1.5 Growth and evolution Flashcards
(36 cards)
PEST
Political
Economic
Social
Technological
PESTLE
Political
Economic
Social
Technological
Legal
Ecological
STEEPLE
Sociocultural
Technological
Economic
Environmental
Political
Legal
Ethical
assessment advice 1
remember when citing numbers, to compare it to other data otherwise it has no meaning
assessment advice 2
when doing a STEEPLE analysis, remember that the analysis is of external factors, not internal factors
economy of scale
the decrease in per unit production cost as an output or activity increases
diseconomy of scale
the increase in unit production cost as output or activity increases
assessment advice
when defining the economies of scale be sure to include the phrase “per unit” or “per average cost” in your definition
advantages of big businesses
- survival
- economies of scale
- higher status
- market leader status
- increased market share
advantages of small businesses
- greater focus
- greater prestige
- greater motivation
- competitive advantage
- less competition
internal growth
sometimes referred to as organic growth, this occurs when a business grows by relying on its own resources and capabilities: investment in new products, or new sales channels, or more stores etc to increase sales
external growth
occurs when a business expands with the aid of resources and capabilities not internally developed by the company itself - instead, the company obtains these new resources and capabilities by acquiring another company or forming some type of relationship, like a joint venture, with another organzation
merger
occurs when two companies that are theoretically “equal” legally become one company
acquisition
when one company purchases a majority or all the shares of another company
takeover
when one company acquires a majority or all the shares in another company
when the word “takeover” is used, the situation usually means that the company being acquired does not welcome the transaction
examples of external growth
mergers and acquisitions
takeover
joint venture
strategic alliance
franchise
horizontal integration
occurs when the two businesses being integrated are not merely in the same broad industry, but are actually in the same line of business and in the same chain of production
vertical integration
occurs when one business integrates with another at a different stage in the chain of production, or when a business begins operations in an earlier stage through internal growth
occurs for various reasons, including to ensure reliable supply, avoid government regulation (such as price control or taxes), reduce transaction costs and eliminate the market power of other businesses
what is backwards vertical integration
if a business becomes involved in an earlier stage in the chain of production
what is forwards vertical integration
when one business integrates further forward (to a later stage) in the chain of production
conglomeration
when two business in unrelated lines of business integrate - this type of integration is known as diversification
joint venture
an organisation created, owned, operated by two or more other organisations
the joint venture is legally distinct from the organisations that created it
strategic alliance
occurs when two or more businesses cooperate in some legal way that enhances the value for all parties
members of the alliance retain their independence
a strategic alliance is less binding than a joint venture, as new organisation is created
