Understanding Business

Question 1

Horizontal Integration (external growth)

Answer 1

When two businesses from the same sector of industry become one eg. bank and a bank

Question 2

Lateral Integration (external growth)

Answer 2

When a business merges with a business which is in the same industry, but not the same exact product eg. Greggs and a wedding cake bakery

Question 3

Conglomerate Integration (external growth)

Answer 3

When businesses in different markets join together. The businesses activities are totally unrelated ; spreads risk of failure.

Completely different

Question 4

Open in new locations/expand existing branches (organic growth)

Answer 4

helps to reach new markets and to cater for more products,customers, and staff increasing sales

Question 5

introducing e-commerce (organic growth)

Answer 5

selling online means that a business can trade 24/7 to a global market

Question 6

Economies of scale (adv of growth)

Answer 6

Businesses benefit from just being so large. Can buy in bulk which is cheaper, money can be used else where in the business.

Question 7

Increases profits (adv of growth)

Answer 7

More products to sell or more stores to sell products in results in more sales, therefore more profits.

Question 8

Removes competition (adv of growth)

Answer 8

Bigger businesses can put smaller ones out of business and this can significantly increase the market share of the bigger business.

Question 9

Reduces risk of failure (adv of growth)

Answer 9

Bigger businesses with more products or branches can spread the risk and avoid ‘putting all their eggs in one basket’.

Question 10

Strategic decisions

Answer 10

Long term (over 5 years)
Senior managers
High risk

Question 11

Tactical decisions

Answer 11

Medium term
Middle managers
Medium risk

Question 12

Operational decisions

Answer 12

Short term ; day-to-day
Supervisors/all staff
Low risk

Question 13

Describe an entrepreneurial structure

Answer 13

One main decision maker, usually the owner.

Other staff have input but are generally never consulted.

All final decisions are made by the owner .

Question 14

Advantages of a Entrepreneurial structure

Answer 14

Quick decision making as there is little consultation.

Staff know who to report to.

High quality decisions are made as the decision maker is experienced.

Question 15

Disadvantages of an entrepreneurial structure

Answer 15

Can create heavy workload for the main decision maker

If the decision maker is unavailable or busy decisions can’t be made

Demotivates some staff as they don’t get a chance to show off their creativity or imitative - they are told what to do, they give no input - staff may feel unimportant