Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

business > unit 9 > Flashcards

unit 9 Flashcards

1
Q

reasons for growth

A
  • increase shareholder value
  • increase market share
  • decrease average costs
  • fulfil an objective of growth
  • stakeholders perception of success
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

reasons for retrenchment

A
  • downsizing the scale of business
    operations (closing, delayering,
    selling off parts)
  • possible reasons include
    • restructure to increase
      efficiency
  • turn around poor business
  • focus on core business
  • sell off less profitable parts of
    business to improve overall
    performance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

what is organic growth

A

when a firm grows with its existing businesses (increasing capacity and outlets)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

what is external growth

A

is growth that is dependent on other businesses and may be via merges, takeovers or joint ventures

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

economies of scale

A

economies of scale arise when unit costs fall as output increases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

concept links to economies of scale

A
  • efficiency
  • unit costs
  • productivity
  • market share
  • competitive advantage
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

unit cost formula

A

total output in period (units)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

internal economies of scale

A

arise from the increased output of the business itself

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

external economies of scale

A

occur within an industry: all competitors benefit

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

technical economies of scale

A

as firms grow, they are often able to invest heavily I automatic in order to further improve their efficiency and productivity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

managerial economies of scale

A

smaller firms are often unable to afford manager with specialist expertise (finance, HR, marketing)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

what is marketing economies of scale

A

spring a fixed marketing spend over a larger range of products, markets and customer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

what is network economies

A
  • adding extra customers or users to a
    network that is already established
    (netlfix)
  • adding an extra customer adds little
    extra cost to the business and spreads
    the fixed costs over more customer
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

what is financial economies

A

larger firms benefit from access to more and cheaper finance

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

what’s external economies of scale

A
  • occur when a whole industry grows
    larger ad firms benefit from lower
    long-run average costs
  • associated with particular geographic
    areas
  • examples
    (having many specialists suppliers
    close by,
    access to research and development
    facilities,
    pool of skilled labour to choose from)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

economies of scope

A

where its cheaper to produce a range of products rather than specialise in a very limited number.
- hypermarkets
- amazon
- proctor & gamble

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

what is overtrading

A

happens when a business expands too quickly without having the financial resources to support such a quick expansion

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

when is overtrading most likely to happen

A
  • growth is achieved by making significant capital investment in production or operations capacity before revenues are generated
  • sales are made on credit and customers take too long to settle amounts owed
  • significant growth I investors is required in order to trade from the expanding capacity
  • a long-term contract requires a business to incur substantial costs before payments are made by customers under the contract
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

symptoms of overtrading

A
  • high revenue growth but low
    gross and operating profits
  • persistent use of bank overdraft
    facility
  • significant increases in the
    payable days and receivables
    days ratio
  • significant decrease in the
    current ratio
  • very low inventory turnover
    ratio
  • low levels of capacity utilisation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

what are the most effective steps to avoid overtrading are essentially those that would be taken as part of a sensible cash flow and working capital management

A
  • reducing inventory level
  • scaling back the pace of growth until
    profit margin and cash reserves have
    improved
  • leasing rather than buying capital
    equipment
  • obtaining better payment terms from
    suppliers
  • enforcing better payment terms with
    customers
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

synergy definition

A

happens when the value of two businesses brought together us higher than the sum of the value of the two individual businesses. in other words, when synergy happens, 1+1 = more than 2!

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

what are the two types of synergy

A

cost saving :
- eliminate duplicated functions and
services
- better deals from suppliers
- higher productivity and efficiency
from shared assets

revenue:
- cross-selling to customers of both
businesses
- access to new distribution
- brand extensions
- new geographic markets opened up

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

what is retrenchment

A
  • to cut down or reduce something
  • use resources more carefully
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

examples of retrenchment in business

A

reduce output & capacity
- product/market withdrawal
- disposal of business unit
- job losses
- calling back investment

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

what drives retrenchment

A
  • costs too high
  • low ROCE
  • high gearing
  • loss of market share
  • failed takeover
  • economic downturn
  • change of ownership
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

implication for change management

A
  • will depend on the scale and scope of
    the retrenchment
  • small-scale, incremental retrenchment
    has only limited impact
  • significant retrenchment is often
    associated with a fundamental
    reappraisal of the business
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

what is organic growth

A

involves expansion from within a business, for example by expanding the product range, or number of business units and locations

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

advantages of organic growth

A
  • less risk than external growth
  • can be financed through internal
    funds
  • builds o a business strengths
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

disadvantages of organic growth

A
  • growth achieved may be dependent
    on the growth of the overall market
  • hard to build market share if business
    is already a leader
  • franchisees can be hard to manage
    effectively (McDonalds)
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

what is franchising

A

arises when a franchisor grants a licence to another business to allow it trade using the brand/business format

