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Business > Unit 9 > Flashcards

Unit 9 Flashcards

1
Q

Define economies of scale

A

The cost advantages that a business can exploit by expanding their scale of production. By reducing the average unit cost as a result.
= 5 internal types
= 2 external types

MORE OF THE SAME

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2
Q
  1. Bulk Buying
A

Purchasing high quantities to get a lower price because of their market power and cheaper to deal with one customer and deliveries can be on a larger scale.

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3
Q
  1. Technical Economies of scale
A

Larger businesses can invest in expensive specialist capital machinery
- not viable for smaller scale business = may not be cost effective
- tescos invest in stock control technology

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4
Q
  1. Specialisation of Workforce
A

Larger businesses specialise certain tasks to enable higher production from each workforce

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5
Q
  1. Marketing Economies of scale
A

Large businesses can negotiate discounted advertisement in bulk
- supermarkets use buying power when purchasing supplies from farmers

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6
Q
  1. Managerial Economies of scale
A

large scale manufacturers employ specialists to manage and supervise production in certain areas

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7
Q
  1. Infrastructure Improvements
A

Spending by a local authority on improving the transport network.

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8
Q
  1. Suppliers concentration
A

Relocation of component suppliers and support businesses close to main manufacturing site
= cost saving

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9
Q

Define economies of scope

A

Arise when unit costs fall as the result of producing more than one product or operating in different markets.

MORE OF SOMETHING DIFFERENT OF IN A DIFFERENT MARKET

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10
Q

What is the experience curve?

A

Showing the effect of experience on unit costs. An established business will have experienced workers and leaders, allowing it to increase efficiency, leading to lower unit costs.

-Most experienced will have significant cost advantage
-Highest market share will have most experience
-Experience is a key to barrier to entry
-Should maximise market share
-Acquisitions (eg takeovers) may be best to achieve better experience

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11
Q

What is organic growth?

A

From within a business
= expanding product range or number of units and locations.

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12
Q

Benefits of organic growth

A

-Lower risk and easier to manage
= slower pace and control on brand image
-Financed by retained profits
= less debt = low gearing
-No interference from the CMA

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13
Q

Drawbacks of organic growth

A

-Slow growth may give competitors time to over take
-No opportunity for synergy with another business or acquiring their customer base

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14
Q

What is a Merger?

A

A combination of two previously separate firms which is achieved by forming a new firm with the two integrated
-Can cut costs
-Grow revenues
-Increase profits
-Benefit the distributed shareholders

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15
Q

What is meant by integration?

A

When two businesses are brought together integrating activities and specialties

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16
Q

What is meant by synergy?

A

When two businesses together can achieve more than the sum of their achievements individually

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17
Q

Cost synergies

A

Better deals from suppliers
= purchasing economies of scales benefited because the merged orders will be larger

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18
Q

Revenue synergies

A

Cross- selling to customers of both businesses
= share customer databases

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19
Q

What is a Takeover?

A

Buying out of one business by another which usually occurs through the purchases of shares.
=More than 50% of shares.

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20
Q

Horizontal integration

A

Same industry which operate at the same stage of production process is combined

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21
Q

Vertical forward integration

A

Acquiring a business further up the supply chain

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22
Q

Vertical backwards integration

A

Acquiring a business operating earlier in the supply chain

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23
Q

Conglomerate integration

A

Combination of firms in unrelated business activities

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24
Q

Benefits of takeovers

A

-Increased market share and achieve price control
-To get economies of scale
-Secure point of sale
= forward vertical
-Secure supplies and restrict access for rivals
= backward vertical
-Reduce risk and mitigate down turns
= conglomerate
-Acquire knowledge
-Acquire talent
= tech industry common

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25
Q

mergers & takeovers must be approved by which organisation?

A

Competition and Markets authority

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26
Q

What are the key reasons a takeover fails?

A

-Large cost funding takeovers
-Integrating systems
-Share price - fresh equity
-Clash in corporate cultures
-Loss of customers - human capital loss
-Bad timing - external economic environment problems

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27
Q

What are Diseconomies of scale?

A

Occur when a business grows so large that the cost per unit increases as output rises.
- Communication problems
- Coordination problems
- Lack of motivation

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28
Q

What is overtrading?

A

Happens when a business expands too quickly without having the financial resources to support such a quick expansion.
- Significant decrease in current ratio
- High revenue but low gross and operating profits
- Low levels of capacity utilisation.

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29
Q

What is Greiner’s Model?

