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IB Business Management > Unit 1: 1.5 Growth + Evolution + MNC > Flashcards

Unit 1: 1.5 Growth + Evolution + MNC Flashcards

1
Q

What does the STEEPLE tool do?

A

examines external environment, the opportunities and threats AKA things you react to.

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2
Q

S in STEEPLE

A

social environment; cultural and demographic change can directly affect activities of a business

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3
Q

Some examples of S in STEEPLE

A
  • role of women, children in society
  • social welfare, business ethics
  • spread of multi-culturalism (immigration)
  • education levels, languages, wealth, population totals.
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4
Q

T in STEEPLE

A

technological environment; affects ALL aspects of business functions

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5
Q

Some examples of T in STEEPLE

A
  • infrastructure (roads, rail transit, ports)
  • internet
  • AI
  • cybersecurity
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6
Q

How does T in STEEPLE affect all business functions?

A

HR: working from home
marketing: social media
finance: financial information reports online
operations: tracking shipments around world

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7
Q

The first E in STEEPLE (order doesn’t matter)

A

economic: a country’s economy is doing as it relates operations of business

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8
Q

Some examples of the first E in STEEPLE

A
  • inflation
  • fiscal policy
  • monetary policy
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9
Q

What is inflation?

A

prices go up while income stays the same.

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10
Q

Why does inflation happen?

A

2 ways:
demand pull: large demand = increased price, we cause inflation
cost push: costs more to produce goods or services which increase people’s salaries

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11
Q

What is fiscal policy?

A

adjusts taxes to increase spending and put more people to work.

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12
Q

What does fiscal policy do?

A

helps in inflation when tax % increases, it slows spending (which causes inflation)
high tax % = stop spending
low tax % = speed spending

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13
Q

What is monetary policy?

A

adjust money supply by changing interest rates.

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14
Q

What does monetary policy do?

A

lower interest rates = easier to borrow money to spend

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15
Q

What is the discount rate? WILL BE ON EXAM MR. HOGAN

A

interest rate that the government banks charge member banks.

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16
Q

The second E in STEEPLE

A

environmental: factors such as climate, environmental regulations

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17
Q

Some examples of the second E in STEEPLE

A
  • climate change
  • natural disasters
  • sustainability practices
  • energy use
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18
Q

P in STEEPLE

A

political: impact of political factors such as policy, stability, tax, trade on the organization

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19
Q

Some examples of P in STEEPLE

A
  • government policy
  • relationship between countries
  • security/terrorism
  • lobbying/advocacy
  • political stability/instability
  • tax regulations (also economic)
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20
Q

L in STEEPLE

A

legal: impact of laws and regulations on a business

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21
Q

Some examples of L in STEEPLE

A
  • business laws
  • employment laws
  • consumer protection laws
  • environmental laws
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22
Q

The third E in STEEPLE

A

ethical: impact of morals, right or wrong, CSR

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23
Q

Some examples of the third E in STEEPLE

A
  • CSR
  • fair trade
  • workplace ethics
  • transparency
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24
Q

What is Laissez-Faire?

A

government takes relaxed approach to watch business activity

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25
Q

What does Laissez-Faire do?

A
  • allows businesses to grow without a lot of government regulations
  • businesses will develop competition among themselves
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26
Q

What is interventionist?

A

government uses regulations and policies

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27
Q

What types of things does interventionist governments do?

A
  • fiscal policies
  • monetary policies
  • discount rate
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28
Q

What is economies of scale?

A

the reduction in a firm’s unit costs of production that results in an increase in the scale of operations. (lower costs by increasing output)
businesses chose to grow because they want to benefit from this

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29
Q

Advantages of EOS

A
  • increased profits
  • generating higher return on investment
  • larger business scale
  • solidification of business and becomes less vulnerable
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30
Q

What does average cost mean?

A

the cost per unit of output

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31
Q

How do you find the average cost?

A

total cost/quantity

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32
Q

What are internal economies of scale?

A

economies of scale that happen within the companies control.

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33
Q

Types of internal EOS

A
  • technical
  • financial
  • managerial
  • specialization
  • maketing
  • purchasing
  • risk-bearing
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34
Q

What are technical economies?

A

large firms can use sophisticated capital and machinery tp mass produce products

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35
Q

What are financial economies?

A

large firms can borrow large sums of money at lower rates of interest compared to smaller companies

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36
Q

What are managerial economies?

A

people cannot be equally good at everything, therefore, specialization leads to higher productivity and therefore average costs fall.

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37
Q

What are specialization economies?

A

similar t managerial but results from division of labour.

38
Q

What are marketing economies?

A

large firms benefit from lower average cost by selling in bulk

39
Q

What are purchasing economies?

A

large firms can lower average cost by buying resources in bulk

40
Q

What are risk-bearing economies?

A

savings by diversification of products/services offered in the market.

41
Q

What are external economies of scale?

A

large firms benefit from outside the business due to favorable location or growth in industry.

42
Q

Types of external EOS?

A
  • technology
  • skilled labor
  • regional specialization
43
Q

What are technology external EOS?

A
  • infrastructure
  • internet access
  • ports for shipping
44
Q

What are skilled labor external EOS?

A
  • higher education centers
  • centers providing large pool of trained workers
45
Q

What are regional specialization external EOS?

A

specific area has a highly regarded and trustworthy reputation for producing a certain good

46
Q

What are internal diseconomies of scale?

A

occurs when a business becomes outsized and average costs begin to rise

47
Q

Why does internal diseconomies of scale happen?

A

when the expansion of output comes with increasing average costs because a business has not grown enough to be able to increase output
- loss of control, poor communication, worker alienation
- labor force problems, bored workers, slackers
- complacency, become too comfortable as a company

48
Q

Types of internal DOS?