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

advantages of franchising

A
  • running your own business
  • tried & tested brand
  • advice, support, training
  • easier to raise finance
  • buying power of franchisor
  • lowers the risk of market entry
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

disadvantages of franchising

A
  • not cheap! initial fees + royalties &
    commission
  • restrictions on actions, including
    selling
  • franchisor owns the brand
  • franchisor may fail
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

why does franchising work for the franchisor

A
  • a classic growth strategy for a proven
    business format
  • enables much quicker geography
    growth for a relatively low investment
  • still have the option to open locations
    that are operated by the franchisor
  • capital investment by franchisees is an
    important source of growth finance
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

potential benefits of a joint venture

A
  • JV partners benefit from each others
    expertise and resources (market,
    knowledge, customer base,
    distribution channels, R&D expertise)
  • each JV partner might have the option
    to acquire in the future the JV
    business based on agreed terms if it
    proves successful
  • reduces the risk of a growth strategy -
    particularly if it involves entering a
    new market to diversification
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

potential drawbacks of a joint venture

A
  • there may be an imbalance in the
    level of expertise, investment and
    assets bought to venture
  • the objectives pf each party may differ
  • different cultures and management
    styles may hinder progress
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

what is a takeover

A

involves pone business acquiring control of another business

37
Q

possible reasons for takeovers

A
  • increase market share
  • access economies of scale
  • secure better distribution
  • acquire intangible assets
  • spread risks by diversifying
  • overcome barriers to entry to
    target market
  • defend itself against a takeover
    threat
  • enter new segments of an
    existing market
  • to eliminate competition
38
Q

types and direction of integration

A
  • forward vertical
  • horizontal
  • backwards vertical
  • conglomerate
39
Q

what is forward + vertical direction

A

acquiring a business further up in the supply chain - manufacturing buys a distributor

40
Q

what is backward + vertical direction

A

acquiring a business operating earlier in the supply chain - a retailer buys a wholesale

41
Q

what is horizontal directions

A

acquiring a business at the same stage go the supply chain eg a manfucature buys a competitor

42
Q

what’s conglomerate directions of integration

A

where the acquisition has no clear connection to the business buying it

43
Q

potential benefits of horizontal integration

A
  • achieve economies of scale
  • cost synergies from the rationalisation of the business and revenue synergies
  • wider range of products
  • reduces competition
44
Q

potential benefits of vertical integration

A
  • enables a business to capture a
    greater share of the profit on each
    sale
  • secures important sources of supply
    or distribution
  • create a barrier to entry to potential
    new competitors
  • Gai greater insights into customer
    needs and wants at each stage of the
    supply
45
Q

what is invention

A

formulation of new ideas for products or processes

46
Q

what is innovation

A

practical application of new inventions into marketable products or services

47
Q

what are the two main types of innovation

A

product - launching new or improved products too the market
process - finding better or more efficient ways of producing existing products, or delivering existing

48
Q

what are the advantages if product innovation

A
  • higher prices and profitability
  • opportunity to build early
    customer loyalty
  • enhanced reputation as an
    innovative company
  • PR coverage
  • increased market share
49
Q

what are the advantages of process innovation

A
  • reduced costs
  • improved quality
  • more responsive customer
    service
  • greater flexibility
  • higher profits
50
Q

what is kaizen groups

A
  • linked with developing an innovative
    culture in business
  • another kind of quality assurance
  • based on concept/culture of
    continuous improvement
  • encourages employees to engage fully
    with finding ways to improve quality
    processes
51
Q

what must innovative firms protect intellectual property to

A
  • keep control of intellectual property
  • maintain “unique selling point”
  • maximise return on investment
  • reduce threat of competition
52
Q

whats copyright

A
  • important protection for many
    creative industries - e.g. media,
    design, publishing
  • lasts for 70 years after author death
  • can control how copyrighted work is
    exploited
53
Q

what is globalisation

A

a process in which national economies have become increasingly integrated and inter-dependent

54
Q

reasons for greater globalisation

A
  • containerisation
  • trade agreements
  • reduced tariffs and protectionism
  • expansion of global trading blocks
  • improved technology
55
Q

benefits of globalisation on companies

A
  • access to new markets
  • economies of scale
  • source cheaper
  • access to finance
  • greater economic growth
  • spread risk
56
Q

disadvantages of globalisation on companies

A
  • greater global competition
  • exchange rates
  • cultural consideration
  • geopolitical development
  • global supply chains and coordination
57
Q

what are emerging economies

A

an emerging market economy is transitioning from a low-income, less developed, often pre-industrial economy toward a modern, industrial economy with a higher standard of living

58
Q

positive characteristics of emerging markets

A
  • high economic growth (7-10% per
    year)
  • large populations
  • rising middle incomes
  • greater openness to trade
  • developing regulatory systems
59
Q

limitations characteristics of emerging markets

A
  • political volatility
  • economic volatility - inflation,
    exchange rates
  • poor infrastructure
60
Q

what makes them an attractive market

A
  • high economic growth - higher
    incomes, greater disposable income
  • market not yet served domestically
    and little competition
  • first mover advantage, potential for
    significant sales - established market
    share
  • own domestic markets may be
    saturated
  • scope for economies of scale
61
Q

what is the bartlettt and ghoshal model

A

indicates the strategic options for business wanting to manage their international operations based on two pressures: local responsiveness and global integration

