Part A Flashcards
Study Part A
Explain the maturity stage of the business lifecycle
After expansion or consistent growth during the growth stage, the business should be at the top of its industry. This stage is generally the longest stage that a business will go through in the business life cycle. During this cycle the business may still be experiencing growth but not at the same rate as the growth stage and yearly profits should be stable.
What are some challenges of the maturity stage of the business life cycle
Challenges during this stage include:
-Environmental changes (internal, external and macro), changes in the economy, society or market conditions.
-Emerging technologies and innovations can impact the industry.
-Increasing competition.
What are some motivations for expansion?
-Access to a broader market
-Increased buying power
-Profit Potential
-Production cost reductions
-Competitive advantage
-An offer by a foreign distributor
-Expense reductions
-Economics of sale
-Reducing risk of decline
Explain the niche market expansion strategy
A niche market can be strategically developed by an expanding business or can evolve organically
-Developing or servicing a niche market allows smaller businesses the opportunity to compete with larger businesses that may already have majority of the share in the mainstream market. (A niche market is a small segment of the market that has a unique set of characteristics, they typically focus on a specific demographic, product of service).
Explain the innovation strategy for expansion
When expanding into global markets innovation is a necessary strategy to maintain a competitive advantage and retain or grow a share of the market. Innovation theories are applied to the product, process, marketing or organisation methods of the business. Innovation allows the business to develop these processes to remain competitive/gain a competitive edge.
Explain how a businesses can use research and development as an expansion strategy
Research and Development:
R+D is where a business develops new technology or improves existing technology to improve business operations. R+D helps a business to find innovative ways to improve, invent or gain a competitive edge. It is an important strategy to a business is suitable, keeps up with emerging technologies and maintains viability. (reduces costs + increases productivity or generates new profit streams)
Explain how a businesses can use Emerging technology as an expansion strategy
Emerging Technologies:
Businesses that invest in R+D and strive for innovation will develop, utilise or encounter emerging technologies. These technologies are important in the business expansion as they are technologies that are considered to substantially alter the environment they will contribute to. In business emerging technologies can disrupt industries, drive business growth, facilitate expansion and create niche markets.
Explain the business financing option of going public
-Referred to as an Initial Public Offering (IPO) or a float, is when a business makes their shares, that were previously privately owned, available to new investors. IPO’s offer an influx of capital by offering shares to the general public on the Australian Securities Exchange (ASX).
Disadvantages include:
-Time-consuming
-Involves extensive disclosures of sensitive information, such as financial data and risks
-Require conforming to stringent regulations in areas such as reporting and accountability
Explain the business financing option of money in capital markets
A capital market is a financial market where financial securities such as stocks and bonds are purchased and sold by either institutions or individuals. Investing in capital markets can enable mature corporations to finance expansion through growth of their investments; however, this strategy poses significant risks as its effectiveness is reliant on the investments producing positive and opportune returns for businesses.
Explain the business financing option of dividends
A dividend is an allotment of a cooperation’s profit that is distributed to shareholders in return for their continued investment in the business. Shareholders can receive their dividends in the form of cash or shares with the former being the most common and generally paid at regular intervals such as quarterly or annually.
Companies that are eager to expand may opt not to make dividend payments, thus, enabling them to invest their profits back into their own firm; however, this may deter new investors from investing as they would expect dividends in return for their capital.
Explain the business financing option of government grant and and incentives
In maturity, the grants and funding available are designed to foster growth and increase the exporting and global business from Australia. When selecting financing options for expansion, one of the primary benefits of government grants is that the business doesn’t have to pay anything back. This can take away some of financial burden and pressure and enable a business to take a risk in expanding to a market that an investor or a bank may not finance. Limitations on this strategy include the short-term nature of government grants and the stringent expectations imposed on recipient businesses,
Explain the business financing option of private equity
-The investment of money into private companies not listed on a public exchange, whereby capital is usually from institutional investors and accredited investors, or the buyout of public companies.
-Benefits:
-Capital injection
-The expertise and credibility gained from investors
-Increased company worth, borrowing capacity, and financial strength
-Disadvantages:
-High repayment outlays
-Dilution of ownership
Explain the development stage employment cycle
Development focuses on building business culture and inducting and on boarding staff. Development processes such as on boarding need to be formalised to ensure staff feel valued and relevant to the achievement of business goals and objectives.
Explain the maintenance stage of the employment cycle
The maintenance stage focusses on motivating and supporting employees to help the business achieve its goals and objectives. Employee productivity should be at its peak during the maintenance stage.
Explain the role of
risk management during expansion
Risk management is a process used to identify, evaluate and manage the risk of the business activities in order to minimise the impact of risks during expansion.
The business must consider the possible implications of an activity, how likely they are to occur and the consequences if this should happen.
Explain the role of contingency planning
Contingency planning (or Plan B) is part of the risk management process and is a plan of action to mitigate future events or circumstances that can negatively impact a business.
The PPRR model is an approach to contingency planning. The PPRR steps are prevention, preparedness, response and recovery.
Explain the role of
the intrapreneur in a competitive market
-Intrapreneurship is where an employee within a business promotes innovative product development and marketing. Intrapreneurship can be important when in a competitive environment since intrapeneurship can introduce the business to new ways the business could be operating since intrepreneurs often seek ways to improve efficiency and productivity for a competitive advantage in the business.
