1
Q
What is organic growth?
A
Organic growth involves expansion from within a business e.g. expanding product range
2
Q
What is external growth?
A
External growth is when a business acquires another business using external resources
3
Q
What are the benefits of organic growth?
A
Builds on a business’ strengths (e.g. brands, customers)
Can be financed through internal funds (e.g. retained profits)
Less risk than external growth (e.g. takeovers)
4
Q
Disadvantages of organic growth?
A
Hard to build market share if the business is already a leader
Growth achieved may be dependant on the growth of the overall market
Slow growth- shareholders may prefer more rapid growth (through external growth)
5
Q
What is a takeover?
A
A takeover (or acquisition) involves a business acquring control of another business
6
Q
What is an example of a takeover?
A
Netflix to buy Warner Bros for $83 billion
7
Q
Why might Netflix want to take over Warner Bros?
A
To increase their supplier power (by having more movies)
To increase their market share- can lead to them being able to charge premium prices
To reduce costs in the long term- Because they dont have to pay a fee to rent Warner Bros movies e.g. Harry Potter series
To get economies of scale (by using Warner Bros resources)
8
Q
What are reasons for a takeover?
A
Increase market share (Facebook buying Instagram)
Acquire new skills (Disney buying Pixar in 1996- Pixar was the leader in CGI (computer genereated imagery)
To access economies of scale
To secure better distribution
To acquire intangible assets (brands, patents, trademarks)
To spread risks by diversifying (Facebook buying Whatsapp) (Apple used to buy a small company every month e.g. ‘Faceshift’)
To overcome barriers to entry to target markets
To defend itself against a takeover threat
To enter new segments of an existing market (When Google bought Youtube in 2012)
To eliminate competition
9
Q
What are the drawbacks of a takeover?
A
High cost involved (Facebook paid $16 billion for Whatsapp and at the time- Whatsapp made no profit)
Problems of valuation
Upset customers and suppliers (Kraft takeover of Cadbury- they wanted it to stay as an iconic british brand)
Problems of integration (change management)
Resistance from employees
Non-existent cost savings (might not get economies of scale e.g. if Walmart bought Tesco they might have to buy from their existing suppliers)
Incompatibility of management styles, structures and culture
Questionable motives
High failure rate (HP bought Autonomy in 2011 but HP suffered financial and culture issues so it was a big failure
10
Q
What is a merger?
A
A merger is a combination of two previously seperate firms which is achieved by forming a completely new business into which the two original firms are integrated
11
Q
Common features of a merger:
A
Both businesses broadly “equals” (in terms of size, value and activities)
They usually operate in the same industry (they can therefore access economies of scale, become a market leader- dominant position, have relatively similiar objectives, employees already work in that market)
They have significant potential
They come with risks e.g. trying to merge organisational cultures
12
Q
Examples of mergers:
A
- T mobile US + Sprint (2020)- two telecom companies, this merger helped to accelerate 5G network development
- Skydance media + Paramount Global- they formed Paramount Skydance Corporation
- Exxon + Mobil (both major oil firms)- formed ExxonMobil 1999
13
Q
What is franchising?
A
Franchising arises when a franchiser grants a licence (franchise) to another business (franchisee) to allow it to trade using the brand/business format
14
Q
Advantages of franchising:
A
Tried and tested brand
Running your own business
Advice, support and training given
Easier to raise finance (advantage for the franchise)
Lower risk method of market entry + lower failure rate
Buying power of franchisor (advantage for the franchise)
15
Q
Disadvantages of franchising:
A
Restrictions on actions, including selling
Not cheap- initial fees + royalites (to the franchise)
Franchisor owns the brand
What happens if the franchisor fails? e.g. claires went bankrupt for the second time in 2025
16
Q
Why is franchising good for the main business?
A
It enables much quicker geographical growth for a relatively low investment
There is still the option for the franchisor to open locations that they operate themselves
Capital investment by franchisees is an important source of growth finance to a business
17
Q
What is a joint venture?
A
When a seperate business entity is created by two or more parties, involving shared ownership, returns and risks (basically they work together on a project)
18
Q
What are examples of a joint venture?
