Unit 3 Chapter 5

Question 0

Intellectual property rights (IPR)

Answer 0

The rights to own and to exploit ideas or inventions, or literary or other cultural works. They give legal protection to the owners or originators of the ideas or inventions and prevent others from copying them.

Question 1

Globalisation

Answer 1

The process through which an increasingly free flow of ideas, people, goods, services and capital leads to the integration of economies and societies.

Question 2

Risks

Answer 2

Threats that may or may not occur, but can be quantified using probabilities. E.g. insurance companies can assess the probability of fires occurring and can offer policies that cover the risk for individuals and businesses.

Question 3

Uncertainty

Answer 3

Possibilities that cannot be quantified and may appear without warning. A new competing product could threaten a business at any time. People may change their minds about what they like to buy, reducing demand without warning.

Question 4

Diversifying

Answer 4

Selling more than one product, or the same product in more than one market. If there is decreasing demand for one product, or generally in more than one particular market, profits can still be made with other products or in other markets.

Question 5

Inorganic growth

Answer 5

When a business expands by taking over or merging with another company. Both mergers and takeovers may allow rationalisation that can cut costs and expand markets.

Question 6

Merger

Answer 6

Combining with another company in a collaborative basis.

Question 7

Takeover // Acquisition

Answer 7

The situation where one company is buying another. This may be an amicable process or it may involve a hostile bid, which is not supported by the management of the business that is being taken over.

Question 8

Horizontal integration

Answer 8

Involves a merger or takeover where both firms are in the same line of production. They could both be undertaking just one part of the production process, or the end product could be very similar.

Question 9

Vertical integration

Answer 9

Amalgamating two businesses which have specialised in different parts of the production process. Farmers who set up farm shops, instead of selling the wholesalers, are integrating vertically.

Question 10

Economies of scale

Answer 10

A reduction in average costs of production brought about by an increase in the size and scale of the business.

Question 11

Synergy

Answer 11

The idea that after a merger or takeover, the performance of a combined enterprise will exceed that of its previously separate parts. Sometimes this is expressed as 2+2=5. Some mergers are based on this expectation but do not actually achieve this outcome.