A

Helps you to think about your own organization’s growth trajectory, and plan ahead so you can overcome each growth crises that affects it.

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30
Q

What are the 5 phases within Greiner’s Model?

A
  1. Creativity
  2. Direction
  3. Delegation
  4. Coordination
  5. Collaboration
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31
Q

What are the 5 crisis within Greiner’s Model?

A
  1. Leadership
  2. Autonomy
  3. Control
  4. Red Tape
  5. ?
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32
Q

What is Retrenchment?

A

The opposite of growth by cutting down the size of a business to become more financially stable.
- Recruitment freeze or voluntary redundancy
- Delayering
- Closing down a division or factory
- Making redundancies

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33
Q

Product innovation

A

Creation of new or improved products. Adapting to changing trends for consumers.

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34
Q

Benefits of Product innovation

A

-First mover advantage
-Can set premium prices with new products
-Higher market share

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35
Q

Process innovation

A

Development of new ways of making or providing a product. Adapting to a competitive market environment to find efficient production.

36
Q

Benefits of Process innovation

A

-Price leading to set lower prices to compete easy
-Market share
-Profit and mass customisation

37
Q

How can R&D in products improve profit margins?

A

Leading in either niche or mass market with differentiated products can improve sales and profit margins.

38
Q

How can R&D in process improve profit margins?

A

Low unit costs and reduced waste.

39
Q

Product innovation protection

A

-Intellectual Property Protection
-A Patent = certificate stating that someone is the owner of an innovation. It prevents others from copying this innovation. The owner of such a certificate can sell the right to reproduce their idea and innovation under a licensed agreement.

40
Q

How can Intraprenuership promote innovation?

A

Involves people within a business creating new business opportunities which leads to the creation of new parts of the business or new businesses.

41
Q

How can a business encourage intrapreneurship?

A

-Support by not punishing failure
-Business culture
-Financial rewards
-Allocate time in work for innovations

42
Q

How can Kaizen promote innovation?

A

Continuous improvement in a lean production, constantly implementing small changes to the business in order to improve the quality and efficiency.

43
Q

What are the 3 benefits of Kaizen to promote innovation?

A

-Motivating for workers to improve work ethic
-Could highlight improvement in their own work
-Low cost

44
Q

How can Benchmarking promote innovation?

A

Involves looking outward to examine how others achieve their performance levels, and to understand the processes they use.
-More efficient
-Cost effective
-Quicker
-Improve adaptation.

45
Q

What is meant by disruptive innovation?

A

Refers to the innovation that creates a new product or new market that eventually disrupts an existing market.
-Disruptive technology = when innovation considerably alters market
-Disruptive innovation = significant problems for businesses making choice between adopting new technology, processes and products or sticking with normality

46
Q

what is internationalisation?

A

the increasing interdependence of businesses within international markets

47
Q

what opportunities are created for a growing business by entering international countries?

A
  • new markets
  • new customers
  • access to cheaper resources
  • economies of scale
  • diversify risk of downturn in domestic market
  • prolong product life cycle
  • lower tax by declaring in country with lower corp tax
48
Q

what threats are created for a growing business by entering international countries?

A
  • trade barriers= tariffs and quotas
  • local trends and customs
  • reliability of dealing with international business and shipping companies.
49
Q

what are the factors influencing the attractiveness of international markets?

A
  • size of the market
  • economic growth and levels of disposable income
  • exchange rates
  • ease of doing business and political environment
  • infrastructure
  • domestic competition.
50
Q

what is a multi national company (MNC)?

A

a business that operates in more than one country and has business operations in two or more countries

51
Q

what are key benefits of exporting?

A
  • increase size of target market
  • manufacturing stays in UK= quality control
  • less cost to set up
52
Q

what are drawbacks of exporting?

A
  • limited knowledge of markets
  • products may have to be customised
  • tariffs and quotas limit exports
53
Q

what is direct investment?

A

HQ in home country and additional operations in different country.

54
Q

what are the key benefits of direct investment?

A
  • retains control
  • profits kept
  • direct investment = vertical integration
55
Q

what are the drawbacks of direct investment?

A
  • high investment outlay
  • organisational culture
56
Q

what is alliances?

A

makes an agreement with another business to pool resources for a specific project

57
Q

what are the key benefits of alliances?

A
  • local knowledge
  • may support cultural differences
  • synergies
58
Q

what are the drawbacks of alliances?

A
  • share profits
  • different objectives
  • trade secrets
59
Q

what is licensing?

A

legal agreement to authorise another company to produce/ sell goods for a return fee.