A
Lyft & Waymo- teamed together to make automatic driving cars
Ford Otosan- an automotive compant which is joint venture between Ford Motor company and Koç holding, formed in 1959 and is now more than 60 years strong. It was a way for Ford to enter into the European market. The joint venture has multiple plants in Turkey
Shell and Qatar energy
Microsoft and Nokia
Vodafone qnd Telefónica agreed to share their mobile network
Google and NASA developing Google Earth
19
Q
Integration:
A
Integration means takeovers
20
Q
What is backward vertical integration?
A
Acquiring a business operating earlier in the supply chain e.g. a retailer buys a wholesaler or supplier
21
Q
What is forward vertical integration?
A
Acquiring a business further up in the supply chain e.g, manufacturer buys a distributor
22
Q
What is horizontal integration?
A
Acquiring a business at the same stage of the supply chain e.g. manufacturer buys a competitor
23
Q
What is a conglomerate (integration)?
A
Where the acquisition has no clear connection to the business buying it
24
Q
Benefits of horizontal integration:
A
Achieve economies of scale
Cost synergies (savings) from the rationalisation of the business (cutting costs e.g. Netflix won’t have to pay rent on Warner Bros movies anymore if they take them over)
Potential to secure revenue synergies (how you combine resources to generate more revenue e.g. in 2006, after Disney bought Pixar- pixar merchandise such as finding nemo clothes, can be sold at disney theme parks. Disney plus can also generate more revenue as it now has pixar movies so it is more attractive to people)
Wider range of products i.e. diversification
Reduces competition by removing key rivals, this increases market share and long-run pricing power
Buying an existing and well known brand can be cheaper than originally growing a brand- this can then make barriers to entry higher for potential rivals
25
What are some examples of horizontal integration?
JD taking over footaslyum in 2019
ExxonMobil's acquisition of Pioneer natural resources, a major US oil and gas producer in May 2024. This deal doubled ExxonMobil's footprint in the Permain Basin (one of the most important oil-producing regions in the US)
Domino buying the largesr Germain pizza chain for $86 million in December 2015
26
Benefits of vertical integration:
Enables a business to capture a greater share of the profit on each sale
Secures important sources of supply or distribution
Create a barrier to entry of supply or distribution
Gain greater insights into customer needs and wants at each stage of the supply chain
27
Examples of vertical integration:
Forward vertical integration- Tesla opening itd own retail stores- has its own showrooms and online retailer stores- cutting out car dealerships
Forward vertical integration- In September 2015- Booker was given the green light for a takeover deal worth £40million of Budgens and Londis grocery chains
Backward vertical integration- Starbucks buying coffee farms and roasting facilities- this lets starbucks control bean quality and supply and now they dont have to buy it from independant suppliers
Backward vertical integration- In 2020, Apple bought Voysis which is the voice for siri
28
IN RELATION TO SPENCELY SIDE- LOW/HIGH CURRENT RATIO
Low current ratio= This is bad- high levels of liabilites e.g. 1:3
High current ratio= This is good- high levels of assets e.g. 1:0.4
29
Advantages of conglomerates:
Risk diversification
Market power and brand recognition
Access to capital
Economies of scope (decrease in unit costs as a result of producing a range of different types of goods e.g. disney merchandise in theme parks)
Financial strength
30
Disasdvantages of conglomerates:
Complex management structure
Reduced shareholder value
Cultural clashes
Lack of focus
Risk of overextension- entering markets with not much knowledge, geographically overextend
31
Example of conglomerates:
Tata owns Air India but were fine during Covid when no one was flying because they own lots of other industries such as tata steel, tata motors, tata consultancy services
Amazon and Google
32
What is retrenchment?
To cut down or reduce operations i.e. use resources more carefully
33
Examples of retrenchment in a business:
Job losses
Reduce output & capacity
Product/market withdrawal (reduce product range)
Disposal of business units e.g. selling a warehouse
Scaling back investmemt
34
Example of retrenchment:
Spotify axes 17% of its workforce in December 2023 in the third round of layoffs this year
This was because they overexpanded earlier during Covid when so many people were using the app. Without Covid, they didnt need that many staff
Spotify's redundancies were caused by:
- Over expansion
- High labour and content costs
- Pressure to become consistently profitable
- Higher interest rates and weaker economic conditions
- Strategic refocus on core activities
35
What is overtrading?
