9.1 Asessing A Change In Scale Flashcards
What is organic growth?
Growing a business from within.
E.g. expanding the product range.
Why do business grow organically?
Control over growth rate - able to allocate resources responsibly.
Can build on strengths - able to control rate to prevent going beyond what is manageable, can avoid relying on external methods of funding.
What is external growth?
Outside of the business.
Usually involves merger or takeover.
Name the 4 types a of integration.
Forward and vertical.
Backwards and vertical.
Horizontal.
Conglomerate.
What is forward and vertical integration?
Acquiring a business further down the supply chain.
Define backward and vertical integration.
Acquiring a business earlier in the supply chain.
E.g. retailer buys supplier.
What is horizontal integration?
Acquiring a business at the same stage of the supply chain.
Give a successful example of horizontal integration.
Disney acquired Pixar.
Shared technological innovation.
Now able to produce upwards of 8 movies a year.
What is a conglomerate?
When a business buys another with no clear connection.
Give an example of a conglomerate.
Procter and gamble.
Originally sold soap and candles.
Now owns companies selling cleaning products, skincare and drinks.
Why do businesses commit to external growth?
Enter into new markets.
Reduce competition.
Define retrenchment.
Cutting back.
What are the types/steps of retrenchment?
Recruitment freeze/voluntary redundancy.
Delayering.
Close factories.
Redundancies.
Why do business retrench?
Financial issues.
Capacity reached.
Why may a business choose to do a recruitment freeze?
Non threatening - no affect on morale, motivation.
What are the downsides to a recruitment freeze?
Good people leave and need to be replaced - or work may become too much for employees remaining.
No opportunity to restructure.
What is delayering?
Removing a layer of management from the hierarchy.
What is delayering?
Removing a layer of management.
What are the drawbacks of delayering?
May intensify work for remaining employees.
Loss of promotional opportunities - demotivating.
Name 2 potential benefits of delayering.
Enrich remaining jobs.
Faster communication.
Why may a business chose to close a factory?
Reduces fixed costs.
Improve capacity utilisation elsewhere.
What are advantages of making redundancies?
Opportunity to reshape organisation - enrich some jobs, increase motivation.
Keep good staff - increase labour productivity.
Why are redundancies risky?
Creates job security issues - demotivating.
What are the issues with growth?
Economies of scale.
Economies of scope.
Diseconomies so scale.
Synergy.
Overtrading.