60
Q

what are the key benefits of licensing?

A
  • gains access
  • fees = revenue earnt
  • avoid quotas and tariffs
61
Q

what are the drawbacks of licensing?

A
  • risk brand image
  • small portion of profits
  • exclusive rights
62
Q

what is offshoring?

A

the relocation of business activities from the home country to a different international location.

63
Q

what are the reasons for offshoring?

A
  • lower costs
  • less legislation
  • access to skills and natural resources
    -close to suppliers
  • overcoming trade barriers
64
Q

what are the reasons against offshoring?

A
  • rise in inflation and labour cost
  • transport cost
  • exchange rates fluctuations
  • long lead times
  • ethical issues
  • CSR (Corporate social responsibility)
65
Q

what is outsourcing?

A

the transfer of business functions from being done within the business to be provided by a supplier

66
Q

what is reshoring?

A

involves a business returning production or operations to the host country that had previously been moved to a different international location.

67
Q

what are the reasons for reshoring?

A
  • shorter lead times
  • greater flexibility
  • greater quality control
  • less threat of IPP (Patent) theft
  • provides USP
68
Q

define lead time

A

the amount of time it takes to process an order, manufacture a product, deliver a good, or a combination of these processes

69
Q

what does the Bartlett and Ghoshal model explore?

A

How a business can manage international operations. it addresses the key forces on global businesses. these are cost pressure and pressure to be ‘local’

70
Q

strategy 1 - Global strategy
- high global integration pressure
- low responsiveness to local pressures

A

a standardised product sold around the world
- using this strategy maximises the benefits of economies of scale and efficiencies
- struggle in markets where localised needs exist
e.g Tech- Apple

71
Q

strategy 2 -international strategy
- low global integration pressure
- high responsiveness to local pressures

A

produced for domestic market with some alterations for international markets
- focus on domestic market
e.g Exporting - niche products

72
Q

strategy 3 - transnational strategy
- high global integration pressure
-high responsiveness to local pressures

A

high responsiveness to local markets but business is highly integrates sharing knowledge and expertise
- hard to effectively implement
- can benefit from economies of scale
e.g cost efficiency, customisation - Cars

73
Q

strategy 4 - Multi-domestic strategy
- low global integration pressure
-high responsiveness to local pressures

A

products are tailored for local markets, subsidiaries may operate independently of on another
- MNCs meeting needs through decentralisation
- highly adaptive
- hard to manage different countries
e.g fast food - MacDonald’s

74
Q

how does internationalism impact marketing?

A

researching the market and identifying needs and wants of diff markets and developing appropriate marketing mix

75
Q

how does internationalism impact Finance?

A

analysing how increasing competition may lead to pressure for cost reductions

76
Q

how does internationalism impact operations?

A

sourcing materials, adaptation of products, quality and capacity to examine

77
Q

how does internationalism impact HR?

A

recruitment and training. if offshoring, redundancies may be needed as well as considering management styles with different cultures = Hofstede’s cultural differences

78
Q

what is digital technology?

A

use of computers to find, store, analyse, manipulate and communicate information
- creates both opportunities and threats

79
Q

what is e-commerce?

A

involves buying and selling of good or services online.
- growth into m-commerce influence sourcing supplies (B2B) and reaching customers (B2C)
- easier to reach global markets

80
Q

how can you link e-commerce to Porters 5 forces model?

A

how it has changes the barriers to entry to markets and the nature of competitive rivalry

81
Q

what is big data?

A

the process of collecting and analysing large data sets from traditional and digital sources to identify trends and patterns that can be used in decision making.

82
Q

what are the benefits to big data?

A
  • dynamic pricing
  • market research
  • operate more efficiently
83
Q

what is data mining?

A

the process of analysing data from different perspectives and summarising it into useful information, including discovery of previously unknown interesting patterns, unusual records or dependencies

84
Q

what are the benefits of effective data mining?

A
  • identifying relationships between data sets
  • better predicting future trends and behaviours
  • extract commercial from big data sets
  • generate strategies built on data insights
85
Q

what is enterprise planning (ERP) ?

A

a software system that helps businesses integrate and manage their often complex financial, supply chain, manufacturing, operations, reporting and HR systems

86
Q

what are the benefits of ERP?

A
  • better control over assets and cash flow
  • streamlines inventory ordering
  • improved customer service
  • better managed projects
  • employee retention
  • international business management
87
Q

what are the key pressures to adopt digital technology?

A
  • innovation by competitors
  • customer expectations
  • access
    -cost
  • analytics

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