When a business expands too quickly without having the financial resources to support such a quick expansion
36
How is overtrading linked to a businesses finance?
It can occur even if a business is profitable
37
What type of business is overtrading likely to happen in?
A retail business- they attempt to grow too fast bc it is easy to just lease a shop, and there is fierce competition in the market
38
Classic symptons of overtrading:
High revenue growth but low gross and operating profit (bc of super high costs)
Persistent use of a bank overdraft facility
Significant increase in the payables days and recievable days ratios
Significant increase in the current ratio
39
Example of overtrading:
WeWork
At its peak in 2019 it was worth $46 billion
They then filed for bankruptcy in November 2023
They got too big too quickly and their office space was not wanted during Covid
Example of poor leadership
40
Potential benefits of growth:
Economies of scale
Economies of scope
Synergy
41
What is synergy?
The additional benefit you gain from combining the two firms
42
An example of a synergy:
Sainsburys took over argos in 2016 for 1.48$billion bid
This is an example of revenue synergies as there was cross-selling as Argos' products are in Sainsbury's stores
43
What are the two sources of "synergy"
Cost savings synergies
Revenue synergies
44
Cost savings synergies:
Elimate duplicated functions and services
Better deals from suppliers
Higher productivity & efficiency from shared assets
45
Revenue synergies:
Cross selling to customers of both businesses
Access to new distribution methods e.g. after Sainsbury took over Argos- argos can sell its toys on Sainsburys online
Brand extensions (when a well known brand launches a new product or strategy)
New geographic markets opened up e.g. Kraft took over Cadbury's to sell more of their products in Europe and to sell Cadburys products in different countries such as the US
46
What are economies of scale?
When unit costs fall as output increases
47
What are the three types of economies of scale?
Technical economies of scale
Purchasing economies of scale
Managerial economies of scale
48
What are technical economies of scale?
They occur when a firm reduces its average costs by using large-scale, capital intensive production methods
49
What are purchasing economies of scale?
They arise when large firms buy raw materials or components in bulk and therefore recieve discounts from suppliers
50
What are managerial economies of scale?
They occur when larger firms can employ specialist managers
51
What are economies of scope?
They occur when a firm lowers average costs by producing a range of different but related products using shared resources or processes
52
Examples of economies of scope:
Disney + pixar- able to sell merchandise at disney land and stores
Apple- large range not just phones
Tesco- tesco mobile, supermarker, tesco insurance, tesco banking
53
Why might a business choose a takeover as a method of growth?
It is much quicker
54
What are the reasons for greater globalisation of businesses?
Expansion of financial capital flows between countries e.g. easier for businesses to borrow money from abroad
Increasing trade agreements e.g. reducing tariffs
Improvements in communications technology
Improvements in transport
55
Emerging economies:
Chinas economy has grown lots from 10th in 1992 to 1st in 2024
Massive growth in india and indonesias economies- they have never been in the top ten- in 2024 India was third and Indonesia was fifth
In international markets- emerging and developing economies have taken the lead in terms of share of globsl GDP. Estimated at 58% of GDP in 2024
56
Reasons for operating internationally:
Reduce dependance on domestic market
Access faster growing markets and demand (emerging economies)
Acheive economies of scale (bc of large and growing populations in emerging economies)
Better serve customers located overseas
Build brand value, particulalry global brands
57
What is diseconomies of scale?
As you increase output, average costs rise
58
What is an example of diseconomies of scale?
Uber- they got too big too quickly and there average costs rose. In response to this, they got rid of 400 members of staff
59
What factors influence the attractiveness of international markets? (Evaluative/ it depends on points)
Size and growth of target customer base
Ease of entry into international markets
Extent to which a product will need to be adapted
Existing competitive structure in the target market e.g. Amazon struggled in the Indian market because of local competition
Economic conditions in the target economy e.g. exchange rates
Need for local expertise or partners
Consistency with corporate objectives
Other external environment factors e.g. legal
60
What are the main methods of entering international markets?
