Unit 9 Flashcards
what is retrenchment ?
a strategy used by a business to reduce its overall size pr diversity of operations.
what is a takeover (acquisition) ?
where one business acquires control of the assets of another business, either by a formal offer or through buying shares.
what is a merger ?
where 2 or more businesses join together in mutual consent.
what are the reasons for growth ?
. increased profit (growth brings increased sales and revenue)
. survival
. reduce risk (moving into new markets and diversifying can spread cost of uncertainty and risk)
. increased market share (more dominant position in the market, thereby greater power over suppliers and perhaps their prices)
what are the reasons why a business may pursue retrenchment ?
. changes in the market (may be because of changes in taste and fashion, technological advancement etc)
. failed takeover
. economic downturn (to better cope with changing economic environment)
what are the common characteristics of organic/internal growth ?
. selling more or new products/services
. targeting a wider or new market
. often financed by retained profit
. slower and less risky
what are common characteristics of external growth ?
. achieved through takeovers or mergers
. growth by acquisition
. quicker but more risky
what are economies of scale ?
reduction in AC of production as output increases, due to growth.
what are economies of scope ?
the reduction in AC due to producing a variety of goods/services.
what are diseconomies of scale ?
increase in AC of production due to growth.
what causes diseconomies of scale ?
. poor communication
. lack of control and coordination
. culture clash
what is over trading ?
occurs when a business grows too quickly, undertaking more business than its working capital can cope with, causing liquidity problems.
what is synergy ?
the value and performance of the 2 businesses combined will be greater than the sum of the 2 parts.
(2 + 2 = 5)
what is greiners model of growth ?
describes different phases of a business growth.
what are the 6 different phases of greiners model ?
1). growth through creativity (use of creativity by a limited workforce to meet demand of customers)
2). growth through direction (professional managers are brought in to solve leadership crisis)
3). growth through delegation (departments introduced)
4). growth through co-ordination (centralised structure)
5). growth through collaboration (organisational goals)
6). growth through alliances (take-over mergers)
what are the characteristics of retrenchment ?
downsizing
sale of assets
job losses
what are the causes of retrenchment ?
changes in market conditions
economic downturn
failed takeover
what are the different types of takeovers and mergers ?
vertical
(business merges or takeover another business in the same production chain but at a different stage.
this could be an earlier (backward vertical integration) or later stage (forward vertical integration)
horizontal
(when a business merges or takeover a business in the same stage of the production change as them).
conglomerate
(when a business merges or takesover a business in a totally unrelated business area).
what are the reasons mergers or takeover fail ?
. an over-optimistic assessment of the benefits
. a lack of detailed research
. resistance from employees
. clashes of culture
. a lack of experience and expertise
. financial pressures
what is joint venture ?
a business arrangement where 2 or more businesses agree to pool their resources for the accomplishment of a specific task.
what is Franchising ?
a method of growth where an existing business grants another party the right to use its trade name and sell its products and services. the franchisee usually has to pay an upfront fee, and a percentage of sales revenue as a royalty each year to the franchiser.
what are the benefits of franchising ?
+ relatively quick
+ financed by franchisee
+ franchisee is likely to be highly motivated
+ less complex organisational structure
what is innovation ?
the creation of more effective processes, products and ideas.
how does a business innovate ?
investing in R&D
what are the pressures for change ?
. survival
. shareholders
. competitive environment
. social and ethical concern (more environmentally friendly)
what are the benefits of innovation ?
+ competitive advantage
+ aligned to strategic positioning (differentiation or low cost)
+ stakeholder value (greater returns for stakeholders etc.)
what are the drawbacks of innovation ?
- high cost
- high risk
- pressures for shortermism from stakeholder
what are some characteristics of an innovative organisation ?
+ promote innovation as an organisational value
+ an acceptance that some ideas will fail
+ finance is available for innovation
+ encouragement for employees to ‘think outside the box’
what are some ways of becoming an innovative organisation ?
. Kaizen (focus on small improvements, everyone in the business strive for improvement)
. research and development
. intrapreneurship (individuals who are entrepreneurial)
. benchmarking
what is benchmarking ?
a tool for continuous improvement.
process of measuring the performance of your businesses against the best in the industry.
what are the benefits of benchmarking ?
+ more efficient
+ more cost-saving
what are intellectual property rights (IP) ?
an intangible asset belongs to the owner or organisation.
what are ways of protecting innovation and intellectual property ?
. patent
. trademarks
. copyrights
what is a patent ?
a government license that gives the inventor exclusive rights to use their invention for 20 years preventing others from copying or selling the invention without permission of the inventor.
what is a trademark ?
something that distinguishes a product or business from others in the market.
