Unit 9-Business growth

Question 1

Greiners Growth Model

Answer 1

Shows each phase of growth is followed by a crisis

Question 2

5 phases of GGM and the crisis’ that follow

Answer 2

Creativity>Leadership
Direction>Autonomy
Delegation>Control
Coordination>Red tape (bureaucracy)
Collab>Growth

Question 3

Creativity>Leadership crisis

Answer 3

Creative but lack leadership to give direction and structure. Outside managers employed

Question 4

Direction>Autonomy crisis

Answer 4

More delegation, but employees want more say and senior managers want to retain control.

Question 5

Delegation>Control crisis

Answer 5

More delegation, decentralised. Leaders try regain control to coordinate business to use resources effectively

Question 6

Coordination>Red tape

Answer 6

Control is regained. Centralised more, too many procedures, decrease efficiency as longer chain of command

Question 7

Collaboration>Growth crisis

Answer 7

Procedures are replaced by collaboration of departments. Focus on communication. May struggle to grow internally and may have to consider external growth e.g mergers

Question 8

External economies of scale +example

Answer 8

When industries are concentrated in small geographical areas. e.g more local suppliers/labour to chose from i.e silicon valley

Question 9

Experience curve

Answer 9

Advantages enjoyed by a business by having employees familiar with business. CPU falls, less waste, more practice etc

Question 10

Economies of Scope

Answer 10

Producing multiple products. Expand production, brand loyalty too

Question 11

Retrenchment

Answer 11

Downsizing scale of business.

Question 12

Why retrench

Answer 12

Stay profitable 
Reduce DISE.OS
Declining market
Focus on core business
Easier to control

Question 13

Retrenchment on workers

Answer 13

If too fast, workers productivity falls as job security worsens

Question 14

Organic growth pros (3)

Answer 14

+maintain culture/management
+less risk as expanding what it’s good at, and using retained profit mostly
+less disruptive change, maintain productivity and morale

Question 15

Organic growth cons (3)

Answer 15

Longer, takes time adapt to changes
Miss out opportunities for more ambitious growth
Can still lose control by selling too many shares/over franchising

Question 16

Problems of fast growth (3)

Answer 16

• DIS.ECOS
• risk of overtrading (cash flow)
• CMA

Question 17

Franchising

Answer 17

allows a business to use the idea, name and reputation of an established business

Question 18

how does franchising work

Answer 18

they pay initial fee and ongoing payments usually a % of rev/profit

Question 19

Pros cons of franchising (2,1)

Answer 19

+fast expansion, using brand that works.
+costs and risks on franchisee
-loss of control, harm rep

Question 20

Synergy

Answer 20

2 businesses join together can generate more revenue or cost save (e.o.s) than operating separately

Question 21

Takeovers/Acquisitions and 2 types

Answer 21

Owning over 50%. Can be hostile/agreed

Question 22

Overtrading

Answer 22

Business expands too fast putting pressure on working capital/CF. Demand can be too high, or supply too high

Question 23

Joint ventures pros cons 4,2

Answer 23

Set up new business, share resources and profit but no change of ownership.
\+good if lack capital
\+combined expertise
\+shared risk
\+access to international market
-shared rev
-conflict

Question 24

Reasons to grow externally (5)

Answer 24

Quicker growth, diversify 
Shared experience/expertise
Increase MS-reduce comp. 
EOS
Cost savings e.g merging with firms that already have resources (synergy)

Question 25

Cons of external growth

Answer 25

Risk, limited experience
Time
Costs (DISE.O.S)-selling off parts 
Conflict
CMA

Question 26

Criticisms of experience curve (2)

Answer 26

Can become complacent due to experience

Can cause resistance causing lack of innovation

Question 27

2 Criticisms of GGM

Answer 27

Some dont experience crisis

No consideration of pace of growth

Question 28

2 types of synergy

Answer 28

Cost saving

Higher sales/rev

Question 29

How to achieve cost saving through synergy (3)

Answer 29

E.o.S (purchasing etc)
Rationalising (reduce dupe costs)
Shared assets improve efficiency

Question 30

How to achieve higher sales through synergy (2)

Answer 30

Increased brand awareness

Increased distribution channels

Question 31

Impact of growth on finance

Answer 31

Ensure good cashflow to prevent overtrading, can be done also by sources of finance

Question 32

Impact of growth on operations

Answer 32

E.O.S however Dise.o.s and potential quality issues

Question 33

Impact of growth on marketing

Answer 33

Adapt marketing mix e.g more distribution channels, pricing strategies etc

Question 34

Problems with retrenching

Answer 34

Loss of E.O.S
Workers security-motivation
Loss of experience curve from workers-higher CPU

Question 35

How to prevent overtrading (2) and evaluate

Answer 35

Produce cashflow forecast to identify shortages and then take action (sources of finance/improve CF)

eval:of course there’s cons of SoF

Reduce receivables delay payables

Can deteriorate supplier relationship, loss of discount etc. Or for customers, loss of sales.