Exporting
Licensing
Alliances
Direct investment
61
What is exporting- a method of entering international markets?
Selling to customers in another country but not locating there
62
What is licensing- a method of entering international markets?
Giving another business a license to sell your products abroad e.g. franchising e.g. concessions in department stores
63
What are alliances- a method of entering international markets?
Entering into another country by agreements- most common method is a joint venture with a local company
64
What is direct investment- a method of entering international markets?
Opening another store (or factory) in a differing location
65
Benefits of exporting:
Uses existing systems e.g. e-commerce
Online promotion makes this cost effective
Can choose which orders to accept
Direct customer relationship established
All of profit remains within the business
Can choose basis of payment e.g. terms, currency, delivery options etc.
66
Drawbacks of exporting:
Potentially bureaucratic (lots of layers of paperwork) e.g. export declarations- this can be time consuming and complex
No direct physical contact with customer
Risk of non-payment
Customer service processes may need to be extended e.g. after sales care in foreign languages
67
Benefits of licensing:
Agent of distributor should have specialist market knowledge and existing customers
Fewer transactions to handle
Can be cost effective- commission or distrubtor margin is a variable cost, not fixed
(this is a low risk strategy)
68
Drawbacks of licensing:
Loss of profit margin
Unlikely to be an exclusive arrangment- question mark over agent and distributor commitment & effort
Harder to manage quality of customer service
Agent/distributor keeps the customer relationship (the business doesnt get this)
69
Benefits of alliances:
Speed & potentially transformational
Popular way of entering emerging markets
Reduced risk- shared with joint venture partner
Buying into existing expertise and market presence (local company in the market you want to enter into)
Joint ventures may be a requirement in some markets
70
Drawbacks of alliances:
Higher risk, particularly if the wrong joint venture partner or takeover target is selected
Significant cost & investment of management time
Need to understand and comply with local legal and tax issues
Expensive to withdraw if the strategy goes wrong
71
Benefits of direct investment:
Local contact with customers & suppliers
Quickly gain detailed insights into market needs
Direct control over quality and customer service
Avoids tariff barriers- improving competitiveness as the product wont be as expensive as others (this can be a good it depends on point as it depends on whether there are tariffs from this country to the other country or not)
(depends on point- direct investment is much better for a service than exporting as it is much harder to export a service rather than goods, therefore it depends on the nature of the product)
72
Drawbacks of direct investment:
Significant cost & investment of management time
Need to understand and comply with local legal and tax issues
Higher risk
73
What is offshoring?
Offshoring involves the relocation of business activities from the home country to a different international location
74
What is an it depends on point for direct investment/exporting?
Depends on if it is a good or service- service needs to be in the country really
75
Key features of offshoring:
It is the changed international location of where the business activity is perfomed
Offshoring has been associated with the relocation of manufacturing activties from a domestic economy overseas e.g. from the US to China or UK to Poland
Offshoring is also increasingly common with business services (customer service) e.g. UK financial services using call centres in India- these are becoming less common though due to AI chat bots emerging
76
What is the difference between offshoring and outsourcing?
Offshoring- the work is done overseas (either by same or different business)
Outsourcing- someone else does the work (never tbe same company)
77
Why do businesses move production overseas? (offshoring)
Manufacturing costs lower
Potentially better skilled & higher quality
Make use of existing capacity overseas
Take advantage of free trade areas (might be able to ship to other countries without paying tariffs)
78
Drawbacks of offshoring:
Longer lead times for supply
(bad) Implications for CSR
Additional management costs
Impact of exchange rates (can be drawback or advantage)
Communication: language and time zones
79
What is reshoring?
Reshoring involves the repatration of business activties from overseas back to the home country
80
What are some reasons for reshoring?
Greater certainty around delivery times (including shorter delivery times)
Minimise risk of supply chain disruptions
Reduce complexity of supply chain
Easier to collaborate with home suppliers
Greater certainty about the quality of inputs and components
Cost advantage of producing or sourcing overseas is not as it used to be
81
Example of reshoring:
Ford moved production from Mexico back to the US
82
Example of offshoring:
Apple assembles lots of its products in Shenzhen, China
83
What are the two approaches for managing international business?
