Unit 9-strategic methods: how to pursue strategies Flashcards
what is retrenchment?
a strategy used by a business to reduce its overall size or diversity of operations
what are takeovers?
also known as acquisitions, is where one business acquires control of the assets of another business either by a formal offer that is accepted (friendly takeover) or by the purchase of a controlling interest of shares (hostile takeover)
what are mergers?
where two or more businesses join together by mutual consent
why is growth an important objective?
-increased profit
-survival
-reduces risk
-increase market share
why might a business pursue a strategy of retrenchment?
-changes in the market
-failed takeover
-economic downturn
what is organic/internal growth?
-selling more products or services
-targeting a wider or new market
-often financed by retained profit
-slower and less risky
what is external growth?
-achieved through take overs or mergers
-is groet by acquisition
-quicker but more risky
what are economies of scale?
the proportionate saving in costs as a result of an increase in the size of an operating unit
what are economies of scope?
the proportionate saving gained by producing two or more distinct products, when the cost of doing so is less that producing each separately
what are diseconomies of scale?
a situation where economies of scale no longer occur and unit costs begin to increase rather than decrease
why might diseconomies of scale occur?
-poor communication
-lack of control and coordination
-alienation of the workforce
what is the experience curve?
the idea that the more you do something, the better you get at it, enabling quicker and cheaper production
what is overtrading?
where a business grows too quickly, undertaking more business that its working capital can cope with
what is a synergy?
the idea that value and performance of two businesses combined will be greater than the sum of two parts
what is Greiner’s model of growth?
describes different phases of a business’s growth and provides a framework to understand different organisational structures and coordination methods
what are the different phases of Greiner’s model of growth and what are the corresponding crisis?
1: growth through creativity, leadership crisis
2: direction, autonomy crisis
3: delegation, control
4: coordination, red tape
5: collaboration, growth
6: alliances
what are some characteristics of retrenchment, their causes, problems and solutions?
-downsizing: caused by changes in the market, problem: alienation of the workforce, minimising workforce impact should solve it
-sale of assets: caused by economic downturn, problem: alienation of workforce, good communication should solve it.
-job losses: caused by a failed takeover, problem: alienation of workforce, collaboration with trade unions should solve it
how does growth and retrenchment affect the functional areas of a business?
-marketing: regarding changing marketing objectives in a growing or declining market and the impact on the marketing mix
-finance: impact decisions of growth in terms of both working cap and cap investment. might relate to financial stability in a declining market
-ops: in relation to unit costs, capacity and how to use technology
-HR: in relation to the organisational structure and responsibilities, the need for recruitment, selection and training and how to approach redundancies.
what are the different types of mergers and takeovers?
-vertical integration: forwards and backwards
-horizontal integration
-conglomerate integration
why might takeovers and mergers fail?
-an over-optimistic assessment of benefits
-a lack of detailed research
-resistance from employees
-clashes of culture
-a lack of experience and expertise in the case of conglomerate integration
-financial pressures, including paying too high a price
what is a joint venture?
a business arrangement where two 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 (the franchisor) grants another party (the franchisee) the right to use its trade name and sell its products or service
what benefits does franchising have on a franchisor?
-it is relatively quick
-finance is provided by the franchisee
-the franchisee is likely to be highly motivated
-the organisational structure is less complex
what is innovation?
the process of converting an invention into a good, service or process that creates value for a business.
it is necessary for a business to conduct R&D
what are the pressures for a business to become more innovative?
-survival
-shareholders and the city
-competitive environment
-social and ethical
benefits of innovation for a business
-competitive advantage
-aligned to strategic position (differentiation or low cost strategy)
-stakeholder value increases
what is keizen and what does it focus on?
the philosophy and practice of continuous improvement.
