lot of money could be spent with little return
- Operational difficulties – especially through the learning curve productivity can be reduced
- Competition – rivals may be tempted to join the new market
- Generic products – copies can be manufactured
methods businessess can use to become innovative are
- Introduction kaizen techniques
- Using research & development
- ‘intrapreneurship’
- Benchmarking
kaizen is
Kaizen means ‘continuous improvement’ and was an idea which was developed in Japan and then brought to the west
kaizen focuses on
- Eliminating waste
- Improving productivity
- Achieving sustained continual improvement in the product and process of an organisation.
research and development falls into two forms they are
- Customer orientated business (customer needs identified and then solutions found).
- Product orientated business (products are developed first and then markets sought).
Intrapreneurship is
the act of behaving like an entrepreneur while working within a large organisation
benchmarking is
identifying the best practice used in the production process and delivery of the product itself. This can be against other industries or used internally.
four key steps to benchmarking are
- Understand in detail the existing business process.
- Analyse the business processes of others.
- Compare business performance against others analysed.
- Implement steps to close the gap.
when a business becomes innovative that should concider what factors?
- Protecting ideas
- Planning
- Secrecy
- Customer orientation
innovation can affect what functional areas
- Human resources
- Marketing
- Finance
- Operations management
what could prevent innovation?
- No money available
- It’s a long term strategy shareholders may require short term rewards
- Bank not willing to lend
- Relatively low success rate
big data
A data set which is too large and complex to manipulation or interrogate with standard methods or tools
using big data can enable a business to
- Have purchase history information
- Use customer relationship management software effectively
- Link to social media so that likes/dislikes considered
- Uses information from partner business
data mining is
The practice of examining large pre-existing databases in order to generate new information
Enterprise resource planning (ERP) is
A term used to describe the business management system which integrates the data sources and processes of an entire organisation into one system. A single data base