Force for local responsiveness
Pressure for cost reduction/force for global integration
84
Force for local responsiveness:
Do customers in each country expect the product to be adapted to meet local requirements?
Do local (domestic competitors) have an advantage based on their ability to be more responsive?
85
Pressures for cost reduction/force for global integration:
How important is standardisation of the product in order to operate efficiently e.g. economies of scale
Is consistent global branding required in order to achieve international success
86
Examples of force for local responsiveness:
KFC in China:
They have 10,000 stores in China, only 4,300 in the US
They were popular due to the infusion of Chinese tastes into food
In 2020, more there were more than 180 different products to choose from
They had first-mover advantage into small towns rather than other food brands
98% of their stores are owned by Yum China instead of being franchised in order to avoid the loss of control after entering into a new market they don't know that well
Amazon bought the rights to show Indian cricket matches in India
87
Example of pressures for cost reduction/force for global integration:
Apple and Coco-Cola don't change their products depending on the market- they focus on cost reduction
Amazon adapted thier pricing strategy in the Indian market to cater to local people- in comparison to Netflix that maintained a more standardised product
88
What is the difference between invention & innovation?
Invention- formulation of new ideas for products or processes
Innovation- practical application of new inventions into marketable products and services
88
What is invention?
The formulation of new ideas for products or processes
YOU WILL RARELY EVER TALK ABOUT THIS
89
What is innovation?
The practical application of new inventions into marketable products and services
90
External pressures for innovation:
Political change- may open up new geographical markets through trade deals requiring a new approach or changes to the product e.g. buying new petrol and diesel cars in UK will be banned by 2035
Economic change- may create pressure for a lower cost solution to a problem e.g Zipcar- cheap solution for those in cities who want short-term car use. Also an environmentally friendly solution
Social change- may put pressure on businesses for new environmentally friendly changes e.g. Zipcar
Technological developments- may create oppurutnities for new ways of doing business e.g. Uber driverless cars- trials of self driving cars in 2026 wider rollout in 2027 across UK.
Competitive pressure- rivals may require businesses to respond or they will lose market share e.g. Apple vs Samsung
91
Two main types of innovation:
Product innovation- launching new or improved products (or services) to the market e.g. smartphones, apple CarPlay
Process innovation- finding better or more efficient ways of producing existing products or delivering existing services e.g. Amazon using drones for delivery in the US- called Amazon Prime Air. Amazon also collects stock in its warehouse depending on predicting trends through search history etc.
92
Advantages of product innovation:
First mover advantage can mean:
- higher prices and profitability
- Added value
- Oppurtunity to build customer loyalty
- Enhanced reputation as an innovative company
- PR coverage
- Increased market share
93
Advantages of process innovation:
- Reduced costs
- Improved quality
- More responsive customer base
- Greater flexibility
- Higher profits
94
Benefits of innovatiom:
-Improved productivity and reduced costs
-Building a brand
-Establishing an advantage over competitors
-Higher sales and profits
-Builds a strong organisational culture which should attract more talent
95
Drawbacks of innovation:
- Initial financial outlay required
- Existing resources not focused on core business
- Difficult to predict potential returns (in the long run)
- Can be a high degree of risk/failure
96
What are the three ways of becoming an innovative organisation?
Kaizen groups
Benchmarking
Intrapeneurship
97
How can kaizen groups help you become an innovative organisation?
They are linked with developing an innovative culture in a business
Method of quality assurance
Based on the concept of continuous improvement
Encourage employees to engage fully with finding ways to improve quality processes
98
What is benchmarking and how can benchmarking help you become an innovative organisation?
Definition- The objective of benchmarking is to understand and evaluate the current position of a business or organisation in relation to best practice and to identify areas and means of performance improvement
Main types of benchmarking:
Internal benchmarking- Benchmarking businesses or operations from within the same organisation, e.g. business units in different countries
Process benchmarking- Comparing against best practice organisations that perform similar work or deliver similar services
Performance or competitive benchmarking- businesses consider their position in relation to performance characteristics of key products and services
External benchmarking- analysing outside organisations that are simply l
known to be "best in class"
Strategic benchmarking- Examines the long term strategies and general approaches that have enabled high-performers to succeed
Functional benchmarking- Comparing with partners drawn from different business sectors to find ways of improving work processes
99
What is intrapreneurship and how can it help you become an innovative organisation?