-making continuous small improvements that help a biz stay at the top of a field
-involves everyone in the biz and urges all to strive for improvement
-recognises there is always room for improvement and wants workers to be confident and offer suggestions
-relies on teamwork and quality circles, worker groups meet and work together to solve problems and come up with innovative changes
what is intrapreneurship?
the practice of entrepreneurship that exists within an established business. it’s the act of behaving like an entrepreneur
what is benchmarking?
a strategic and analytical process of continuously measuring an organisation’s products, services and practices against a recognised leader
what is a patent?
a government license that gives the holder the rights to a process, design or new invention
what is a trademark?
a recognisable name, logo, slogan or design that denotes a specific product or service and legally differentiates it from others
what is copyright?
the legal protection provided for the work of authors, composers and artists
how does innovation impact the different functional areas?
-finance: needs funding with no guarantee of a return
-marketing: may stem from or need market research to ascertain customer reactions, promotion
-ops: process innovation directly affects ops, new products may require new processes, capacity
-HR: fully engaged talented workforce
what are the reasons for targeting, operating in and trading with international market
-growth and profit
-economies of scale
-diversify risk
-trade liberalisation
-tax
what is transfer pricing?
the setting of the price for goods and services sold between related legal entities within an organisation
what are some factors influencing the attractiveness of international markets?
-risk levels
-competition
-market potential
-legal and political environment
-economic factors
-culture
-methods of entry
what is off shoring?
the movement of the operations of a business to another country
what are the 4 main methods of entering international markets?
-exporting
-licensing
-alliances
-direct investment
what are the positives and negatives of exporting?
P: little investment needed
N: possible tariffs and trade barriers
what are the positives and negatives of licensing?
P: quick ad low cost, avoids barriers
N: dependent on local producers
what are the positives and negatives of alliances?
P: knowledge and expertise of local partner
N: means sharing knowledge and technology
what are the positives and negatives of direct investment?
P: direct costs and avoids barriers, lower costs
N: high risk, with potential for management and control problems
what factors influence a business to buying, selling and producing abroad?
-skills
-new markets
-a business friendly framework
-overcoming trade barriers
-quality
-cost
what might make businesses hold back from off-shoring?
-ethical issues
-control and quality
-IP theft
-british reputation
what is barlett and goshal’s international strategies model?
it identifies 4 international strategies according to the pressure for local responsiveness (high or low) and the pressure for integration (high or low)
what is the impact of internalisation on the 4 funcional areas of the business?
-marketing: researching the market and developing appropriate promotional strategies
-finance: will need financing, increasing competitiveness might lead to pressure for cost reduction
-ops: sourcing materials, adapting products, quality and capacity , pressure to reduce unit costs
-HR: recruitment and training, redundancy strategies may be needed, consideration of management styles when working with different cultures
what is digital technology?
describes the use of digital resources to find, analyse, create, communicate and use information effectively in digital context
what pressures might there be to adopt digital technology?
-improving performance
-keeping up with consumer and market trends
adv of e-commerce for consumers and for a business
consumers:
-it allows access to more products and services at cheaper prices
-info is available instantly
-it enables participation at auctions
-more convenient
business:
-provides opportunities 24/7 and 365 days a year
-offers a global reach, potential cost reductions and supply chain improvements
disadv of e-commerce for consumers
-they are unable to examine products personally
-dependent on system reliability
-personal info can be stolen through hacking
-they may not have access, as even today some people are not connected to the internet
what is big data?
the ever-increasing amounts of structured, semi-structured and unstructured data that have the potential to be mined for info
what is data mining?
the process used by organisations to turn large amounts of data (big data) into useful information
what is enterprise resource planning (ERP)?
the business management software system by which an organisation manages and integrates the important parts of its business
what advantages does ERP bring to a business?
-better analysis
-better management of resources
-greater customer satisfaction
-lower costs
what impact does digital technology have on the functional areas of the business?
-finance: quick an easy to undertake
-marketing: digital tech have opened up new markets, enabled more targeted promotions and reduced marketing costs, e-commerce and social media
-ops: digital tech has enabled greater automation of production an more efficient inventory control, lower costs, better quality, greater flexibility and reduced work
-HR: digital tech has enabled the development of more flexible, multi-skilled workforces.
