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Business > Unit 9 - Growth > Flashcards

Unit 9 - Growth Flashcards

1
Q

Retrenchment

A

The cutting back of an organisations scale of operations

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2
Q

Why do businesses retrench

A
  • Poor performance
  • strong competition
  • to focus on core
  • economic landscape (e.g. recession)
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3
Q

How do businesses retrench

A
  • reduce capacity
  • delayer
  • close stores/offices/factories
  • redundancies
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4
Q

Internal growth (organic)

A

When a firm expands its existing capacity or range of activities by extending its premises/ building new factories from its own resources rather than by integrating with another firm

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5
Q

External growth

A

Mergers, takeovers, franchising, ventures

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6
Q

Ventures

A

Venture capitalists/ larger companies invest in companies in their early stages of development. Prepared to support new businesses with technical and managerial expertise
(High risk high rewards)

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7
Q

Vertical integration

A

The coming together of firms in the same industry but at different stages of the production process e.g. Tesco buying a farm / BP buying a fuel supplier

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8
Q

Vertical forwards integration

A

Where a manufacturer integrates with a retailer that sells its finished product

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9
Q

Backwards vertical integration

A

A manufacturer integrates with the supplier of its raw material

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10
Q

Horizontal integration

A

The coming together of firms at the same stage of production and in the same market
E.g. Disney and Pixar

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11
Q

Conglomerate integration

A

The coming together of firms operating in unrelated markets
(Diversification to spread risk)

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12
Q

Impacts of growth

A
  • economies of scale
  • diseconomies of scale
  • economies of scope
  • synergy
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13
Q

Synergy

A

Two firms join together and the resulting outcome is expected to be much better than two individual companies working alone. Teamwork creates an overall better result if working towards the same goal

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14
Q

Overtrading

A

When a business expands too quickly without having the financial resources to support such a quick expansion, putting strain on working capital
E.g. a business opening a store without the sales to cover the costs/ a business taking a large bid and maximising their overdraft for additional funds to pay for supplies

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15
Q

Implications of overtrading on business strategies

A
  • cash flow strategies
  • extend payable days and reduce receivable days to hold cash for a longer time to allow sufficient working capital
  • closure of business
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16
Q

Economies of scope

A

When unit costs are lower due to spreading costs when a business produces a wider range of products rather than specialise in just one or a few products
E.g. supermarket like Tesco, Amazon , Unilever (diverse product portfolio)

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17
Q

Advantages and disadvantages of economies of scope

A

+ gain efficiency
+ more security
+ using the same resources to produce multiple products saves money and time
+ increased customer choice
-less experience with new products
-damaging reputation
-loss of image
-market research is time consuming

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18
Q

Diseconomies of scale

A

The disadvantages that an organisation experiences due to an increase in size

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19
Q

Poor motivation from diseconomies of scale?

A

Business grows - less personal contact with management- alienation- staff feeling under valued- decreased motivation- decrease in labour productivity (output)- increase unit costs

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20
Q

Poor communications due to diseconomies of scale?

A

Poor motivation / too many levels of hierarchy - communication deteriorates - misunderstandings- problems in operations

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21
Q

Poor coordination due to diseconomies of scale?

A

Growth - hard for people at the top to control and coordinate effectively - if leader refuses to delegate they may be unable to cope with increases work load - problems in operations

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22
Q

Economies of scale

A

Advantages of being a large business

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23
Q

Purchasing economy of scale

A

Negotiate discounts when buying supplied in large quantities and get longer credit periods that small competitors - USP/ control cash flow

24
Q

Managerial economies of scale

A

Employ the best managers with specialist skills - greater knowledge and skill - motivated staff/ innovations- increased productivity - lower unit costs

25
Q

Technical economies of scale

A

Large businesses can afford to buy better and more advanced machinery - increased efficiency - lower unit costs

26
Q

Impact of growth on marketing

A

+ afford to lower price if price elastic
+ diversity
+ expansion of target marker
+ product life cycle extension strategies
+ localisation of advertisement (international markets / different languages )
+ enhanced customer data insight
+ economies of scope

27
Q

Impact of retrenchment on marketing

A
  • reduced marketing budgets
  • less advertising
  • narrowed target audience
  • reductions in product or service offerings
28
Q

Impact of growth on operations

A
  • economies of scale (bulk, technology, managerial)
  • extend payable days
  • increased capacity utilisation
  • invest more in technology and automation
29
Q

Impact of retrenchment on operations

A
  • diseconomies of scale
  • decreased capacity utilisation (downsizing)
30
Q

Impact of growth on finance

A
  • good cashflow forecast for budgeting
  • more recievable days than payable days
  • higher operational costs (rent, utilities, wages etc)
  • potential for higher revenue and profit
31
Q

Impact of retrenchment on finance

A
  • sell assets
  • reduced operating expenses
  • short term financial relief (liquidity)
  • decreased revenue potential
  • low investor confidence
32
Q

Impact of growth on Human Resources

A
  • training (increased time and costs)
  • more layers in structure of business so less control
  • emphasis on managing business culture
  • higher demand for employee support and resources
33
Q

Impact of retrenchment on Human Resources

A
  • higher redundancies
  • reduce training
  • delayer business structure
34
Q

Innovation

A

The successful exploitation of new ideas. Enables businesses to compete effectively in an increasingly competitive global environment. (A practical application of new inventions into marketable products or services)

35
Q

Invention

A

Formulation of new ideas for products or processes

36
Q

Product innovation

A

The creation and launch of a good or service that is new, or a sognicaint change to an earlier good or service

37
Q

Advantages of product innovation

A

First mover advantage means…
- higher price and profitability (price skimming)
- added value
- opportunity to build early customer loyalty
- PR coverage
- increased market share

38
Q

Process innovation

A

The creation of a new way of making, providing or delivering a particular food or service
e.g. Redbull F1 car pit stops (1.7secs)

39
Q

Advantages of process innovation

A
  • reduced unit costs (efficiency so increased productivity)
  • improved quality
  • more responsible customer service
  • greater flexibility
  • higher profitability
40
Q

Kaizen

A

Continuous improvement
Policy for implementing small, incremental changes in order to achieve innovation, better quality and/or greater efficiency
E.g. Toyota

41
Q

Benchmarking

A

The practice of comparing business processes and performance in relation to best practice within the same sector

42
Q

Advantages and disadvantages of benchmarking

A

+ enhanced quality
+provides a goal for employees which will increase motivation
+cam make the organisation more competitive in the market by identifying the other businesss weaknesses
-may be difficult to gather required into from competitions
-time consuming to study
-internal factors e.g. lack of finance may prevent adoptions of competitors practices
-company/product will only be as good as the benchmark set
-poor choice of company to benchmark off can lead to no innovation

43
Q

Research and development

A

When businesses gather knowledge to create new products/ discover new ways to improve their existing products and services

44
Q

Research and development contributes to innovation by…

A
  • influencing product development
  • influencing process innovation
  • encourage strategic planning
  • provide the necessary data and insight to launch new products/ services
  • deploying new technologies/ improving them
    HOWEVER, only contributes to innovation if money is successfully invested
45
Q

Intrapreneurship

A

A system allowing an employee to act like an entrepreneur within an organisation
E,g, used by Apple and Google

46
Q

Advantage of intrapreneurship

A
  • encourages out of the box thinking
  • drives growth
  • boost morale /self esteem
  • enhance creativity
  • increase profitability use resilience’s in most efficient way
  • encourages open communication
47
Q

Intrapreneurship relies on…

A
  • culture of innovation and creativity
  • support from team managers
  • excellent two ways communication
  • rewards (recognition)
  • ownership of projects
48
Q

Intellectual property

A

Any intangible assets that arise from human knowledge and ideas
E.g. business name, logo, designs and inventions

49
Q

Patent

A

An exclusive right granted for an invention or design of a product (purely product or process)
- generally lasts for 20 years after 5 years
- benefit inventors by providing them with legal protection for inventions
E.g. Coca Cola owns patent on their formula

50
Q

Copyright

A

The legal ownership of intellectual property and conveys the right to control its reproduction and distribution (authors, copiers, artists). Usually lasts around 70 years in the UK
E.g. Star Wars (original fiction / non fiction work)

51
Q

Trademark

A

A recognisable insignia, phrase, word or symbol that denotes a specific product and legally differentiates it from all others of its kind (signs,symbols, logos, words displayed on business).
Must renew every 10 years and can last forever
E.g. Apple logo, Golden Arches of McDonald’s

52
Q

Problems of innovation

A
  • uncertainty (no guarantee of success and costs will be high)
  • operational difficulties
  • competition
  • generic products ( copies that are produced cheaply as soon as patent expires
53
Q

Impact of innovation on marketing

A
  • market research (costly and time consuming)
  • product life cycle - marketing focus on extension strategies
54
Q

Impact of innovation on finance

A
  • budget must be strict as no guarantee innovation will be successful
  • high costs and there’s no guarantee
  • investment appraisal (need to work out the return of investment of innovation)
55
Q

Impact of innovation on operations

A
  • process innovation e.g. Redbull pit stops
  • kaizen
  • just in time - save unit costs
56
Q

Impact of innovation on HR

A
  • rewards needed for staff who come up with innovative ideas
  • training needed for staff to learn how to use new products/services
  • motivated staff

Business (13 decks)

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