Definition- Intrapreneurship is the practice of encouraging entrepreneurial thinking and innovation WITHIN an existing organisation
Entrepeneurship vs Intrapreneurship:
- Entrepreneur is a person who sets up a business or businesses taking on financial risk with the hope of financial reward, Entrepreneurship is entreprenuerial activity by an entrepreneur. Rewards go to the entrepreneur and risk is taken by entrepreneur
- Intrapreneurship is entrepreneurial activity by employees and managers (within a company). Rewards (mostly) go to the company (such as share issues). Risk is taken by the company
100
Two famous examples of intrapreneurship:
Gmail (Google)- employees at Google are allowed time for personal projects. Some of Google's best projects come out of their 20% free time policy that they give to employees. One of these was Gmail, launched on 1 April 2004
PlayStation (Sony)- Ken Kutaragi, a relatively junior Sony employee spent house tinkering with his daughters Nintendo to make it more powerful and user friendly. What came from his work turned into one of the world's most recognisable brands- the Sony PlayStation
101
Ways to encourage and facilitate Intrapreneurship:
- Structured time away from work to aid development of business ideas e.g. Google
- Cross-functional teams- Laissez-faire leadership style, Matrix structure
- Secondment (spending time working for another organisation for a period of time) of staff tl smaller businesses/startups- relates to benchmarking, smaller businesses might have to be more innovative to enter into a market for the first time, they might have a more democratic leadership style, so they have more oppurtinity to share their ideas, improving communication. They also wont have diseconomies of scale as they have better coordination and communication
- Staff competitions/innovation
102
Reasons why large businesses (like PLCs) are not intrapreneurial:
Complacency/arrogance
Bureaucracy (can say a large business is more bureaucratic) - stifling initiative, means more paperwork
Reward systems do not provide an incentive to innovate (may be bc they are focused on profit, small business might provide incentives better as people who come up with the idea that helps businesses grow, usually grow with thr business and a small business is also more likely to issue shares to employees as a reward. They also have a small number of employees at the start so if someone comes up with an idea they might be promoted and grow with the business, becoming important)
Short-termism- PLCs for example are focused on profit so may not designate time to intrapreneurship
103
Ways to protect innovation and intellectual property:
Patents
Copyright
104
Protection an invention-patents:
To be protected by a patent, the invention must be:
- new
- an innovative step (i.e. not obvious to other people with knowledge of the subject)
- Capable of industrial application (i.e. it can be made and used)
105
Copyright:
-Widely used as a way of protecting creative work of all kinds
- Protection is automatic for any originial work
- Can control how copyrighted work is exploited (e.g. licence, royalties)
106
Linking innovation strategy to the functional areas of the business:
HR- bonuses, policies- google 20% free time, recruitment, training, motivation
Finance- Spend money on research and development, budgeting-allocating funds for innovative purposes, sources of finance to actually implement the innovation
Marketing- Market research to focus on a competitive advantage, 'process' and 'physical environment' or marketing mix
Operations- Kaizen, improving JIT ability, implementing quality assurance
107
Research and development definition:
The investment a business makes in developing new products or improving existing products and processes, often through scientific or technological research. It focuses on innovation and improvement
108
Good brand loyality inelasticty link:
This maintains brand loyalty- can give them higher percived value- they chan charge premium prices- decreases customers price sensitivity- increases the inelasticty of the product
109
Term to use for Apple coming out with a new iphone regularly:
They have a high product replacement ratio
110
What does digital technology include?
Automation, e-commerce, big data and data mining
111
Pressures to adopt digital technology:
Serve existing customers better
Research new customers in new segments & locations
Offer new ways of delivering products and services using digital technology
Reduce costs by integrating digital technology into operations
The need to respond to digital innovation by competitors
Access, analyse and action data that provides key insights into customer needs and business performance
112
What is e-commerce
E-commerce involves digitally enabled commercial transactions between and among organisations and individuals
113
Benefits of e-commerce to business:
Access to markets worldwide, 24 hours a day
A new way in which customers can shop
Relatively cheap start-up costs
Greater access to suppliers
Greater ease of comparing prices
114
A move to e-commerce by a business needs to be considered carefully because:
-May bring additional costs in terms of spending in warehouses and the operating costs of the delivery sysyem if the business produces physical products.