62
Q

what are the two factors in this model

A
  • force for local responsiveness
    • do customers in each country
      expect the product to be adapted
      to meet local requirements
    • do lock have an advantages based
      on heir ability to be more responsive
  • force for global integration
    • how important is standardisation of
      the product in order to operate
      efficiently
    • is consistent global branding
      required in order to achieve
      international success
63
Q

what is global strategy

A
  • where there is high need to keep
    costs down and products
    standardised
  • low pressure for local responsiveness
  • high pressure for global integration
  • key features
    • highly centralised
    • focus on efficiency
  • little sharing of expertise locally
  • standardised products
64
Q

what is multi-domestic strategy

A
  • where there is a strong need to meet
    local demands
  • high pressure for local responsiveness
  • low pressure for global integration
  • key features
    • aims to maximise benefits of
      meeting local market needs through
      extensive customisation
    • decision making decentralised,
    • local businesses treated as separate
      businesses,
    • strategies for each country
65
Q

what is offshoring

A

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

66
Q

key features of offshoring

A
  • its the changed international location
    of where the business activity is
    performed that is key
  • associated with the relocation of
    manufacturing activities from a
    domestic economy overseas
  • also increasingly common with
    business services
67
Q

offshoring

A

work done overseas

68
Q

outsourcing

A

someone else does the work

69
Q

why do business move production overseas

A
  • manufacturing costs lower
  • potentially better skilled and
    higher quality
  • makes use of existing capacity
    overseas
  • take advantage of tree trade areas
70
Q

potential drawbacks with offshoring

A
  • longer lead times for supply
  • implications for CSR
  • additional management costs
  • impact of exchange rates
  • communication: language and time
    zones
71
Q

what is reshoring

A

involves the repatriation of business activities from overseas back to the home county

72
Q

reasons for reshoring

A
  • greater certainty around delivery
    times
  • easier to collaborate with home
    suppliers
  • greater certainty about the quality of
    inputs and components
  • cost advantages of producing or
    sourcing overseas is not as significant
    as it used to be
73
Q

key pressures on business to adopt digital technology

A
  • serve existing customers better via
    data analysis
  • tech new customers in new segments
    and locations
  • offer new ways of delivering products
    and services using digital technology
  • reduce costs by integrating digital
    technology into operations - inventory
    control
  • the need to respond to digital
    innovation by competitors
74
Q

what is e-commerce

A

involves digitally enabled commercial transactions between and among organisations and individuals

75
Q

created destruction

A

innovation challenges existing business models

76
Q

examples of creative destruction

A
  • music and book retailing (amazon)
  • grocery retailing (Ocado,tesco)
  • holidays (Expedia, trip advisor)
  • music streaming (Spotify)
  • media consumption (Netflix, YouTube)
77
Q

key impacts of e-commerce on marketing

A
  • marketing strategy of differentiation
    increasingly effective
  • product life cycle are shortened
  • greater use of digital promotion
  • brands and retailers increasingly
    using multiple distribution channels
  • greater use of dynamic pricing
  • increased need for localisation
  • ability to sell a much wider product
    range
78
Q

key impacts of e-commerce on HRM

A
  • need for employees to have a broader
    range of digital skills
  • workforce planning - to support highly
    seasonal demand
  • concerns over the working conditions
    of staff working in e-commerce
    warehouse
79
Q

key impacts of e-commerce on operations

A
  • logistics behind large-scale e-
    commerce platforms are complex
  • economies of scale are becoming
    increasingly important
  • it is now relatively easy for smaller
    firms to sell online
80
Q

key impacts of e-commerce on finance

A
  • significant investment required to set
    up e-commerce platforms and to
    integrate them with other systems
  • e-commerce likely to involve greater
    use of multi-currency transactions
81
Q

what is big data

A

generation of humongous amounts of data that are too large for many software applications to handle
(analysis of these is known as data mining)

82
Q

reasons for the exponential growth of big data

A
  • retail e-commerce database
  • user interactions with website, mobile
    apps, social media
  • usage within logistics, transportation
    systems, financial and health care
  • location data (GPS-generated)
  • internet of things (IoT) data generated
83
Q

key business application of big data

A
  • tracking and monitoring the
    performance, safety and reliability of
    operational equipment (data
    generated by sensors)
  • generating marketing insights into the
    needs and wants of customers
  • improved decision making - analysing
    the real-time impact of pricing
    changes (dynamic pricing)
  • better security of business systems: ca
    identify unusual activity, for example
    on secure-access systems
  • more efficient management of
    capacity: can inform decision-making
    about capacity management
84
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

85
Q

examples of data mining can help a business improve competitiveness

A
  • sales forecasting
  • databade marketing
  • market segmentation
  • e-commerce basket analysis
86
Q

examples of data mining

A
  • Dunnhumby & Tesco
  • club card loyalty program
  • using data about pasty customer purchase habits, Tesco was able to stock its stories with precisely what customers might want in the future. It was revolutionary for the UK retail scene
87
Q

example of data mining

A
  • pop tarts and hurricanes
  • increased 7 times prior to a hurricane
  • Walmart places the strawberry pop-
    tarts at the checkouts prior to a
    hurricane
88
Q
A

business (15 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions