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Flashcards in Chapter 1.7 Deck (14)
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1

Why do businesses wants to grow larger? Give 4 reasons.

-Economies of scale -Gain a larger market share -To survive against rivals -To spread risks Ultimate aim - gain more profit in the long run (private sector)

2

Name 2 methods of internal growth and external growth.

Internal growth - Changing price; advertising and promoting External growth - Joint ventures; strategic alliance

3

What are advantages for -franchising for a franchiser? -a franchisee?

Franchising for a franchisee: -Parent company experience rapid growth -Allows a business to have a national/international presence -Economies of scale (lower costs of production) Franchisee: -Lower risk -Lower start-up cost for research & development

4

Explain the quadrants of the Ansoff Matrix.

-Market penetrations: low-risk strategy; existing products in an existing market Product development: medium-risk strategy; new products in an existing market -Market development: Medium-risk growth strategy; existing products in a new market -Diversification: high-risk growth strategy; marketing new products in a new market

5

Explain the circumstances when economies of scale might not benefit customers.

-Can be a barrier to entry, creates less competitive market -Can be achieved through high volume output

6

Explain why economies of scale may be inappropriate for businesses.

-Sole traders want to keep tight control -Firms may not participate in trading

7

Why are there so many small firms that continue to succeed if economies of scale is so important?

-Small firms operates in a niche market -Better cost control -Offer a flexible local personal service

8

Define 'economies of scale.' Give an example.

-Is the lower average costs of production as a firm operates on a larger scale due to an improvement in productive efficiency Ex: Airbus super jumbo has more seats than Boeing jumbo jet but Airbus burns less fuel per seat. (so the average cost of fuel for Airbus is lower)

9

Distinguish between internal and external economies.

Internal - Those that are within the firm and organization's control Ex: Technical economies: has sophisticated machinery Financial - larger sums of money External - businesses that operates beyond the control of the business Ex: Technological - improved transportation & communication

10

Distinguish between internal and external growth.

Internal growth (organic growth) - a business grows internally, using its own resources to increase the scale of its operations External growth (Amalgamation or Inorganic growth)- business growth through mergers/acquisitions (takeover)

11

Distinguish between joint ventures and strategic alliances.

Joint ventures - two or more business becomes a company and split costs, risks, control, and rewards Strategic Alliance - two or more business cooperates in a business venture and split things too but remains separate

12

Define conglomerate.

-Large multinational that operate in many countries.

13

Define franchise, franchisee, and franchisor.

Franchise- An agreement between a franchisor selling its rights to other franchisees to allow them to sell products under its name Franchisee - The purchaser of a franchise Franchisor - when the franchisee pays a license fee to the parent company of the business

14

Define mergers and takeovers.

Mergers - intergration of two or more businesses forming one single company

Takeovers (aka acquisitiosn) - When a company buys a controlling interest in another company