-The business must also consider the balance between having a physical presence and moving online e.g. in the case of retailers, will online sales enhance sales from retail outlets or just cancel out their sales
115
Barriers to e-commerce growth:
-Customer's inability to use and touch the products
-Having to wait for delivery
-Delivery costs
-Worries about how to return products
116
What is automation?
Automation in a business refers to using technology, like machines, software or AI, to perform tasks wuth minimal human intervention. It applies to areas like production, customer service, data analysis and marketing
117
Benefits of automation:
- Increased efficiency- speeds up tasks and reduces human error
- Cost reduction- cuts labour costs and reallocates resources
- Higher productivity- allows for 24/7 operation and faster output
- Improved customer experience- provides quicker, more personalized service
- Better data management- enhances decision making through accurate, real-time data
- Scalability- easily adjusts to higher demand without major changes
yes
118
Value of automation:
Competitive advantage- reduces costs, improves services, and supports innovation
Flexibility- quickly adapts to market changes
Sustainability- optimizes resources and reduces waste
Overall, automation boosts efficiency, cuts costs, and helps businesses stay competitive
119
What is big data?
Big data is the process of collecting and analysing large data sets from traditional and digital sources to identify trends and patterns that can be used in decision making
120
Reasons for the growth of big data:
Retail e-commerce databases
User interactions with websites and mobile apps
Usage of logistics, transportatioj systems, financial and health care
Social media data
Location data (e.g. GPS generated)
New forms of scientific data (e.g. human genome analysis- the study of a persons complete set of DNA to understand how genes work)
121
Key businezs applications of big data:
Tracking and monitoring the performance, safety and reliability of operational equipment (e.g. data generated by sensors)
Generating marketing insights into the needs and wants of customers, based on the transactions, feedback, comments (e.g. from e-commerce analysis, social media posts). Big data is revolutionising traditional market research
Improved decision-making- for example analysing the real-time impact of pricing changes or other elements of the marketing mix (the use of big data to drive dynamic pricing is a great example of this)
Better security of business systems- big data can be analysed to identify unusal activity, for example on secure-access systems
More efficient management of capacity- the increasing use of big data to inform decision-making about capacity management (e.g. in transportation amd logisitcs systems) is a great example of how big data can help a business operating more efficiently
122
What is data mining?
The process of analysing data from different perspectives and summarising it into useful information, including discovery of previously unknown interesting patterns, unusual records or dependencies
123
Benefits to businesses from effective data mining:
- Identify previously unseen relationships between business data sets
- Better predict future trends and behaviours
- Extract value (e.g. performance insights) from big data sets
- Generate business actions built on data insights
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How can data mining help a business be more competitive?
Sales forecasting- analysing when customers bought to predict when they wull buy again
Database marketing- examining customer purchasing patterns and looking at the demographics and psychographics (attitides, values and interests- what people think and what they care about) of customers to build predictive profiles
Market segmentation- a classic use of data mining, using data to break down a market into meaninful segments like age income, occupation or gender
E-commerce basket analysis- using mined data to predict future customer behaviour by past performance including purchases and preferences
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Example of Data mining: Dunnhumby & Tesco
Dunnhumby pioneered data mining to help Tesco better understand its customers
Dunnhumby launched the Tesco Clubcard loyalty program
Using data about past customer purchase habits, Teaco was able to stock its stores with precisely what customers might want in the future
It was revolutionary for the UK retial scene
This British data mining company (Dunnhumby) is worth $3 billion
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The value of digital technology for a business:
- Improvements in communication and availabilty of information
- Better management
- Enabling new ways of doing business
- Changes in HR issues
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Digital technology can also create challenges:
Leadership
Culture change
The rate of change
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The threats of digital technology for businesses:
Downward pressure on prices and profit margins
New unexpected competitors
Keeping up with change
