Strategy and implementation Flashcards
(24 cards)
What is franchising
the legal right to use another business name and branding to sell product
Who is the franchisor and ads and disads
person selling franchise
+fast growth with lower risk-franchisee finances growth and pay right to join
+economies of scale quickly involvd in bulk buying for the franchises
+Increased income from franchise fees-upfront payments and on going royalty payments
-loss of control-franchisee harder to manage than manager
-profits lost
-reputation
Benefits and disads for franchisee
+may be supported by national advertising/promotion
+reduce risk of failure selling under established brand and gain finances
+ support offered by franchisor-training, equipment
-not operating with as much freedom as ordinary business due to franchise agreement
-cannot sell business without franchisor permission
-make regular payments as roylaty fees
What is the major objective of growth
increase profitability and improve profit margins
What is rationalisation
reorganisation of business to increase efficiency normally leading to reduction in size, change of policy or alterazid stratagy relating to particular products
Reasons for rationilisation
-focus on core business
-sell off less profitable parts of business to improve overall performance
-turn around poor performance
-restructure to improve efficiency
Examples of rationilsation
closing of branches
transferring of production-ford stopping production in uk
trimming of product ranges-discontinued less profitable products
What can rationalisation lead to
uncertainties, resistance from staff, loss of jobs, redundecys
so must be planned and thought through
Factors that may affect decision about location/relocation
-external eos
-costs
-target market
-legislation
-infrastructure
-politcal and economic environment
What is offshoring
process of moving business functions such as production and it support abroad
Why may a business offshore?
-take advantage of lower costs- labour and land
-higher productivity may result
-easier to enter new markets if based in that country
-overcome domestic regulations
What is reshoring
where a business who previously moved business functions offshore brings back to country of origin
Why may a business reshore
-costs savings no longer significant
-quality issues if closer at home its easier to moniter
-shorter lead times to not wait to be shipped from one country to another
Factors affecting regional location
access to markets-business want to be close to customers, growth of e commerce and online purchases counteract, manufactures want to be close to suppliers for use of jit, type and quality of infrastructure including electronic communication systems, forced to relocate due to external diseconomies of scale congestion, wage rates
Other factors affecting regional relocation
costs and nature of production-cost and availability and skills of labour, affected by gov grants, availablity of land,closer to supplier reduces costs
social- managers move where suits them and their families-leisure, low crime rate
historical-still remain in locality of where originally established
What has made business location alot more flexible
telephone, internet and other communication networks
What businesses may relocate globally
large businesses
Factors affecting international relocation
maximising eos-single plant supplying all their requirements for a type of product or range of components average costs of production fall
accsess international markets-access to trading bloc such as eu or nafta may need production facility in trading bloc such
tax advantage-operation where taxation levels are lower allowing transfer costing maximising profit where taxation is lower
freedom from restrictions-employment laws, practises that would be unnacceptable in countries with economic development
What is a footloose business
not tied to a particular location or country and can relocate across national borders in response to changing economic conditions
allows
-cheap capital
-low labour costs
-tax advantages
What is outsourcing
delegating one or business processes to an external provider who then owns manages and administers selected process to agreed standards
What does outsourcing involve
suppliers not directly employed by the business
moves jobs outside of business and may even replace them with employment overseas-especially popular for support services
increased efficiency and lower costs-often carry out same work for lower costs
What is offshoring
involves relocation of business activities from home country to different international location
Ads and disads of offshoring
-manufacturing costs lower
-better skilled higher quality
-closer to customers and demand
-overcome protectionism
-communication language and time zones
-longer lead times for supply
-exposed to changes in exchange rates
Advantages and disadvantages of outsourcing
-significantly reduced staff costs
-less investment risk into production facilities lets outside supplier take risk
-capital needed reduces as less investment needed
-lower costs means more capital for r and d
-poor customer service or quality
-existing employees feel demotivated if believe job at risk
-breakdown of communication in production chain-not in same building or close proximity- language or time zones
