Growth

Question 1

What does Ansoff’s Matrix link to organic or external growth?

Answer 1

Organic

Question 2

What is market penetration?

Answer 2

Existing products in existing markets

Question 3

What is product development?

Answer 3

New products in existing markets

Question 4

What is market development?

Answer 4

Existing products in new markets

Question 5

What is diversification?

Answer 5

New products in new markets

Question 6

What is a joint venture?

Answer 6

A business arrangement where 2 or more parties share their resources to complete a specific task

Question 7

Do the businesses merge or remain separate in a joint venture?

Answer 7

Remain separate

Question 8

What are economies of scale?

Answer 8

Cost advantages associated with the increased scale of a business

Question 9

Name 3 economies of scale?

Answer 9

Internationalisation
Becoming more capital intensive
Reducing labour costs

Question 10

What are technical economies?

Answer 10

More money to invest in machinery

Question 11

What are specialisation economies?

Answer 11

Ability to hire staff and training

Question 12

What are purchasing economies?

Answer 12

Buying in bulk
Bargaining price with suppliers

Question 13

What are R&D economies?

Answer 13

Can devote more money to R&D

Question 14

What are marketing economies?

Answer 14

Better techniques to get economies of scale

Question 15

What are financial economies?

Answer 15

Raise more money, better payment terms

Question 16

What are social and welfare economies?

Answer 16

Can invest in things that will make staff happier

Question 17

What are managerial economies?

Answer 17

Can employ the best managers and adopt a more cost-effective administration procedure

Question 18

What are economies of scope?

Answer 18

Cost advantages when producing a range of products together in one company than separate

Question 19

How is economies of scope different to scale?

Answer 19

Focuses on saving costs by sharing resources compared to making each product separately

Question 20

What is an example of a business that specifically benefits from economies of scope?

Answer 20

Unilever

Question 21

What does the synergy in external growth relate to?

Answer 21

The added value created when businesses combine through mergers or partnerships

Question 22

What is a franchise?

Answer 22

A business where an established owner sells the rights to use company name, model and trademarks to independent operators

Question 23

What is a franchisor?

Answer 23

An individual that sells or grants the right to open stores and sell products or services using its brand or expertise

Question 24

What is a franchisee?

Answer 24

A business owner who is licensed to operate a branded outlet of a retail chain - independent

Question 25

What are 3 advantages of franchising?

Answer 25

Customer brand Established business Low risk of failure

Question 26

What is a disadvantage of franchising?

Answer 26

Cost-high investment

Question 27

What are 2 key financial costs of franchising?

Answer 27

Equipment Franchisee must pay a fee to franchisor

Question 28

Why can franchising be attractive to entrepreneurs?

Answer 28

Provides support and resources

Question 29

What is an example of economies of scale?

Answer 29

Bulk buying

Question 30

What is an example of diseconomies of scale?

Answer 30

Inefficiency due to being so big

Question 31

What does overtrading do to the business?

Answer 31

Damages cash flow

Question 32

What is synergy?

Answer 32

The value of 2 businesses together enhances overall value e.g complementary skills

Question 33

What is overtrading?

Answer 33

When you get too much business and struggle financially to meet the demand

Question 34

What is an example of overtrading?

Answer 34

Ordering too much stock and then running out of cash