A
  • loss of control
  • labor force problems
  • complacency
49
Q

Loss of control in IDOS

A

poor communication, worker alienation

50
Q

Labor force problems in IDOS

A

bored workers, slackers

51
Q

Complacency in IDOS

A

become too comfortable as a company

52
Q

What are external diseconomies of scale?

A

increase in average cost due to factors beyond company’s control

53
Q

Types of external DOS?

A
  • location
  • competition for labor
  • infrastructure
54
Q

Location in EDOS

A

scarcity of real estate increase rent

55
Q

Competition for labor in EDOS

A

employees can move in and out of jobs (may need to offer higher pay and benefits)

56
Q

Infrastructure in EDOS

A

traffic congestion, delays in transportation

57
Q

What are small and large organizations measured by?

A
  • market share, sales revenue as % of industry
  • total revenue, annual sales turnover
  • workforce size, # of workers
  • profit, revenue - expenses
58
Q

Advantages of being a small organization

A
  • cost control
  • flexible to change
  • personal service
  • easier to communicate
  • small market town
  • low barriers to entry
  • better cost-control
59
Q

Disadvantages of being a small organization

A
  • limited money
  • no benefit to EOS
  • large risk burden on owners
  • risk to external environment
60
Q

Advantages of being a large organization

A
  • recognize brand
  • value added service
  • greater choice
  • customer loyalty
  • specialization
  • sources of money
  • research/develop
61
Q

Disadvantages of being a large organization

A
  • communication
  • cost control
  • efficient problems
  • customer service
  • less flexible
62
Q

What is internal (organic) growth?

A

business using own capabilities and resources to increase scale of operations

63
Q

How is internal (organic) growth done?

A

ANSOFF MATRIX
- market penetration, change price, promotions
- product/service development, add value, more locations to purchase, credit offerings, training + development

64
Q

What is external (inorganic) growth?

A

occurs through deals made with outside organizations

65
Q

Why do businesses do external growth?

A
  • faster model
  • reduce competition
  • greater market share/power
  • shared knowledge + ideas
  • spread risk
66
Q

How do businesses do external growth? What are the methods?

A
  • mergers and acquisitions
  • joint-ventures
  • franchise
  • strategic alliance
67
Q

Advantages of mergers and acquisitions

A
  • greater market share
  • EOS
  • synergy
  • survival
  • diversification
  • gain entry to new markets
68
Q

Disadvantages of mergers and acquisitions

A
  • redundancies
  • conflict
  • culture clash
  • loss of control
  • diseconomies of scale
  • regulatory problems
69
Q

What are mergers and acquisitions? Horizontal integration

A

merging firms in the same industry

70
Q

What are mergers and acquisitions? Vertical integration

A

merging firms in different sectors

71
Q

What are mergers and acquisitions? Lateral integration

A

merging similar firms but they do not compete against eachother

72
Q

What are joint-ventures?

A

two or more firms join and split costs to start new legal business. A+B=C.
only for a limited period of time and by the end of the contract can end or continue

73
Q

Advantages of joint-ventures

A
  • product service development
  • save money for both parties
  • save time
  • new tech/new markets
  • does not require long term commitment
  • acquire new business associates
74
Q

Disadvantages of joint-ventures

A
  • culture clash
  • communication issues
  • loss of control
  • conflict over strategies
  • sharing sensitive info
75
Q

What are franchises?

A

a business where one party (the franchisee) acquires the access to the processes and trademarks of an established business (the franchisor)
the franchisee buys right t sell a product/service under an established brand

76
Q

Advantages of franchisor

A
  • brand recognition
  • less risk
  • no direct managing responsibilities
  • higher profitability
77
Q

Disadvantages of franchisor

A
  • financial info shared
  • initial costs
  • limited flexibility
  • less privacy
78
Q

Advantages of franchisee

A
  • reduced risk
    -lower costs (buying power)
  • established brand
79
Q

Disadvantages of franchisee

A
  • dependent on the franchisor
  • limited creative opportunity
  • shared financial info
  • costs
80
Q

What is a strategic alliance?

A

two or more businesses join together and split costs to cooperate in a business venture. (but no new business entity is created)

81
Q

Advantages of strategic alliances

A
  • pooling of resources
  • synergy
  • wider channel of distribution
82
Q

Disadvantages of strategic alliances

A
  • business culture clash
  • lack of control
  • merged reputation
83
Q

What is globalization?

A

integration and interdependence of the world’s economies, cultures, and populations.

84
Q

How is globalization done?

A

using ansoff matrix market development

85
Q

Why is globalization done?

A
  • less global trade barriers
  • technology progress
  • deregulation of business activity
  • cultural awareness
  • common language
86
Q

What is foreign direct investment (FDI)?

A

investment made by a company in one country buys a company in another country.

87
Q

Why do MNCs go global?

A
  • saturation of domestic markets
  • labor costs
  • more closer to global customers
  • spread risk
  • external EOS
  • government incentives
  • increase revenue
  • lower cost of production
  • natural resource extraction/source raw materials
88
Q

What are multinationals?

A

an organization that works in two or more countries

89
Q

What are transnationals?

A

same as MNCs but does not identify with any single nation

90
Q

The impact of MNCs on host countries: Advantages

A
  • skills and technology
  • savings and investment
  • tax revenues
  • local industry
  • employment
  • economic growth
  • foreign exchange earnings
91
Q

The impact of MNCs on host countries: Disadvantages

A
  • environmental degradation
  • inappropriate consumption
  • use of government resources
  • economic and political power over countries
  • competition to attract MNCs

IB Business Management (5 decks)

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