(logo, slogan etc).
what are copyrights ?
an authors legal ownership of a creative work such as literary, musical work, programmes, and blueprint.
what is internationalism ?
the ideal of countries working together politically, economically and socially to achieve common goals.
what are the reasons for targeting, operating in, and trading in international markets ?
+ growth and profit (more and new potential customers)
+ economies of scale
+ over saturated domestic market
+ reduced trade barriers
+ tax avoidance
what are the factors influencing the attractiveness of international markets ?
. risk (language cultures barriers)
. competition
. market potential (size and growth of market)
. legal and political environment (trade barriers ?)
. economic factors (exchange rates, interest rates)
. cost
. culture
. methods of entry
what is the main reason why organisations produce and source more resources from abroad ?
+ cost (resources of desired quality, quantity, and reliability can be obtained overseas, at a much cheaper cost).
what is off-shoring ?
the movement of business operations to another country or organisation overseas.
what are the 4 main methods of entering international markets ?
. Exporting
. Licensing
. Alliances
. Direct Investment
what are the costs and benefits of exporting, as a method of entering international markets ?
B: little investment required
C: possible tariffs and trade barriers
what are the costs and benefits of Licensing, as a method of entering international markets ?
B: quick, and lost cost
avoids barriers
C: depends on local producers
what are the costs and benefits of Alliances, as a method of entering international markets ?
B: knowledge and expertise of local partner
C: means sharing valuable knowledge and technology
what are the costs and benefits of Direct Investment, as a method of entering international markets ?
B: direct control and avoids barriers, low cost
C: high risk, potential for management and control problems
what are the influences on buying, selling, and producing abroad (Off-shoring) ?
. Skills
. new markets
. a business-friendly framework
. overcome trade barriers
. natural resources
. pressures for local responsiveness and pressures for cost reduction
what are some drawbacks of Off-shoring ?
- ethical issues (exploitation of cheap labour)
- control and quality
- IP theft
- British reputation (having produce made in Britain carries a certain reputation with it)
what is Bartlett and Goshals Matrix ?
identifies 4 international strategies according to the pressures for local responsiveness and the pressures for cost reduction.
what are the 4 main international strategies of Bartlett and Goshals Matrix ?
. International Strategy (Low CR, Low LR)
focuses on producing in your home country, using your home countries expertise
. Multi-domestic strategy (Low CR, High LR)
treating each market independently, adapting products to the needs of each local customer base
. Transnational strategy (High CR, High, LR)
knowledge and innovation are sought and and developed throughout the organisation
. Global strategy (High CR, Low LR)
highly centralised business focused on economies of scale
what are the pressures to adopt to digital technology ?
. improving performance to stay competitive
(digital technology can lead to lower costs and quicker more efficient decision making)
. keeping up with consumer and market trends
(allows business to be more flexible to changing demands)
what is ecommerce ?
relates to buying and selling goods/services through an electronic medium.
what are the advantages of ecommerce ?
+ cheaper goods/ervices
+ information available instantly
+ provides businesses 24/7 access to consumers
+ global reach
what are the disadvantages of ecommerce ?
- consumers are unable to examine products personally
- they are dependent on system reliability
- personal information can be stolen
what is m-commerce ?
buying a selling goods through wireless technology (mobile phones)
what is Big Data ?
refers to the increasing amounts of structured, semi-structured, and unstructured data, that has the potential to be mined for infomation.
what are the characteristics of Big Data ? (4 V’s)
. Volume
. Velocity
. Variety
. Veracity (messiness or trustworthiness of data)
what is the value of technology, in terms of analysing data ?
+ it can create a better understanding of customers and purchasing habits, allowing businesses to target customers better
+ businesses processes relating to stock levels, supply chains and delivery routes can be optimised
+ big data can also be used to improve sports performance, national security, and health
what is data mining ?
the process used by organisations to turn large amounts of data (big data) into useful information.
can be used for analysis e.g. financial planning, promotion etc
what is enterprise resource planning (ERP) ?
the business management software system by which an organisation manages and integrates the important parts of its business.
before ERP business had to separate systems for different functions and processes, which caused what ?
. duplication
. a lack of sharing data
. inconsistency
. isolated decisions
. increased expenses
what are the advantages of ERP (enterprise resource planning) ?
+ better analysis and planning capabilities
+ better management of resources
+ greater customer satisfaction
+ increased expenses
how has digital technology improved the different departments and functional areas of a business ?
Finance: (financial monitoring and analysis are both quicker and easier to undertake)
Marketing: (digital technologies have opened up new markets, enabled more targeted promotions and significantly reduced marketing costs.)
Operations: (greater automation and more efficient inventory control, lower costs, better quality)
Human Resources: (the development of more flexible, multi-skilled workforces who work better under better conditions who can be closely monitored)
